Exhibit 10.27

 

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Integrated Device Technology, Inc. (IDT)

Incentive Compensation Plan Document

 

Plan Purpose

 

Integrated Device Technology, Inc.’s (“IDT” or the “Company”) Incentive
Compensation Plan (the “Plan”) has been established to help align participating
IDT employees’ goals and efforts with the Company’s goals and direction. Through
the Plan, a portion of an eligible employee’s total cash compensation
opportunity will be directly linked to the annual business results of both the
unit in which the employee works and Company-wide performance. This gives
eligible employees a clear and direct stake in their own unit’s success and in
the Company’s overall success. Under the Plan, achieving these goals will result
in a cash bonus payment that rewards employees for their contributions toward
the Company’s objectives.

 

The payment scale for this Plan is based on aligning and sharing the benefits of
profitability between IDT’s stockholders and employees. In summary, this Plan is
intended to:

 

  •   Encourage outstanding performance (both Company-wide and individual);

 

  •   Align and share the benefits of successful Company performance with
eligible employees;

 

  •   Enhance teamwork; and

 

  •   Support a consistent process for establishing, measuring and rewarding
performance.

 

Eligibility and Participation

 

Eligible employees are all exempt employees who are customarily employed for at
least 20 hours per work week at the Director level and above, who have been
employed during the Performance Period (as defined below), who are not
participants in another IDT incentive program (e.g. the IDT Sales Incentive
Program), and who are employed in good standing as of the last day of the
Performance Period (“Eligible Employee”). Eligibility under the Plan may be
affected by employment status as provided in more detail in the Employment
Status Effect on Award section herein. Employees must be in Good Standing at the
end of the Performance Period to be eligible for payment under the Plan. “Good
Standing” for purposes of the Plan shall mean that the employee is not on a
performance improvement plan or under any other types of disciplinary action.

 

The Committee (as defined below) may change the eligibility provisions of the
Plan at any time.

 

Authority and Administration

 

The Plan will be administered under the authority and subject to the approval of
the Compensation Committee of the Board of Directors (the “Committee”). The
Committee will approve the total amount to be paid under the Plan for each
Performance Period and the specific amounts to be paid to the CEO and the
executive officers.

 

The Vice President of Human Resources is responsible for the preparation and
coordination of all pertinent performance and award information required for
Plan administration.

 

IDT Confidential         April, 2005

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The Company reserves the right to modify, amend, cancel, or repeal the plan at
any time.

 

Performance Period

 

The Performance Period is one year, directly coinciding with IDT’s fiscal year.

 

Performance Unit Program and Profit Sharing Plan

 

The performance unit program will be cancelled and replaced by this Plan.
Eligible employees under this Plan are also no longer eligible to participate in
the IDT Profit Sharing Plan as of April 4, 2005.

 

Individual Incentive Targets

 

Each Eligible Employee will be assigned an individual incentive target. This
target will be established considering job level, job role, job function,
competitive benchmarks, as well as accomplishment within the employee’s job
level. The Individual Inventive Target may be adjusted at the sole discretion of
the Company due to company, job, performance, or market changes. Incentive
Targets will be expressed as a percent of base salary.

 

Unit Performance

 

During the annual Company-wide commit process before the beginning of the fiscal
year each business unit will set objectives that must be approved by the CEO and
CFO. The CFO’s objectives must be approved by the CEO. The CEO’s objectives must
be approved by the Committee.

 

At the end of the Performance Period the level of unit achievement will be
measured against each target objective, with a met target objective measuring
100% achievement. The average achievement level of all unit objectives
represents the Unit Achievement Factor. Units must reach a minimum of 50% of
their Unit Achievement Factor to be eligible for an incentive payout
(threshold). The maximum Unit Achievement Factor and therefore the highest
achievable factor is 125%.

 

Company-Wide Performance

 

The Committee shall approve the targeted overall non-GAAP Earnings Per Share
(“EPS”) that will be used as the metric for Company-wide Performance. The
specific threshold and maximum EPS performance values will also be approved by
the Committee.

 

A Payout Leverage Scale will be developed based on the set threshold, target and
maximum EPS values. The Scale will have specific achievement levels assigned to
each EPS value, with the target EPS value measuring 110% achievement. The
minimum EPS value to be achieved by the company will receive a 50% achievement
factor (threshold) and the maximum EPS value to be achieved will receive a 200%
achievement factor.

 

At the end of the Performance Period the level of Company-wide achievement will
be determined by comparing the actual non-GAAP EPS to the established EPS
target. The achievement factor assigned to the actual EPS performance represents
the Company-wide Achievement Factor. An EPS achievement below the threshold will
result in a 0% Company-wide Achievement Factor and an EPS achievement above the
maximum will result in a 200% Company-wide Achievement Factor. Within the range,
an EPS achievement must meet or exceed the metric in order to qualify for the
designated Payout.

 

IDT Confidential         April, 2005

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Calculation of Actual Incentive Payout

 

The Actual Incentive Payout for each Eligible Employee is calculated by
multiplying the Individual Incentive Target by the Individual Base Salary
(“Target Incentive Amount”). The Target Incentive Amount is then multiplied by
the Unit Achievement Factor (“Unit Incentive Amount”). The Unit Incentive Amount
is then multiplied by the Company-wide Achievement Factor (“Actual Incentive
Payout”). If the Unit Achievement Factor is 0% (threshold not met), there will
be no Actual Incentive Payout. If the EPS Achievement Factor is 0% (threshold
not met), there will be no Actual Incentive Payout. Any Actual Incentive Payout
amount may be modified by the Committee or IDT management, in their sole
discretion, to reflect performance or other issues of Eligible Employees that
they believe should be reflected in the Actual Incentive Payout.

 

Timing

 

Employees will be notified of their final objectives within the first quarter of
a new Performance Period.

 

Finance will publish quarterly reports on the status of accomplishment of goals
under the Plan versus objectives. However, due to the sensitivity of data
certain measurements may not be published. The target payment date for Actual
Incentive Payouts will be within approximately 45 days of the end of a
Performance Period (“Payment Date”).

 

Award Determination and Payout

 

For purposes of the Plan, base pay will be defined as actual base salary paid
for the period employed during the Performance Period (exclusive of any other
compensation, such as overtime, premium pay, stock compensation, relocation
payments, or any other bonus payment or incentive award).

 

Incentive Targets

 

All modifications to individual participation levels and performance criteria
are only valid with written approval of the Vice President of HR and the CEO.

 

Transfer or Promotion to Different Incentive Level

 

If an Eligible Employee transfers from one unit to another or is assigned to a
different job role during the Performance Period (or becomes eligible in the
Plan during a Performance Period), the incentive target will be determined on a
pro-rata basis, based on the number of months assigned to each unit. Partial
months will be credited on a pro-rata basis. The Eligible Employee will be
informed of a change in status at the time the change is made.

 

Relationship to Other Benefits

 

Payments under this Plan will be included in the definition of pay for purposes
of IDT’s Deferred Compensation Plan in so far as the deferral election complies
with all legislative requirements. Payments under this Plan may be deposited
into IDT’s 401(k) and ESPP plans within the provisions of these plans, but will
not be taken into account in determining life insurance and disability benefits.

 

International Eligible Employees

 

Payment of any Actual Incentive Payout for Eligible Employees who are located
outside of the United States will be subject to applicable International laws
and regulations relating to the payment of compensation in that jurisdiction.
IDT will comply with all International laws when making Actual Incentive Payouts
to Eligible Employees located outside of the United States under this Plan.

 

IDT Confidential         April, 2005

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Employment Status Effect on Award

 

If all other qualifications are met, the following changes in employment status
during the year may affect eligibility.

 

No payment will be awarded to employees who are not in Good Standing, who
voluntarily resign or are terminated for Cause as of the last day of the
Performance Period. For purposes of this Plan, a termination for “Cause” shall
mean a termination due to the employee’s failure to satisfactorily perform his
or her duties in the opinion of IDT management; the employee’s violation of IDT
policies, procedures or rules; the employee’s breach of his/her confidentiality
or proprietary rights agreement, or the employee’s conviction of any crime that
harms IDT’s image, in each case as determined in good faith by the employee’s
manager or the Board of Directors of the Company.

 

Change in Employment Status

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Impact on Actual Incentive Payout

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Entrance to Director level or above (i.e. promotion) mid (fiscal) year.  
Pro-rated award based on time in position Entrance to Director level or above as
a new-hire employee after beginning of the fiscal year.   Pro-rated award based
on time in position Movement from one level to another after the beginning of
the plan year.   Pro-rated award based on time in position Leave of absence  
Employees on a leave of absence for a period of less than 30 days will receive
their full award on the Payment Date. Employees on a leave of absence for a
period of more than 30 days during any Performance Period will receive a
pro-rated award on the Payment Date based on time in position, to the extent
that they remain employed by IDT on the last day of the Performance Period for
which payment is to be made. Involuntary termination (non-performance related)  
Pro-rated award paid on the Payment Date, regardless of the termination date.
Involuntary termination (due to death or disability)   Pro-rated award paid on
the Payment Date, regardless of the termination date. Involuntary termination
(all other)   No award Voluntary resignation   No award

 

IDT Confidential         April, 2005

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Beneficiary

 

An Eligible Employee may name a beneficiary to receive any Actual Incentive
Payout earned up to the time of death. If such designation is not made, the
beneficiary named for the regular employee benefit plans will be considered the
named beneficiary.

 

Amendment or Termination of Plan

 

The Board shall have the right to amend, modify or terminate the Plan at any
time without notice.

 

Severability

 

If any provision of this Plan shall be declared illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining provisions
of this Plan but shall be fully severable, and this Plan shall be construed and
enforced as if said illegal or invalid provision had never been inserted herein.

 

Construction

 

The section headings are included only for convenience of reference and are not
to be taken as limiting or extending the meaning of any of the terms and
provisions of this Plan. Whenever appropriate, words used in the singular shall
include the plural, or the plural may be read as the singular. When used herein,
the masculine gender includes the feminine gender.

 

No Right to Continued Employment

 

Nothing in this Plan shall be construed to give any person the right to remain
in the employ of the Company. The Company reserves the right to terminate the
employment of any person at any time and for any reason.

 

Governing Law

 

The Plan shall be governed by, and construed and interpreted in accordance with,
the laws of the State of California without regard to the conflict of law
provisions thereof.

 

Integrated Device Technology, Inc. By:  

/s/ Clyde R. Hosein

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                Secretary

 

IDT Confidential         April, 2005