<PAGE>   1

                                                                   EXHIBIT 10.46


                              VLSI TECHNOLOGY, INC.

                    NON-QUALIFIED DEFERRED COMPENSATION PLAN


                            (EFFECTIVE JUNE 1, 1997)



<PAGE>   2

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>            <C>                                                                        <C>
ARTICLE I      TITLE AND DEFINITIONS......................................................2

ARTICLE II     PARTICIPATION..............................................................4

ARTICLE III    DEFERRAL ELECTIONS.........................................................4

ARTICLE IV     ACCOUNTS...................................................................6

ARTICLE V      VESTING....................................................................7

ARTICLE VI     GENERAL DUTIES............................................................ 8

ARTICLE VII    DISTRIBUTIONS............................................................. 8

ARTICLE VIII   ADMINISTRATION..........................................................  11

ARTICLE IX     MISCELLANEOUS...........................................................  13

</TABLE>


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                              VLSI TECHNOLOGY, INC.

                    NON-QUALIFIED DEFERRED COMPENSATION PLAN



        This Plan, effective as of June 1, 1997 (the "Effective Date"), is
adopted by VLSI Technology, Inc. (the "Company"), acting on behalf of itself and
its designated subsidiaries. Throughout, the term "Company" shall include
wherever relevant any entity that is directly or indirectly controlled by the
Company or any entity in which the Company has a significant equity or
investment interest, as determined by the Company.


                                    RECITALS

        1. The Company wishes to establish a supplemental retirement plan for
the benefit of a select group of management or highly compensated employees of
the Company.

        2. The Company wishes to provide that the plan to be established shall
be designated as the VLSI Technology, Inc. Non-Qualified Deferred Compensation
Plan (the "Plan").

        3. The Company wishes to provide under the Plan for the payment of
vested accrued benefits to Plan participants and their beneficiary or
beneficiaries ("Trust Beneficiaries").

        4. The Company wishes to provide under the Plan that the Company shall
pay all of the accrued benefits from its general assets.

        5. The Company intends to enter into an agreement (the "Trust
Agreement") with a person or persons, including an entity, who shall serve as
trustee (the "Trustee") under an irrevocable trust (the "Trust") to be used in
connection with the Plan.

        6. The Company wishes to make contributions to the Trust so that such
contributions will be held by the Trustee and invested, reinvested and
distributed, all in accordance with the provisions of this Plan and the Trust
Agreement.

        7. The Company intends that amounts allocated to the Trust and the
earnings thereon shall be used by the Trustee to satisfy the liabilities of the
Company under the Plan with respect to each Plan participant for whom an Account
has been established and such utilization shall be in accordance with the
procedures set forth herein.

        8. The Company intends that the Trust be a "grantor trust" with the
principal and income of the Trust treated as assets and income of the Company
for federal and state income tax purposes.

        9. The Company intends that the assets of the Trust shall at all times
be subject to the claims of the general creditors of the Company as provided in
the Trust Agreement.


<PAGE>   4

        10. The Company intends that the existence of the Trust shall not alter
the characterization of the Plan as "unfunded" for purposes of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and shall not be
construed to provide income to Plan participants under the Plan prior to actual
payment of the vested accrued benefits thereunder.

        NOW THEREFORE, the Company does hereby establish the Plan as follows and
does also hereby agree that the Plan shall be structured, held and disposed of
as follows:


                                    ARTICLE I

                             TITLE AND DEFINITIONS

1.1     Title.

        This Plan shall be known as the VLSI Technology, Inc. Non-Qualified
Deferred Compensation Plan.

1.2     Definitions.

        Whenever the following words and phrases are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below.

        "Account" means for each Participant the bookkeeping account maintained
by the Committee that is credited with amounts equal to (1) the portion of the
Participant's Salary that he or she elects to defer, (2) the portion of the
Participant's Commissions that he or she elects to defer, (3) the portion of the
Participant's Bonus that he or she elects to defer, (4) Company contributions
made to the Plan for the Participant's benefit, and (5) adjustments to reflect
deemed earnings pursuant to Section 4.1(d).

        "Beneficiary" or "Beneficiaries" means the beneficiary last designated
in writing by a Participant in accordance with procedures established by the
Committee to receive the benefits specified hereunder in the event of the
Participant's death. No beneficiary designation shall become effective until it
is filed with the Committee during the Participant's lifetime.

        "Board of Directors" or "Board" means the Board of Directors of the
Company.

        "Bonus" means any incentive compensation other than Commissions that is
payable to a Participant in addition to the Participant's Salary.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Commissions" means any cash-based commission compensation payable to a
Participant.


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        "Committee" means the Committee appointed by the Board to administer the
Plan in accordance with Article VIII.

        "Company" means VLSI Technology, Inc., any successor corporation and any
entity that is directly or indirectly controlled by the Company or any entity in
which the Company has a significant equity or investment interest, as determined
by the Company.

        "Compensation" means the Salary, Commissions and Bonus that the
Participant is entitled to for services rendered to the Company.

        "Disability" means a Participant's long-term disability as defined in
the Company's long-term disability plan for employees.

        "Distributable Amount" means the amount credited to a Participant's
Account.

        "Effective Date" means June 1, 1997.

        "Eligible Employee" means (i) a common law employee of the Company
performing services regularly in the United States who is a vice-president or
more senior employee of VLSI Technology, Inc., or (ii) any other employee or
category of employee designated by the Committee. Notwithstanding the foregoing,
the Committee may determine in writing that an otherwise Eligible Employee shall
not be eligible to participate in this Plan.

        "Fund" or "Funds" means one or more of the funds or contracts selected
by the Committee pursuant to Section 3.3.

        "Initial Election Period" means June 30, 1997 in the case of an
individual who is an Eligible Employee as of the Plan Effective Date; otherwise
the 30-day period following the Eligible Employee's date of hire or, if later,
upon first becoming an Eligible Employee.

        "Interest Rate" means, for each Fund, an amount equal to the net rate of
gain or loss on the assets of such Fund during each valuation period, but not
less frequently than monthly.

        "Participant" means any Eligible Employee who elects to defer
Compensation in accordance with Section 3.1.

        "Payment Eligibility Date" means the first day of the month following
the calendar quarter in which a Participant terminates employment or dies, or if
not such date, as soon as administratively possible thereafter.

        "Plan" means the VLSI Technology, Inc. Non-Qualified Deferred
Compensation Plan set forth herein, now in effect, or as amended from time to
time.



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        "Plan Year" means the 12-consecutive month period beginning January 1
and ending December 31, or, if different, the Company's fiscal year, provided
that the first Plan Year shall be a short year beginning June 1, 1997 and ending
December 31, 1997.

        "Salary" means the Employee's base salary for the Plan Year. Salary
excludes any other form of compensation such as bonuses, restricted stock,
proceeds from stock options or stock appreciation rights, severance payments,
moving expenses, car or other special allowance, or any other amounts included
in an Eligible Employee's taxable income that is not compensation for services.
Deferral elections shall be computed before taking into account any reduction in
taxable income by salary reduction under Code Sections 125 or 401(k), or under
this Plan.


                                   ARTICLE II

                                 PARTICIPATION

2.1     Participation.

        An Eligible Employee shall become a Participant in the Plan by electing
to defer a portion of his or her Compensation in accordance with Section 3.1.


                                   ARTICLE III

                               DEFERRAL ELECTIONS

3.1     Elections to Defer Compensation.

        (a) Initial Election Period. Each Eligible Employee may elect to defer
Compensation by filing with the Committee an election that conforms to the
requirements of this Section 3.1, on a form provided by the Committee, no later
than the last day of his or her Initial Election Period.

        (b) General Rule. The amount of Compensation which an Eligible Employee
may elect to defer is as follows:

               (1)    Any percentage of Salary up to 25%;

               (2)    Any percentage of Commissions up to 100%; and/or

               (3)    Any percentage of Bonus up to 100%;

provided, however, that no election shall be effective to reduce the
Compensation paid to an Eligible Employee for a calendar year to an amount that
is less than the amount necessary to pay applicable 



                                      -4-
<PAGE>   7

employment taxes (e.g., FICA, hospital insurance) payable with respect to
amounts deferred hereunder, amounts necessary to satisfy any other benefit plan
withholding obligations, any resulting income taxes payable with respect to
Compensation that cannot be so deferred, and any amounts necessary to satisfy
any wage garnishment or similar type obligations.

        (c) Effect of Initial Election. An election to defer Compensation during
an Initial Election Period shall be effective with respect to Salary and
Commissions earned during the first pay period beginning after the Initial
Election and to the Bonus payable for the Plan Year with respect to which the
election is made.

        (d) Duration of Compensation Deferral Election. Any Compensation
deferral election made under paragraph (a) or paragraph (e) of this Section 3.1
shall remain in effect, notwithstanding any change in the Participant's
Compensation, until changed or terminated in accordance with the terms of this
paragraph (d); provided, however, that such election shall terminate for any
Plan Year for which the Participant is not an Eligible Employee. A Participant
may increase, decrease or terminate his or her Compensation deferral election,
effective for Compensation earned during pay periods beginning after the
beginning of the next succeeding Plan Year, by filing a new election, in
accordance with the terms of this Section 3.1, with the Committee on or before
the preceding December 15.

        (e) Elections Other Than Elections During the Initial Election Period.
Any Eligible Employee who fails to elect to defer Compensation during his or her
Initial Election Period may subsequently become a Participant, and any Eligible
Employee who has terminated a prior deferral election may elect to again defer
Compensation, by filing an election, on a form provided by the Committee, to
defer Compensation as described in paragraph (b) above. An election to defer
Compensation must be filed on or before December 15 and will be effective for
Salary and Commissions earned during pay periods beginning on and after the
following January 1 and the Bonus paid with respect to services performed in the
Plan Year beginning on the following January 1.

3.2     Company Contributions.

        The Company may, in its sole discretion, make discretionary
contributions to the Accounts of one or more Participants at such times and in
such amounts as the Board may determine. Unless and until the Board or the
Committee determines otherwise, for each Plan Year the Company shall make a
matching contribution for the benefit of each Participant in an amount equal to
the lesser of (i) fifty percent (50%) of the compensation deferred by the
Participant with respect to such Plan Year under both this Plan and the
Company's 401(k) plan, or (ii) three percent (3%) of the Participant's
Compensation for the Plan Year, reduced by any Company matching contributions
allocated to the Participant's matching contribution account under the 401(k)
plan during the Plan Year; provided, however, that the total Company matching
contribution with respect to such Plan Year under both this Plan and the
Company's 401(k) plan shall not exceed the lesser of (i) one-half (1/2) of the
dollar limit in effect for such Plan Year under Section 402(g)(1) of the Code
(or any successor provision), or (ii) three percent (3%) of the dollar limit in
effect for such Plan Year under Section 401(a)(17) of the Code (or any successor
provision).



                                      -5-
<PAGE>   8

3.3     Investment Elections.

        The Committee may, in its discretion, provide each Participant with a
list of investment Funds available for hypothetical investment, and the
Participant may designate, in a manner specified by the Committee, one or more
Funds that his or her Account will be deemed to be invested in for purposes of
determining the amount of earnings to be credited to that Account. The Committee
may, from time to time, in its sole discretion select a commercially available
fund or contract to constitute the Fund actually selected. The Interest Rate of
each such commercially available fund or contract shall be used to determine the
amount of earnings to be credited to Participants' Accounts under Section
4.1(d).

        In making the designation pursuant to this Section 3.3, the Participant
may specify that all or any 1% multiple of his or her Account be deemed to be
invested in one or more of the Funds offered by the Committee. Subject to such
limitations and conditions as the Committee may specify, a Participant may
change the designation made under this Section 3.3 in such manner and at such
time or times as the Committee shall specify. If a Participants fails to elect a
Fund under this Section 3.3, he or she shall be deemed to have elected a money
market fund.

        The Company may, but need not, acquire investments corresponding to
those designated by the Participants hereunder, and it is not under any
obligation to maintain any investment it may make. Any such investments, if
made, shall be in the name of the Company, and shall be its sole property in
which no Participant shall have any interest.


                                   ARTICLE IV

                                    ACCOUNTS

4.1     Participant Accounts.

        The Committee shall establish and maintain an Account for each
Participant under the Plan. Each Participant's Account shall be further divided
into separate subaccounts ("investment fund subaccounts"), each of which
corresponds to an investment fund or contract elected by the Participant
pursuant to Section 3.3. A Participant's Account shall be credited as follows:

        (a) As soon as practicable following the end of each applicable pay
period, the Committee shall credit the investment fund subaccounts of the
Participant's Account with an amount equal to Salary and Commissions deferred by
the Participant during each pay period in accordance with the Participant's
election; that is, the portion of the Participant's deferred Salary and
Commissions that the Participant has elected to be deemed to be invested in a
certain type of investment fund shall be credited to the investment fund
subaccount corresponding to that investment fund.

        (b) As soon as practicable after each Bonus or partial Bonus would have
been paid, the Committee shall credit the investment fund subaccounts of the
Participant's Account with an amount 



                                      -6-
<PAGE>   9

equal to the portion of the Bonus deferred by the Participant's election; that
is, the portion of the Participant's deferred Bonus that the Participant has
elected to be deemed to be invested in a certain type of investment fund shall
be credited to the investment fund subaccount corresponding to that investment
fund.

        (c) As soon as practicable after the last day of the Plan Year or such
earlier time or times as the Committee may determine, the Committee shall credit
the investment fund subaccounts of the Participant's Account with an amount
equal to the portion, if any, of any Company contribution made to or for the
Participant's benefit in accordance with Section 3.2; that is, the portion of
the Participant's Company contribution, if any, that the Participant has elected
to be deemed to be invested in a certain type of investment fund shall be
credited to the investment fund subaccount corresponding to that investment
fund.

        (d) At such time or times as the Committee may determine, but not less
frequently than monthly, each investment fund subaccount of a Participant's
Account shall be credited with earnings in an amount equal to that determined by
multiplying the balance credited to such investment fund subaccount as of the
last day of the preceding valuation period by the Interest Rate for the
corresponding Fund selected by the Company.


                                    ARTICLE V

                                     VESTING

5.1     Account.

        (a) Compensation Deferrals. A Participant's Account attributable to
Salary, Commissions and Bonus deferred by a Participant pursuant to the terms of
this Plan, together with any amounts credited to the Participant's Account under
Section 4.1(d) with respect to such deferrals, shall be 100% vested at all
times.

        (b) Company Contributions. The value of a Participant's Account
attributable to any Company contributions pursuant to Section 3.2 shall vest at
such time or times as the Board shall specify in connection with any such
contributions. Unless otherwise specified by the Board or the Committee,
Participants shall be 100% vested in such amounts, together with any amounts
credited to the Participant's Account under Section 4.1(d) with respect to such
amounts.


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<PAGE>   10

                                   ARTICLE VI

                                 GENERAL DUTIES

        6.1 Trustee Duties. The Trustee shall manage, invest and reinvest the
Trust Fund as provided in the Trust Agreement. The Trustee shall collect the
income on the Trust Fund, and make distributions therefrom, all as provided in
this Plan and in the Trust Agreement.

        6.2 Company Contributions. While the Plan remains in effect, the Company
shall make contributions to the Trust Fund at least once each quarter. The
amount of any quarterly contribution shall be at the discretion of the
Committee. As soon as practicable after the close of each calendar year, the
Company shall make an additional contribution to the Trust Fund to the extent
that previous contributions to the Trust Fund for the current calendar year are
not equal to the total of the Compensation deferrals made by each Participant
plus Company contributions, if any, accrued as of the close of the current
calendar year. The Trustee shall not be liable for any failure by the Company to
provide contributions sufficient to pay all accrued benefits under the Plan in
accordance with the terms of this Plan.

        6.3 Department of Labor Determination. In the event that any
Participants are found to be ineligible, that is, not members of a select group
of highly compensated employees, according to a determination made by the
Department of Labor, the Committee shall take whatever steps it deems necessary,
in its sole discretion, to equitably protect the interests of the affected
Participants.


                                   ARTICLE VII

                                  DISTRIBUTIONS

        7.1   Distribution of Deferred Compensation.

        (a) In the case of a Participant who terminates employment with the
Company as a result of Disability, death or who terminates employment with the
Company with a minimum of five years of employment with the Company, the
Distributable Amount shall be paid to the Participant (and after his death to
his or her Beneficiary) in the form of substantially equal quarterly
installments over 15 years beginning on his or her Payment Eligibility Date.
Notwithstanding the foregoing, a Participant described in the preceding sentence
may elect one of the following optional forms of distribution provided that his
or her election is filed with the Committee within 30 days of the date the
Eligible Employee first becomes a Participant:

                (1) a cash lump sum payable on the Participant's Payment
Eligibility Date, and

                (2) quarterly installments over five or 10 years beginning on
the Participant's Payment Eligibility Date.



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<PAGE>   11

        Notwithstanding the foregoing, a Participant described above may change
his or her form of distribution to one of the optional forms listed above
provided that his or her election is filed with the Committee at least one year
prior to his or her Payment Eligibility Date.

        To the extent the Distributable Amount is paid in installments, the
Participant's Account shall continue to be credited with earnings pursuant to
Section 4.1(d) of the Plan and the installment amount shall be adjusted annually
to reflect gains and losses until all amounts credited to his or her Account
under the Plan have been distributed. Notwithstanding this subsection, if the
Participant's Distributable Amount is $20,000 or less, the Distributable Amount
shall automatically be distributed in the form of a cash lump sum on the
Participant's Payment Eligibility Date.

        (b) In the case of a Participant whose Payment Eligibility Date occurs
prior to the date on which the Participant attains a minimum of five years of
employment with the Company and for reasons other than Disability or death, the
Distributable Amount shall be paid to the Participant in the form of a cash lump
sum on the Participant's Payment Eligibility Date.

        (c) If the Participant is in pay status at the time of death, the
Beneficiary shall be paid the remaining quarterly installments as they come due.

7.2     Early Distributions -- Payout.

        Notwithstanding Section 7.1, in connection with each election to defer
Compensation, a Participant may elect to receive a payout of such deferred
Compensation and its associated Company contributions, if any, prior to
terminating employment with the Company by filing an election (a "Payout
Election"). The Payout Election shall be made on a form provided by the
Committee and shall be subject to such terms and conditions as the Committee may
specify. A Payout Election shall entitle the Participant to receive a lump sum
payment in an amount that is equal to the deferred Compensation and the
associated Company Contribution, if any, plus earnings credited in the manner
provided in Section 4.1(d) above on that amount, determined at the time that the
payout becomes payable. A Payout Election may not specify a date that is within
five years of the date of such Election. In the event the Participant's
employment with the Company terminates for any reason, the Participant's Payout
Election, if any, shall be disregarded, and the distribution of the
Participant's Distributable Amount shall be governed by Section 7.1.

7.3     Early Distributions -- Withdrawal.

        Participants shall be permitted to request to withdraw amounts from
their Accounts prior to termination of employment with the Company ("Early
Distributions"). Upon receiving a withdrawal request, the Committee shall
determine, in its sole discretion, whether to permit any such withdrawal and the
amount, if any, to be withdrawn, subject to the following restrictions:

        (a) The election to take an Early Distribution shall be made by filing a
form provided by and filed with the Committee prior to the end of any calendar
month.


                                      -9-
<PAGE>   12

        (b) The amount payable to a Participant in connection with an Early
Distribution shall in all cases equal 90% of the amount requested by the
Participant or, if lesser, 90% of the withdrawal amount approved by the
Committee; provided, however, that the maximum amount payable to a Participant
in connection with an Early Distribution shall be 90% of the Distributable
Amount as of the end of the calendar month in which the Early Distribution
election is made.

        (c) The amount described in subsection (b) above shall be paid in a
single cash lump sum as soon as practicable after the end of the calendar month
in which the Early Distribution election is made.

        (d) If a Participant receives an Early Distribution, the remaining
portion of the requested or approved amount, as applicable (i.e., 10% of such
amount), shall be permanently forfeited and the Company shall have no obligation
to the Participant or his Beneficiary with respects to such forfeited amount.

        (e) If a Participant receives an Early Distribution, the Participant
shall be ineligible to Participate in the Plan for the balance of the Plan Year
in which the Early Distribution occurs and the following Plan Year.

        (f) An Early Distribution pursuant to this Section 7.3 of less than 90%
of the Participant's Distributable Amount shall be made pro rata from his or her
assumed investments according to the balances in such investments. Subject to
the foregoing, payment of any amount with respect to which a Participant has
filed a request under this Section 7.3 shall be made as soon as practicable
after approval of such request by the Committee.

7.4     Unforeseeable Emergency.

        The Committee may, pursuant to rules adopted by it and applied in a
uniform manner, accelerate the date of distribution of a Participant's Account
because of an Unforeseeable Emergency at any time. "Unforeseeable Emergency"
shall mean an unforeseeable, severe financial condition resulting from (a) a
sudden and unexpected illness or accident of the Participant or his or her
dependent (as defined in Section 152(a) of the Code); (b) loss of the
Participant's property due to casualty; or (c) other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant, but which may not be relieved through other available resources
of the Participant, as determined by the Committee in accordance with uniform
rules adopted by it. Distribution pursuant to this subsection of less than the
Participant's entire interest in the Plan shall be made pro rata from his or her
assumed investments according to the balances in such investments. Subject to
the foregoing, payment of any amount with respect to which a Participant has
filed a request under this subsection shall be made as soon as practicable after
approval of such request by the Committee.

7.5     Inability To Locate Participant.

        In the event that the Committee is unable to locate a Participant or
Beneficiary within two years following the Participant's Payment Eligibility
Date, the amount allocated to the Participant's Deferral 



                                      -10-
<PAGE>   13

Account shall be forfeited. If, after such forfeiture, the Participant or
Beneficiary later claims such benefit, such benefit (calculated immediately
prior to the forfeiture) shall be reinstated without interest or earnings.


                                  ARTICLE VIII

                                 ADMINISTRATION

8.1     Committee.

        A Committee shall be appointed by, and serve at the pleasure of, the
Board. The number of members comprising the Committee shall be determined by the
Board which may from time to time vary the number of members. A member of the
Committee may resign by delivering a written notice of resignation to the Board.
The Board may remove any member by delivering a certified copy of its resolution
of removal to such member. Vacancies in the membership of the Committee shall be
filled promptly by the Board.

8.2     Committee Action.

        The Committee shall act at meetings by affirmative vote of a majority of
the members of the Committee. Any action permitted to be taken at a meeting may
be taken without a meeting if, prior to such action, a written consent to the
action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. The chairman or any other member or members of the
Committee designated by the chairman may execute any certificate or other
written direction on behalf of the Committee.

8.3     Powers and Duties of the Committee.

        (a) The Committee, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan in accordance with its terms, shall be
charged with the general administration of the Plan and shall have all powers
necessary to accomplish its purposes, including, but not by way of limitation,
the following:

                (1)     To select the funds or contracts to be the Funds in
                        accordance with Section 3.3 hereof;

                (2)     To construe and interpret the terms and provisions of
                        this Plan;

                (3)     To amend, modify, suspend or terminate the Plan in
                        accordance with Section 9.4;



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<PAGE>   14

                (4)     To compute and certify the amount and kind of benefits
                        payable to Participants and their Beneficiaries and to
                        direct the Trustee as to the distribution of Plan
                        assets;

                (5)     To maintain all records that may be necessary for the
                        administration of the Plan;

                (6)     To provide for the disclosure of all information and the
                        filing or provision of all reports and statements to
                        Participants, Beneficiaries or governmental agencies as
                        shall be required by law;

                (7)     To make and publish such rules for the regulation of the
                        Plan and procedures for the administration of the Plan
                        as are not inconsistent with the terms hereof; and

                (8)     To appoint a plan administrator or any other agent, and
                        to delegate to them such powers and duties in connection
                        with the administration of the Plan as the Committee may
                        from time to time prescribe.

8.4     Construction and Interpretation.

        The Committee shall have full discretion to construe and interpret the
terms and provisions of this Plan, which interpretation or construction shall be
final and binding on all parties, including but not limited to the Company and
any Participant or Beneficiary. The Committee shall administer such terms and
provisions in a uniform and nondiscriminatory manner and in full accordance with
any and all laws applicable to the Plan.

8.5     Information.

        To enable the Committee to perform its functions, the Company shall
supply full and timely information to the Committee on all matters relating to
the Compensation of all Participants, their death or other cause of termination,
and such other pertinent facts as the Committee may reasonably require.

8.6     Compensation, Expenses and Indemnity.

        (a) The members of the Committee shall serve without compensation for
their services hereunder.

        (b) The Committee is authorized at the expense of the Company to employ
such legal counsel as it may deem advisable to assist in the performance of its
duties hereunder. Expenses and fees in connection with the administration of the
Plan shall be paid by the Company.

        (c) To the extent permitted by applicable state law, the Company shall
indemnify and save harmless the Committee and each member thereof, the Board and
any delegate of the Committee who is an employee of the Company against any and
all expenses, liabilities and claims, including legal fees 



                                      -12-
<PAGE>   15

to defend against such liabilities and claims arising out of their discharge in
good faith of responsibilities under or incident to the Plan, other than
expenses and liabilities arising out of willful misconduct. This indemnity shall
not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement
or otherwise, as such indemnities are permitted under state law.

8.7     Quarterly Statements.

        Under procedures established by the Committee, a Participant shall
receive a statement with respect to such Participant's Account on a quarterly
basis.


                                   ARTICLE IX

                                  MISCELLANEOUS

9.1     Unsecured General Creditor.

        Participants and their Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interests in any specific
property or assets of the Company. No assets of the Company shall be held under
any trust, or held in any way as collateral security for the fulfilling of the
obligations of the Company under this Plan. Any and all of the Company's assets
shall be, and remain, the general unpledged, unrestricted assets of the Company.
The Company's obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the rights of
the Participants and Beneficiaries shall be no greater than those of unsecured
general creditors.

9.2     Restriction Against Assignment.

        The Company shall pay all amounts payable hereunder only to the person
or persons designated by the Plan and not to any other person or corporation. No
part of a Participant's Account shall be liable for the debts, contracts, or
engagements of any Participant, his or her Beneficiary, or successors in
interest, nor shall a Participant's Account be subject to execution by levy,
attachment, or garnishment or by any other legal or equitable proceeding, nor
shall any such person have any right to alienate, anticipate, commute, pledge,
encumber, or assign any benefits or payments hereunder in any manner whatsoever.
If any Participant, Beneficiary or successor in interest is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge any distribution or payment from the Plan, voluntarily or involuntarily,
the Committee, in its discretion, may cancel such distribution or payment (or
any part thereof) to or for the benefit of such Participant, Beneficiary or
successor in interest in such manner as the Committee shall direct.



                                      -13-
<PAGE>   16

9.3     Withholding.

        There shall be deducted from each payment made under the Plan all taxes
which are required to be withheld by the Company in respect to such payment. The
Company shall have the right to reduce any payment by the amount of cash
sufficient to provide the amount of said taxes.

9.4     Amendment, Modification, Suspension or Termination.

        The Committee may amend, modify, suspend or terminate the Plan in whole
or in part, except that no amendment, modification, suspension or termination
shall have any retroactive effect to reduce any amounts allocated to a
Participant's Account, provided that a termination or suspension of the Plan or
any Plan amendment or modification that will significantly increase costs to the
Company shall be approved by the Board. In the event that this Plan is
terminated, the disposition of the amounts credited to a Participant's Account
shall be at the sole discretion of the Committee.

9.5     Governing Law.

        This Plan shall be construed, governed and administered in accordance
with the laws of the State of California.

9.6     Receipt or Release.

        Any payment to a Participant or the Participant's Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Committee and the Company. The
Committee may require such Participant or Beneficiary, as a condition precedent
to such payment, to execute a receipt and release to such effect.

9.7     Payments on Behalf of Persons Under Incapacity.

        In the event that any amount becomes payable under the Plan to a person
who, in the sole judgment of the Committee, is considered by reason of physical
or mental condition to be unable to give a valid receipt therefore, the
Committee may direct that such payment be made to any person found by the
Committee, in its sole judgment, to have assumed the care of such person. Any
payment made pursuant to such determination shall constitute a full release and
discharge of the Committee and the Company.

9.8     No Employment Rights.

        Participation in this Plan shall not confer upon any person any right to
be employed by the Company or any other right not expressly provided hereunder.



                                      -14-
<PAGE>   17

9.9    Headings, etc. Not Part of Agreement.

        Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.

        IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officer on this 9 day of May, 1997.


                                       VLSI TECHNOLOGY, INC.


                                       By: /s/ LARRY L. GRANT
                                           -------------------------------------
                                       Title: V.P. General Counsel and Secretary
                                              ----------------------------------


                                      -15-

<PAGE>   18
                                   EXHIBIT A

                                 AMENDMENT ONE
                          TO THE VLSI TECHNOLOGY, INC.
                    NON-QUALIFIED DEFERRED COMPENSATION PLAN

                                AUGUST 20, 1997

     Section 3.1(b) of the VLSI Technology, Inc. Non-Qualified Deferred
Compensation Plan (the "Plan") is hereby amended, effective with respect to
Plan years beginning on and after January 1, 1998, as follows:

     3.1  Elections to Defer Compensation

          (b)  General Rule. The amount of Compensation which an Eligible
          Employee may elect to defer is as follows:

               (1)  Any percentage of Salary up to 100%;

               (2)  Any percentage of Commissions up to 100%; and /or

               (3)  Any percentage of Bonus up to 100%;

          provided, however, that no election shall be effective to reduce the
          Compensation paid to an Eligible Employee for a calendar year to an
          amount that is less than the amount necessary to pay applicable
          employment taxes (e.g., FICA, hospital insurance) payable with respect
          to amounts deferred hereunder, amounts necessary to satisfy any other
          benefit plan withholding obligations, as resulting income taxes
          payable with respect to Compensation that cannot be so deferred, and
          any amounts necessary to satisfy any wage garnishment or similar type
          obligations.

     To the extent not inconsistent with this Amendment, the terms of the Plan
shall remain in full force and effect.

                                   VLSI TECHNOLOGY, INC.


                                   By: /s/  LARRY L. GRANT    
                                    ------------------------------------------- 
                                     LARRY L. GRANT
                                     V.P., Gen. Counsel & Sec. 
<PAGE>   19
                             VLSI TECHNOLOGY, INC.

                         COMPENSATION COMMITTEE OF THE

                               BOARD OF DIRECTORS

                                  RESOLUTIONS



RATIFICATION OF AMENDMENTS TO THE DEFERRED COMPENSATION PLAN

WHEREAS, on March 5, 1997 the Compensation Committee of the Board of Directors
(the "Compensation Committee") of VLSI Technology, Inc. (the "Corporation")
approved the establishment of a Non-Qualified Deferred Compensation Plan (the
"Plan") whereby a select group of management or highly compensated employees
may voluntarily defer a portion of their compensation, and such Plan has been
amended; and

WHEREAS, on August 20, 1997 the Compensation Committee approved an amendment to
the Plan; and

WHEREAS, the Corporation wishes to incorporate further amendments to the Plan.

NOW, THEREFORE, BE IT

RESOLVED:  That the Compensation Committee of the Board of Directors of VLSI
Technology, Inc. (the "Corporation") hereby ratifies and approves the following
additional amendments to be made a part of its Non-Qualified Deferred
Compensation Plan (the "Plan"):

     1.  Non-employee directors shall be eligible to participate in the Plan;

     2.  Maximum salary deferral of 100%;

     3.  In addition to the quarterly payout election, there shall be an annual
         installment payout election;

     4.  Participants may direct a different payout if death occurs while
         participant is on an installment payout (as opposed to continuing
         same payout participant was on at the time of death);

     5.  Payout shall be in the first quarter after separation from employment,
         if less than five years service; and

     6.  Participants may revoke payout at any time prior to payout, but no
         more than twice.
<PAGE>   20
RESOLVED FURTHER:  That the proper officers of this Corporation are authorized
and directed to execute all documents and to take any and all action as they may
deem necessary or advisable in order to carry out and perform the purposes of
these resolutions and all such prior actions taken by the officers in
connection herewith are ratified and approved.