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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K
______________________________
(Mark One)
/x/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 1, 2012
OR
/ /
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                              to                              .
Commission File No. 0-12695
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
94-2669985
(I.R.S. Employer Identification No.)
6024 SILVER CREEK VALLEY ROAD, SAN JOSE, CALIFORNIA
(Address of Principal Executive Offices)
95138
(Zip Code)
Registrant's Telephone Number, Including Area Code: (408) 284-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common stock, $.001 par value
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:  None 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  ý No  o  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  o No  ý
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  ý  No  o  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý No  ¨  
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
¨   Large accelerated filer                             ý    Accelerated filer                             ¨   Non-accelerated filer                ¨ Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes  o No  ý  
The aggregate market value of the voting and non-voting common equity held by non-affiliates was approxima tely $532 million , comp uted by reference to the last sales price of $5.15 as reported by The NASDAQ Stock Market LLC, as of the last business day of the registrant’s most recently completed second fiscal quarter, October 2, 2011. Shares of common stock held by each executive officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes. 
The number of outstanding shares of the registrant's Common Stock, $.001 par value, as of April 30, 2012 was approximately 142,271,904 .
DOCUMENTS INCORPORATED BY REFERENCE  
Items 10, 11, 12, 13, and 14 of Part III incorporate information by reference from the registrant’s Proxy Statement for the 2012 Annual Meeting of Stockholders.

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INTEGRATED DEVICE TECHNOLOGY, INC.
ANNUAL REPORT ON FORM 10-K
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PART I

Special Note Regarding Forward-Looking Statements

We have made statements in this Annual Report on Form 10-K in Part I, Item 1-“Business,” Item 1A-“Risk Factors,” Item 3-“Legal Proceedings,” Part II, Item 7-“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Annual Report that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  These statements relate to future events and the future results of Integrated Device Technology, Inc., including expectations for IDT's proposed acquisition of PLX and are based on current expectations, estimates, forecasts and projections about our business and growth prospects, the industry in which we operate and general economic conditions and the beliefs and assumptions of our management.  In addition, in this Annual Report on Form 10-K, the words “expects,” “anticipates,” ”targets,” “goals,” “projects,” “intends,” “plans, “believes,” “seeks, “estimates, “will,” “would,” “could,” “might”, and variations of such words and similar expressions, as they relate to us, our business and our management, are intended to identify such forward-looking statements.  Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Annual Report under the section entitled “Risk Factors” under Part I, Item 1A and elsewhere in this Annual Report, and in other reports we file with the Securities and Exchange Commission (SEC), including our most recent quarterly reports on Form 10-Q.

Forward-looking statements speak only as of the date the statements are made.  You should not put undue reliance on any forward-looking statements.  We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.  If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

ITEM 1. BUSINESS

We design, develop, manufacture and market a broad range of low-power, high-performance mixed signal semiconductor solutions for the advanced communications, computing and consumer industries. Currently, we offer communications solutions for customers within the enterprise, data center and wireless markets. Our computing products are designed specifically for storage and server applications and personal computers, while our consumer products focus on solutions for gaming consoles, set-top boxes, digital TV and smart phones . Ultimately, we envision equipping every digital system with an interface based on our silicon.

Our top talent and technology paired with an innovative product-development philosophy focused on digital media allow us to streamline a customer’s overall experience with digital media. Through system-level analog and digital innovation, we consistently deliver extraordinary value to our customers’ applications.

On a worldwide basis, we primarily market our products to original equipment manufacturers (OEMs) through a variety of channels, including direct sales, distributors, electronic manufacturing suppliers (EMS’s) and independent sales representatives.

We seek to differentiate our products from our competitors’ products through the following capabilities:
 
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Focus on market leadership in timing, serial switching and memory interfaces and substantiate the foundation by adding new technologies, including analog, power management and systems expertise;
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Investments in applications expertise, system-level knowledge and whole product solution elements that solve difficult technology challenges for our customers and enable them to reduce their overall bill-of-materials (BOM), increase system performance and lower power consumption while accelerating their time-to-market;
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Application of our diverse skill, expertise and technology to help our customers achieve maximum benefit from evolving technology standards relevant in the market;
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Dependability and reliability of an experienced, high-volume vendor with a long-term view;
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Combination of our digital design silicon heritage and the latest in analog, mixed-signal capabilities to provide highly integrated Application Specific Standard Products (ASSPs); and

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Customizable model and design services to offer user-configured, application-optimized, quick turn benefits to our customers.

IDT was incorporated in California in 1980 and reincorporated in Delaware in 1987. The terms “the Company,” “IDT,” “our,” “us” and “we” refer to Integrated Device Technology, Inc. and its consolidated subsidiaries, where applicable.

Available Information

We electronically file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.   You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed with or furnished to the SEC on our website on the World Wide Web at http://www.IDT.com, by contacting the Investor Relations Department at our corporate offices by calling (408) 284-8200 or by sending an e-mail message to ir@IDT.com.

Products and Markets

We offer a broad portfolio of essential semiconductor solutions, including integrated circuits (ICs) that allow digital media to be synchronized, processed and delivered in current and next-generation communications, computing and consumer applications. Among these, we develop solutions that connect digital systems such as processors and memories to the analog world with sight, sound and touch. To accomplish this, our solutions require analog and digital as well as systems expertise. We have successfully expanded our product portfolios targeting applications for – i) Communication Infrastructure; ii) Enterprise Computing ; iii) Consumer Mobility.

Fiscal year 2011 was a critical year for us, as we successfully transitioned into an analog and digital company and enhanced our market leadership capabilities in the timing, serial switching and memory interface markets. In fiscal 2012, we continued to emphasize our growth strategy: defending and growing our core businesses while expanding our potential content in customers’ systems with new analog-intensive mixed signal solutions to achieve higher growth rates.

We measure our business based on two reportable segments: the Communications segment and the Computing and Consumer segment. In fiscal 2012 , the Communications segment and the Computing and Consumer segment accounted for approximately 47% and 53% , respectively, of our total revenues of $526.7 million . In fiscal 2011 , the Communications segment and the Computing and Consumer segment accounted for approximately 48% and 52% , respectively, of our total revenues of $605.4 million . In fiscal 2010 , the Communications segment and the Computing and Consumer segment accounted for approximately 47% and 53% , respectively, of our total revenues of $524.2 million . For further information, see “Note 19 - Segments” in Part II, Item 8 of this Form10-K.

By leveraging our products and markets, we deliver high value to our customers’ applications through system-level analog and digital innovations.
 
Communications Segment

The Communications segment includes clock and timing solutions, Serial RapidIO ® switching solutions, Crystal Oscillator replacements, radio frequency (RF), signal path products, flow-control management devices, first in and first out (FIFOs), integrated communications processors, high-speed static random access memory (SRAM), digital logic and telecommunications products.

Communication Timing Products: Created for networking, communications (SONET/SDH), advanced computing (servers and workstations) and enterprise storage (SAN and NAS) applications, our communication clocks include high-performance and high-reliability frequency generation and clock distribution products enabling clock-tree development, clock synthesizers optimized for Freescale PowerQUICC™ processors, FemtoClock™ ultra-low jitter clock sources, Stratum-compliant jitter attenuation and frequency translation PLLs, surface acoustic wave (SAW) PLL communications modules, voltage-controlled SAW oscillator modules and complementary metal oxide semiconductor (CMOS) crystal oscillator replacements. We are the leading provider of silicon timing solutions, offering a complete portfolio of products for clock generation, distribution, recovery and jitter attenuation to serve numerous computing, consumer and communications applications.

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Digital Logic Products : We provide fast CMOS TTL-compatible, low-voltage CMOS and advanced low-voltage CMOS, including a broad range of high-performance, 3.3-volt CMOS logic products. These products are developed for network switches and routers, wireless base stations, storage networks, servers and other applications.

FIFO Memories:  We develop products and technologies to help designers solve inter-chip communications problems such as rate matching, data buffering, bus matching and data-priority managing. We provide a large product portfolio with more than 350 synchronous, asynchronous and bi-directional FIFO offerings that address complex issues associated with high-performance networking applications, such as terabit routers, multi-service switching platforms, host bus adaptors and wireless base stations.

Serial RapidIO Solutions : Our family of Serial RapidIO products provides cost-effective, off-the-shelf solutions targeting wireless base station infrastructure applications; specifically baseband processing solutions that utilize digital signal processing (DSP) clusters as well as radio card interface solutions utilizing the Common Public Radio Interface (CPRI™) industry standard. Our RapidIO switch family addresses the needs of switching data between multiple endpoints. These switches are ideal for central switch cards as well as baseband processing cards. The Serial Buffer family of devices provides all the necessary buffering and storage of data at full 10Gb line rates as well as parallel interfaces to enable the use of legacy components over a non-Serial RapidIO interface. The Functional InterConnect (FIC) devices offer low-cost connectivity between Serial RapidIO, CPRI, Time Division Multiplexing (TDM) and parallel interfaces. A “Baseband-on-a-Card” uTCA board with software and Application Programming Interfaces (APIs) enable our customers to significantly improve their time-to-market. These Serial RapidIO solutions are also ideal for other DSP cluster applications, including video imaging, IPTV, medical and military applications.

SRAM Products: With more than two decades of SRAM experience, we produce a broad line of high-speed, industry-standard SRAMs that are used in communications and other markets. We offer a wide range of products from 16-Kbit to 18-Mbit densities in synchronous and asynchronous architectures. We invented Zero Bus Turnaround® (ZBT®) technology, which has become the communications SRAM standard, and co-developed the quad data rate™ architecture (QDR).

RF Products : We provide an industry-first RF product, including the F1200 low-noise digital IF VGA, ideal for commercial radio systems with very high SNR requirements. Its extremely low distortion makes the device very flexible, while the 200 ohm differential input and output impedances allow it to integrate seamlessly into the signal path.

Telecommunications Products: We offer a broad telecommunications semiconductor portfolio, including products for access and transport, TDM switching and voice processing. The IDT SuperJET™ family of J1/E1/T1 transceivers includes the industry’s first monolithic octal density device, designed to address next-generation universal line-card designs in communications applications. In addition, we provide products for multiplexing and a wide selection of time slot interchange switches and programmable voice CODEC devices for high-volume applications.

Computing and Consumer Segment

The Computing and Consumer Segment includes clock generation and distribution products, high-performance server memory interfaces, PCI Express switching solutions, signal integrity products, multi-port products, touch controllers, PC audio, power management solutions and video products.

Audio: Our high-definition (HD) Audio codecs ensure that PCs and notebooks have the best audio fidelity in the market. Our growing portfolio supports from 2 to 10 channels of audio along with advanced technologies, such as integrated digital microphone interface, modem interface, ADAT ® optical interface and more. The power optimization, high performance and quality of our HD Audio codecs bring higher fidelity to media center and entertainment PCs. In addition, our graphical user interface (GUI) enables end users to visually experience the IDT brand while simplifying their control of the computer audio subsystem.

Consumer and Computing Timing Products: Optimized for digital consumer applications, such as video game consoles, set-top boxes (cable, satellite and internet protocol (IP)/digital subscriber line (DSL), digital TV and DVD recorders, our consumer clocks consist of custom and off-the-shelf solutions. Products include programmable timing devices that address in-system programming and test, clock redundancy and I/O translation. By directly enhancing design flexibility, portability and reliability, these products also reduce inventory and test costs. Our other consumer clocks include zero-delay buffers, clock synthesizers, voltage-controlled crystal oscillators and spread-spectrum clock generators.

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CrystalFree ™ Oscillators: Our crystalFree™ products replace quartz-crystal oscillators and passive crystal (XTAL) resonators with advanced technologies, taking advantage of the economies and scale of both semiconductor processes and standard plastic packages. These devices offer a number of advantages over traditional quartz-crystal based products. Customers worldwide are resolving the challenges encountered with quartz-crystal technology by taking advantage of our CrystalFree technology. The CrystalFree Solid-State crystal-oscillator (XO) replacement products are based on over 35 patents (granted or filed) and consume as little as 1/10th the power of XO products. Also known as CMOS oscillators or silicon oscillators, these devices provide significant price saving, lead time, and performance improvements as compared to quartz-crystal oscillators. Our CrystalFree Solid-State resonator replacement products provide performance, integration, and lead-time advantages over crystal (XTAL) resonators with no cost penalty using solid-state active oscillator technology.

CrystalFree ™ piezoelectric MEMS ( pMEMS ™): Our CrystalFree Piezo MEMS (pMEMS™) Oscillator technology is transforming the frequency control market. Combining the advantages of piezoelectric quartz with the advantages and reliability of silicon MEMS resonators, IDT's pMEMS resonator technology combines the strong electromechanical coupling of the piezoelectric material with the stability and low damping of single crystal silicon to create a passive frequency source of unparalleled performance and reliability. Based on over 40 patents (granted or filed), IDT's CrystalFree pMEMS resonators are the world's smallest hermetically-sealed wafer level package (WLP) resonators.

Our computing timing solutions offer a unique combination of features and high performance, enabling leading-edge technologies, such as PCI Express (Generation 2 and 3), as well as fully buffered, dual in-line memory modules. In addition, we provide customized clock solutions, offering optimized feature sets to meet the needs of specific motherboards. We offer the industry’s largest portfolio of computing timing solutions products for all generations of motherboards that are manufactured by Intel, Inc., Via Technologies, Inc., Silicon Integrated Systems (SiS) Corporation. and Advanced Micro Devices, Inc.

We are the leading provider of silicon timing solutions, offering a complete portfolio of products for clock generation, distribution, recovery and jitter attenuation to serve numerous computing, consumer and communications applications.

Integrated Communications Processors: Our Interprise™ family of integrated communications processors consists of a range of processors and development tools. In addition, we partner with industry-leading software and hardware vendors to deliver system platforms to communications customers. The devices are based on the MIPS™ instruction set architecture and serve communications market segments, such as Ethernet switches, enterprise gateways and wireless local area networks (LANs), as well as edge and access market areas, including fiber-to-the-home and wireless application protocols (WAPs). Our Interprise processors provide a combination of flexibility, performance and appropriate integration levels that enable customers to get to market quickly with cost-effective, flexible systems.

Memory Interface Products : The broad range of our products for dual in-line memory modules (DIMMs) is a direct result of our significant experience in timing, high-speed serial interface and logic technologies. Our advanced memory buffer devices (AMBs) are a class of products that provide a high-speed, serial, communications interface between the memory controller and modules on the channel of FB-DIMMs for server and workstation applications. We offer register and PLL chipsets to meet the latest memory speed needs of server and workstation devices, including Single Data Rate (SDR), Double Data Rate (DDR), DDR2, and DDR3 memory technology.

Multi-Port Memory Products: We offer a comprehensive portfolio of high-performance multi-port memory products. Our portfolio consists of more than 150 types of asynchronous and synchronous dual-ports, tri-ports, four-ports and bank-switchable dual-ports. These devices are well-suited for wireless infrastructures, networking, storage, wireless handsets, high-speed image processing and multi-core computing, such as supercomputers.
 
Power Management Solutions: We offer the industry's first true single-layer wireless transmitter IC and highest-output-power wireless receiver, the widest dynamic range power metering ICs, the industry's first embedded mixed-signal platform Intelligent System Power Solution, the coolRAC™ high-efficiency rack-level system power solution, and HyperGear™ companion power management and timing solutions for improved performance and efficiency.

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The Power Metering Solutions represent our entry into the smart grid industry with its first family of metering ICs for smart power meters. The Power Metering Solutions feature the widest dynamic range in the industry as well as high accuracy, helping improve the performance of smart meters.

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The Intelligent System Power Solutions device represents the industry's first embedded mixed-signal platform solution and incorporates a microcontroller, power management, audio and other key functions into a single component. The new

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P95020 is a single-chip solution that provides intelligent system power management to help improve battery life in today's portable electronic devices.

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IDT's Wireless Power Solutions offer the world's first true single-chip wireless power transmitter accompanied by the industry's highest-output-power single-chip receiver solution. In addition, IDT's highly integrated multi-mode transmitter reduces board footprint by 80 percent and solution BOM cost by 50 percent compared to existing solutions.
 
Signal Integrity Products: Computing and storage applications face increasing signal integrity challenges as data rates continuously rise. The high speed I/O used in today’s systems make cost-effective and reliable PCB design complicated. Our signal integrity products condition signals and help alleviate constraints in computing, storage and communications applications.

Switching Solutions: Our family of PCI Express switching solutions is aimed at high-performance server, storage, embedded and communications applications. Moreover, we offer customers a complete integrated hardware/software development kit that includes evaluation boards, software drivers and a graphical user interface that enables complete system configuration and optimization. Our PCIe Gen1,Gen2 and Gen3 devices are optimized for I/O expansion system interconnects and inter-domain communications.
 
Touch Controllers : Increasingly, touch technology is being used in consumer electronics and durable goods to create sleek, streamlined products. The latest mobile phone and media player designs feature capacitive touch, differentiating them from standard offerings with mechanical buttons. In consumer durables, such as washing machines and refrigerators, touch interfaces are implemented not only for visual appeal, but also for enhanced reliability in kitchen and laundry environments where heat, moisture and dust present challenges for traditional input techniques. We offer compelling touch solutions based on a strategy of integration, reliability and power efficiency.
 
Sales Channels

We sell our semiconductor products through three channels: direct sales to OEMs and EMSs, consignment sales to OEMs and EMSs, and sales through distributors.  Direct sales are managed mainly through our internal sales force and independent sales representatives.  Revenue is recognized on direct sales based on the relevant shipping terms.  During fiscal 2012 , direct sales accounted for approximately 19% of our total worldwide revenues.

Consignment sales relate to areas where we have established hubs at or near key customers to allow them quick access to our products.  We retain ownership of the product at consignment locations until the product is pulled by the customer.  Consignment sales are managed by our internal sales team and accounted for approximately 12% of our total worldwide revenues in fiscal 2012 .

The majority of our worldwide sales are through distributors.  Our distributors within the U.S. and Europe have rights to price protection, ship from stock pricing credits and stock rotation.  Due to the uncertainty of the amount of the credits related to these programs, revenue is not recognized until the product has been sold by the distributor to an end customer. Within the Asia Pacific region which excludes Japan (“APAC”) and Japan, distributors have limited stock rotation and little or no price protection rights. Revenue is recognized upon shipment to these distributors as we are able to reasonably estimate the amount of pricing adjustments and stock rotation returns.  Revenue recognized on a sell through basis through distribution represented approximately 19% of our total worldwide revenues in fiscal 2012 , while revenue through distribution recognized upon shipment represented 50% of our total worldwide revenues in the same period.

Sales through three distributors accounted for 10% or more of our total revenues in fiscal 2012, 2011 and 2010. Sales through, Maxtek and its affiliates, represented approximately 15% , 19% and 21% of our total revenues in fiscal 2012 , 2011 and 2010 , respectively.  Sales through Avnet, represented approximately 11% , 13% and 11% of our total revenues in fiscal 2012 , 2011 and 2010 , respectively. Uniquest represented approximately 10% of the Company's revenue in fiscal 2012 .  No other distributor, single direct or consignment customer represented 10% or more of our total revenues in fiscal 2012, 2011 and 2010.

Customers

We market our products on a worldwide basis, primarily to OEMs who, in turn, incorporate our products into the customers’ products marketed under their brands. We work closely with our OEM customers to design and integrate current and next generation products to meet the requirements of end users.  Many of our end customer OEMs have outsourced their manufacturing to a concentrated group of global EMSs and original design manufacturers (ODMs), who then buy product directly from us or through our distributors on behalf of the OEM. These EMSs and ODMs have achieved greater autonomy in design win, product qualification and product purchasing decisions, especially for commodity products.  No direct OEM customer accounted for 10% or more of our total revenues in fiscal 2012, 2011 and 2010. However, when sales through all channels are considered, we estimate that end-

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customer sales to Cisco Systems, Inc. and/or its wholly-owned subsidiaries represented approximately 11% our revenues in fiscal 2012. No customer accounted for 10% or more of our total revenues in fiscal 2011 or 2010.

Government Contracts

We may from time-to-time derive revenue from contracts and subcontracts with agencies of, or prime or secondary contractors to, the U.S. government, including U.S. military agencies.  Consequently, we are subject to certain business risks that are particular to companies that contract with U.S. government agencies.  These risks include the ability of the U.S. government or related contractors to unilaterally:

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Terminate contracts at its convenience;
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Terminate, modify or reduce the value of existing contracts, if budgetary constraints or needs change;
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Cancel multi-year contracts and related orders, if funds become unavailable;
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Adjust contract costs and fees on the basis of audits performed by U.S. government agencies;
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Control and potentially prohibit the export of our products;
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Require that the company continue to supply products despite the expiration of a contract under certain circumstances;
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Require that the company fill certain types of rated orders for the U.S. government prior to filling any orders for other customers; and
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Suspend us from receiving new contracts pending resolution of any alleged violations of procurement laws or regulations.
In addition, because we may enter into defense industry contracts with respect to products that are sold both within and outside of the United States, we are subject to the following additional risks in connection with government contracts:

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The need to bid on programs prior to completing the necessary design, which may result in unforeseen technological difficulties, delays and/or cost overruns;
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The difficulty in forecasting long-term costs and schedules and the potential obsolescence of products related to long-term fixed price contracts; and
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The need to transfer and obtain security clearances and export licenses, as appropriate.
The revenue from, and activity with, contracts and subcontracts with agencies of, or prime contractors to, the U.S. government, has declined subsequent to the disposition of our military business to Spectrum Control, Inc. in fiscal 2010.  For further information, please see “Note 6 - Divestitures” in Part II, Item 8 of this Annual Report on Form 10-K.

Manufacturing

We currently use third-party foundries that are primarily located in the Asia- Pacific region to manufacture our products. In fiscal 2010, 2011 and 2012, we manufactured wafers at our Oregon wafer fabrication facility which produced 200mm (8-inch) wafers ranging from 0.6-micron to 0.12-micron process technologies. In the fourth quarter of fiscal 2012, we completed the transition of wafer fabrication activities from our facility to third-party foundries. In addition, during the fourth quarter of fiscal 2012, we completed the sale of this facility to Alpha and Omega Semiconductor Limited. We assemble or package products at several different subcontractors in the APAC region.  Utilizing several different subcontractors located in different countries enables us to negotiate lower prices and limits the risk associated with production concentration in one country or company.  The criteria used to select assembly subcontractors include, but are not limited to cost, quality, delivery, and subcontractor financial stability. We perform vast majority of our test operations at our test facility located in Malaysia.  A relatively small amount of test operations are also performed at third party subcontractors in the APAC region.
Backlog

We offer custom designed products, as well as industry-standard products and ASSPs. Sales are made primarily pursuant to standard purchase orders, which are frequently revised by customers as their requirements change. We have also entered into master purchase agreements, which do not require minimum purchase quantities, with many of our OEM and EMS customers. We schedule product deliveries upon receipt of purchase orders under the related customer agreements. Generally, these purchase orders and customer agreements, especially those for standard products, also allow customers to change the quantities, reschedule delivery dates and cancel purchase orders without significant penalties. In general, orders, especially for industry standard products, are often made with very short lead times and may be canceled, rescheduled, re-priced or otherwise revised prior to shipment. In addition, certain distributor orders are subject to price adjustments both before and after shipment.  For all these reasons, we do not believe that our order backlog is a reliable indicator of future revenues.

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Seasonal Trends

Certain of our products are sold in the computing and consumer end markets which generally have followed annual seasonal trends. Historically, sales of products for these end markets have been higher in the second and third quarters of the fiscal year as consumer purchases of PCs and gaming systems increase significantly in the second half of the calendar year due to back-to-school and holiday demand.

Research and Development

Our research and development efforts emphasize the development and design of proprietary, differentiated, high-performance, low-power analog and mixed-signal semiconductor products. We believe that a sustained level of investment in research and development is necessary to maintain our competitive position. We operate research and development centers in Irvine, San Jose and Sunnyvale, California; Fort Collins, Colorado; Tempe and Tucson, Arizona; Atlanta, Georgia; Austin, Texas; Basking Ridge, New Jersey; Andover, Marlborough and Watertown, Massachusetts; Ann Arbor, Michigan; Ottawa , Canada and Shanghai, China. Research and development expenses, as a percentage of revenues, were approximately 30% , 26% and 26% in fiscal 2012, 2011 and 2010, respectively.

Our product development activities are focused on the design of integrated circuits that provide differentiated features and enhanced performance primarily for communications, computing and consumer applications.

Competition

The semiconductor industry is characterized by rapid technological advances, cyclical market patterns, erosion of product sale prices and evolving industry standards. Many of our competitors have substantially greater technical, marketing, manufacturing or financial resources than we do. In addition, several foreign competitors receive financial assistance from their governments, which could give them a competitive advantage. We compete in different product areas to varying degrees on the basis of technical innovation and product performance, as well as product quality, availability and price.

Our competitive strategy is to use our applications expertise to develop a deep understanding of customers’ systems and to use our unique combination of analog and digital technologies to develop complete product portfolios that solve our customers’ whole problem.  We differentiate our products through innovative configurations, proprietary features, high performance, and breadth of offerings. Our ability to compete successfully and to expand our business will depend on a number of factors, including but not limited to:

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Performance, feature, quality and price of our products;
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Timing and success of new product introductions by us, our customers and our competitors;
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Quality of technical service and support and brand awareness;
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Cost effectiveness of our design, development, manufacturing and marketing efforts; and
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Global economic condition.

We compete with product offerings from numerous companies, including LSI, Conexant Systems, Cypress Semiconductor, Exar, Freescale Semiconductor, Integrated Silicon Solutions, Intel, Maxim Integrated Products, Micrel Inc., Pericom Semiconductor, Philips Electronics, PLX Technology, Realtek Semiconductor, STMicroelectronics, Texas Instruments, Toshiba, Analog Devices, Inphi, Silicon Laboratories, Montage, and Diablo.

Intellectual Property and Licensing

We rely primarily on our patents, trade secrets, contractual provisions, licenses, copyrights, trademarks, and other proprietary rights mechanisms to protect our intellectual property.  We believe that our intellectual property is a key corporate asset, and we continue to invest in intellectual property protection. We also intend to increase the breadth of our patent portfolio. There can be no assurance that any patents issued to us will not be challenged, invalidated or circumvented, that the rights granted thereunder will provide competitive advantages to us or that our efforts to protect our intellectual property rights will be successful.

In recent years, there has been a growing trend of companies resorting to litigation to protect their semiconductor technology from unauthorized use by others. We have been involved in patent litigation, which has adversely affected our operating results. Although we have obtained patent licenses from certain semiconductor manufacturers, we do not have licenses from a number of semiconductor manufacturers with broad patent portfolios.  While we are not knowingly infringing on any of their patents, these semiconductor manufacturers may resort to litigation or other means in an effort to find infringements and force us to obtain

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licenses to their patents.  Our success will depend in part on our ability to obtain necessary intellectual property rights and protect our intellectual property rights.  While we have filed patent applications, we cannot be certain that these applications will issue into patents or that we will be able to obtain the patent coverage and other intellectual property rights necessary to protect our technology.  Further, we cannot be certain that once granted, the intellectual property rights covered by such patents will not be challenged by other parties.

Environmental Regulation

We are committed to protecting the environment and the health and safety of our employees, customers and the public.  We endeavor to adhere to the most stringent standards across all of our facilities, to encourage pollution prevention and to strive towards continual improvement.  As an integral part of our total quality management system, we strive to exceed compliance with regulatory standards in order to achieve a standard of excellence in environmental, health and safety management practices.

Our manufacturing facilities are subject to numerous environmental laws and regulations, particularly with respect to the storage, handling, use, discharge and disposal of certain chemicals, gases and other substances used or produced in the semiconductor manufacturing process.  Compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, financial condition or competitive position.  Although we believe that we are fully compliant with all applicable environmental laws and regulations there can be no assurance that current or future environmental laws and regulations will not impose costly requirements upon us.  Any failure by us to comply with applicable environmental laws and regulations could result in fines, suspension of production and legal liability.

Employees

As of April 1, 2012 , we had approximately1,800 employees worldwide, with approximately 850 employees located in the United States.  Our future success depends in part on our ability to attract and retain qualified personnel, particularly engineers, who are often in great demand. We have implemented policies enabling our employees to share in our success, including stock option, restricted stock unit, stock purchase and incentive bonus plans. We have never had a work stoppage related to labor issues.  None of our employees are currently represented by a collective bargaining agreement, and we consider our relationship with our employees to be good.


ITEM 1A.  RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below and all information contained in this report before you decide to purchase our common stock. If any of the possible adverse events described below actually occurs, we may be unable to conduct our business as currently planned and our financial condition and operating results could be harmed. In addition, the trading price of our common stock could decline due to the occurrence of any of these risks, and you may lose all or part of your investment. The risks described below are not the only risks facing us.  Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations, results, and financial condition.

Our operating results can fluctuate dramatically.   Our operating results have fluctuated in the past and are likely to vary in the future. Fluctuations in operating results can result from a wide variety of factors, including:

•
global economic conditions, including those related to the credit markets;
•
changes in the demand for and mix of products sold and in the markets we and our customers serve;
•
the cyclicality of the semiconductor industry;
•
the availability of industry-wide wafer processing capacity;
•
the availability of industry-wide and package specific assembly subcontract capacity and related raw materials;
•
competitive pricing pressures;
•
the success and timing of new product and process technology announcements and introductions from us or our competitors;
•
potential loss of market share among a concentrated group of customers;
•
difficulty in attracting and retaining key personnel;
•
difficulty in predicting customer product requirements;
•
production difficulties and interruptions caused by our complex manufacturing and logistics operations;
•
reduced control over our manufacturing and product delivery as a result of our increasing reliance on subcontractors, foundry and other manufacturing services;
•
unrealized potential of acquired businesses and resulting assets impairment;

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•
availability and costs of raw materials from a limited number of suppliers;
•
political and economic conditions in various geographic areas;
•
reduced customer demand as a result of the impact from natural and/or man-made disasters which may adversely impact our customer's manufacturing capability or reduce our customer's ability to acquire critical materials or components to manufacture their end products;
•
costs associated with other events, such as intellectual property disputes or other litigation; and
•
legislative, tax, accounting, or regulatory changes or changes in their interpretation.


Global economic conditions, including those related to the credit markets, may adversely affect our business and results of operations .

Adverse changes in global financial markets and rapidly deteriorating business conditions in the world's developed economies in late 2008 and the first half of calendar year 2009 resulted in a significant global economic recession. Continuing concerns about the impact of high energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market, a declining real estate market in the U.S. and sovereign debt crises in Europe and the U.S. have contributed to instability in both U.S. and international capital and credit markets, weakened demand and diminished expectations for the U.S. and global economy. These conditions, and the resulting low business and consumer confidence, and high unemployment have contributed to substantial volatility in global capital markets and uncertain demand for our products throughout fiscal 2010, fiscal 2011, and in fiscal 2012. It is difficult for our customers, our vendors, and us to accurately forecast and plan future business activities in this economic environment.

The economic slowdown resulted in reduced customer spending for semiconductors and weakened demand for our products, which had a negative impact on our revenue, gross profit, results of operations and cash flows during fiscal 2010, 2011 and 2012. Global credit markets continue to be volatile and sustainable improvement in global economic activity is uncertain. Should the rate of global economic growth falter, customer demand for our products may continue to decline, which is likely to have a negative impact on our revenue, gross profit, results of operations and cash flows. Reduced customer spending and weakened demand may drive the semiconductor industry to reduce product pricing, which would also have a negative impact on our revenue, gross profit and results of operations and cash flows. In addition, the semiconductor industry has traditionally been highly cyclical and has often experienced significant downturns in connection with, or in anticipation of, deterioration in general economic conditions and we cannot accurately predict how severe and prolonged any downturn might be.

The cyclicality of the semiconductor industry exacerbates the volatility of our operating results.  

The semiconductor industry is highly cyclical. The semiconductor industry has experienced significant downturns, often in connection with product cycles of both semiconductor companies and their customers, but also related to declines in general economic conditions. These downturns have been characterized by volatile customer demand, high inventory levels and accelerated erosion of average selling prices. Any future economic downturns could materially and adversely affect our business from one period to the next relative to demand and product pricing. In addition, the semiconductor industry has experienced periods of increased demand, during which we may experience internal and external manufacturing constraints. We may experience substantial changes in future operating results due to the cyclical nature of the semiconductor industry.

Demand for our products depends primarily on demand in the communications, enterprise computing, personal computer (PC), and consumer markets which can be significantly affected by concerns over macroeconomic issues.

Our product portfolio consists predominantly of semiconductor solutions for the communications, computing, and consumer markets. Our strategy and resources are directed at the development, production and marketing of products for these markets. The markets for our products will depend on continued and growing demand for communications equipment, servers, PCs and consumer electronics. These end-user markets may experience changes in demand that could adversely affect our business and could be greater in periods of economic uncertainty and contraction. To the extent demand or markets for our products or markets for our products do not grow, our business could be adversely affected.

We are reliant upon subcontractors and third-party foundries.

We are dependent on third-party subcontractors for all of our assembly operations. We are also dependent on third-party outside foundries for the manufacture of our silicon wafers. Our increased reliance on subcontractors and third-party foundries for our current products increases certain risks because we will have less control over manufacturing quality and delivery schedules, maintenance of sufficient capacity to meet our orders and generally, maintaining the manufacturing processes we require. During the fourth quarter of fiscal 2012, we completed the transfer of our internal wafer fabrication production to outside foundries. Due to production lead times and potential capacity constraints, any failure on our part to adequately forecast the mix of product demand

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and resulting foundry and subcontractor requirements could adversely affect our operating results. In addition, we cannot be certain that these foundries and subcontractors will continue to manufacture, assemble, package and test products for us on acceptable economic and quality terms, or at all, and it may be difficult for us to find alternatives in a timely and cost-effective manner if they do not do so.

We have made and may continue to make acquisitions and divestitures which could divert management's attention, cause ownership dilution to our stockholders, be difficult to integrate, and/or adversely affect our financial results.

Acquisitions and divestitures are commonplace in the semiconductor industry and we have acquired and divested, and may continue to acquire or divest, businesses and technologies. Integrating newly acquired businesses or technologies could put a strain on our resources, could be costly and time consuming, and might not be successful. Acquisitions or divestitures could divert our management's attention and other resources from other business concerns. In addition, we might lose key employees while integrating new organizations. Acquisitions and divestitures could also result in customer dissatisfaction, performance problems with an acquired company or technology, dilutive or potentially dilutive issuances of equity securities, the incurrence of debt, the assumption or incurrence of contingent liabilities, or other unanticipated events or circumstances, any of which could harm our business. Consequently, we might not be successful in acquiring or integrating any new businesses, products, or technologies, and might not achieve anticipated revenues and cost benefits. In addition, we might be unsuccessful in finding or completing acquisition or divestiture opportunities on acceptable terms in a timely manner.

Our proposed acquisition of PLX Technology, Inc., may not be successfully completed, and even if it is completed, we may not be able to fully realize the anticipated benefits of the acquisition.

On April 30, 2012, we entered into an Agreement and Plan of Merger (Merger Agreement) with PLX Technology, Inc (PLX), pursuant to which we will commence an exchange offer (offer) to purchase all of the outstanding shares of PLX common stock, $0.001 par value, in exchange for consideration, per share of PLX common stock, comprised of (i) $3.50 in cash plus (ii) 0.525 of a share of IDT common stock, without interest and less any applicable withholding taxes, with the ultimate goal of merging PLX with and into one of our wholly owned subsidiaries (merger). The offer and the merger are subject to the satisfaction or, where permissible, waiver of a number of conditions, many of which are out of our control, including there being tendered enough shares of PLX common stock in the offer to constitute a majority of the voting power of PLX common stock outstanding and the expiration of applicable waiting periods under antitrust regulations. As a result, the offer and the merger may not be successfully completed. Furthermore, if the completion of the offer and the merger are substantially delayed, we may not be able to realize the expected benefits of the merger on a timely basis or at all.

Even if the offer and the merger were completed, the successful integration of PLX's business and operations into those of our own and our ability to realize the expected synergies and benefits of the transaction are subject to a number of risks and uncertainties, many of which are outside of our control. These risks and uncertainties include, among other things:

•
our ability to complete the timely integration of organizations, operations, procedures, policies and technologies, as well as the harmonization of differences in the business cultures of the two companies and retention of key personnel;
•
our ability to minimize the diversion of management attention from ongoing business concerns during the process of integrating the two companies;
•
our ability to preserve customer, supplier and other important relationships of both IDT and PLX and resolve potential conflicts that may arise; and
•
our ability to address differences in the business cultures of IDT and PLX to maintain employee morale and retain key employees.

In addition, the offer and the merger may not be accretive and may cause dilution to the combined company's earnings per share, which may negatively affect the price of our common stock following consummation of the offer and the merger. Any failure to realize the full benefits and synergies of the offer and the merger could adversely impact our business, results of operation and financial condition.

We currently expect to take on significant debt to finance the transactions contemplated by the Merger Agreement, and such increased debt levels could adversely affect its business, cash flow and results of operations.

We currently expect to borrow up to $185 million in connection with the consummation of the offer and the merger, which will significantly increase our outstanding indebtedness and interest expense. In order to provide the merger consideration, prepay PLX's bank indebtedness, and pay related fees and expenses, we currently expect to sell shares of preferred stock of one of our wholly-owned subsidiaries to Bank of America, N.A. (Bank of America) pursuant to a master repurchase agreement we signed with Bank of America on June 13, 2011 (the Repurchase Agreement). In addition, we have arranged commitments for $75 million

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of new financing with J.P. Morgan Securities LLC and J.P. Morgan Chase Bank, N.A. (JPM) in connection with the offer and the merger (the Credit Facility).

The degree to which we are leveraged under the repurchase agreement and the credit facility will increase our interest expense and could have other important consequences, such as:

•
increasing our vulnerability to adverse economic and industry conditions;
•
requiring us to dedicate a significant portion of our cash flow from operations and other capital resources to principal and interest, thereby reducing our ability to fund working capital, capital expenditures and other cash requirements;
•
limiting our flexibility to plan for, or react to, changes and opportunities in, our industry, which may place us at a competitive disadvantage; and
•
limiting our ability to incur additional debt or obtain other additional financing on acceptable terms, if at all.
These financing arrangements, and any restrictions included therein, may have an adverse impact on IDT's business, cash flow and results of operations, and could adversely affect the value of IDT's common stock.
In addition, the terms of the financing obligations under the Repurchase Agreement and the Credit Facility include restrictions, such as affirmative and negative covenants, conditions to the transactions and the pledge of security interests in certain of IDT's assets. A failure to comply with these restrictions could result in a default under the Repurchase Agreement or the Credit Facility or could require us to obtain waivers from Bank of America or JPM for failure to comply with these restrictions. In addition, our ability to meet our obligations, including any repayment obligations, under the Repurchase Agreement and the Credit Facility will depend on our future performance, which will be subject to financial, business, and other factors affecting our operations, many of which are beyond our control. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on IDT's business, financial condition or results of operations.

We build most of our products based on estimated demand forecasts.

Demand for our products can change rapidly and without advance notice. Demand can also be affected by changes in our customers' levels of inventory and differences in the timing and pattern of orders from their end customers. A large percentage of our revenue in the APAC region is recognized upon shipment to our distributors. Consequently, we have less visibility over both inventory levels at our distributors and end customer demand for our products. Further, the distributors have assumed more risk associated with changes in end demand for our products. Accordingly, significant changes in end demand in the semiconductor business in general, or for our products in particular, may be difficult for us to detect or otherwise measure, which could cause us to incorrectly forecast end-market demand for our products. If we are not able to accurately forecast end demand for our products, we may be left with large amounts of unsold products, may not be able to fill all actual orders, and may not be able to efficiently utilize our existing manufacturing capacity or make optimal investment and other business decisions. As a result, we may end up with excess and obsolete inventory or we may be unable to meet customer short-term demands, either of which could have an adverse impact on our operating results.

If we are unable to execute our business strategy successfully, our revenues and profitability may be adversely affected.

Our future financial performance and success are largely dependent on our ability to execute our business strategy successfully. Our present business strategy to be a leading provider of essential mixed signal semiconductor solutions will be affected, without limitation, by: (1) our ability to continue to aggressively manage, maintain and refine our product portfolio including focus on the development and growth of new applications; (2) our ability to continue to maintain existing customers, aggressively pursue and win new customers; (3) our ability to successfully develop, manufacture and market new products in a timely manner; (4) our ability to develop new products in a more efficient manner ; (5) our ability to sufficiently differentiate and enhance of our products; (6) our ability to successfully deploy R&D investment in the areas of displays, silicon timing, power management, signal integrity and radio frequency and (7) our ability to rationalize our manufacturing operations including the transition to wholly outsourced wafer fabrication operations. 

We cannot assure you that we will successfully implement our business strategy or that implementing our strategy will sustain or improve our results of operations. In particular, we cannot assure you that we will be able to build our position in markets with high growth potential, increase our volume or revenue, rationalize our manufacturing operations or reduce our costs and expenses.

Our business strategy is based on our assumptions about the future demand for our current products and the new products and applications that we are developing and on our ability to produce our products profitably. Each of these factors is subject to one or more of the risk factors set forth in this report.  Several risks that could affect our ability to implement our business strategy are beyond our control. In addition, circumstances beyond our control and changes in our business or industry may require us to change our business strategy.

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Our results are dependent on the success of new products.    

The markets we serve are characterized by competition, rapid technological change, evolving standards, short product life cycles and continuous erosion of average selling prices. Consequently, our future success will be highly dependent upon our ability to continually develop new products using the latest and most cost-effective technologies, introduce our products in commercial quantities to the marketplace ahead of the competition and have our products selected for inclusion in leading system manufacturers' products. In addition, the development of new products will continue to require significant R&D expenditures. If we are unable to successfully develop, produce and market new products in a timely manner, have our products available in commercial quantities ahead of competitive products or have our products selected for inclusion in products of systems manufacturers and sell them at gross margins comparable to or better than our current products, our future results of operations could be adversely affected. In addition, our future revenue growth is also partially dependent on our ability to penetrate new markets in which we have limited experience and where competitors are already entrenched. Even if we are able to develop, produce and successfully market new products in a timely manner, such new products may not achieve market acceptance. The above described events could have a variety of negative effects on our competitive position and our financial results, such as reducing our revenue, increasing our costs, lowering our gross margin percentage, and ultimately leading to impairment of assets.

We are dependent on a concentrated group of customers for a significant part of our revenues.     

A large portion of our revenues depends on sales to a limited number of customers. If these relationships were to diminish, or if these customers were to develop their own solutions or adopt a competitor's solution instead of buying our products, our results could be adversely affected.
 
Many of our end-customer original equipment manufacturers (OEMs) have outsourced their manufacturing to a concentrated group of global electronics manufacturing service (EMSs) providers and original design manufacturers (ODMs) who then buy products directly from us or from our distributors on behalf of the OEM. These EMSs and ODMs have achieved greater autonomy in the design win, product qualification and product purchasing decisions, especially for commodity products. Competition for the business from EMSs and ODMs is intense and there is no assurance we can remain competitive and retain our existing market share with these customers. If these companies were to allocate a higher share of commodity or second-source business to our competitors instead of buying our products, our results would be adversely affected. Furthermore, as EMSs and ODMs have represented a growing percentage of our overall business, our concentration of credit and other business risks with these customers has increased. Competition among global EMSs and ODMs is intense as they operate on very low margins. If any one or more of our global EMSs or ODMs customers were to file for bankruptcy or otherwise experience significantly adverse financial conditions, our business would be adversely affected as well.

In addition, we utilize a relatively small number of global and regional distributors around the world, who buy product directly from us on behalf of their customers. For example, sales through three distributors represented 15% , 11% and 10% of the Company's net revenues, respectively, for fiscal 2012 . In addition, at April 1, 2012 , three distributors represented 19% , 16% , and 12% of the Company's gross accounts receivable. If our business relationships with any of these distributors were to diminish or any of these distributors were to file for bankruptcy or otherwise experience significantly adverse financial conditions, our business could be adversely affected. Because we continue to be dependent on product demand from a small group of OEM end customers and global and regional distributors, any material delay, cancellation or reduction of orders from or loss of these or other major customers could cause our revenue to decline significantly.

We are dependent on a limited number of suppliers.   

Our manufacturing operations depend upon obtaining adequate raw materials on a timely basis. The number of suppliers of certain raw materials, such as silicon wafers, ultra-pure metals and certain chemicals and gases needed for our products, is very limited. In addition, certain packages for our products require long lead times and are available from only a few suppliers. From time to time, suppliers have extended lead times or limited supply to us due to capacity constraints. Our results of operations would be materially and adversely affected if we were unable to obtain adequate supplies of raw materials in a timely manner or if there were significant increases in the costs of raw materials, or if foundry or assembly subcontractor capacity were not available, or if capacity were only available at unfavorable prices.

Our operations and business could be significantly harmed by natural disasters.

A majority of the third-party foundries and subcontractors we currently use are located in Malaysia, South Korea, Philippines, Singapore, Taiwan, Thailand, and China. In addition, we own a test facility in Malaysia. The risk of an earthquake or tsunami in these Pacific Rim locations is significant, as highlighted by the severe earthquakes and tsunami that struck the northeast coast of

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Japan in March 2011 and the massive flooding in Thailand in October 2011. While we did not experience a significant impact on our operation from these disasters, the occurrence of an earthquake, drought, floods, fires, or other natural disaster near any of these locations could cause a significant reduction of end-customer demand and/or availability of materials, a disruption of the global supply chain, an increase in the cost of products that we purchase, and otherwise interfere with our ability to conduct business. In addition, public health issues, acts of terrorism or other catastrophic events could significantly delay the production or shipment of our products. Although we maintain insurance for some of the damage that may be caused by natural disasters, our insurance coverage may not be sufficient to cover all of our potential losses and would not cover us for lost business. As a result, a natural disaster in one or more of these regions could have a material adverse effect on our financial condition and results of operations.

Costs related to product defects and errata may harm our results of operations and business.

Costs associated with unexpected product defects and errata, or deviations from published specifications, due to, for example, unanticipated problems in our design and manufacturing processes, could include:

•
writing off the value of inventory of such products;
•
disposing of products that cannot be fixed;
•
recalling such products that have been shipped to customers;
•
providing product replacements for, or modifications to, such products; and
•
defending against litigation related to such products.


These costs could be substantial and may therefore increase our expenses and lower our gross margin. In addition, our reputation with our customers or users of our products could be damaged as a result of such product defects and errata, and the demand for our products could be reduced. The announcement of product defects and/or errata could cause customers to purchase products from our competitors as a result of anticipated shortages of our components or for other reasons. These factors could harm our financial results and the prospects for our business.

If the credit market conditions deteriorate, it could have a material adverse impact on our investment portfolio.

Although we manage our investment portfolio by purchasing only highly rated securities and diversifying our investments across various sectors, investment types, and underlying issuers, recent volatility in the short-term financial markets has been high. We have no securities in asset backed commercial paper and hold no auction rated or mortgage backed securities. However it is uncertain as to the full extent of the current credit and liquidity crisis and with possible further deterioration, particularly within one or several of the large financial institutions, the value of our investments could be negatively impacted.

Intellectual property claims against and/or on behalf of the Company could adversely affect our business and operations.   

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in significant and often protracted and expensive litigation. We have been involved with patent litigation and asserted intellectual property claims in the past, both as a plaintiff and a defendant, some of which have adversely affected our operating results. Although we have obtained patent licenses from certain semiconductor manufacturers, we do not have licenses from a number of semiconductor manufacturers that have broad patent portfolios. Claims alleging infringement of intellectual property rights have been asserted against us in the past and could be asserted against us in the future.

As a result of these claims, we may have to discontinue the use of certain processes, license certain technologies, cease the manufacture, use, and sale of infringing products; incur significant litigation costs and damages and develop non-infringing technology. We might not be able to obtain such licenses on acceptable terms or develop non-infringing technology. Further, the failure to renew or renegotiate existing licenses on favorable terms, or the inability to obtain a key license, could materially and adversely affect our business. Future litigation, either as a plaintiff or a defendant, could adversely affect our operating results, as a result of increased expenses, the cost of settled claims, and/or payment of damages.

Our product manufacturing operations are complex and subject to interruption.

From time to time, we have experienced production difficulties, including lower manufacturing yields or products that do not meet our or our customers' specifications, which has resulted in delivery delays, quality problems and lost revenue opportunities. While delivery delays have been infrequent and generally short in duration, we could experience manufacturing problems, capacity constraints and/or product delivery delays in the future as a result of, among other things, the complexity of our manufacturing processes, changes to our process technologies (including transfers to other facilities and die size reduction efforts), and difficulties

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in ramping production. In addition, any significant quality problems could damage our reputation with our customers and could take focus away from the development of new and enhanced products. These could have a significant negative impact on our financial results.

We are dependent upon electric power and water provided by public utilities where we operate our manufacturing facility. We maintain limited backup generating capability, but the amount of electric power that we can generate on our own is insufficient to fully operate this facility, and prolonged power interruptions and restrictions on our access to water could have a significant adverse impact on our business.

Tax benefits we receive may be terminated or reduced in the future, which would increase our costs.

As a result of our international manufacturing operations, a significant portion of our worldwide profits are in jurisdictions outside the United States, primarily Malaysia, which has granted the Company significant reductions in tax rates. These lower tax rates allow us to record a relatively low tax expense on a worldwide basis. Under current Malaysia law, we are not subject to tax on our operational and investment income. If U.S. corporate income tax laws were to change regarding deferral of manufacturing profits or other matters impacting our operating structure, this would have a significant impact to our financial results.

In addition, we were granted a tax holiday in Malaysia during fiscal 2009. The tax holiday was contingent upon us continuing to meet specified investment criteria in fixed assets, and to operate as an APAC regional headquarters center. In the fourth quarter of fiscal 2011, we agreed with the Malaysia Industrial Development Board (MIDA) to cancel this tax holiday and entered into a new tax holiday which is a full tax exemption on statutory income for a period of 10 years commencing April 4, 2011. We are required to meet several requirements as to financial targets, investment, headcount and activities in Malaysia to retain this status. Our inability to renew this tax holiday when it expires or meet certain conditions of the agreement with MIDA may adversely impact our effective tax rate.

Our financial results may be adversely affected by higher than expected tax rates or exposure to additional tax liabilities. Tax audits may have a material adverse effect on our profitability.

As a global company, our effective tax rate is highly dependent upon the geographic composition of worldwide earnings and tax regulations governing each region in which we operate. We are subject to income taxes in the United States and various foreign jurisdictions, and significant judgment is required to determine worldwide tax liabilities. Our effective tax rate could be adversely affected by changes in the mix of earnings between countries with differing statutory tax rates, in the valuation of deferred tax assets, in tax laws or by material audit assessments, which could affect our profitability. In particular, the carrying value of deferred tax assets, which are predominantly in the United States (U.S.), is dependent upon our ability to generate future taxable income in the United States. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority such as the Internal Revenue Service in the United States could have a material effect on our profitability.

The costs associated with legal proceedings can be substantial, specific costs are unpredictable and not completely within our control, and unexpected increases in litigation costs could adversely affect our operating results.

We have been involved in various legal proceedings, an example of which is described above in Part I, Item 3 "Legal Proceedings." The costs associated with legal proceedings are typically high, relatively unpredictable, and are not completely within our control. While we do our best to forecast and control such costs, the costs may be materially more than expected, which could adversely affect our operating results. Moreover, we may become involved in unexpected litigation with additional litigants at any time, which would increase our aggregate litigation costs, and could adversely affect our operating results. We are not able to predict the outcome of any of any legal action, and an adverse decision in any legal action could significantly harm our business and financial performance.

The loss of the services of any key personnel may adversely affect our business and growth prospects.

Our performance is substantially dependent on the performance of our executive officers and key employees. The loss of the services of any of our executive officers, technical personnel or other key employees could adversely affect our business. In addition, our future success depends on our ability to successfully compete with other technology firms in attracting and retaining specialized technical and management personnel. If we are unable to identify, hire, and retain highly qualified technical and managerial personnel, our business and growth prospects could be adversely affected.

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Our results of operations could vary as a result of the methods, estimates, and judgments we use in applying our accounting policies.

The methods, estimates, and judgments we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that leads us to change our methods, estimates, and judgments. Changes in those methods, estimates, and judgments could significantly affect our results of operations. In particular, the calculation of stock-based compensation expense under the authoritative guidance requires us to use valuation methodologies that were not developed for use in valuing employee stock options and make a number of assumptions, estimates, and conclusions regarding matters such as expected forfeitures, expected volatility of our share price and the exercise behavior of our employees. Changes in these variables could affect our stock-based compensation expense and have a significant and potentially adverse affect on our gross margins, research and development and selling, general and administrative expenses.

Our reported financial results may be adversely affected by new accounting pronouncements or changes in existing accounting standards and practices.

We prepare our financial statements in conformity with accounting principles generally accepted in the United States.  These accounting principles are subject to interpretation by the Financial Accounting Standards Board (FASB), SEC and various organizations formed to interpret and create appropriate accounting standards and practices. New accounting pronouncements and varying interpretations of accounting standards and practices have occurred and may occur in the future. New accounting pronouncements or a change in the interpretation of existing accounting standards or practices may have a significant effect on our reported financial results and may even affect our reporting of transactions completed before the change is announced or effective.

International operations add increased volatility to our operating results.    

A substantial percentage of our total revenues are derived from international sales, as summarized below:
 
(percentage of total revenues)
Fiscal
2012
 
Fiscal
2011
 
Fiscal
 2010
Asia Pacific
66
%
 
65
%
 
66
%
Americas
15
%
 
16
%
 
18
%
Japan
8
%
 
9
%
 
8
%
Europe
11
%
 
10
%
 
8
%
Total
100
%
 
100
%
 
100
%

In addition, our test facility in Malaysia, our design centers in Canada and China, and our foreign sales offices incur payroll, facility, and other expenses in local currencies. Accordingly, movements in foreign currency exchange rates can impact our revenues and costs of goods sold, as well as both pricing and demand for our products.

Our non-U.S. offshore sites, manufacturing subcontractors and export sales are also subject to risks associated with foreign operations, including:

•
political instability and acts of war or terrorism, which could disrupt our manufacturing and logistical activities;
•
regulations regarding use of local employees and suppliers;
•
currency controls and fluctuations, devaluation of foreign currencies, hard currency shortages and exchange rate fluctuations;
•
changes in local economic conditions;
•
governmental regulation of taxation of our earnings and those of our personnel; and
•
changes in tax laws, import and export controls, tariffs and freight rates.

Contract pricing for raw materials and equipment used in the fabrication and assembly processes, as well as for foundry and subcontract assembly services, may also be affected by currency controls, exchange rate fluctuations and currency devaluations. We sometimes hedge currency risk for currencies that are highly liquid and freely quoted, but may not enter into hedge contracts for currencies with limited trading volume. In addition, as much of our revenues are generated outside the United States, a significant portion of our cash and investment portfolio accumulates in the foreign countries in which we operate. On April 1, 2012 , we had cash, cash equivalents and investments of approximately $243.3 million invested overseas in accounts belonging to our foreign subsidiaries. While these amounts are primarily invested in U.S. dollars, a portion is held in foreign currencies, and all offshore

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balances are exposed to local political, banking, currency control and other risks. In addition, these amounts may be subject to tax and other transfer restrictions.

We invest in companies for strategic reasons and may not realize a return on our investments.

We make investments in companies around the world to further our strategic objectives and support our key business initiatives. Such investments include equity instruments of private companies, and many of these instruments are non-marketable at the time of our initial investment. These companies range from early-stage companies that are often still defining their strategic direction to more mature companies with established revenue streams and business models. The success of these companies is dependent on product development, market acceptance, operational efficiency, and other key business factors as well as their ability to secure additional funding, obtain favorable investment terms for future financings, or participate in liquidity events such as public offerings, mergers, and private sales. If any of these private companies fail, we could lose all or part of our investment in that company. If we determine that other-than-temporary decline in the fair value exists for an equity investment in a private company in which we have invested, we write down the investment to its fair value and recognize the related write-down as an investment loss.

When the strategic objectives of an investment have been achieved, or if the investment or business diverges from our strategic objectives, we may decide to dispose of the investment. We may incur losses on the disposal of our non-marketable investments. Additionally, for cases in which we are required under equity method accounting to recognize a proportionate share of another company's income or loss, such income or loss may impact our earnings. Gains or losses from equity securities could vary from expectations depending on gains or losses realized on the sale or exchange of securities, gains or losses from equity method investments, and impairment charges for equity and other investments.

We rely upon certain critical information systems for the operation of our business.

We maintain and rely upon certain critical information systems for the effective operation of our business. These information systems include telecommunications, the Internet, our corporate intranet, various computer hardware and software applications, network communications, and e-mail. These information systems are subject to attacks, failures, and access denials from a number of potential sources including viruses, destructive or inadequate code, power failures, and physical damage to computers, communication lines and networking equipment. To the extent that these information systems are under our control, we have implemented security procedures, such as virus protection software and emergency recovery processes, to address the outlined risks. While we believe that our information systems are appropriately controlled and that we have processes in place to adequately manage these risks, security procedures for information systems cannot be guaranteed to be failsafe and our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business.

We are exposed to potential impairment charges on certain assets.

Over the past several years, we have made several acquisitions. As a result of these acquisitions, we had over $1 billion of goodwill and over $204 million of intangible assets on our balance sheet at the beginning of fiscal 2009. As a result of our impairment analysis in fiscal 2009, we recorded a goodwill impairment charge of $946.3 million and an acquisition-related intangible asset impairment charge of $79.4 million. In determining fair value, we consider various factors including our market capitalization, forecasted revenue and costs, risk-adjusted discount rates, future economic and market conditions, determination of appropriate market comparables and expected periods over which our assets will be utilized and other variables.

If our assumptions regarding forecasted cash flow, revenue and margin growth rates of certain long-lived asset groups and reporting units are not achieved, an impairment review may be triggered for the remaining balance of goodwill and long-lived assets prior to the next annual review in the fourth quarter of fiscal 2013, which could result in material charges that could impact our operating results and financial position.

We have limited experience with government contracting, which entails differentiated business risks.

We may from time-to-time derive revenue from contracts and subcontracts with agencies of, or prime or secondary contractors to, the U.S. government, including U.S. military agencies. Consequently, we are subject to certain business risks that are particular to companies that contract with U.S. government agencies. These risks include the ability of the U.S. government or related contractors to unilaterally:

•
terminate contracts at its convenience;
•
terminate, modify or reduce the value of existing contracts, if budgetary constraints or needs change;
•
cancel multi-year contracts and related orders, if funds become unavailable;

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•
adjust contract costs and fees on the basis of audits performed by U.S. government agencies;
•
control and potentially prohibit the export of our products;
•
require that the we continue to supply products despite the expiration of a contract under certain circumstances;
•
require that we fill certain types of rated orders for the U.S. government prior to filling any orders for other customers; and
•
suspend us from receiving new contracts pending resolution of any alleged violations of procurement laws or regulations.
 
In addition, because we may enter into defense industry contracts with respect to products that are sold both within and outside of the United States, we are subject to the following additional risks in connection with government contracts:

•
the need to bid on programs prior to completing the necessary design, which may result in unforeseen technological difficulties, delays and/or cost overruns;
•
the difficulty in forecasting long-term costs and schedules and the potential obsolescence of products related to long-term fixed price contracts; and
•
the need to transfer and obtain security clearances and export licenses, as appropriate.

The revenue from, and activity with, contracts and subcontracts with agencies of, or prime contractors to, the U.S. government, has declined subsequent to the disposition of our military business in November 2009.

Our common stock may experience substantial price volatility.   

Our stock price has experienced volatility in the past, and volatility in the price of our common stock may occur in the future, particularly as a result of fluctuations in global economic conditions and quarter-to-quarter variations in our actual or anticipated financial results, or the financial results of other semiconductor companies or our customers. Stock price volatility may also result from product announcements by us or our competitors, or from changes in perceptions about the various types of products we manufacture and sell. In addition, our stock price may fluctuate due to price and volume fluctuations in the stock market, especially in the technology sector, and as a result of other considerations or events described in this section.

We depend on the ability of our personnel, raw materials, equipment and products to move reasonably unimpeded around the world.

Any political, military, world health or other issue which hinders the worldwide movement of our personnel, raw materials, equipment or products or restricts the import or export of materials could lead to significant business disruptions. Furthermore, any strike, economic failure, or other material disruption on the part of major airlines or other transportation companies could also adversely affect our ability to conduct business. If such disruptions result in cancellations of customer orders or contribute to a general decrease in economic activity or corporate spending on information technology, or directly affect our marketing, manufacturing, financial and logistics functions, our results of operations and financial condition could be materially and adversely affected.

We are subject to a variety of environmental and other regulations related to hazardous materials used in our manufacturing processes.   

The manufacturing and testing of our products require the use of hazardous materials that are subject to a broad array of environmental, health and safety laws and regulations. Any failure by us to adequately control the use or discharge of hazardous materials under present or future regulations could subject us to substantial costs or liabilities or cause our manufacturing operations to be suspended.

Existing and future environmental, health and safety laws and regulations could also require us to acquire pollution abatement or remediation equipment, modify our product designs, or incur other expenses associated with such laws and regulations. Many new materials that we are evaluating for use in our operations may be subject to regulation under existing or future environmental laws and regulations that may restrict our use of one or more of such materials in our manufacturing, and test processes, or products. Any of these restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our manufacturing and test processes.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.


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ITEM 2. PROPERTIES

We own and operate a test facility in Malaysia (approximately 145,000 square feet). Our Malaysia facility is subject to ground leases. We owned and operated a wafer fabrication facility in Hillsboro, Oregon (approximately 245,000 square feet) until January 2012. In January 2012, we completed the sale of this facility.

Our corporate headquarters and various administrative, engineering and support functions are located in San Jose, California.  We own and occupy approximately 263,000 square feet of space at our San Jose headquarters.  We also lease various facilities throughout the world for research and development and sales and marketing functions, including design centers in the United States, Canada and China.

We believe that the facilities that we currently own or lease are suitable and adequate for our needs for the immediate future.

ITEM 3. LEGAL PROCEEDINGS

For a discussion of legal proceedings, please see “Note 16 – Commitments and contingencies- Litigation” in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock

Our Common Stock is traded on the NASDAQ Global Select Market under the symbol IDTI. The following table shows the high and low sales prices for our Common Stock as reported by the NASDAQ Global Select Market for the fiscal periods indicated:
 
High
 
Low
Fiscal 2012
 
 
 
First Quarter
$
8.74

 
$
6.99

Second Quarter
8.10

 
5.10

Third Quarter
6.46

 
4.70

Fourth Quarter
7.52

 
5.47

 
 
 
 
Fiscal 2011
 

 
 

First Quarter
$
7.18

 
$
5.10

Second Quarter
6.25

 
4.82

Third Quarter
7.28

 
5.58

Fourth Quarter
8.67

 
6.26


Stockholders

As of April 30, 2012 there were approximately 718 record holders of our Common Stock. A substantial majority of our shares are held by brokers and other institutions on behalf of individual stockholders.

Dividends

We have never paid cash dividends on our Common Stock. We currently plan to retain any future earnings for use in our business and do not currently anticipate paying cash dividends in the foreseeable future.
 
Equity Incentive Programs

We primarily issue awards under our equity based plans in order to provide additional incentive and retention to directors and employees who are considered to be essential to the long-rang success of the Company.  Please see “Note 9 – Stock-Based Employee Compensation” in Part II, Item 8 of this Annual Report on Form 10-K.

Other equity plan information required by this Item is incorporated by reference to the information in Part III, Item 12 of this Form 10-K.

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Issuer Purchases of Equity Securities

The following table sets forth information with respect to repurchases of our common stock during the fourth quarter of fiscal 2012:
Period
Total Number of Shares Purchased
 
Average Price Paid Per Share
 
Total Number of Shares
 Purchased as Part of
 Publicly Announced
 Plans or Programs
 
Approximate Dollar
 Value of Shares that
 May Yet Be Purchased
 Under the Plans or
 Programs
January 2, 2012 - January 29, 2012
500,484

 
$
5.82

 
500,484

 
$
81,948,970

January 30, 2012 - February 26, 2012
318,586

 
$
6.59

 
318,586

 
$
79,849,484

February 27, 2012 - April 1, 2012
—

 
$
—

 
—

 
$
79,849,484

Total
819,070

 
$
6.12

 
819,070

 
 


On July 21, 2010, our Board of Directors approved a share repurchase plan to repurchase up to $225 million of our common stock.  The old share repurchase program was canceled upon the approval of the new share repurchase program. In fiscal 2011, we repurchased approximately 12.8 million shares of our common stock at an average price of $6.06 per share for a total purchase price of $77.7 million under this new program.  In fiscal 2012 , we repurchased approximately 10.4 million shares of our common stock at an average price of $6.49 per share for a total purchase price of $67.5 million under this new program.  As of April 1, 2012 , approximately $79.8 million was available for future purchase under this new share repurchase program.  Share repurchases were recorded as treasury stock and resulted in a reduction of stockholders’ equity.  

Stock Performance Graph
 
Set forth below is a line graph comparing the percentage change in the cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Index and the S&P Electronics (Semiconductors) Index for a period of five fiscal years.  Our fiscal year ends on a different day each year because our year ends at midnight on the Sunday nearest to March 31 of each calendar year.  However, for convenience, the amounts shown below are based on a March 31 fiscal year end.  “Total return,” for the purpose of this graph, assumes reinvestment of all dividends.
 
The performance of our stock price shown in the following graph is not necessarily indicative of future stock price performance.
 Cumulative Total Return
2007
 
2008
 
2009
 
2010
 
2011
 
2012
Integrated Device Technology, Inc.
$
100.00

 
$
55.51

 
$
31.26

 
$
39.36

 
$
47.60

 
$
46.37

S&P 500
$
100.00

 
$
92.57

 
$
57.43

 
$
82.10

 
$
93.77

 
$
99.13

S&P Semiconductor index
$
100.00

 
$
94.41

 
$
60.13

 
$
87.26

 
$
101.64

 
$
109.75


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ITEM 6. SELECTED FINANCIAL DATA

The data set forth below are qualified in their entirety by reference to, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included in this Annual Report on Form 10-K.

Statements of Operations Data
 
Fiscal Year Ended
 
(in thousands, except per share data)
April 1, 2012 (3)
 
April 3,
2011

 
March 28,
2010 (4)

 
March 29,
2009 (5)

 
March 30,
2008

Revenues (2)
$
526,696

 
$
605,389

 
$
524,162

 
$
659,580

 
$
779,824

Net income (loss) from continuing operations (1)(2)
37,323

 
93,826

 
64,721

 
(1,027,403
)
 
45,400

Basic net income (loss) per share- continuing operations (1)(2)
0.26

 
0.61

 
0.39

 
(6.11
)
 
0.24

Diluted net income (loss) per share - continuing operations (1)(2)
0.26

 
0.60

 
0.39

 
(6.11
)
 
0.24

 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
33,777

 
74,391

 
52,062

 
143,775

 
186,730


Balance Sheets and Other Data
 ( in thousands)
April 1,
2012
 
April 3,
2011

 
March 28,
2010

 
March 29,
2009

 
March 30,
2008

Cash, cash equivalents and investments (6)
$
325,459

 
$
299,192

 
$
343,189

 
$
296,073

 
$
239,191

Total assets
717,634

 
727,460

 
750,945

 
678,367

 
1,781,837

Other long-term obligations
16,494

 
15,808

 
21,833

 
14,314

 
18,364

 
(1)
During the third quarter of fiscal 2012, we identified errors primarily related to retention bonuses associated with our plan to exit our Oregon manufacturing facility ($6.4 million expense). In addition, we had corrected prior period errors in the first and second quarters of 2012 related to retention bonuses ($0.5 million expense) for certain key employees and accounts payable system related error ($1.0 million benefit) respectively. We have revised the statement of operations data for all affected periods (fiscal 2011 and 2010 included herein) to reflect the correct balances. For more information refer to "Note 2-Revision of Prior Period Financial Statements" in Part II, Item 8 of this Form10-K.
(2)
In fiscal 2012, we completed the sale of certain assets related to IDT's Hollywood Quality Video and Frame Rate Conversion video processing product lines. The results of operations for these discontinued businesses have been segregated and excluded from the continuing operations presented.
(3)
In fiscal 2012, we recognized a gain on divestitures of $20.7 million relating to the sale of our wafer fabrication facility in Hillsboro, Oregon.
(4)
In fiscal 2010, we recognized net gain of $78.3 million on divestitures related to the sale of NWD assets, MNC business and SLE business. See "Note 6 - Other Divestitures (not accounted as discontinued operations)" in Part II, Item 8 of this Form10-K for more information regarding these divestitures.
(5)
In fiscal 2009, we recognized a goodwill impairment charge of $1.0 billion as we determined that the carrying value of our goodwill exceeded the fair value.
(6)
Cash, cash equivalents and investments exclude equity investments not classified as available for sale.



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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in conjunction with “Item 6. Selected Financial Data” and “Item 8. Financial Statements and Supplementary Data”, included elsewhere in this Annual Report on Form 10-K.
 
The information in this Annual Report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking. Forward-looking statements are based upon current expectations that involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to: operating results; new product introductions and sales; competitive conditions; capital expenditures and resources; manufacturing capacity utilization; customer demand and inventory levels; intellectual property issues; and the risk factors set forth in the section “Risk Factors” in Part I, Item 1A, of this Annual Report on Form 10-K. As a result of these risks and uncertainties, actual results and timing of events could differ significantly from those anticipated in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements for future events or new information after the date of this Annual Report on Form 10-K.
 
Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S.  The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements.  Our estimates and assumptions are based on historical experience and other factors that we consider to be appropriate in the circumstances.  However, actual future results may vary from our estimates and assumptions.

We believe that the following accounting policies are "critical," as defined by the SEC, in that they are both highly important to the portrayal of our financial condition and results, and they require difficult management judgments, estimates and assumptions about matters that are inherently uncertain.

Revenue Recognition .   Our revenue results from semiconductors sold through three channels: direct sales to original equipment manufacturers (OEMs) and electronic manufacturing service providers (EMSs), consignment sales to OEMs and EMSs, and sales through distributors. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and our ability to collect is reasonably assured.  For direct sales, we recognize revenue in accordance with the applicable shipping terms. Revenue related to the sale of consignment inventory is not recognized until the product is pulled from inventory stock by the customer.

For distributors in the Americas and Europe regions, who have stock rotation, price protection and ship from stock pricing adjustment rights, we defer revenue and related cost of revenues on sales to these distributors until the product is sold through by the distributor to an end-customer.  Subsequent to shipment to the distributor, we may reduce product pricing through price protection based on market conditions, competitive considerations and other factors.  Price protection is granted to distributors on the inventory that they have on hand at the date the price protection is offered.  We also grant certain credits to our distributors on specifically identified portions of the distributors’ business to allow them to earn a competitive gross margin on the sale of our products to their end-customers.  As a result of our inability to estimate these credits, we have determined that   the sales price to these distributors is not fixed or determinable until the final sale to the end-customer.

In the APAC region and Japan, we have distributors for which revenue is recognized upon shipment, with reserves recorded for the estimated return and pricing adjustment exposures.  The determination of the amount of reserves to be recorded for stock rotation rights requires that we make estimates as to the amount of product which will be returned by customers within their limited contractual rights.  We utilize historical return rates to estimate the exposure in accordance with authoritative guidance for Revenue Recognition When Right of Return Exists . In addition, from time to time, we offer pricing adjustments to distributors for product purchased in a given quarter that remains in their inventory.  These amounts are estimated by management based on discussions with customers, assessment of market trends, as well as historical experience.  

Income Taxes .  We account for income taxes under an asset and liability approach that requires the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities be recognized as deferred tax assets and liabilities. Generally accepted accounting principles require us to evaluate the ability to realize the value of our net deferred tax assets on an ongoing basis. A valuation allowance is recorded to reduce the net deferred tax assets to an amount that will more likely than not be realized. Accordingly, we consider various tax planning strategies, forecasts of future taxable income and our most recent operating results in assessing the need for a valuation allowance. In consideration of the ability to realize the value of net deferred tax assets, recent results must be given substantially more weight than any projections of future profitability. Since the fourth

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quarter of fiscal 2003, we have determined that, under applicable accounting principles, it is more likely than not that we will not realize the value of our net deferred tax assets. Our assumptions regarding the ultimate realization of these assets remained unchanged in fiscal 2012 and accordingly, we continue to maintain a valuation allowance to reduce our deferred tax assets to an amount that is more likely than not to be realized.

We recognize the tax liabilities for uncertain income tax positions taken on our income tax return based on the two-step process prescribed under US GAAP. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If we later determine that the exposure is lower or that the liability is not sufficient to cover our revised expectations, we adjust the liability and effect a related change in our tax provision during the period in which we make such determination.

Inventories .   Inventories are recorded at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market value.  We record provisions for obsolete and excess inventory based on our forecasts of demand over specific future time horizons. We also record provisions to value our inventory at the lower of cost or market value, which rely on forecasts of average selling prices (ASPs) in future periods.  Actual market conditions, demand and pricing levels in the volatile semiconductor markets that we serve may vary from our forecasts, potentially impacting our inventory reserves and resulting in material impacts to our gross margin.

Valuation of Long-Lived Assets and Goodwill .  We own and operate our own manufacturing testing facilities (see Part I of this Form 10-K), and have also acquired certain businesses and product portfolios in recent years. As a result, we have property, plant and equipment, goodwill and other intangible assets. We evaluate these items for impairment on an annual basis, or sooner, if events or changes in circumstances indicate that carrying values may not be recoverable. Triggering events for impairment reviews may include adverse industry or economic trends, significant restructuring actions, significantly lowered projections of profitability, or a sustained decline in our market capitalization. Evaluations of possible impairment and if applicable, adjustments to carrying values, require us to estimate among other factors, future cash flows, useful lives and fair values of our reporting units and assets. Actual results may vary from our expectations.

We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We utilize a discounted cash flow analysis to estimate the fair value of our reporting units. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units.

Stock-based Compensation .   In accordance with FASB guidance on share-based payments, we measure and recognize compensation expense for all stock-based payments awards, including employee stock options, restricted stock units and rights to purchase shares under employee stock purchase plans, based on their estimated fair value and recognize the costs in the financial statements over the employees’ requisite service period.

The fair value of employee restricted stock units is equal to the market value of our common stock on the date the award is granted.  We estimate the fair value of employee stock options and the right to purchase shares under the employee stock purchase plan using the Black-Scholes valuation model.  Option-pricing models require the input of highly subjective assumptions, including the expected term of options and the expected price volatility of the stock underlying such options.  In addition, we are required to estimate the number of stock-based awards that will be forfeited due to employee turnover and true up these forfeiture rates when actual results are different from our estimates.  We attribute the value of stock-based compensation to expense using an accelerated method.  Finally, we capitalize into inventory a portion of the periodic stock-based compensation expense that relates to employees working in manufacturing activities.

We update the expected term of stock option grants annually based on our analysis of the stock option exercise behavior over a period of time.  The interest rate is based on the average U.S. Treasury interest rate over the expected term during the applicable quarter.  We believe that the implied volatility of our common stock is an important consideration of overall market conditions and a good indicator of the expected volatility of our common stock.  However, due to the limited volume of options freely traded over the counter, we believe that implied volatility, by itself, is not representative of the expected volatility of our common stock.  Therefore, upon the adoption of the FASB’s authoritative guidance for stock-based payments at the beginning of fiscal

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2007, we revised the volatility factor used to estimate the fair value of our stock-based awards which now reflects a blend of historical volatility of our common stock and implied volatility of call options and dealer quotes on call options, generally having a term of less than twelve months.  We have not paid, nor do we have current plans to pay dividends on our common stock in the foreseeable future.

Revision of Prior Period Financial Statements
During the third quarter of fiscal 2012, we identified errors primarily related to retention bonuses associated with our plan to exit our Oregon manufacturing facility ($6.4 million expense). In addition, we had corrected prior period errors in the first and second quarters of 2012 related to retention bonuses ($0.5 million expense) for certain key employees and accounts payable system related issues ($1.0 million benefit) respectively. We assessed the materiality of these errors individually and in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletin No. 99, and concluded that the errors were not material to any of our prior annual or interim financial statements. Further, although we also concluded that correcting the errors, on a cumulative basis, would not be material to the expected results of operations for the year ended April 1, 2012, we elected to revise our previously issued financial statements as permitted in SEC’s Staff Accounting Bulletin No. 108 regarding immaterial revisions. We also elected to revise our previously issued consolidated financial statements the next time they are filed. As each subsequent filing is made in the future, the previous period consolidated financial statements affected by the errors will be revised. We have revised the April 3, 2011 consolidated balance sheet and the consolidated statements of operations for fiscal 2011 and 2010 included herein to reflect the correct balances. Of the above mentioned errors, the amount related to the accounts payable system related issue has been corrected in the accumulated deficit balance as of the end of fiscal 2009 as shown in the consolidated statements of stockholders' equity and will not impact the earnings of prior, current or subsequent filings. The impact of correcting these errors on net income as reported for fiscal 2011 and fiscal 2010 was a reduction of $3.0 million and $1.6 million, respectively. (See "Note 2-Revision of Prior Period Financial Statements" in Part II, Item 8 of this Form10-K).

Recent developments
Credit facility
On June 13, 2011 , we entered into a Master Repurchase Agreement (the "Repurchase Agreement") with Bank of America, N.A. (Bank of America), pursuant to which we have the right, subject to the terms and conditions of the Repurchase Agreement, to sell to Bank of America up to 1,431 shares of Class A preferred shares of one of our wholly owned subsidiaries, in one or more transactions prior to June 13, 2012 , for an aggregate purchase price of $135 million in cash. Pursuant to the Repurchase Agreement, to the extent we sell any such shares to Bank of America, we will be obligated to repurchase from Bank of America and Bank of America will be obligated to resell to us, those preferred shares for the aggregate purchase price paid by Bank of America. In such case, and while such shares are outstanding, we will also be obligated to make monthly payments to Bank of America at a floating interest rate of LIBOR plus 2.125% and will have the right to accelerate the repurchase of all or any portion of the shares prior to June 13, 2016 . In addition, we are obligated to pay retention fees associated with amounts available under the Repurchase Agreement. These retention fees have been recorded as interest expense in our Statement of Operations. The Repurchase Agreement also contains certain customary events of default. As of April 1, 2012 , we have not sold any preferred stock to Bank of America. . On May 17, 2012, we entered into an amendment to the Repurchase Agreement which, among other things, extended the availability of the transactions under the Repurchase Agreement until December 13, 2012.
Acquisition of Nethra Imaging
In November, 2011, we completed the acquisition of Nethra Imaging for $2.0 million in cash consideration, of which $0.3 million will be kept in escrow account for a period of one year. As a result of this transaction, IDT has obtained a SerDes team of engineers, rights to technology and a number of customer contracts. The acquisition of Nethra Imaging had no material effect on our fiscal 2012 results of operations.
Acquisition of Fox Electronics
On April 30, 2012, we completed the acquisition of Fox Electronics (Fox), a leading supplier of frequency control products including crystals and crystal oscillators, in an all-cash transaction for approximately $30 million, of which $26 million was paid at closing. The effects of this transaction will be recorded in the first quarter of our fiscal 2013. We believe that the combination of Fox's product portfolio with our award-winning CrystalFree™ oscillators makes us the industry's most comprehensive one-stop shop for frequency control products. In addition, we expect that this acquisition will help accelerate the adoption of CrystalFree™ by enabling customers to purchase pMEMS and CMOS solid-state oscillators alongside traditional quartz-based components through an established and trusted sales channel.

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Discontinued operations
In the second quarter of fiscal 2012, we completed the transfer of certain assets related to IDT’s Hollywood Quality Video (HQV) and Frame Rate Conversion (FRC) video processing product lines to Qualcomm pursuant to an Asset Purchase Agreement. The sale of these HQV and FRC video processing assets is intended to allow us to intensify focus on our analog-intensive mixed-signal, timing, and interface solutions. Upon closing of the transaction, Qualcomm paid $58.7 million in cash consideration, of which $6.0 million will be withheld in an escrow account for a period of two years. In the second quarter of fiscal 2012, we recorded a gain of $45.9 million related to this divestiture in fiscal 2012. The HQV and FRC product lines represented a significant portion of our video processing assets. We currently intend to fully divest our remaining video processing product lines and have classified these assets as available for sale. The video processing lines were previously included as part of our Computing and Consumer reportable segment. For financial statement purposes, the results of operations for these discontinued businesses have been segregated from those of the continuing operations and are presented in the consolidated financial statements as discontinued operations. Unless otherwise indicated, the following discussion pertains only to our continuing operations.
Divestiture of wafer fabrication facility
On January 31, 2012, we completed the sale of our wafer fabrication facility located in Hillsboro, Oregon related assets and specific liabilities to Jireh Semiconductor Incorporated, an Oregon corporation and wholly owned subsidiary of Alpha and Omega Semiconductor Limited (AOS) for $26.3 million in cash. We recorded a gain of $20.7 million on this divestiture in fiscal 2012.
Proposed acquisition
On April 30, 2012, we entered into an Agreement and Plan of Merger with PLX Technology, Inc (PLX). The Merger Agreement provides that subject to the terms of the Merger Agreement, we will commence an exchange offer (the Offer) to purchase all of the outstanding shares of PLX common stock, $0.001 par value, in exchange for consideration, per Share, comprised of (i) $3.50 in cash plus (ii) 0.525 of a share of IDT common stock, without interest and less any applicable withholding taxes, and upon the consummation of the offer and subject to the satisfaction of certain conditions, PLX will merge with and into Pinewood Acquisition Corp, our wholly-owned subsidiary (the Merger). We expect the proposed acquisition to expand our core serial switching and interface business. We believe that we and PLX have complementary product sets, technologies and customer bases.
As of the filing date of this Form10-K, the exchange offer had not yet commenced.

Overview

The following table and discussion provide an overview of our operating results from continuing operations for fiscal 2012 , 2011 and 2010 : 
 
Fiscal Year End
 
(in thousands, except for percentage)
April 1,
2012
 
 
April 3,
2011
 
 
March 28,
2010
Revenues
$
526,696

 
 
$
605,389

 
 
$
524,162

Gross profit
$
280,506

 
 
$
328,942

 
 
$
223,784

As a % of revenues
53
%
 
 
54
%
 
 
43
 %
Operating income (loss)
$
20,850

 
 
$
70,857

 
 
$
(14,822
)
As a % of revenues
4
%
 
 
12
%
 
 
(3
)%
Net income (loss) from continuing operations
$
37,323

 
 
$
93,826

 
 
$
64,721

As a % of revenues
7
%
 
 
15
%
 
 
12
 %
 
Our revenues decreased by $78.7 million, or 13% to $526.7 million in fiscal 2012 compared to fiscal 2011 .  The decrease was primarily due to a decrease in unit shipments as we experienced reduced overall demand for our products in the communications market segment and the computing and consumer market segment. This overall reduction in demand is consistent with economic conditions within the markets we serve.   Gross profit decreased by $48.4 million in fiscal 2012 as compared to fiscal 2011 primarily as a result of lower revenues. Gross profit as a percentage of net revenues was 53% in fiscal 2012 as compared to 54% in fiscal 2011. Our operating income decreased from $70.9 million in fiscal 2011 to $20.9 million in fiscal 2012 primarily due to lower revenues.   Net income from continuing operations in fiscal 2012 was $37.3 million and includes a $20.7 million gain from sale of our wafer fabrication facility. This compares to fiscal 2011 net income from continuing operations of $93.8 million which included a $20.1 million one-time tax benefit associated with the effective settlement of an IRS audit.  We ended fiscal 2012 with cash and cash equivalents and short-term investments of $325.5 million. We generated $33.8 million in cash from operations in

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fiscal 2012 , received $51.7 million in proceeds from the divestiture of our HQV and FRC video processing business and $18.6 million in proceeds from the sale of our wafer fabrication facility. During fiscal 2012, we repurchased 10.4 million shares of our common stock for a total of $67.5 million . The stock repurchase activity is one element of our overall program to offset dilution from employee stock options and increase return on invested capital, which we believe improves shareholder value over time.

Results of Operations

Revenues
Revenues by segment:
Fiscal Year Ended
(in thousands)
April 1,
2012

 
April 3,
2011

 
March 28,
2010

Communications
$
248,370

 
$
291,426

 
$
245,438

Computing and Consumer
278,326

 
313,963

 
278,724

Total revenues
$
526,696

 
$
605,389

 
$
524,162


Product groups representing greater than 10% of net revenues:
Fiscal Year Ended
As a percentage of net revenues
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Communications:
 
 
 
 
 
Communications timing products
18
%
 
17
%
 
16
%
All others less than 10% individually
29
%
 
30
%
 
30
%
     Total communications
47
%
 
47
%
 
46
%
 
 
 
 
 
 
Computing and Consumer:
 
 
 
 
 
Consumer and computing timing products
21
%
 
24
%
 
28
%
Memory interface products
18
%
 
15
%
 
14
%
All others less than 10% individually
14
%
 
14
%
 
12
%
Total computing and consumer
53
%
 
53
%
 
54
%
 
 
 
 
 
 
Total
100
%
 
100
%
 
100
%

Communications Segment
Revenues in our Communications segment decreased $43.1 million , or 15% to $248.4 million in fiscal 2012 as compared to fiscal 2011, as a result of reduced customer demand for products in this segment. In general, demand for most products within this market segment declined in-line with market conditions, with the exception of revenues from our flow control management products which increased 21% as compared to the prior year. This increase resulted from continued growth in demand for our Rapid I/O switching solutions products.
In fiscal 2011, revenues in our Communications segment increased $46.0 million , or 19% compared to fiscal 2010 due to an improved macroeconomic environment and increased unit shipments of our products.  Revenues from our flow control management products more than doubled as a result of the significant growth in demand for our Rapid I/O switching solutions products, along with increased demand for our timing and telecom products in the communications markets.  Revenues from SRAM, FIFO, and digital logic products increased 21% due to the strength in the communication integrated circuit market.

Computing and Consumer Segment
 
Revenues in our Computing and Consumer segment decreased $35.6 million , or 11% to $278.3 million in fiscal 2012 as compared to fiscal 2011 , as a result of reduced demand. In general, demand for most products within this market segment declined in-line with market conditions, with the exception of increased demand for our memory interface products as a result of continued growth in demand for our DDR3 products.

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In fiscal 2011, revenues in our Computing and Consumer segment increased $35.2 million , or 13% as compared to fiscal 2010 as a result of the improved global macroeconomic environment, design wins and increased unit shipments of our products. Revenues from our memory interface products increased 18% as a result of strong demand for our DDR3 products.  

Revenues by Region

Revenues in fiscal 2012 decreased in all regions as compared to fiscal 2011. Revenues in APAC (excluding Japan), Americas, Japan and Europe accounted for 66%, 15%, 8% and 11%, respectively, of consolidated revenues in fiscal 2012 compared to 65%, 16%, 9% and 10%, respectively, of our consolidated revenues in fiscal 2011. Revenues in APAC, Americas, Japan and Europe accounted for 66%, 18%, 8% and 8%, respectively, of consolidated revenues in fiscal 2010.  The Asia Pacific region continues to be our strongest region, as many of our largest customers utilize manufacturers in that region.

Deferred Income on Shipments to Distributions

Included in the Balance Sheet caption “ Deferred income on shipments to distributors” are amounts related to shipments to certain distributors for which revenue is not recognized until our product has been sold by the distributor to an end customer . The components as of April 1, 2012 and March 28, 2010 are as follows:
(in thousands)
April 1, 2012
 
April 3, 2011
Gross deferred revenue
$
17,883

 
$
15,463

Gross deferred costs
(3,620
)
 
(2,610
)
Deferred income on shipments to distributors
$
14,263

 
$
12,853


The gross deferred revenue represents the gross value of shipments to distributors at the list price billed to the distributor less any price protection credits provided to them in connection with reductions in list price while the products remain in their inventory.  Based on our history, the amount ultimately recognized as revenue is generally less than the gross deferred revenue as a result of ship from stock pricing credits, which are issued in connection with the sell through of the product to an end customer.  As the amount of price adjustments subsequent to shipment is dependent on the overall market conditions, the levels of these adjustments can fluctuate significantly from period to period. Historically, the price adjustments have represented an average of approximately 27% of the list price billed to the customer.  As these credits are issued, there is no impact to working capital as this reduces both accounts receivable and deferred revenue.  The gross deferred costs represent the standard costs (which approximate actual costs) of products we sell to the distributors.  

Gross Profit
 
Fiscal Year Ended
 
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Gross Profit (in thousands)
$
280,506

 
$
328,942

 
$
223,784

Gross Profit Percentage
53
%
 
54
%
 
43
%

Gross profit decreased $48.4 million or 15% in fiscal 2012 compared to fiscal 2011 primarily due to lower revenue levels. Gross profit as a percentage of revenues decreased 1% in fiscal 2012 compared to fiscal 2011 . Our gross profit percentage in fiscal 2012 was negatively affected by $4.9 million primarily due to lower fixed manufacturing capacity utilization combined with a $1.8 million increase in charges for excess inventory reserves, which was offset in part by a $3.4 million release of severance and other accrued expenses associated with the transition of wafer fabrication activities. During the fourth quarter of fiscal 2012 we completed the transition of wafer fabrication activities from our Oregon fab to third party foundries. As of April 1, 2012, the balance of inventory buffer stock which has been built in anticipation of the transition of wafer fabrication activities totaled approximately $13 million. We anticipate that, on average, the cost of wafers transferred to third party foundries will be comparable to the cost of wafers manufactured at our Oregon facility during fiscal 2011 and first half of 2012, when manufacturing capacity was fully utilized.  Compared to prior years, we expect our fiscal year 2013 cost of sales and gross margin to be favorably affected by the absence of expenses associated with transfer of fabrication production to third party foundries of $4.6 million, $5.3 million and $2.3 million recorded in fiscal years 2012, 2011 and 2010, respectively. However, given the long term nature of our wafer supply agreement with TSMC, we do expect our future cost per wafer unit to be less volatile when compared to prior years when the cost of sales was affected by periods of idle capacity at our Oregon wafer fabrication facility.

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In fiscal 2011, gross profit increased $105.2 million or 47% compared to fiscal 2010 and gross profit percentage increased 11% in fiscal 2011 compared to fiscal 2010 .  Our gross profit percentage was positively affected by a favorable shift in the mix of products sold, a higher utilization of our fabrication facility and manufacturing cost reduction initiatives. The utilization of our manufacturing capacity in Oregon increased from approximately 79% of equipped capacity in 2010 to 100% of equipped capacity in fiscal 2011.  In addition, gross profit percentage in fiscal 2011 was positively affected by cost savings from the closure of our test facility in Singapore and consolidation of our test operations in Malaysia.  Our gross profit percentage in fiscal 2010 was negatively affected by $8.4 million related to the sale of acquired inventory valued at fair market value, less an estimated selling cost, associated with our acquisition of Tundra and $5.7 million of restructuring costs, while we had no such charges in fiscal 2011.

Operating Expenses

The following table presents our operating expenses for fiscal years 2012 , 2011 and 2010 , respectively:
 
 
April 1, 2012
 
April 3, 2011
 
March 28, 2010
 
(in thousands, except for percentages)
 
Dollar Amount
 
% of Net
Revenues
 
Dollar Amount
 
% of Net
Revenues
 
Dollar Amount
 
% of Net
Revenues
Research and development
 
$
158,749

 
30
%
 
$
154,465

 
26
%
 
$
135,683

 
26
%
Selling, General and administrative
 
$
100,907

 
19
%
 
$
103,620

 
17
%
 
$
102,923

 
20
%
 
Research and Development (R&D)

R&D expense increased $4.3 million , or 3% , to $158.7 million in fiscal 2012 compared to fiscal 2011 . The increase was primarily due to a $4.1 million increase in salaries and wages associated with increased R&D headcount combined with $2.8 million in increase in outside R&D consulting expenses, which were offset in-part by a $4.1 million reduction in accrued variable incentive compensation expenses.

R&D expense increased $18.8 million , or 14% , to $154.5 million in fiscal 2011 compared to fiscal 2010.  The increase was primarily attributable to a $8.0 million increase in variable incentive compensation expense, a $6.6 million increase in salaries and wages and other employee benefits costs partially due to an additional one week of operations in fiscal 2011 and $2.2 million increase in R&D software license costs. 

Selling, General and Administrative (SG&A)
 
SG&A expenses decreased $2.7 million , or 3% , to $100.9 million in fiscal 2012 compared to fiscal 2011 .  The decrease was primarily the result of a $1.7 million decrease in variable incentive compensation, a $1.5 million decrease in outside professional fees for legal, tax and other services, a $0.8 million decrease in intangible amortization expenses, a $0.7 million decrease in sales representative commissions and a $0.6 million decrease in depreciation and equipment expenses which were offset in part by a $3.0 million increase in salaries and wages and other employee benefit costs.

SG&A expenses increased $0.7 million , or 1% , to $103.6 million in fiscal 2011 compared to fiscal 2010 .  The increase in SG&A was primarily due to a $3.3 million increase in variable incentive compensation expense and a $3.5 million increase in salaries and wages and other employee benefit costs partially due to an additional one week of operations in fiscal 2011, a $2.3 million increase in sales representative commissions and other selling costs attributable to higher revenues in fiscal 2011.  Partially offsetting these increases was a $2.4 million decrease in outside professional fees for legal, tax and other services primarily attributable to lower acquisition and litigation activities in fiscal 2011 and a $5.6 million decrease in severance expense.
  
Other-Than-Temporary Impairment Loss on Investment

We account for our equity investments in privately held companies under the cost method. These investments are subject to periodic impairment review and measured and recorded at fair value when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of our investments has occurred and is other than temporary, an assessment is made by considering available evidence, including the general market conditions, the investee’s financial condition, near-term prospects, market comparables and subsequent rounds of financing. The valuation also takes into account the investee’s capital structure, liquidation preferences for its capital and other economic variables. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management judgment. In fiscal 2012, we

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determined that the value of two of our non-marketable private equity investments were impaired and we recorded $3.4 million in other-than temporary impairment losses during the period. We did not recognize any impairment losses in fiscal 2011 and fiscal 2010 .

Restructuring Charges
During fiscal 2012, we recorded $3.6 million in restructuring expenses for employee retention costs in connection with our plans to fully divest remaining video processing product lines. These costs have been recorded to discontinued operations. As of April 1, 2012 , the total accrued balance for employee retention costs related to this restructuring action was $3.6 million . We expect to complete this restructuring action in the second quarter of fiscal 2013 .
We approved a restructuring plan to exit wafer production operations at our Oregon fabrication facility in fiscal 2010 in connection with our plan to transition the manufacture of products to Taiwan Semiconductor Manufacturing Limited ('TSMC"). As a result, we accrued restructuring expenses of $4.8 million for severance payments and other benefits associated with this restructuring action in fiscal 2010 . During fiscal 2012 , we decreased this accrual by $3.1 million based on the actual number of employees who were offered employment with the acquirer of the wafer fabrication facility. During fiscal 2012, we also recorded a prior period adjustment of $4.1 million for employee retention costs associated with this restructuring action. See "Note 2-Revision of Prior Period Financial Statements" in Part II, Item 8 of this Form10-K for prior period adjustments. An additional $2.5 million for employee retention costs was recorded in fiscal 2012. As of April 1, 2012 , the total accrued balance for severance and retention costs related to this restructuring was $1.0 million . We expect to complete this restructuring action in the first quarter of fiscal 2013 .

In connection with discontinuing manufacturing operations at our Singapore facility in the fourth quarter of fiscal 2010 , we exited its leased facility in Singapore in the first quarter of fiscal 2011 . As a result, we recorded lease impairment charges of approximately $0.5 million in fiscal 2011 , which represented the future rental payments under the agreements, reduced by an estimate of sublease incomes, and discounted to present value using an interest rate applicable to us. These charges were recorded as cost of goods sold. As of April 1, 2012 , the remaining accrued lease liabilities were $0.1 million . We expect to pay off the facility lease charges through the third quarter of fiscal 2013 .
 
In connection with the divestiture of Silicon Logic Engineering business in the third quarter of fiscal 2010 , we exited certain leased facilities. As a result, we recorded lease impairment charges of approximately $0.9 million , which represented the future rental payments under the agreements, reduced by an estimate of sublease incomes, and discounted to present value using an interest rate applicable to us. We completed the restructuring plan in fiscal 2012.

  Gain on Divestitures (not accounted as discontinued operations)

As discussed above, in fiscal 2012 we recorded gain on divestiture of $20.7 million on sale of our wafer fabrication facility in Oregon.

In fiscal 2010, we recorded a net gain on divestitures of $78.3 million . This included a $82.7 million gain on the sale of certain assets related to network search engine business to NetLogic Microsystems, Inc., a loss of $0.2 million on sale of certain assets and transfer of certain liabilities related to the Silicon Logic Engineering (SLE) business to Open Silicon Inc and a loss of $4.3 million related to the sale of certain assets and transfer of certain liabilities related to our military business to Spectrum Control, Inc.

Interest Income and Other, Net 

The components of interest income and other, net are summarized as follows:
 
Fiscal Year Ended
(in thousands)
April 1, 2012
 
April 3, 2011
 
March 28, 2010
Interest income
$
459

 
$
1,051

 
$
1,741

Interest expense
(1,319
)
 
(35
)
 
(56
)
Other income (expense), net
(258
)
 
2,681

 
2,192

Interest income and other, net
$
(1,118
)
 
$
3,697

 
$
3,877


Interest income decreased $0.6 million in fiscal 2012 compared to fiscal 2011 , primarily due t o lower average earnings on cash

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and investment balances. Interest expense increased in fiscal 2012 compared to fiscal 2011 by $1.3 million due to interest charges associated with the credit facility with Bank of America which was established in the first quarter of fiscal 2012.  Increase in Other expense of $2.9 million in fiscal 2012 compared to fiscal 2011 , was primarily attributable to decrease in value of our our deferred compensation plan assets.

Interest income decreased $0.7 million in fiscal 2011 compared to fiscal 2010, primarily due to lower average interest rates and lower cash and investment balances during fiscal 2011compared to fiscal 2010.  Other income (expense), net increased $0.5 million, primarily attributable to a decrease in foreign currency loss and an increase in gain from sale and retirement of our fixed assets in fiscal 2011 compared to fiscal 2010.

Income Tax Expense (Benefit)

We recorded an income tax provision of $0.2 million in fiscal 2012, an income tax benefit of $19.4 million in fiscal 2011 and an income tax provision of $2.5 million in fiscal 2010.  The income tax provision in fiscal 2012 was primarily due to foreign tax expenses. The income tax benefit in fiscal 2011 was primarily attributable to a one-time tax benefit of $20.1 million associated with the effective settlement of an IRS audit for the fiscal years from 2001 to 2008.  In the fourth quarter of fiscal 2011, we entered into a Closing Agreement with the IRS on the “buy-in payment” for our tax structure and Extraterritorial Income Exclusion for exported products outside the U.S.  The total tax adjustments increased taxable income and reduced our net operating loss carryforward by $59.5 million. We recorded an income tax provision of $2.5 million in fiscal 2010, which primarily reflected income tax provision for the sale of the NWD assets and MNC business, the true-up of the federal income tax returns for fiscal 2009, current U.S. and state taxes and foreign income taxes.  This was offset by income tax benefits for the true-up of the state fiscal 2009 income tax returns and the U.S. refundable research and development credit.

As of April 1, 2012 , we continued to maintain a valuation allowance against our net U.S. and foreign deferred tax assets, as we could not conclude that it is more likely than not that we will be able to realize our U.S. and foreign deferred tax assets in the foreseeable future. We will continue to evaluate the release of the valuation allowance on a quarterly basis.

Liquidity and Capital Resources

Our cash and cash equivalents and short-term investments were $325.5 million at April 1, 2012 , an increase of $26.3 million compared to April 3, 2011 .  We had no outstanding debt at April 3, 2011 and March 28, 2010. As discussed above, we have a credit facility with Bank of America under which we can sell preferred shares of our wholly owned subsidiary to the bank for up to $135 million in cash prior to December 13, 2012, but to the extent we sell any such shares, we are obligated to repurchase it from the bank prior to June 13, 2016.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled $33.8 million in fiscal 2012 compared to $74.4 million in fiscal 2011 and $52.1 million in fiscal 2010 . Cash provided by operating activities in fiscal 2012 consisted of our net income, as adjusted to exclude gain on divestitures of $66.6 million and depreciation, amortization and other non-cash items totaling $54.9 million ; and cash used for working capital requirements primarily related to decreases in accounts payable, other accrued liabilities and accrued compensation partially offset by decrease in accounts receivable. Decrease in accounts payable of $12.2 million was primarily attributable to reduced inventory subcontract activities in the fourth quarter of fiscal 2012 combined with the timing of payments. Decrease in other accrued liabilities of $13.2 million was primarily due to decreases in accrued severance costs, supplier obligations and miscellaneous payables. Accrued compensation decreased by $5.8 million primarily due to mid-year payouts made in the third quarter of fiscal 2012 and reduced incentive bonus accruals for fiscal 2012 as compared to fiscal 2011. Decrease in accounts receivable of $21.2 million was primarily the result of decrease in sales.
In fiscal 2011, net cash provided by operating activities consisted of our net income, as adjusted to exclude depreciation, amortization and other non-cash items totaling $54.4 million , and cash used for working capital requirements primarily related to increase in accounts receivable and inventory partially offset by decrease in income tax payable.  Increase in accounts receivable of $12.0 million was primarily attributable to the increase in sales and timing of shipments. Increase in inventory of $15.3 million was primarily attributable to increased inventory in work in process to support increased higher shipment levels combined with our build-ahead of inventory in anticipation of our wafer fabrication transition to the third party foundry.  The decrease in income tax payable of $19.5 million was due to our effective tax settlement with the IRS in the fourth quarter of fiscal 2011. 
In fiscal 2010, net cash provided by operating activities consisted of our net income, as adjusted to exclude gain on divestitures of $78.3 million and depreciation, amortization and other non-cash items totaling $61.5 million ; and cash used for working capital requirements primarily related to decrease in inventories, increase in other accrued liabilities, increase in accounts payable partially offset by an increase in accounts receivable. Decrease in inventory of $26.2 million was primarily attributable to our efforts to align our inventory levels to meet current demand. Increase in other accrued liabilities of $3.7 million was primarily attributable

32

to an increase in accruals related to our restructuring actions, deferred gain related to the agreement signed in connection with divestiture of our NWD assets and an increase in the fair value of our executive deferred compensation plan due to stock market performance improvement in fiscal 2010. Increase in accounts receivable of $13.8 million was due to higher level of shipments in the fourth quarter of fiscal 2010 . Increase in accounts payable of $8.2 million was primarily attributable to the timing of payments and increase in the volume of foundry and subcontractor activity.
Cash Flows from Investing Activities
Net cash provided by investing activities in fiscal 2012 was $47.5 million compared to net cash used by investing activities of $0.4 million in fiscal 2011 and of $52.7 million in fiscal 2010 .  Net cash provided by investing activities in fiscal 2012 primarily consisted of $70.2 million of proceeds from divestitures, net proceeds of $4.0 million from sale of short-term investments and receipt of $2.6 million on sale of a non-marketable security partially offset by $22.4 million of expenditures to purchase capital equipment, $5.0 million paid for purchase of intangible assets and $2.0 million paid for acquisition of Nethra Imaging business.

In fiscal 2011, net cash used by investing activities primarily consisted of expenditure of $12.5 million to purchase capital equipment, payment of $7.4 million for IKOR acquisition and purchase of non-marketable security of $5.5 million partially offset by net proceeds from sale of short-term investments of $25.0 million.

In fiscal 2010, net cash used by investing activities primarily consisted of payment of $85.0 million for acquisitions, expenditure of $12.9 million to purchase capital equipment, $63.2 million of net purchases of short-term investment partially offset by net cash proceeds from the divestiture activities of $109.4 million. 
Cash Flows from Financing Activities
Net cash used in financing activities was $50.6 million in fiscal 2012 as compared to $90.8 million in fiscal 2011 and $15.2 million in fiscal 2010.

Cash used in financing activities in fiscal 2012, was primarily due to repurchases of approximately $67.5 million of IDT common stock, partially offset by proceeds of approximately $16.3 million from the exercise of employee stock options and the issuance of stock under our employee stock purchase plan.

In fiscal 2011, cash used in financing activities was primarily the result of repurchases of approximately $107.6 million of IDT common stock, partially offset by proceeds of approximately $15.3 million from the exercise of employee stock options and the issuance of stock under our employee stock purchase plan.

In fiscal 2010, cash used in financing activities was primarily due to repurchase of $24.4 million of IDT common stock, partially offset by proceeds of approximately $7.3 million from the exercise of employee stock options and the issuance of stock under our employee stock purchase plan.

We anticipate capital expenditures of approximately $30 million to $35 million during fiscal 2013 to be financed through cash generated from operations and existing cash and investments.

Cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase. We maintain the cash and cash equivalents with reputable major financial institutions. Deposits with these banks may exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits or similar limits in foreign jurisdictions. These deposits typically may be redeemed upon demand and, therefore, bear minimal risk. In addition, a significant portion of cash equivalents is concentrated in money market funds which are invested primarily in U.S. government treasuries. While we monitor daily the cash balances in our operating accounts and adjust the balances as appropriate, these balances could be affected if one or more of the financial institutions with which we deposit fails or is subject to other adverse conditions in the financial markets. As of April 1, 2012 , we had not experienced any loss or lack of access to our invested cash or cash equivalents in our operating accounts.  However, we can provide no assurances that access to our invested cash and cash equivalents will not be affected by adverse conditions in the financial markets. See Item 1A-“Risk Factors: Global Market and Economic Conditions, including those related to the credit markets, may adversely affect our business and results of operations.”

In addition, as much of our revenues are generated outside the U.S., a significant portion of our cash and investment portfolio accumulates in the foreign countries in which we operate. At April 1, 2012 , we had cash, cash equivalents and investments of approximately $243.3 million invested overseas in accounts belonging to various IDT foreign operating entities. While these amounts are primarily invested in U.S. dollars, a portion is held in foreign currencies, and all offshore balances are exposed to local political, banking, currency control and other risks. In addition, these amounts may be subject to tax and other transfer restrictions.

33


All of our short-term investments which are classified as available-for-sale investments are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the length of time, general market conditions and our intent and ability to hold the investment for a period of time sufficient to allow for recovery. Although we believe the portfolio continues to be comprised of sound investments due to high credit ratings and government guarantees of the underlying investments, a further decline in the capital and financial markets would adversely impact the market values of its investments and their liquidity. We continually monitor the credit risk in our portfolio and future developments in the credit markets and make appropriate changes to our investment policy as deemed necessary. We did not record any other-than-temporary impairment charges related to our short-term investments in fiscal 2012 and fiscal 2011.
Contractual Obligations and Commercial Commitments
The following table summarizes our contractual arrangements at April 1, 2012 and the expected timing and effects of these commitments on our liquidity and cash flow in future periods:
 
Payments Due by Period
 
 
 
Less Than
 
2-3
 
4-5
 
 
(in thousands)
Total
 
1 Year
 
Years
 
Years
 
Thereafter
Operating leases
$
11,889

 
$
4,193

 
$
4,792

 
$
2,398

 
$
506

Other supplier obligations (1)
21,338

 
11,723

 
9,171

 
444

 
—


(1)
Other supplier obligations represent payments due under various software design tool and technology license agreements.
 
As of April 1, 2012 , our unrecognized tax benefits were $25.4 million, of which $0.7 million are classified as long-term liabilities and $24.7 million which are netted against deferred tax assets. In addition, we have $14.9 million of amounts payable related to obligations under our deferred compensation plan, which are classified as long-term liabilities. At this time, we are unable to make a reasonably reliable estimate of the timing of payments, if any, in individual years due to uncertainties in the timing or outcomes of either actual or anticipated tax audits and the timing of employee departures.  As a result, these amounts are not included in the table above.
 
Purchase orders or contracts for the purchase of raw materials and other goods and services are not included in the table above. We are not able to determine the aggregate amount of such purchase orders that represent binding contractual obligations, as purchase orders often represent authorizations to purchase rather than binding agreements.  Our purchase orders are based on our current manufacturing needs and are fulfilled by our vendors within short time horizons. We also enter into contracts for outsourced services, which generally contain clauses allowing for cancellation prior to services being performed without significant penalty.  In addition, the table above excludes leases in which amounts have been accrued for impairment charges.

As discussed above, on April 30, 2012 we entered in an agreement with PLX Technology, Inc to purchase all outstanding shares of PLX Technology for approximately $330 million which we expect to fund with cash and common stock.

We believe that existing cash and investment balances, together with cash flows from operations and credit facilities, will be sufficient to meet our working capital and capital expenditure needs through at least fiscal 2013. We may choose to investigate other financing alternatives; however, we cannot be certain that additional financing will be available on satisfactory terms.


Off-Balance Sheet Arrangements
 
As of April 1, 2012 , we did not have any off-balance sheet arrangements, as defined under SEC Regulation S-K Item 303(a)(4)(ii), other than the items discussed in Note 16 – Commitment and Contingencies- Commitments (Operating leases)” in Part II, Item 8 of this Annual Report on Form 10-K.

Recent Accounting Pronouncements
 
For further information, please see “Note 1—Summary of Significant Accounting Policies” in Part II, Item 8 of this Annual Report on Form 10-K.
 

34


Related Party Transactions
 
For further information, please see “Note 22—Related Party Transactions” in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our interest rate risk relates primarily to our short-term investments of 190.5 million and 194.5 million as of April 1, 2012 and April 3, 2011 , respectively.  By policy, we limit our exposure to long-term investments and mitigate the credit risk through diversification and adherence to a policy requiring the purchase of highly rated securities. As of April 1, 2012 and April 3, 2011 , the Company’s cash, cash equivalents and investment portfolio was concentrated in securities with same day liquidity and at the end of fiscal 2012, a substantial majority of securities in our investment portfolio had maturities of less than two years. A hypothetical 10% change in interest rates will not have a material effect on the value of our investment portfolio as of April 1, 2012.  We do not currently use derivative financial instruments in our investment portfolio.

At April 1, 2012 and April 3, 2011 , we had no outstanding debt.

We are exposed to foreign currency exchange rate risk as a result of international sales, assets and liabilities of foreign subsidiaries, local operating expenses of our foreign entities and capital purchases denominated in foreign currencies.  We may use derivative financial instruments to help manage our foreign currency exchange exposures.  We do not enter into derivatives for speculative or trading purposes. We have foreign exchange facilities used for hedging arrangements with banks that allow the Company to enter into foreign exchange contracts totaling approximately $20.0 million , all of which was available at April 1, 2012 . We performed a sensitivity analysis as of April 1, 2012 and April 3, 2011 and determined that, without hedging the exposure, a 10% change in the value of the U.S. dollar would result in an approximate 0.5% and 0.4% impact on gross profit margin percentage, as we operate manufacturing testing facility in Malaysia, and an approximate 1.2% and 0.9% impact to operating expenses (as a percentage of revenue) as we operate sales offices in Japan and throughout Europe and design centers in the U.S., China, and Canada.  At April 1, 2012 and April 3, 2011 , we had no outstanding foreign exchange contracts.

We did not have any currency exposure related to any outstanding capital purchases as of April 1, 2012 and April 3, 2011 .


35
Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Consolidated Financial Statements:
 
 
 
Financial Statement Schedule:
 


36
Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Integrated Device Technology, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index appearing under item 15(a)(1), present fairly, in all material respects, the financial position of Integrated Device Technology, Inc. and its subsidiaries at April 1, 2012 and April 3, 2011 , and the results of their operations and their cash flows for each of the three years in the period ended April 1, 2012 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the accompanying index under item 15(a)(2)   presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated   financial statements.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 1, 2012 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A.  Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Jose, CA
May 21, 2012

INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
 
(in thousands, except per share amounts )
April 1, 2012
 
April 3, 2011
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
134,924

 
$
104,680

Short-term investments
190,535

 
194,512

Accounts receivable, net of allowances of $3,009 and $4,568
60,609

 
81,798

Inventories
71,780

 
67,041

Income tax receivable
417

 
1,653

Prepayments and other current assets
23,267

 
22,276

Total current assets
481,532

 
471,960

Property, plant and equipment, net
69,984

 
67,754

Goodwill
96,092

 
104,020

Acquisition-related intangible assets, net
40,548

 
51,021

Deferred non-current tax assets
179

 
2,034

Other assets
29,299

 
30,671

Total assets
$
717,634

 
$
727,460

Liabilities and stockholders' equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
25,211

 
$
35,419

Accrued compensation and related expenses
26,156

 
32,784

Deferred income on shipments to distributors
14,263

 
12,853

Deferred tax liabilities
421

 
2,224

Other accrued liabilities
13,443

 
30,886

Total current liabilities
79,494

 
114,166

Deferred tax liabilities
1,552

 
1,513

Long-term income tax payable
706

 
712

Other long-term liabilities
16,494

 
15,808

Total liabilities
98,246

 
132,199

Commitments and contingencies (Note 16)


 


Stockholders' equity:
 

 
 

Preferred stock: $.001 par value: 10,000 shares authorized; no shares issued
—

 
—

Common stock: $.001 par value: 350,000 shares authorized; 142,194 and 148,352 shares outstanding at April 1, 2012 and April 3, 2011, respectively
142

 
148

Additional paid-in capital
2,377,315

 
2,343,726

Treasury stock at cost: 90,426 shares and 80,037 shares at April 1, 2012 and April 3, 2011, respectively
(977,296
)
 
(909,824
)
Accumulated deficit
(782,136
)
 
(840,596
)
Accumulated other comprehensive income
1,363

 
1,807

Total stockholders' equity
619,388

 
595,261

Total liabilities and stockholders' equity
$
717,634

 
$
727,460


The accompanying notes are an integral part of these consolidated financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Fiscal Year Ended
 
(In thousands, except per share data)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Revenues
$
526,696

 
$
605,389

 
$
524,162

Cost of revenues
246,190

 
276,447

 
300,378

Gross profit
280,506

 
328,942

 
223,784

Operating expenses:
 

 
 

 
 

Research and development
158,749

 
154,465

 
135,683

Selling, general and administrative
100,907

 
103,620

 
102,923

Total operating expenses
259,656

 
258,085

 
238,606

Operating income (loss)
20,850

 
70,857

 
(14,822
)
Gain on divestitures
20,656

 
—

 
78,306

Other-than-temporary impairment loss on investments
(2,797
)
 
—

 
—

Interest income and other, net
(1,118
)
 
3,697

 
3,877

Income before income taxes from continuing operations
37,591

 
74,554

 
67,361

Income tax expense (benefit)
268

 
(19,272
)
 
2,640

Net income from continuing operations
$
37,323

 
$
93,826

 
$
64,721

 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
Gain from divestiture
45,939

 
—

 
—

Loss from discontinued operations before income taxes
(24,891
)
 
(24,260
)
 
(26,390
)
Benefit from income taxes
(89
)
 
(85
)
 
(92
)
Net income (loss) from discontinued operations
21,137

 
(24,175
)
 
(26,298
)
 
 
 
 
 
 
Net income
$
58,460

 
$
69,651

 
$
38,423

 
 
 
 
 
 
Basic net income per share- continuing operations
$
0.26

 
$
0.61

 
$
0.39

Basic net income (loss) per share -discontinued operations
$
0.15

 
$
(0.16
)
 
$
(0.16
)
Basic net income per share
$
0.41

 
$
0.45

 
$
0.23

 
 
 
 
 
 
Diluted net income per share - continuing operations
$
0.26

 
$
0.60

 
$
0.39

Diluted net income (loss) per share -discontinued operations
$
0.14

 
$
(0.15
)
 
$
(0.16
)
Diluted net income per share
$
0.40

 
$
0.45

 
$
0.23

 
 
 
 
 
 
Weighted average shares:
 

 
 

 
 

Basic
143,958

 
154,511

 
165,408

Diluted
145,848

 
155,918

 
165,961



The accompanying notes are an integral part of these consolidated financial statements.

INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Fiscal Year Ended
 
(in thousands)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Cash flows provided by operating activities:
 
 
 
 
 
Net income
$
58,460

 
$
69,651

 
$
38,423

Adjustments:
 

 
 

 
 

Depreciation
18,818

 
17,986

 
22,118

Amortization of intangible assets
16,489

 
19,932

 
21,073

Assets impairment
—

 
—

 
1,602

Gain from divestitures
(66,595
)
 
—

 
(78,306
)
Stock-based compensation expense, net of amounts capitalized in inventory
16,795

 
16,529

 
16,674

Other-than temporary impairment loss on investments
2,797

 
—

 
—

Deferred tax provision
90

 
120

 
58

Tax benefit from share based payment arrangements
(562
)
 
(1,487
)
 
432

Changes in assets and liabilities (net of amounts acquired):
 

 
 

 
 

Accounts receivable, net
21,189

 
(12,005
)
 
(13,826
)
Inventories
(4,802
)
 
(15,280
)
 
26,244

Prepayments and other assets
(637
)
 
1,808

 
2,686

Accounts payable
(12,154
)
 
978

 
8,231

Accrued compensation and related expenses
(5,767
)
 
10,357

 
1,807

Deferred income on shipments to distributors
1,410

 
(5,908
)
 
(123
)
Income taxes payable and receivable
1,439

 
(19,476
)
 
1,296

Other accrued liabilities and long-term liabilities
(13,193
)
 
(8,814
)
 
3,673

Net cash provided by operating activities
33,777

 
74,391

 
52,062

Cash flows provided by (used) for investing activities:
 

 
 

 
 

Acquisitions, net of cash acquired
(1,957
)
 
(6,247
)
 
(85,000
)
Cash in escrow related to acquisitions
—

 
(1,160
)
 
—

Proceeds from divestitures
70,242

 
—

 
109,434

Purchases of property, plant and equipment, net
(22,396
)
 
(12,510
)
 
(12,927
)
Purchase of intangible assets
(5,000
)
 
—

 
—

Proceeds from sale of non-marketable security
2,619

 
—

 
—

Purchases of non-marketable securities
—

 
(5,500
)
 
(1,000
)
Purchases of short-term investments
(492,672
)
 
(447,032
)
 
(325,510
)
Proceeds from sales of short-term investments
295,908

 
42,613

 
53,635

Proceeds from maturities of short-term investments
200,743

 
429,413

 
208,639

Net cash provided by (used) for investing activities
47,487

 
(423
)
 
(52,729
)
Cash flows used for financing activities:
 

 
 

 
 

Proceeds from issuance of common stock
16,288

 
15,296

 
7,336

Repurchase of common stock
(67,472
)
 
(107,607
)
 
(24,370
)
Excess tax benefit from share based payment arrangements
562

 
1,487

 
1,824

Net cash used for financing activities
(50,622
)
 
(90,824
)
 
(15,210
)
Effect of exchange rates on cash and cash equivalents 
(398
)
 
1,010

 
367

Net increase (decrease) in cash and cash equivalents
30,244

 
(15,846
)
 
(15,510
)
Cash and cash equivalents at beginning of period
104,680

 
120,526

 
136,036

Cash and cash equivalents at end of period
$
134,924

 
$
104,680

 
$
120,526

Supplemental disclosure of cash flow information
 

 
 

 
 

Cash paid for:
 

 
 

 
 

Interest
$
1,184

 
$
6

 
$
7

Income taxes, net of refunds
$
(197
)
 
$
(127
)
 
$
1,219

Noncash investing activities:
 

 
 

 
 

Common stock options assumed in connection with the Tundra acquisition
$
—

 
$
—

 
$
721

The accompanying notes are an integral part of these consolidated financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 
Common Stock and Additional Paid-In Capital
 
Treasury
Stock
 
Retained
Earnings (Accumulated Deficit)
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
(in thousands)
Shares
 
Dollars
 
 
 
 
 
 
 
 
Balance, March 29, 2009
165,298

 
$
2,283,766

 
$
(777,847
)
 
$
(948,670
)
 
$
870

 
$
558,119

Comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

Net income
—

 
—

 
—

 
38,423

 
—

 
38,423

Translation adjustment
—

 
—

 
—

 
—

 
287

 
287

Net unrealized loss on investments
—

 
—

 
—

 
—

 
(111
)
 
(111
)
Total comprehensive income
 

 
 

 
 

 
 

 
 

 
38,599

Issuance of common stock
1,745

 
7,336

 
—

 
—

 
—

 
7,336

Common stock options assumed
—

 
721

 
—

 
—

 
—

 
721

Repurchase of common stock
(4,165
)
 
—

 
(24,370
)
 
—

 
—

 
(24,370
)
Excess tax benefit from stock option
—

 
2,256

 
—

 
—

 
—

 
2,256

Stock-based compensation expense
—

 
16,534

 
—

 
—

 
—

 
16,534

Balance, March 28, 2010
162,878

 
2,310,613

 
(802,217
)
 
(910,247
)
 
1,046

 
599,195

Comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

Net income
—

 
—

 
—

 
69,651

 
—

 
69,651

Translation adjustment
—

 
—

 
—

 
—

 
978

 
978

Net unrealized loss on investments
—

 
—

 
—

 
—

 
(217
)
 
(217
)
Total comprehensive income
 

 
 

 
 

 
 

 
 

 
70,412

Issuance of common stock
3,594

 
15,296

 
—

 
—

 
—

 
15,296

Repurchase of common stock
(18,120
)
 
—

 
(107,607
)
 
—

 
—

 
(107,607
)
Excess tax benefit from stock option
—

 
1,487

 
—

 
—

 
—

 
1,487

Stock-based compensation expense
—

 
16,478

 
—

 
—

 
—

 
16,478

Balance, April 3, 2011
148,352

 
2,343,874

 
(909,824
)
 
(840,596
)
 
1,807

 
595,261

Comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

Net income
—

 
—

 
—

 
58,460

 
—

 
58,460

Translation adjustment
—

 
—

 
—

 
—

 
(383
)
 
(383
)
Net unrealized loss on investments
—

 
—

 
—

 
—

 
(61
)
 
(61
)
Total comprehensive income
 

 
 

 
 

 
 

 
 

 
58,016

Issuance of common stock
4,231

 
16,288

 
—

 
—

 
—

 
16,288

Repurchase of common stock
(10,389
)
 
—

 
(67,472
)
 
—

 
—

 
(67,472
)
Excess tax benefit from stock option
—

 
562

 
—

 
—

 
—

 
562

Stock-based compensation expense
—

 
16,733

 
—

 
—

 
—

 
16,733

Balance, April 1, 2012
142,194

 
$
2,377,457

 
$
(977,296
)
 
$
(782,136
)
 
$
1,363

 
$
619,388


The accompanying notes are an integral part of these consolidated financial statements.

37
Table of Contents

INTEGRATED DEVICE TECHNOLOGY, INC.
Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Nature of Business .     Integrated Device Technology, Inc. (IDT or the Company) designs, develops, manufactures and markets a broad range of integrated circuits for the advanced communications, computing and consumer industries.

Basis of Presentation .     The Company's fiscal year is the 52 or 53 week period ending on the Sunday nearest to March 31. Fiscal 2012 included 52 weeks and ended on April 1, 2012 . Fiscal 2011 included 53 weeks and ended on April 3, 2011 and fiscal 2010 included 52 weeks and ended on March 28, 2010 .

Reclassifications.     Certain fiscal 2011 and fiscal 2010 amounts in the accompanying consolidated financial statements have been reclassified to conform to the fiscal 2012 presentation. These reclassifications had no effect on the previously reported consolidated statements of operations or stockholders’ equity.

Principles of Consolidation .   The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated.

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.

Cash and Cash Equivalents .   Cash equivalents are highly liquid investments with remaining maturities of three months or less at the time of purchase.

Investments

Available-for-Sale Investments .   Investments designated as available-for-sale include marketable debt and equity securities.  Available-for-sale investments are classified as short-term, as these investments generally consist of highly marketable securities that are intended to be available to meet near-term cash requirements.  Marketable securities classified as available-for-sale are reported at market value, with net unrealized gains or losses recorded in accumulated other comprehensive income (loss), a separate component of stockholders' equity, until realized.  Realized gains and losses on investments are computed based upon specific identification, are included in interest income and other, net and have not been significant for all periods presented.

Non-Marketable Equity Securities .   Non-marketable equity securities are accounted for at historical cost or, if the Company has significant influence over the investee, using the equity method of accounting.

Other-Than-Temporary Impairment .   All of the Company’s available-for-sale investments and non-marketable equity securities are subject to a periodic impairment review.  Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary.  This determination requires significant judgment.  For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the previous six months, general market conditions and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for recovery.  For non-marketable equity securities, the impairment analysis requires the identification of events or circumstances that would likely have a significant adverse effect on the fair value of the investment, including revenue and earnings trends, overall business prospects and general market conditions in the investees’ industry or geographic area.  Investments identified as having an indicator of impairment are subject to further analysis to determine if the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.

Inventories .    Inventories are recorded at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market value.  Inventory held at consignment locations is included in finished goods inventory as the Company retains full title and rights to the product.  Inventory valuation includes provisions for excess and obsolete inventory based on management’s forecasts of demand over specific future time horizons and reserves to value our inventory at the lower of cost or market which rely on forecasts of average selling prices (ASPs) in future periods.

Property, Plant and Equipment .     Property, plant and equipment are stated at cost. Property, plant and equipment acquired in conjunction with mergers or acquisitions are stated at estimated fair value at the time of acquisition.  For financial reporting purposes, depreciation is computed using the straight-line method over estimated useful lives of the assets.  Estimated useful lives for major asset categories are as follows: machinery and equipment, three to five  years; and buildings and improvements, 10 to 30  years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the remaining term of the lease.

Long-Lived Assets and Goodwill .    The carrying values of long-lived assets, including purchased intangibles are evaluated whenever events or circumstances indicate that the carrying values may not be recoverable. If estimated undiscounted cash flows are not sufficient to recover the carrying values, the affected assets are considered impaired and are written down to their estimated fair value, which is generally determined on the basis of discounted cash flows or outside appraisals.

The Company tests for impairment of goodwill and other indefinite-lived assets on an annual basis, or more frequently if indicators of impairment are present.  These tests are performed at the reporting unit level using a two-step, fair-value based approach. The first step, used to determine if impairment possibly exists, is to compare the carrying amount of a reporting unit, including goodwill, to its fair value. If the carrying amount of the reporting unit exceeds the fair value, the second step is to measure the amount of impairment loss by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.

Income Taxes .  The Company accounts for income taxes under an asset and liability approach that requires the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities be recognized as deferred tax assets and liabilities. Generally accepted accounting principles require the Company to evaluate its ability to realize the value of its net deferred tax assets on an ongoing basis. A valuation allowance is recorded to reduce the net deferred tax assets to an amount that will more likely than not be realized. Accordingly, the Company considers various tax planning strategies, forecasts of future taxable income and its most recent operating results in assessing the need for a valuation allowance. In the consideration of the ability to realize the value of net deferred tax assets, recent results must be given substantially more weight than any projections of future profitability. Since the fourth quarter of fiscal 2003, the Company determined that, under applicable accounting principles, it could not conclude that it was more likely than not that the Company would realize the value of its net deferred tax assets. The Company’s assumptions regarding the ultimate realization of these assets remained unchanged in fiscal 2012 and accordingly, the Company continues to record a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized.

The Company recognizes the tax liability for uncertain income tax positions on the income tax return based on the two-step process. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires the Company to determine the probability of various possible outcomes. The Company evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If the Company later determines that the exposure is lower or that the liability is not sufficient to cover its revised expectations, the Company adjusts the liability and effect a related change in its tax provision during the period in which the Company makes such determination.

Revenue Recognition .  The Company’s revenue results from semiconductor products sold through three channels: direct sales to original equipment manufacturers (OEMs) and electronic manufacturing service providers (EMSs), consignment sales to OEMs and EMSs, and sales through distributors.   The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and its ability to collect is reasonably assured.

For distributors in Americas and Europe regions, who have stock rotation, price protection and ship from stock pricing adjustment rights, the Company defers revenue and related cost of revenues on sales to these distributors until the product is sold through by the distributor to an end-customer.  Subsequent to shipment to the distributor, the Company may reduce product pricing through price protection based on market conditions, competitive considerations and other factors.  Price protection is granted to distributors on the inventory that they have on hand at the date the price protection is offered.  The Company also grants certain credits to its distributors on specifically identified portions of the distributors’ business to allow them to earn a competitive gross margin on the sale of the Company’s products to their end customers.  As a result of its inability to estimate these credits, the Company has determined that   the sales price to these distributors is not fixed or determinable until the final sale to the end-customer.

In the Asia Pacific region excluding Japan (APAC) and Japan, the Company has distributors for which revenue is recognized upon shipment, with reserves recorded for the estimated return and pricing adjustment exposures.   The determination of the amount of reserves to be recorded for stock rotation rights requires the Company to make estimates as to the amount of product which will be returned by customers within their limited contractual rights.  The Company utilizes historical return rates to estimate the exposure . In addition, on occasion, the Company can offer pricing adjustments to distributors for product purchased in a given quarter that remains in their inventory.  These amounts are estimated by management based on discussions with customers, assessment of market trends, as well as historical practice.

Shipping and Handling Costs .   The Company includes shipping and handling costs billed to customers in revenues.  The Company’s shipping and handling costs are included in cost of revenues.

Stock-based Compensation . The fair value of employee restricted stock units is equal to the market value of the Company’s common stock on the date the award is granted.  The Company estimates the fair value of employee stock options and the right to purchase shares under the employee stock purchase plan using the Black-Scholes valuation model, consistent with the FASB’s authoritative guidance for share-based payments.  Option-pricing models require the input of highly subjective assumptions, including the expected term of options and the expected price volatility of the stock underlying such options.  In addition, the Company is required to estimate the number of stock-based awards that will be forfeited due to employee turnover and true up these forfeiture rates when actual results are different from our estimates.  The Company attributes the value of stock-based compensation to expense on an accelerated method.  Finally, the Company capitalizes into inventory a portion of the periodic stock-based compensation expense that relates to employees working in manufacturing activities.

The Company updates the expected term of stock option grants annually based on its analysis of the stock option exercise behavior over a period of time.  The interest rate used in the Black-Scholes valuation model to value the stock option is based on the average U.S. Treasury interest rate over the expected term during the applicable quarter.  The Company believes that the implied volatility of its common stock is an important consideration of overall market conditions and a good indicator of the expected volatility of its common stock.  However, due to the limited volume of options freely traded over the counter, the Company believes that implied volatility, by itself, is not representative of the expected volatility of its common stock.  Therefore, the Company's volatility factor used to estimate the fair value of its stock-based awards reflects a blend of historical volatility of its common stock and implied volatility of call options and dealer quotes on call options, generally having a term of less than twelve months.  The Company has not paid, nor does it have current plans to pay dividends on its common stock in the foreseeable future.

Translation of Foreign Currencies .     For subsidiaries in which the functional currency is the local currency, gains and losses resulting from translation of foreign currency financial statements into U.S. dollars are recorded as a component of accumulated other comprehensive income. For subsidiaries where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in interest income and other, net and have not been significant for all periods presented. 
 
Certain Risk and Concentrations .     The Company's most significant potential exposure to credit concentration risk includes debt-security investments, foreign exchange contracts and trade accounts receivable.  The Company’s investment policy addresses sector and industry concentrations, credit ratings and maturity dates.  The Company invests its excess cash primarily in high rated money market and short-term debt instruments, diversifies its investments and, by policy, invests only in highly rated securities to minimize credit risk.

The Company sells integrated circuits to OEMs, distributors and EMSs primarily in the U.S., Europe, Japan and Asia Pacific. The Company monitors the financial condition of its major customers, including performing credit evaluations of those accounts which management considers to be high risk, and generally does not require collateral from its customers.   When deemed necessary, the Company may limit the credit extended to certain customers.   The Company’s relationship with the customer, and the customer’s past and current payment experience, are also factored into the evaluation in instances in which limited financial information is available. The Company maintains an allowance for doubtful accounts for probable credit losses, including reserves based upon a percentage of total receivables.  When the Company becomes aware that a specific customer may default on its financial obligation, a specific amount, which takes into account the level of risk and the customer’s outstanding accounts receivable balance, is reserved.  These reserved amounts are classified within selling, general and administrative expenses.  Write-offs of accounts receivable balances were not significant in each of the three fiscal years presented.

Sales through one family of distributors, Maxtek and its affiliates, represented approximately 15% , 19% and 21% of the Company’s revenues in fiscal 2012 , 2011 and 2010 , respectively.  Sales through another two distributors, Avnet represented approximately 11% , 13% and 11% of the Company’s revenues in fiscal 2012 , fiscal 2011 and 2010 , respectively and Uniquest represented approximately 10% of the Company's revenue in fiscal 2012 .  No other distributor, single direct or consignment customer represented 10% or more of our total revenues in fiscal 2012, 2011 and 2010. At April 1, 2012, three distributors represented 19% , 16% and 12% of the Company’s gross accounts receivable. At April 3, 2011, three distributors represented 19% , 14% , and 11% of the Company’s gross accounts receivable.

For foreign exchange contracts, the Company manages its potential credit exposure primarily by restricting transactions to only high-credit quality counterparties.

The semiconductor industry is characterized by rapid technological change, competitive pricing pressures, and cyclical market patterns. The Company's results of operations are affected by a wide variety of factors, including general economic conditions, both at home and abroad; economic conditions specific to the semiconductor industry; demand for the Company's products; the timely introduction of new products; implementation of new manufacturing technologies; manufacturing capacity; the availability and cost of materials and supplies; competition; the ability to safeguard patents and intellectual property in a rapidly evolving market; and reliance on assembly and manufacturing foundries, independent distributors and sales representatives. As a result, the Company may experience substantial period-to-period fluctuations in future operating results due to the factors mentioned above or other factors.

Product Warranty .    The Company maintains a reserve for obligations it incurs under its product warranty program. The standard warranty period offered is one year, though in certain instances the warranty period may be extended to as long as two years.  Management estimates the fair value of its warranty liability based on actual past warranty claims experience, its policies regarding customer warranty returns and other estimates about the timing and disposition of product returned under the program.

Recent Accounting Pronouncements .

In September 2011, the Financial Accounting Standards Board (FASB) issued amended guidance regarding the testing of goodwill for impairment. The objective of this amendment is to simplify how entities test goodwill for impairment. Under the updated guidance an entity is to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The amended guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In June 2011, the FASB issued amended guidance regarding the presentation of comprehensive income. The amended guidance requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance also requires presentation of adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income and the components of other comprehensive income are presented. The amended guidance is effective on a retrospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.
In May 2011, the FASB issued additional guidance on fair value measurements that clarifies the application of existing guidance and disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. The updated guidance is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Note 2. Revision of Prior Period Financial Statements
During the third quarter of fiscal 2012, the Company identified errors primarily related to retention bonuses associated with its plan to close its Oregon manufacturing facility ( $6.4 million expense). In addition, the Company had corrected prior period errors in the first and second quarters of 2012 related to retention bonuses ( $0.5 million expense) for certain key employees and accounts payable system related issues ( $1.0 million benefit) respectively. The Company assessed the materiality of these errors individually and in the aggregate on prior periods’ financial statements in accordance with the SEC’s Staff Accounting Bulletin No. 99 (SAB 99), and concluded that the errors were not material to any of its prior annual or interim financial statements. Further although the Company also concluded that correcting the errors, on a cumulative basis, would not be material to the expected results of operations for the year ended April 1, 2012, the Company elected to revise its previously issued financial statements as permitted in SEC’s Staff Accounting Bulletin No. 108 (SAB 108) regarding immaterial revisions. The Company also elected to revise its previously issued consolidated financial statements the next time they are filed. As each subsequent filing is made in the future, the previous period consolidated financial statements affected by the errors will be revised. The Company has revised the April 3, 2011 consolidated balance sheet and the consolidated statements of operations for the fiscal years 2011 and 2010 included herein to reflect the correct balances. Of the above mentioned errors, the amount related to the accounts payable system related issue has been corrected in the accumulated deficit balance as of the end of fiscal 2009 as shown in the consolidated statements of stockholders' equity and will not impact the earnings of prior, current or subsequent reported filings. The impact of correcting these errors on net income as reported for fiscal 2011 and fiscal 2010 was a reduction of $3.0 million and $1.6 million , respectively.

Set out below are the line items within the consolidated balance sheet as of April 3, 2011 and for the fiscal years ended April 3, 2011 and March 28, 2010 that have been affected by the revisions. The revision had no impact on the Company’s total cash flows from operating, investing or financing activities.
 
For the Fiscal Year Ended,
 
For the Fiscal Year Ended,

 
April 3, 2011
 
March 28, 2010
(in thousands, except per share amounts)
As
Reported (1)
Adjustments
As
 Revised
 
As
Reported (1)
Adjustments
As
 Revised
Consolidated Statement of Operations
 
 
 
 
 
 
 
Cost of revenues
$
273,767

$
2,680

$
276,447

 
$
299,038

$
1,340

$
300,378

Gross profit
331,622

(2,680
)
328,942

 
225,124

(1,340
)
223,784

Research and development
154,249

216

154,465

 
135,467

216

135,683

Selling, general and administrative
103,540

80

103,620

 
102,883

40

102,923

Total operating expenses
257,789

296

258,085

 
238,350

256

238,606

Operating income
73,833

(2,976
)
70,857

 
(13,226
)
(1,596
)
(14,822
)
Income from continuing operations
   before income taxes
77,530

(2,976
)
74,554

 
68,957

(1,596
)
67,361

Provision for income taxes
(19,272
)
—

(19,272
)
 
2,640

—

2,640

Net income from continuing operations
96,802

(2,976
)
93,826

 
66,317

(1,596
)
64,721

Net income
$
72,627

$
(2,976
)
$
69,651

 
$
40,019

$
(1,596
)
$
38,423

 
 
 
 
 
 
 
 
Basic income (loss) per share:
 
 
 
 
 
 
 
    Continuing operations
$
0.63

$
(0.02
)
$
0.61

 
$
0.40

$
(0.01
)
$
0.39

    Net income (loss)
$
0.47

$
(0.02
)
$
0.45

 
$
0.24

$
(0.01
)
$
0.23

 
 
 
 
 
 
 
 
Diluted net income (loss) per share:
 
 
 
 
 
 
 
    Continuing operations
$
0.62

$
(0.02
)
$
0.60

 
$
0.40

$
(0.01
)
$
0.39

    Net income (loss)
$
0.47

$
(0.02
)
$
0.45

 
$
0.24

$
(0.01
)
$
0.23

 
 
 
 
 
 
 
 
1) Reflect's previously reported amounts as adjusted for discontinued operations (see Note 5)
 
As of April 3, 2011
(in thousands)
As Reported
 
Adjustments
 
As Revised
Consolidated Balance Sheets
 
 
 
 
 
Accounts payable
$
36,470

 
$
(1,051
)
 
$
35,419

Accrued compensation
    and related expenses
28,212

 
4,572

 
32,784

Total current liabilities
110,645

 
3,521

 
114,166

Total liabilities
128,678

 
3,521

 
132,199

Accumulated deficit
(837,075
)
 
(3,521
)
 
(840,596
)
Total stockholders' equity
$
598,782

 
$
(3,521
)
 
$
595,261



Note 3. Net Income Per Share

 Basic net income per share is computed using the weighted-average number of common shares outstanding during the period.  Diluted net income per share is computed using the weighted-average number of common and dilutive potential common shares outstanding during the period. Potential common shares include employee stock options and restricted stock units. For purposes of computing diluted net income per share, weighted average potential common shares do not include potential common shares that are anti-dilutive under the treasury stock method.
 
The following table sets forth the computation of basic and diluted net income per share: 
 
Fiscal Year Ended
 
(in thousands, except per share amounts)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Numerator (basic and diluted):
 
 
 
 
 
Net income from continuing operations
$
37,323

 
$
93,826

 
$
64,721

 
 
 
 
 
 
Denominator:
 
 
 
 
 
Weighted average common shares outstanding, basic
143,958

 
154,511

 
165,408

Dilutive effect of employee stock options and restricted stock units
1,890

 
1,407

 
553

Weighted average common shares outstanding, diluted
145,848

 
155,918

 
165,961

 
 
 
 
 
 
Basic net income per share from continuing operations
$
0.26

 
$
0.61

 
$
0.39

Diluted net income per share from continuing operations
0.26

 
0.60

 
0.39


Potential dilutive common shares of 11.1 million , 15.0 million and 27.0 million pertaining to employee stock options and restricted stock units were excluded from the calculation of diluted earnings per share for the fiscal years ended April 1, 2012 , April 3, 2011 and March 28, 2010 , respectively, because the effect would have been anti-dilutive.  


Note 4. Business Combinations
Acquisition of Nethra Imaging
On November 2, 2011, the Company completed the acquisition of Nethra Imaging for $2.0 million in cash consideration, of which $0.3 million will be kept in escrow account for a period of one year. As a result of this transaction, IDT has obtained a SerDes team of engineers, rights to technology and a number of customer contracts.
The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. The fair values assigned to tangible and intangible assets acquired are based on management estimates and assumptions.
The aggregate purchase price has been allocated as follows:
(in thousands)
 
Fair Value
Property, plant and equipment, net
 
$
51

Amortizable intangible assets - exisitng technology
 
874

Amortizable intangible assets - customer relationships
 
435

Goodwill and workforce
 
640

Total purchase price
 
$
2,000

Existing technology consists of products that have reached technological feasibility. The Company valued the existing technology utilizing a discounted cash flow (DCF) model, which uses forecasts of future revenues and expenses related to the intangible assets. The Company utilized a discount factor of 31% for existing technology and is amortizing the intangible asset over 3 years on a straight-line basis.
Customer relationship values have been estimated utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible asset. The Company utilized a discount factor of 31% for this intangible asset and is amortizing this intangible asset over 3 years on a straight-line basis.
The Nethra Imaging acquisition and related financial results have been included in the Company’s Consolidated Statements of Operations from the closing date of the acquisition on November 2, 2011. Pro forma earnings information has not been presented because the effect of the acquisition is not material to the Company’s historical financial statements.

Acquisition of certain assets of IKOR Acquisition Corporation (“IKOR”)

On April 16, 2010 , the Company completed its acquisition of certain assets of IKOR, a former subsidiary of iWatt Corporation.  IKOR designed and manufactured power voltage regulator module   (VRM) solutions for high-performance computing.  Pursuant to the agreement, the Company acquired IKOR- patented coupled inductor (CL) technology and related assets and hired members of IKOR’ engineering team.  The total purchase price was $7.7 million , including the fair value of contingent consideration of $1.5 million payable upon the achievement of certain business performance metrics during the twelve months after the closing date. The fair value of the contingent consideration was estimated using probability-based forecasted revenue for the business as of the acquisition date.  The maximum payment for this contingent consideration is $2.8 million .  Pursuant to the agreement, $1.8 million in cash has been held in escrow and will be utilized to fund the contingent consideration payment. During the third quarter of fiscal 2011 , the fair value of the contingent consideration was remeasured based on the revised revenue forecast for the business.  As a result, the fair value of the contingent consideration increased $0.3 million to $1.8 million .  The change in the fair value of the contingent consideration was recorded in selling and administrative expenses in fiscal 2011 .  There was no change in the fair value of the contingent consideration in fiscal 2012. During the third quarter of fiscal 2012, the Company paid the $1.8 million in contingent consideration through the release of the funds held in escrow.
 
The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. The acquired CL technology complements the Company’s growing power management initiative, allowing it to achieve higher levels of performance and integration.  The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management estimates and assumptions. 

The Company incurred approximately $0.3 million   of acquisition-related costs, which were included in SG&A expenses on the Consolidated Statements of Operations for fiscal 2011 .

The aggregate purchase price was allocated as follows:
(in thousands)
Fair Value
Accounts receivable
$
836

Inventories
1,136

Prepayments and other current assets
63

Property, plant and equipment, net
277

Accounts payable and accrued expenses
(1,226
)
Amortizable intangible assets
5,711

Goodwill
946

Total purchase price
$
7,743


A summary of the allocation of amortizable intangible assets is as follows:
( in thousands )
Fair Value
Amortizable intangible assets:
 
Existing technologies
$
5,224

Customer relationships
443

Backlog
44

Total
$
5,711

 
Identifiable Tangible Assets and Liabilities

Assets and liabilities were reviewed and adjusted, if required, to their estimated fair value.
 
Inventories – The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less reasonable selling margin.

Amortizable Intangible Assets

Existing technologies consist of products that have reached technological feasibility. The Company valued the existing technologies utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible assets. The Company utilized discount factors of 35% - 36% for the existing technologies and is amortizing the intangible assets over 7 years on a straight-line basis.

Customer relationship values have been estimated utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible asset. The Company utilized discount factor of 35% for this intangible asset and is amortizing this intangible asset over 5 years on a straight-line basis.

Backlog represents the value of the standing orders for IKOR products as of the closing date of the acquisition.  Backlog was valued utilizing a DCF model and a discount factor of 15% .  The value was amortized over five month period.

IKOR acquisition related financial results have been included in the Company’s Consolidated Statements of Operations from the closing date of the acquisition on April 16, 2010.  Pro forma earnings information has not been presented because the effect of the acquisition is not material to the Company’s historical financial statements.

Acquisition of Mobius Microsystems (Mobius)

On January 14, 2010 , the Company completed its acquisition of Mobius, a privately-held, fabless semiconductor company based in Sunnyvale, California, acquiring all of Mobius’ outstanding shares of common stock for approximately $21 million in cash.  Pursuant to the agreement and upon closing the transaction, the Company acquired patented all-silicon oscillator technology and related assets along with members of Mobius’ engineering team.

A summary of the total purchase price is as follows:
(in thousands)
 
Cash paid
$
20,188

Acquisition-related costs assumed by the Company
500

Total purchase price
$
20,688


The Company allocated the purchase price to the tangible and intangible assets acquired, including in-process research and development (IPR&D), based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The acquisition has extended the Company’s leadership into high accuracy, crystal oscillator replacements. The all-silicon timing technology has provided the Company with power, size and time-to-market advantages. The fair values assigned to tangible and intangible assets acquired are based on management estimates and assumptions.  Goodwill as a result of this acquisition is not expected to be deductible for tax purposes.

The Company incurred approximately $0.5 million of acquisition-related costs, which were included in SG&A expenses on the Consolidated Statements of Operations for fiscal 2010 .

The purchase price has been allocated as follows:
(in thousands)
Fair Value
Cash
$
170

Property, plant and equipment, net
237

Other assets
44

Existing technology
15,768

In-process research and development
3,536

Goodwill
2,105

Liabilities assumed
(1,172
)
Total purchase price
$
20,688

 
Identifiable Tangible Assets
 
Assets were reviewed and adjusted, if necessary, to their estimated fair value.
 
Amortizable Intangible Assets
 
Existing technology consists of products that have reached technological feasibility.  The Company used a DCF model with a discount rate of 30% to determine the fair value of the existing technology and is amortizing it on a straight-line basis over 7 years.

IPR&D
 
Projects that qualify as IPR&D represent those at the development stage and require further research and development to determine technical feasibility and commercial viability. Technological feasibility is established when an enterprise has completed all planning, designing, coding, and testing activities that are necessary to establish that a product can be produced to meet its design specifications, including functions, features, and technical performance requirements. The value of IPR&D was determined by considering the importance of each project to the Company’s overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value based on the percentage of completion of the IPR&D projects. The Company utilized the DCF method to value the IPR&D, using a discount factor of 33% . There were two IPR&D projects underway at Mobius at the acquisition date and the fair value assigned to each project was $2.4 million and $1.1 million , respectively.  One project was 100% complete in the third quarter of fiscal 2011. The Company is amortizing this intangible asset over 7 years on a straight-line basis. The second project is expected to complete in the first quarter of fiscal 2013.   Pro forma earnings information has not been presented because the effect of the acquisition is not material to the Company’s historical financial statements.

Acquisition of Tundra Semiconductor Corporation (Tundra)

On June 29, 2009 , the Company completed its acquisition of Tundra, pursuant to which the Company acquired 100% of the voting common stock of Tundra at a price of CDN $6.25 per share, or an aggregate purchase price of approximately CDN $120.8 million .  The Company paid approximately $104.3 million in cash. In addition, as part of the consideration in the acquisition, the Company assumed options to purchase up to 0.8 million shares of its common stock. As a result, the acquisition resulted in the issuance of approximately 0.8 million stock options with a fair value of $0.7 million .  The total consideration was approximately $105.0 million .  The options were valued using the Black-Scholes option pricing model. Approximately $3.4 million of acquisition-related costs were included SG&A expenses on the Consolidated Statements of Operations for fiscal 2010 . A summary of the total purchase price is as follows:
(in thousands)
 
Cash paid
$
104,316

Assumed stock options
721

Total purchase price
$
105,037


The Company allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values was recorded as goodwill. Tundra’s technology and development capabilities are complementary to the Company’s existing product portfolios for RapidIO and PCI Express.  This strategic combination has provided customers with a broader product offering, as well as improved service, support and a future roadmap for serial connectivity.  These are the significant contributing factors to the establishment of the purchase price, resulting in the recognition of goodwill.  The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions.   Purchased intangibles with finite lives are amortized over their respective estimated useful lives on a straight-line basis.

The purchase price has been allocated as follows:
(in thousands)
Fair Value
Identifiable tangible assets acquired
 
Cash and cash equivalents
$
46,085

Accounts receivable
1,260

Inventories
19,881

Prepayments and other current assets
6,119

Property, plant and equipment, net
7,692

Other assets
4,025

Accounts payable and accruals
(11,877
)
Other long-term obligations
(3,549
)
Net identifiable tangible assets acquired
69,636

Amortizable intangible assets
19,979

Goodwill
15,422

Total purchase price
$
105,037


A summary of the allocation of amortizable intangible assets is as follows:
( in thousands )
Fair Value
Amortizable intangible assets:
 
Existing technology
$
8,476

Customer relationships
7,973

Trade name
2,911

In-process research and development
619

Total
$
19,979

 
Useful lives are primarily based on the underlying assumptions used in the DCF model.

Identifiable Tangible Assets and Liabilities

Assets and liabilities were reviewed and adjusted, if required, to their estimated fair value.
 
Inventories – The value allocated to inventories reflects the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less a reasonable selling margin.
 
Property, plant and equipment – The fair value was determined under the continued use premise as the assets were valued as part of a going concern.  This premise assumes that the assets will remain “as-is, where is” and continue to be used at their present location for the continuation of business operations.  Value in use includes all direct and indirect costs necessary to acquire, install, fabricated and make the assets operational.  The fair value was estimated using a cost approach methodology.

Amortizable Intangible Assets

Existing technology consists of products that have reached technological feasibility. The Company valued the existing technology utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible asset.  The Company utilized discount factors of 20% - 22% for the existing technology and is amortizing the intangible assets over 5 years on a straight-line basis.

Customer relationship values were estimated utilizing a DCF model, which uses forecasts of future revenues and expenses related to the intangible asset.   The Company utilized discount factors of 20% - 22% for each of these intangible assets and is amortizing the intangible assets over 5 years on a straight-line basis.

The Tundra trade name was determined using the relief from royalty method, which represents the benefit of owning this intangible asset rather than paying royalties for its use.  The Company utilized a discount rate of 20% for the trade name and is amortizing this intangible asset over 7 years on a straight-line basis.
 
IPR&D
 
The Company utilized the DCF method to value the IPR&D, using a discount factor of 22% - 24% and will amortize this intangible asset once the projects are complete. There were two IPR&D projects underway at Tundra at the acquisition date. Both projects were completed in the fourth quarter of fiscal 2010.  The Company is amortizing these intangible assets over 5 years on a straight-line basis.

Pro Forma Financial Information (unaudited)

The following unaudited pro forma financial information presents the combined results of operations of the Company and Tundra as if the acquisition had occurred as of the beginning of fiscal 2010.
 
Fiscal Year Ended
 
 
(in thousands, except per share amounts)
March 28,
2010
 
Revenues
$
546,145

 
Net income (loss)
36,537

 
Basic income (loss) per share
$
0.22

 
Diluted income (loss) per share
$
0.22

 

The unaudited pro forma financial information should not be taken as representative of the Company’s future consolidated results operations or financial condition.  Tundra product related revenues from the date of acquisition through March 28, 2010 were $29.8 million .
 
Acquisition of certain assets of Leadis Technology, Inc. (Leadis)

On June 10, 2009 , the Company completed its acquisition of certain sensor technology and related assets from Leadis, along with members of Leadis’ engineering team. The total purchase price of approximately $6.3 million was paid in cash. Approximately $0.2 million of acquisition-related costs was included in SG&A expenses on the Consolidated Statements of Operations for fiscal 2010 .

The Company has allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The acquisition provided the Company with a touch sensor technology, team of engineers, certain assets and a product line involving touch sensor technology. The Company believes that these technologies will allow it to address a broader range of multimedia applications with highly integrated processing, interfacing and connectivity solutions. This transaction is intended to enable the Company to provide OEMs and ODMs with lower power, higher functionality Application-Specific Standard Products (ASSPs) that will enable them to provide consumers with a richer, more complete digital media experience. These opportunities, along with the ability to sell touch sensor products to the Company’s existing customer base, were significant contributing factors to the establishment of the purchase price. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management estimates and assumptions. The goodwill as a result of this acquisition is expected to be deductible for tax purposes.  Goodwill is not amortized but will be reviewed at least annually for impairment. Purchased intangibles with finite lives are being amortized over their respective estimated useful lives on a straight line basis.

The purchase price has been allocated as follows:
(in thousands)
Fair Value
Net tangible assets acquired
$
151

Amortizable intangible assets
6,040

Goodwill
59

Total purchase price
$
6,250


A summary of the allocation of amortizable intangible assets is as follows:
(in thousands)
Fair Value
Amortizable intangible assets:
 
Existing technology
$
4,670

Customer relationships
1,092

In-process research and development
278

Total
$
6,040

 
Useful lives are primarily based on the underlying assumptions used in the DCF models.
 
Net Tangible Assets
 
Assets were reviewed and adjusted, if required, to their estimated fair value.

Amortizable Intangible Assets
 
Existing technology consists of products that have reached technological feasibility. The Company valued the existing technology utilizing a DCF model, which used forecasts of future revenues and expenses related to the intangible assets. The Company utilized discount factors of 42% and 44% for existing technology and is amortizing the intangible assets on a straight-line basis over 7 years.
 
The value of the customer relationships intangible asset was estimated using a DCF model, which used forecasts of future revenues and expenses related to the intangible assets. The Company utilized discount factors of 42% - 45% and is amortizing this intangible asset on a straight-line basis over 5 years.
 
IPR&D

Projects that qualify as IPR&D represent those at the development stage and require further research and development to determine technical feasibility and commercial viability. The value of IPR&D was determined by considering the importance of each project to the Company’s overall development plan, estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value based on the percentage of completion of the IPR&D projects. The Company utilized the DCF method to value the IPR&D, using discount factors of 45% and 46% . There were two IPR&D projects underway at Leadis at the acquisition date.  As of April 1, 2012, both the projects were complete and the Company is amortizing them over a useful life of 7 years.

Leadis acquisition related financial results have been included in the Company’s Consolidated Statements of Operations from the closing date of the acquisition on June 28, 2009. Pro forma earnings information has not been presented because the effect of the acquisition is not material to the Company’s historical financial statements.
 

Note 5. Discontinued Operations and Assets Held For Sale
On September 26, 2011, the Company completed the transfer of certain assets related to IDT’s Hollywood Quality Video (HQV) and Frame Rate Conversion (FRC) video processing product lines to Qualcomm pursuant to an Asset Purchase Agreement. The sale of these HQV and FRC video processing assets is intended to allow the Company to intensify focus on its analog-intensive mixed-signal, timing, and interface and solutions. Upon the closing of the transaction, Qualcomm paid the Company $58.7 million in cash consideration, of which $6.0 million will be withheld in an escrow account for a period of two years and is included in the Company’s balance sheet as other assets (non-current).

38

In the second quarter of fiscal 2012, the Company recorded a gain of $45.9 million related to this divestiture. The following table summarizes the components of the gain (in thousands):
Cash proceeds from sale (including amounts held in escrow)
$
58,744

Less book value of assets sold and direct costs related to the sale:


Fixed assets transferred to Qualcomm
(434
)
Goodwill write-off
(8,568
)
Intangible assets write-off
(1,818
)
License write-off
(525
)
Transaction and other costs
(1,460
)
Gain on divestiture
$
45,939

The Company’s HQV and FRC product lines represented a significant portion of the Company’s video processing assets. The Company currently intends to fully divest its remaining video processing product lines within the next twelve months and has classified these assets as held for sale. As of April 1, 2012 the remaining video processing assets classified as held for sale consisted of $1.0 million in fixed assets and $0.7 million in intangible assets. The video processing lines were included as are part of the Company’s Computing and Consumer reportable segment. For financial statement purposes, the results of operations for these discontinued businesses have been segregated from those of the continuing operations and are presented in the Company's consolidated financial statements as discontinued operations.
The results of discontinued operations for the fiscal years 2012, 2011 and 2010 are as follows (in thousands):
 
For the Fiscal Year Ended,
 
April 1, 2012

 
April 3, 2011

 
March 28, 2010

Revenues
$
9,620

 
$
20,316

 
$
11,744

Cost of revenue
11,271

 
16,627

 
11,961

Operating expenses
23,240

 
27,949

 
26,173

Gain on divestiture
45,939

 
—

 
—

Benefit for income taxes
(89
)
 
(85
)
 
(92
)
Net income (loss) from discontinued operations
$
21,137

 
$
(24,175
)
 
$
(26,298
)


Note 6. Other Divestitures (not accounted as discontinued operations)

Wafer fabrication facility

On January 31, 2012, the Company completed the sale of a wafer fabrication facility located in Hillsboro, Oregon and related assets and specific liabilities to Jireh Semiconductor Incorporated, an Oregon corporation and wholly owned subsidiary of Alpha and Omega Semiconductor Limited ("AOS") for $26.3 million in cash, of which $5.0 million was received as a purchase option deposit in fiscal 2011.
The following table summarizes the components of the gain on divestiture:
(in thousands)
 
Cash proceeds from sale
$
26,330

Assets sold:
 

Fixed assets, net
(3,131
)
Other assets
(1,362
)
Liabilities transferred
476

Transaction and other costs
(1,657
)
Gain on divestiture
$
20,656


Silicon Logic engineering business

On December 4, 2009 , the Company completed the sale of certain assets and transferred certain liabilities related to its Silicon Logic engineering business to Open Silicon, Inc ("OSI") for $1 in cash.  As a result, the Company recorded a loss of $0.2 million in fiscal 2010 related to the divestiture. In connection with the divestiture, the Company entered into a design service agreement with OSI, whereby they agreed to provide and the Company agreed to purchase design services from OSI through the third quarter of fiscal 2011 . The total commitment under this design service agreement was $0.8 million . The agreement was complete in fiscal 2011 . The Company also signed a sublease agreement with OSI for office facility in Eau Claire, Wisconsin, which will expire in June 2012 . The sale of the SLE business did not qualify as discontinued operations as the Company had cash flows associated with the design service agreement that the Company signed with OSI.

The following table summarizes the components of the loss:
(in thousands)
 
Cash proceeds from sale
$
—

Assets sold:
 

Fixed assets, net
(120
)
Other assets
(24
)
Liabilities transferred
17

Transaction and other costs
(40
)
Loss on divestiture
$
(167
)

Military business

On November 30, 2009 , the Company completed the sale of certain assets and transferred certain liabilities related to its military business to Spectrum Control, Inc ("Spectrum Control") for approximately $12.8 million . As a result, the Company recorded a loss of $4.3 million in fiscal 2010 related to the divestiture. All employees in the Company’s military business were transferred to Spectrum Control as a result of the transaction. In addition, the Company also signed a sublease agreement with Spectrum Control for the facility in Worcester, Massachusetts, which expired in May 2010 .  Prior to the divestiture, the military business was part of a larger cash-flow generating product group and did not, on its own, represent a separate operation of the Company.  Therefore, this sale did not qualify as discontinued operations.

The following table summarizes the components of the loss:
(in thousands)
 
Cash proceeds from sale
$
12,800

Assets sold:
 

Accounts receivable, net
(1,022
)
Inventory, net
(5,027
)
Fixed Assets, net
(982
)
Intangible Assets, net
(9,517
)
Other assets
(46
)
Liabilities transferred
572

Transaction and other costs
(1,051
)
Loss on divestiture
$
(4,273
)

Network search engine business

On July 17, 2009 , the Company completed the sale of certain assets related to its network search engine business (the "NWD Assets") to NetLogic Microsystems, Inc ("Netlogic") for $98.2 million in cash, pursuant to an Asset Purchase Agreement by and between the Company and NetLogic dated April 30, 2009 (the "Agreement"). The Company’s NWD Assets were part of the Communications reportable segment. In connection with the divestiture, the Company entered into a supply agreement with NetLogic, whereby they agreed to buy and the Company agreed to sell Netlogic certain network search engine products for a limited time following the closing of the sale.  According to the terms set forth in the agreement, the Company has committed to supply certain products either at its standard costs or below its normal gross margins for such products, which are lower than their estimated fair values. As a result, the Company recorded a liability of $3.0 million related to the estimated fair value of this agreement, of which $1.3 million and $0.8 million was recognized in fiscal 2011 and 2010 . The Company expects to complete sales under this Agreement in fiscal 2012 .  In fiscal 2010 , the Company recorded a gain of $82.7 million related to sale of NWD assets to NetLogic. The sale of the NWD business did not qualify as discontinued operations as the Company continues to generate cash flows associated with the supply agreement that the Company signed with Netlogic.

The following table summarizes the components of the gain:
(in thousands)
 
Cash proceeds from sale
$
98,183

Assets sold:
 
Inventory, net
(7,593
)
Fixed Assets and license transferred
(583
)
Goodwill write off
(3,701
)
Transaction and other costs
(579
)
Fair market value of the supply agreement with Netlogic
(2,980
)
Gain on divestiture
$
82,747


Note 7. Fair Value Measurement

Fair value measurement is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing assets or liabilities.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted market prices for identical assets or liabilities in active markets at the measure date.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.  The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of April 1, 2012 :
 
Fair Value at Reporting Date Using:
(in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total Balance
Cash Equivalents and Short-Term investments:
 
 
 
 
 
 
 
US government treasuries and agencies securities
$
156,315

 
$
—

 
$
—

 
$
156,315

Money market funds
104,596

 
—

 
—

 
104,596

Corporate bonds
—

 
21,538

 
—

 
21,538

International government bonds
—

 
4,648

 
—

 
4,648

Corporate commercial paper
—

 
3,148

 
—

 
3,148

Bank deposits
—

 
11,633

 
—

 
11,633

Municipal bonds
—

 
653

 
—

 
653

Total assets measured at fair value
$
260,911

 
$
41,620

 
$
—

 
$
302,531


The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of April 3, 2011 :
 
Fair Value at Reporting Date Using
 
 
 
(in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total
Cash Equivalents and Short-Term investments:
 
 
 
 
 
 
 
US government treasuries and agencies securities
$
119,926

 
$
—

 
$
—

 
$
119,926

Money market funds
32,203

 
—

 
—

 
32,203

Corporate bonds
—

 
57,087

 
—

 
57,087

Corporate commercial paper
—

 
51,785

 
—

 
51,785

Bank deposits
—

 
17,764

 
—

 
17,764

Municipal bonds
$
—

 
$
369

 
$
—

 
$
369

Total assets measured at fair value
$
152,129

 
$
127,005

 
$
—

 
$
279,134

Liabilities:
 
 
 
 
 
 
 
Fair value of contingent consideration
—

 
—

 
1,800

 
1,800

Total liabilities measured at fair value
$
—

 
$
—

 
$
1,800

 
$
1,800


U.S. government treasuries and U.S. government agency securities as of April 1, 2012 and April 3, 2011 do not include any U.S. government guaranteed bank issued paper. Corporate bonds include bank-issued securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

The securities in Level 1 are highly liquid and actively traded in exchange markets or over-the-counter markets. Level 2 fixed income securities are priced using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data.

In connection with the acquisition of IKOR (please see "Note 4- Business Combinations"), a liability was recognized for the Company’s estimate of the fair value of contingent consideration on the acquisition date based on probability-based forecasted revenue.  This fair value measurement is based on significant inputs not observed in the market and thus represents a Level 3 measurement. This fair value measurement is valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s own assumptions concerning future revenue of the acquired business in measuring fair value. During fiscal 2012, the Company paid the $1.8 million in contingent consideration through the release of the funds held in escrow.

The following table summarizes the change in the fair value of the contingent consideration measured using significant unobservable inputs (Level 3) for fiscal 2012 :
( in thousands )
Estimated Fair Value
Balance as of April 3, 2011
$
1,800

Deletions
(1,800
)
Balance as of April 1, 2012
$
—


Cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase. The Company maintains its cash and cash equivalents with reputable major financial institutions.  Deposits with these banks may exceed the FDIC insurance limits or similar limits in foreign jurisdictions. These deposits typically may be redeemed upon demand and, therefore, bear minimal risk.  While the Company monitors daily the cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be affected if one or more of the financial institutions with which the Company deposits fails or is subject to other adverse conditions in the financial markets.  As of April 1, 2012 , the Company has not experienced any losses in its operating accounts.

All of the Company’s available-for-sale investments are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the length of time, general market conditions and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for recovery. Although the Company believes its portfolio continues to be comprised of sound investments due to high credit ratings and government guarantees of the underlying investments, a further decline in the capital and financial markets would adversely impact the market values of its investments and their liquidity. The Company continually monitors the credit risk in its portfolio and future developments in the credit markets and makes appropriate changes to its investment policy as deemed necessary.  The Company did not record any impairment charges related to its available-for-sale investments in fiscal 2012 and 2011 .

Note 8. Investments

Available-for-Sale Securities

Available-for-sale investments at April 1, 2012 were as follows:
 
(in thousands)
Cost
 
Gross
Unrealized
 Gains
 
Gross
Unrealized
 Losses
 
Estimated Fair
 Value
U.S. government treasuries and agencies securities
$
156,331

 
$
8

 
$
(24
)
 
$
156,315

Money market funds
104,596

 
—

 
—

 
104,596

Corporate bonds
21,485

 
59

 
(6
)
 
21,538

International government bonds
4,650

 
1

 
(3
)
 
4,648

Corporate commercial paper
3,148

 
—

 
—

 
3,148

Bank deposits
11,633

 
—

 
—

 
11,633

Municipal bonds
652

 
1

 
—

 
653

Total available-for-sale investments
302,495

 
69

 
(33
)
 
302,531

Less amounts classified as cash equivalents
(111,996
)
 
—

 
—

 
(111,996
)
Short-term investments
$
190,499

 
$
69

 
$
(33
)
 
$
190,535


Available-for-sale investments at April 3, 2011 were as follows:
 
(in thousands)
Cost
 
Gross
Unrealized
 Gains
 
Gross
Unrealized
 Losses
 
Estimated Fair
 Value
U.S. government treasuries and agencies securities
$
119,917

 
$
17

 
$
(8
)
 
$
119,926

Money market funds
32,203

 
—

 
—

 
32,203

Corporate bonds
57,001

 
104

 
(18
)
 
57,087

Corporate commercial paper
51,785

 
—

 
—

 
51,785

Bank deposits
17,764

 
—

 
—

 
17,764

Municipal bonds
368

 
1

 


 
369

Total available-for-sale investments
279,038

 
122

 
(26
)
 
279,134

Less amounts classified as cash equivalents
(84,623
)
 
—

 
1

 
(84,622
)
Short-term investments
$
194,415

 
$
122

 
$
(25
)
 
$
194,512

 
The cost and estimated fair value of available-for-sale debt securities at April 1, 2012 , by contractual maturity, were as follows:
( in thousands )
Amortized
Cost
 
Estimated Fair
Value
Due in 1 year or less
$
290,342

 
$
290,334

Due in 1-2 years
10,248

 
10,290

Due in 2-5 years
1,905

 
1,907

Total investments in available-for-sale debt securities
$
302,495

 
$
302,531


The cost and estimated fair value of available-for-sale debt securities at April 3, 2011 , by contractual maturity, were as follows:
( in thousands )
Amortized
Cost
 
Estimated Fair
Value
Due in 1 year or less
$
265,392

 
$
265,473

Due in 1-2 years
10,001

 
10,017

Due in 2-5 years
3,645

 
3,644

Total investments in available-for-sale debt securities
$
279,038

 
$
279,134



The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses as of April 1, 2012 , aggregated by length of time that individual securities have been in a continuous loss position.
 
Less Than 12 Months
 
12 Months or Greater
 
Total
(in thousands)
Fair
Value
 
Unrealized
 Loss
 
Fair
 Value
 
Unrealized
 Loss
 
Fair
Value
 
Unrealized
 Loss
Corporate bonds
$
4,213

 
$
(7
)
 
$
—

 
$
—

 
$
4,213

 
$
(7
)
U.S. government treasuries and agencies securities
114,056

 
(24
)
 
—

 
—

 
114,056

 
(24
)
International government bonds
2,550

 
(2
)
 


 


 
2,550

 
(2
)
Total
$
120,819

 
$
(33
)
 
$
—

 
$
—

 
$
120,819

 
$
(33
)

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses, as of April 3, 2011 , aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
(in thousands)
Fair
 Value
 
Unrealized
 Loss
 
Fair
 Value
 
Unrealized
 Loss
 
Fair
 Value
 
Unrealized
 Loss
Corporate bonds
$
24,176

 
$
(18
)
 
$
—

 
$
—

 
$
24,176

 
$
(18
)
U.S. government treasuries and agencies securities
36,531

 
(8
)
 
—

 
—

 
36,531

 
(8
)
Total
$
60,707

 
$
(26
)
 
$
—

 
$
—

 
$
60,707

 
$
(26
)

Currently, a significant portion of the Company’s available-for-sale investments that it holds are all high grade instruments.  As of April 1, 2012 , the unrealized losses on the Company’s available-for-sale investments represented an insignificant amount in relation to its total available-for-sale portfolio. Substantially all of the Company’s unrealized losses on its available-for-sale marketable debt instruments can be attributed to fair value fluctuations in an unstable credit environment that resulted in a decrease in the market liquidity for debt instruments.  Because the Company has the ability to hold these investments until a recovery of fair value, which may be maturity, the Company did not consider these investments to be other-than-temporarily impaired at April 1, 2012 and April 3, 2011 .

Non-Marketable Equity Securities

The Company accounts for its equity investments in privately held companies under the cost method.  These investments are subject to periodic impairment review and measured and recorded at fair value when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of its investment has occurred and is other than temporary, an assessment was made by considering available evidence, including the general market conditions, the investee’s financial condition, near-term prospects, market comparables and subsequent rounds of financing.   The valuation also takes into account the investee’s capital structure, liquidation preferences for its capital and other economic variables. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management judgment. During fiscal 2012 , the Company determined that the carrying values of two of its non-marketable private equity investments were impaired and recorded a $3.4 million other-than temporary impairment loss during the period. Also, during fiscal 2012 , the Company sold a non-marketable equity security for $2.6 million and recorded a gain on sale of $0.6 million in the period.

The aggregate carrying value of the Company’s non-marketable equity securities was approximately $1.7 million and $8.5 million , and was classified within other assets on the Company’s Consolidated Balance Sheets as of April 1, 2012 and April 3, 2011 .  The Company did not recognize any impairment loss in fiscal 2011 and fiscal 2010 .

Note 9. Stock-Based Employee Compensation

Equity Incentive Programs

The Company currently issues awards under three equity based plans in order to provide additional incentive and retention to directors and employees who are considered to be essential to the long-range success of the Company.  These plans are further described below.

2004 Equity Plan (2004 Plan)

In September 2004, the Company’s stockholders approved the 2004 Plan.  On July 21, 2010 , the Board of Directors of the Company approved an amendment to the Company’s 2004 Plan to increase the number of shares of common stock reserved for issuance thereunder from 28,500,000 shares to 36,800,000 shares (an increase of 8,300,000 shares), provided, however, that the aggregate number of common shares available for issuance under the 2004 Plan is reduced by 1.74 shares for each common share delivered in settlement of any full value award, which are awards other than stock options and stock appreciation rights, that are granted under the 2004 Plan on or after September 23, 2010.  On September 23, 2010, the stockholders of the Company approved the proposed amendment described above, which also includes certain other changes to the 2004 Plan, including an extension of the term of the 2004 Plan. Options granted by the Company under the 2004 Plan generally expire seven years from the date of grant and generally vest over a four-year period from the date of grant, with one-quarter of the shares of common stock vesting on the one-year anniversary of the grant date and the remaining shares vesting monthly for the 36 months thereafter.  The exercise price of the options granted by the Company under the 2004 Plan shall not be less than 100% of the fair market value for a common share subject to such option on the date the option is granted.  Full value awards made under the 2004 Plan shall become vested over a period of not less than three years (or, if vesting is performance-based, over a period of not less than one year ) following the date such award is made; provided, however, that full value awards that result in the issuance of an aggregate of up to 5% of common stock available under the 2004 Plan may be granted to any one or more participants without respect to such minimum vesting provisions.   As of April 1, 2012 , there were 12.4 million shares available for future grant under the 2004 Plan.

Compensation Expense

The following table summarizes stock-based compensation expense by line items appearing in the Company’s Consolidated Statement of Operations:
 
Fiscal Year Ended
(in thousands)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Cost of revenue
$
1,784

 
$
1,683

 
$
2,762

Research and development
8,566

 
7,986

 
8,224

Selling, general and administrative
5,983

 
5,000

 
3,444

Discontinued operations
400

 
1,860

 
2,245

Total stock-based compensation expense
$
16,733

 
$
16,529

 
$
16,675


Amount of stock-based compensation expense that was capitalized during the periods presented above was immaterial. Stock-based compensation expense recognized in the Consolidated Statements of Operations is based on awards ultimately expected to vest.  The authoritative guidance for stock-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company attributes the value of stock-based compensation to expense on an accelerated method.
 
Valuation Assumptions

The Company uses the Black-Scholes option-pricing model as its method of valuation for stock-based awards. The Company’s determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, as well as the expected term of the awards. 
 
Fiscal Year Ended
 
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Stock option plans:
 
 
 
 
 
Expected Term
4.31 years

 
4.58 years

 
4.65 years

Risk-free interest rate
1.33
%
 
1.83
%
 
2.12
%
Volatility
43.5
%
 
41.0
%
 
44.7
%
Dividend Yield
—
%
 
—
%
 
—
%
Weighted-average grant-date fair value
$
2.86

 
$
2.75

 
$
2.16

ESPP:
 

 
 

 
 

Expected Term
0.25 years

 
0.25 years

 
0.25 years

Risk-free interest rate
0.03
%
 
0.15
%
 
0.14
%
Volatility
47.7
%
 
41.9
%
 
42.7
%
Dividend Yield
—
%
 
—
%
 
—
%
Weighted-average grant-date fair value
$
1.53

 
$
1.56

 
$
1.48


Stock option exchange program

On September 17, 2009, at the 2009 Annual Meeting of Stockholders, the Company’s stockholders approved a one-time stock option exchange program (option exchange) for the employees other than members of its Board of Directors and executive officers subject to the provisions of Section 16 of the Exchange Act, which allowed employees to surrender certain outstanding stock options for cancellation in exchange for the grant of new replacement options to purchase a lesser number of shares having an exercise price equal to the fair market value of the Company’s common stock on the replacement grant date. On October 30, 2009 , the Company completed this offer.  A total of 992 eligible employees participated in the option exchange. Pursuant to the terms and conditions of the option exchange, the Company accepted for exchange options totaling 9,992,195 , representing 61% of the total number of options eligible for exchange. All surrendered options were canceled effective as of the expiration of the option exchange, and immediately thereafter, in exchange therefore, the Company granted new options with an exercise price of $5.88 per share (representing the per share closing price of its common stock on October 30, 2009 , as reported on the NASDAQ Global Select Market) to purchase an aggregate of 3,329,036 shares of common stock under the 2004 Plan.  New options have a contractual term of five years , based on the weighted-average remaining contractual term of options eligible for exchange as determined at the tender offer date and generally will vest over a three-year period from the date of grant, with one-third of the shares vesting on the one-year anniversary of the grant date and the remaining shares vesting monthly for the 24 months thereafter.  The fair value of the new options granted was measured as the total of the unrecognized compensation cost of the original options tendered and the incremental compensation cost of the new options granted. The incremental compensation cost of the new options granted was measured as the excess of the fair value of the new options granted over the fair value of the original options immediately before cancellation.  The total remaining unrecognized compensation expense related to the original options will be recognized over the remaining requisite service period of the original options while the incremental compensation cost of the new options granted will be recognized over the three years service period.

As a result of the option exchange, the total incremental compensation expense of the new options was approximately $1.8 million , of which $0.2 million , $0.7 million and $0.4 million was recognized in fiscal 2012 , 2011 and 2010 , respectively.

The following is a summary of the Company's stock option activity and related weighted average exercise prices for each category:
 
Fiscal 2012
(shares in thousands)
Shares
 
Price
Beginning stock options outstanding
17,814

 
$
8.49

Granted
4,094

 
7.87

Exercised (1)
(1,102
)
 
5.50

Canceled
(3,326
)
 
10.24

Ending stock options outstanding
17,480

 
$
8.20

Ending stock options exercisable
10,782

 
$
8.94


(1)
Upon exercise, the Company issues new shares of common stock.

The following is a summary of information about stock options outstanding at April 1, 2012 : 
 
 
Options Outstanding
 
Options Exercisable
  Range of Exercise   Prices
 
  Number   Outstanding (in thousands)
 
Weighted-Average
Remaining   Contractual Life
(in years)
 
  Weighted-Average
Exercise Price
 
  Number   Exercisable (in thousands)
 
  Weighted-Average
Exercise Price
4.84 - 5.14
 
2,013

 
3.94
 
$5.05
 
1,420
 
$5.05
5.24 - 5.31
 
99

 
4.00
 
5.29
 
47
 
5.28
5.33 - 5.73
 
712

 
5.89
 
5.47
 
156
 
5.56
5.75 - 5.75
 
1,781

 
5.07
 
5.75
 
802
 
5.75
5.79 - 5.82
 
93

 
4.07
 
5.81
 
64
 
5.82
5.88 - 5.88
 
2,069

 
2.46
 
5.88
 
1,640
 
5.88
5.89 - 7.81
 
1,931

 
5.40
 
6.53
 
758
 
6.44
7.88 - 8.22
 
157

 
4.61
 
8.01
 
72
 
8.12
8.49 - 8.49
 
2,775

 
6.12
 
8.49
 
—
 
8.49
8.69 - 11.19
 
821

 
2.32
 
9.54
 
818
 
9.54
11.23 - 16.82
 
5,028

 
0.83
 
12.03
 
5,005
 
12.03
 
 
17,479

 
3.51
 
$8.20
 
10,782
 
$8.94

As of April 1, 2012 , the weighted-average remaining contractual life of stock options outstanding was 3.51 years and the aggregate intrinsic value was $12.2 million .  The weighted-average remaining contractual life of stock options exercisable was 2.3 years and the aggregate intrinsic value was $7.2 million .  Unrecognized compensation cost related to nonvested stock options, net of estimated forfeitures, was $6.3 million and will be recognized over a weighted-average period of 1.2 years.
 
As of April 1, 2012 , stock options vested and expected to vest totaled approximately 16.5 million with a weighted-average exercise price of $8.26 and a weighted-average remaining contractual life of 3.4 years.  The aggregate intrinsic value as of April 1, 2012 was approximately $11.6 million .

Restricted stock units granted by the Company under the 2004 Plan generally vest over at least a three-year period from the grant date with one-third of restricted stock units vesting on each one-year anniversary.    As of April 1, 2012 , 2.3 million restricted stock unit awards were outstanding under the 2004 Plan.

The following table summarizes the Company’s restricted stock unit activity and related weighted-average exercise prices for each category:
 
Fiscal 2012
(shares in thousands)
Shares
 
Weighted-
 Average
 Grant Date
 Fair Value
 Per Share
Beginning RSU’s outstanding
2,342

 
$
6.70

Granted
1,171

 
7.91

Released
(778
)
 
7.64

Forfeited
(433
)
 
6.81

Ending RSU’s outstanding
2,302

 
$
6.98


As of April 1, 2012 , the unrecognized compensation cost related to restricted stock units granted under the Company’s equity incentive plans was approximately $5.3 million , net of estimated forfeitures, and is expected to be recognized over a weighted-average period of 1.3 years.

As of April 1, 2012 , restricted stock units vested and expected to vest totaled approximately 1.9 million with a weighted-average remaining contract life of 1.1 years.  The aggregate intrinsic value was approximately $13.9 million .

2009 Employee Stock Purchase Plan (2009 ESPP)

On June 18, 2009 , the Board approved implementation of the 2009 Employee Stock Purchase Plan (2009 ESPP) and authorized the reservation and issuance of up to 9,000,000 shares of the Company’s common stock, subject to stockholder approval. On September 17, 2009, the Company’s stockholders approved the plan at the 2009 Annual Meeting of Stockholders.  The 2009 ESPP is intended to be implemented in successive quarterly purchase periods commencing on the first day of each fiscal quarter of the Company.  In order to maintain its qualified status under Section 423 of the Internal Revenue Code, the 2009 ESPP imposes certain restrictions, including the limitation that no employee is permitted to participate in the 2009 ESPP if the rights of such employee to purchase common stock of the Company under the 2009 ESPP and all similar purchase plans of the Company or its subsidiaries would accrue at a rate which exceeds $25,000 of the fair market value of such stock (determined at the time the right is granted) for each calendar year.  

Activity under the Company’s ESPP is summarized in the following table:
(in thousands, except per share amounts)
Fiscal 2012
 
Fiscal 2011
 
Fiscal 2010
Number of shares issued
2,351

 
2,349

 
1,395

Average issuance price
$
4.83

 
$
4.87

 
$
5.22

Number of shares available at year-end
2,905

 
5,256

 
7,605


Note  10. Stockholders' Equity

Stock Repurchase Program .  On January 18, 2007 , the Company’s Board of Directors initiated a $200 million share repurchase program. In fiscal 2009 and 2008 , the Company’s Board of Directors approved expansion of the share repurchase program by a total of $300 million to a total of $500 million . From fiscal 2007 to fiscal 2010 , the Company repurchased approximately 42.9 million shares at an average price of $10.40 per share for a total purchase price of $446.5 million . In fiscal 2011 , the Company repurchased approximately 5.3 million shares at an average price of $5.65 per share for a total purchase price of $29.9 million under this program. On July 21, 2010 , the Company’s Board of Directors approved a new share repurchase plan to repurchase up to $225 million of its common stock.  The old share repurchase program was canceled upon the approval of new share repurchase program.  In fiscal 2011 , the Company repurchased approximately 12.8 million shares at an average price of $6.06 per share for a total purchase price of $77.7 million under this new program. In fiscal 2012 , the Company repurchased approximately 10.4 million shares at an average price of $6.49 per share for a total purchase price of $67.5 million under this new program. As of April 1, 2012 , approximately $79.8 million was available for future purchase under this new share repurchase program.  Share repurchases were recorded as treasury stock and resulted in a reduction of stockholders’ equity.   The program is intended to reduce the number of outstanding shares of Common Stock to offset dilution from employee equity grants and increase stockholder value.


Note 11. Balance Sheet Detail
(in thousands)
April 1,
2012
 
April 3,
2011
Inventories, net
 
 
 
Raw materials
$
6,457

 
$
4,709

Work-in-process
38,843

 
41,517

Finished goods
26,480

 
20,815

Total inventories, net
$
71,780

 
$
67,041

Property, plant and equipment, net
 

 
 

Land
$
11,665

 
$
15,598

Machinery and equipment
290,028

 
781,826

Building and leasehold improvements
44,724

 
135,449

  Total property, plant and equipment, gross *
346,417

 
932,873

Less: accumulated depreciation *
(276,433
)
 
(865,119
)
Total property, plant and equipment, net
$
69,984

 
$
67,754

Other current liabilities
 

 
 

Short-term portion of supplier obligations **
$
1,869

 
$
9,122

Other
11,574

 
21,764

Total other current liabilities
$
13,443

 
$
30,886


Other long-term obligations
 
 
 
Deferred compensation related liabilities
$
14,869

 
$
14,981

Other
1,625

 
827

Total other long-term liabilities
$
16,494

 
$
15,808

 

* During the fourth quarter of fiscal 2012, the Company completed the sale of it's Oregon wafer fabrication facility. Including in the facility sale was $583 million in gross property plant and equipment offset by $580 million in accumulated depreciation.

** Supplier obligations represent payments due under various software design tool and technology license agreements.

Note 12. Deferred Income on Shipments to Distributors

Included in the caption “ Deferred income on shipments to distributors” on the Consolidated Balance Sheets are amounts related to shipments to certain distributors for which revenue is not recognized until our product has been sold by the distributor to an end customer . The components of deferred income on shipments to distributors as of April 1, 2012 and April 3, 2011 are as follows:
 
Fiscal Year Ended
(in thousands)
April 1,
2012
 
April 3,
2011
Gross deferred revenue
$
17,883

 
$
15,463

Gross deferred costs
(3,620
)
 
(2,610
)
Deferred income on shipments to distributors
$
14,263

 
$
12,853


The gross deferred revenue represents the gross value of shipments to distributors at the list price billed to the distributor less any price protection credits provided to them in connection with reductions in list price while the products remain in their inventory.  The amount ultimately recognized as revenue will be lower than this amount as a result of ship from stock pricing credits which are issued in connection with the sell through of our products to end customers. Historically, this amount represents on an average approximately 27% of the list price billed to the customer.  The gross deferred costs represent the standard costs (which approximate actual costs) of products the Company sells to the distributors.  Although we monitor the levels and quality of inventory in the distribution channel, our experience is that products returned from these distributors may be sold to a different distributor or in a different region of the world.  As such, inventory write-downs for products in the distribution channel have not been significant.
Note 13. Comprehensive Income

The components of comprehensive income were as follows:
 
Fiscal Year Ended
  (in thousands)
April 1,
2012
 
April 3,
2011
Net income
$
58,460

 
$
69,651

Currency translation adjustments
(383
)
 
978

Change in net unrealized loss on investments
(61
)
 
(217
)
Comprehensive income
$
58,016

 
$
70,412


The components of accumulated other comprehensive income, net of tax, were as follows:
 
(in thousands)
April 1,
2012
 
April 3,
2011
Cumulative translation adjustments
$
1,328

 
$
1,711

Unrealized gain on available-for-sale investments
35

 
96

Total accumulated other comprehensive income
$
1,363

 
$
1,807


Note 14. Goodwill and Intangible Assets, Net

Goodwill activity for fiscal 2012 and 2011 is as follows:
 
Reportable Segment
 
(in thousands)
Communications
 
Computing and Consumer
 
Total
Balance as of March 28, 2010
$
74,673

 
$
28,401

 
$
103,074

Additions (1)
—

 
946

 
946

Balance as of April 3, 2011
74,673

 
29,347

 
104,020

Impairment losses related to discontinued operations (see note 5)
—

 
(8,568
)
 
(8,568
)
Additions (2)
—

 
640

 
640

Balance as of April 1, 2012
$
74,673

 
$
21,419

 
$
96,092


(1)
Additions were from the IKOR acquisition (see Note 4).
(2)
Additions were from the Nethra acquisition (see Note 4).

Purchase of Intangible Assets from Samplify Systems, Inc.(Samplify)
During the third quarter of fiscal 2012 , the Company acquired from Samplify developed wireless technology including license and patent rights. In exchange for these technology rights, the Company paid Samplify $5.0 million in cash consideration, and returned a portion of IDT’s previous equity investment in Samplify. The total fair value of the consideration paid for the purchased existing technology from Samplify was recorded at $6.5 million . This intangible asset will be amortized over its estimated useful life of 3 years .

Intangible asset balances as of April 1, 2012 and April 3, 2011 are summarized as follows:
 
April 1, 2012
(in thousands)
Gross Assets
 
Accumulated
Amortization
 
Net Assets
Purchased intangible assets:
 
 
 
 
 
Existing technology
$
223,733

 
$
(192,105
)
 
$
31,628

Trademarks
2,911

 
(1,144
)
 
1,767

Customer relationships
127,231

 
(122,511
)
 
4,720

Total amortizable purchased intangible assets
353,875

 
(315,760
)
 
38,115

IPR&D*
2,433

 
—

 
2,433

Total purchased intangible assets
$
356,308

 
$
(315,760
)
 
$
40,548


 
April 3, 2011
(in thousands)
Gross Assets
 
Accumulated
Amortization
 
Net Assets
Purchased intangible assets:
 
 
 
 
 
Existing technology
$
219,700

 
$
(181,722
)
 
$
37,978

Trademarks
3,421

 
(904
)
 
2,517

Customer relationships
127,379

 
(119,564
)
 
7,815

Total amortizable purchased intangible assets
350,500

 
(302,190
)
 
48,310

IPR&D*
2,711

 
—

 
2,711

Total purchased intangible assets
$
353,211

 
$
(302,190
)
 
$
51,021


* IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When the IPR&D project is complete, it is reclassified as an amortizable purchased intangible asset and is amortized over its estimated useful life. If an IPR&D project is abandoned, the Company will record a charge for the carrying value of the related intangible asset to its Consolidated Statements of Operations in the period it is abandoned.

Amortization expense for identified intangibles is summarized below:
 
Fiscal Year Ended
(in thousands)
April 1, 2012
 
April 3, 2011
 
March 28, 2010
Existing technology
$
12,527

 
$
14,174

 
$
14,428

Trademarks
452

 
488

 
384

Customer relationships
3,510

 
5,270

 
6,261

Total
$
16,489

 
$
19,932

 
$
21,073


The intangible assets are being amortized over estimated useful lives of six months to seven years.

Based on the intangible assets recorded at April 1, 2012 , and assuming no subsequent additions to or impairment of the underlying assets, the remaining estimated amortization expense is expected to be as follows (in thousands):
Fiscal Year
Amount
2013
$
13,195

2014
10,744

2015
7,281

2016
4,856

2017 and thereafter
4,472

Total
$
40,548


Note 15. Restructuring

The following table shows the provision of the restructuring charges and the liability remaining as of April 1, 2012 :
(in thousands)
Cost of Revenues
 
Operating Expenses
 
Total
Balance as of March 29, 2009
$
575

 
$
3,649

 
$
4,224

Provision *
9,328

 
12,566

 
21,894

Cash payments
(1,499
)
 
(13,808
)
 
(15,307
)
Balance as of March 28, 2010
8,404

 
2,407

 
10,811

Provision *
3,321

 
2,047

 
5,368

Cash payments
(2,538
)
 
(3,639
)
 
(6,177
)
Balance as of April 3, 2011
9,187

 
815

 
10,002

Provision
(1,425
)
 
4,515

 
3,090

Cash payments
(6,156
)
 
(1,738
)
 
(7,894
)
Balance as of April 1, 2012
$
1,606

 
$
3,592

 
$
5,198


* Amount adjusted to reflect prior period adjustments. See note 2.

Restructuring Actions

As part of an effort to streamline operations with changing market conditions and to create a more efficient organization, the Company has undertaken restructuring actions, to reduce its workforce and consolidate facilities.  The Company’s restructuring expenses were primarily of: (i) severance and termination benefit costs related to the reduction of its workforce; and (ii) lease termination costs and costs associated with permanently vacating certain facilities. 
In connection with the Company’s plans to fully divest its remaining video processing product lines, during fiscal 2012, the Company recorded $3.6 million in restructuring expenses for employee retention costs. These costs have been classified within discontinued operations. As of April 1, 2012 , the total accrued balance for employee retention costs related to this restructuring action was $3.6 million . The Company expects to complete this restructuring action in the third quarter of fiscal 2013 .
In connection with its plan to transition the manufacture of products to Taiwan Semiconductor Manufacturing Limited (TSMC), the Company’s management approved a plan to exit wafer production operations at its Oregon fabrication facility. As a result, the Company accrued restructuring expenses of $4.8 million for severance payments and other benefits associated with this restructuring action in fiscal 2010 . During fiscal 2012 , the Company decreased this accrual by $3.1 million based on the actual number of employee that have been offered employment with the acquirer of the wafer fabrication facility. During fiscal 2012, the Company recorded prior period adjustments of $4.1 million for employee retention costs related to fiscal 2010 and fiscal 2011 (see Note 2 regarding revision of prior period financial statements) and an additional $2.5 million for employee retention costs was recorded in fiscal 2012. As of April 1, 2012 , the total accrued balance for severance and retention costs related to this restructuring was $1.0 million . The Company expects to complete this restructuring action in the first quarter of fiscal 2013 .

In connection with discontinuing manufacturing operations at our Singapore facility in the fourth quarter of fiscal 2010 , the Company exited its leased facility in Singapore in the first quarter of fiscal 2011 . As a result, the Company recorded lease impairment charges of approximately $0.5 million in fiscal 2011 , which represented the future rental payments under the agreements, reduced by an estimate of sublease incomes, and discounted to present value using an interest rate applicable to us. These charges were recorded as cost of goods sold. Since the initial restructuring, the Company has made lease payments of $0.4 million . As of April 1, 2012 , the remaining accrued lease liabilities were $0.1 million . The Company expects to pay off the facility lease charges through the third quarter of fiscal 2013 .
 
In connection with the divestitures of Silicon Logic Engineering business in the third quarter of fiscal 2010 , the Company exited certain leased facilities. As a result, the Company recorded lease impairment charges of approximately $0.9 million , which represented the future rental payments under the agreements, reduced by an estimate of sublease incomes, and discounted to present value using an interest rate applicable to us. These charges were recorded as SG&A. The Company completed the restructuring plan in fiscal 2012.

Note 16. Commitments and Contingencies

Guarantees

As of April 1, 2012 , the Company’s financial guarantees consisted of guarantees and standby letters of credit, which are primarily related to the Company’s electrical utilities in Malaysia, utilization of non-country nationals in Malaysia and Singapore, consumption tax in Japan and value-added tax obligations in Singapore and Holland, and a workers’ compensation plan in the United States. The maximum amount of potential future payments under these arrangements is approximately $2.4 million .

Commitments

Although the Company owns its corporate headquarters in San Jose, California, the Company leases various administrative facilities under operating leases which expire at various dates through fiscal 2016.

As of April 1, 2012 , aggregate future minimum commitments for the next five fiscal years and thereafter under all operating leases, excluding leases in which amounts have been accrued for impairment charges, were as follows (in thousands):
Fiscal Year
 
2013
$
4,193

2014
3,022

2015
1,770

2016
1,464

2017 and thereafter
1,440

Total
$
11,889


Rent expense for the fiscal years ended April 1, 2012 , April 3, 2011 and March 28, 2010 totaled approximately $3.7 million , $4.8 million and $4.8 million , respectively.   Other long-term supplier obligations including payments due under various software design tool and technology license agreements totaled $21.3 million and $8.1 million as of April 1, 2012 and April 3, 2011 , respectively.

Indemnification
 
During the normal course of business, the Company makes certain indemnifications and commitments under which it may be required to make payments in relation to certain transactions.  In addition to indemnifications related to non-infringement of patents and intellectual property, other indemnifications include indemnification of the Company’s directors and officers in connection with legal proceedings, indemnification of various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnification of other parties to certain acquisition agreements. The duration of these indemnifications and commitments varies, and in certain cases, is indefinite. The Company believes that substantially all of its indemnities and commitments provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities and commitments because such liabilities are contingent upon the occurrence of events which are not reasonably determinable.  The Company believes that any liability for these indemnities and commitments would not be material to its accompanying condensed consolidated financial statements.
 
The Company maintains an accrual for obligations it incurs under its standard product warranty program and customer, part, or process specific matters. The Company’s standard warranty period is one year, however in certain instances the warranty period may be extended to as long as two years. Management estimates the fair value of the Company’s warranty liability based on actual past warranty claims experience, its policies regarding customer warranty returns and other estimates about the timing and disposition of product returned under the standard program. Customer, part, or process specific accruals are estimated using a specific identification method. Historical profit and loss impact related to warranty returns activity has been minimal. The total warranty accrual was $0.1 million and $0.4 million as of April 1, 2012 and April 3, 2011 , respectively.

Litigation
 
In April 2008, LSI Corporation and its wholly owned subsidiary Agere Systems Inc. (collectively LSI) instituted an action in the United States International Trade Commission (ITC or Commission), naming the Company and several other respondents.  The ITC action sought an exclusion order under section 337 of the Tariff Act to prevent importation into the U.S. of semiconductor integrated circuit devices and products made by methods alleged to infringe an LSI patent relating to tungsten metallization in semiconductor manufacturing. LSI also filed a companion case in the U.S. District Court for the Eastern District of Texas seeking an injunction and damages of an unspecified amount relating to such alleged infringement. Some of the defendants in the action have since settled the claims against them.  On March 22, 2010, the full ITC Commission issued its Notice of Decision indicating that it had found that the patent claims asserted by LSI were invalid and that there had been no violation of section 337 by the Company, and thereupon terminated its investigation.  On May 14, 2010, LSI filed a Notice of Appeal in the United States Court of Appeals for the Federal Circuit (CAFC) for review of the Final Determination of the Commission.  On July 13, 2010, the patent asserted by LSI in these actions expired.  A motion to dismiss the LSI appeal as moot, based on the expiration of the asserted patent, was granted by the CAFC on November 15, 2010.  On May 19, 2011, LSI filed a motion to dismiss the companion U.S. District Court case against the Company and all remaining defendants. The court issued an order dismissing the lawsuit on June 16, 2011.
 
In November 2010, the Company filed a complaint in the Northern District of California against Phison Electronics Corp. (Phison) for infringement of the Company’s four patents directed to oscillator and clock signal technology.  The lawsuit sought a preliminary and permanent injunction against Phison products as well as damages, attorney's fees and cost of the lawsuit.  Phison filed an answer to the complaint on January 31, 2011, denying infringement of the patents in suit. The companies subsequently entered into a confidential settlement agreement, under which IDT licensed certain patents to Phison and the companies agreed to dismiss all claims and counterclaims in the litigation. The court issued an order dismissing the lawsuit on August 10, 2011.
 
In January 2011, Maxim I Properties, a general partnership owning a certain parcel of real property (the Property), filed a complaint in the Northern District of California naming approximately thirty defendants, including the Company, alleging various environmental violations of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Hazardous Substance Account Act (HSAA), the Resource Conservation and Recovery Act (“RCRA”), and other public and private nuisance claims (the Complaint). The Complaint alleges with regard to the Company that IDT “…generated, transported, and/or arranged for the transport and/or disposal of hazardous waste to the Property.” The Complaint further alleges that the Defendants failed to meet statutory obligations by releasing hazardous substances or wastes to the environment and allowing hazardous substances or wastes to be released or to migrate on the Property and failing to properly investigate and remediate the contamination. In March 2012, the Company filed an answer to the complaint, denying the various allegations in the Complaint. The Company will continue to vigorously defend itself against the allegations in the Complaint. Because the case is at an early stage and no specific monetary demands have been made, it is not possible for us to estimate the range of potential losses.

On May 14, 2012, a putative class action lawsuit captioned Cox v. Guzy, et al., C.A. No. 7529, was filed in the Delaware Court of Chancery (the Cox Complaint). The Cox Complaint names as defendants the members of the PLX Board of Directors, as well as PLX, IDT, Pinewood Acquisition Corp. (Pinewood) and Pinewood Merger Sub, LLC (Pinewood LLC), both of which are wholly-owned subsidiaries of IDT. The plaintiff alleges that PLX's directors breached their fiduciary duties to PLX stockholders in connection with the Offer and the Merger, and were aided and abetted by PLX, IDT, Pinewood and Pinewood LLC. The Cox Complaint alleges that the Offer and the Merger involve an unfair price and an inadequate sales process, unreasonable deal protection devices, and that defendants entered into the Offer and the Merger to benefit themselves personally. The Cox Complaint seeks injunctive relief, including to enjoin the Offer and the Merger, an award of damages, attorneys' and other fees and costs, and other relief.

 

Note 17. Employee Benefit Plans

The Company sponsors a 401(k) retirement matching plan for qualified domestic employees.  The Company recorded expenses of approximately $2.9 million , $1.9 million and $0.2 million in matching contributions under the plan in fiscal 2012 , 2011 , and 2010 , respectively.  Due to poor economic conditions, the Company suspended its matching contributions to qualified 401(k) participants effective April 1, 2009 but reinstated the matching contributions effective in the fourth quarter of fiscal 2010 .

Effective November 1, 2000, the Company established an unfunded deferred compensation plan to provide benefits to executive officers and other key employees.  Under the plan, participants can defer any portion of their salary and bonus compensation into the plan and may choose from a portfolio of funds from which earnings are measured.   Participant balances are always 100% vested.   As of April 1, 2012 and April 3, 2011 , obligations under the plan totaled approximately $14.9 million and $15.0 million , respectively.  Additionally, the Company has set aside assets in a separate trust that is invested in corporate owned life insurance intended to substantially fund the liability under the plan.  As of April 1, 2012 and April 3, 2011 , the deferred compensation plan assets were approximately $14.0 million and $14.2 million , respectively.  The Company incurred costs for this plan for insurance, administration and other support of $0.3 million in each of fiscal 2012 , 2011 and 2010 , respectively.
Note 18. Income Taxes
 
The components of income (loss) before income taxes and the income tax expense (benefit) were as follows:
 
Fiscal Year Ended
(in thousands)
April 1, 2012
 
April 3, 2011
 
March 28, 2010
Income (loss) before income taxes:
 
 
 
 
 
United States
$
(6,126
)
 
$
38,345

 
$
7,797

Foreign
64,765

 
11,949

 
33,174

Income (loss) before income taxes
$
58,639

 
$
50,294

 
$
40,971

Income tax expense (benefit):
 

 
 

 
 

Current:
 

 
 

 
 

United States
$
(321
)
 
$
(20,462
)
 
$
1,904

State
(118
)
 
144

 
(4
)
Foreign
545

 
841

 
458

 
106

 
(19,477
)
 
2,358

Deferred:
 

 
 

 
 

United States
33

 
151

 
154

State
1

 
6

 
1

Foreign
39

 
(37
)
 
35

 
73

 
120

 
190

Income tax expense (benefit):
$
179

 
$
(19,357
)
 
$
2,548


In fiscal years 2012 , 2011 and 2010 , approximately $0.6 million , $1.5 million and $2.3 million , respectively, of U.S. income tax benefits related to the exercise of certain employee stock options decreased income taxes payable and were credited to additional paid-in capital.

39


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 deferred tax assets and liabilities were as follows: 
(in thousands)
April 1, 2012
 
April 3, 2011
Deferred tax assets:
 
 
 
Deferred income on shipments to distributors
$
2,910

 
$
2,379

Non-deductible accruals and reserves
11,641

 
12,717

Inventory related and other expenses
—

 
375

Net operating losses and credit carryforwards
93,624

 
83,387

Depreciation and amortization
17,587

 
22,929

Stock options
6,252

 
5,752

Other
172

 
255

Total deferred tax assets
132,186

 
127,794

Deferred tax liabilities:
 

 
 

Purchased intangibles
(241
)
 
(190
)
U.S. tax on earnings of foreign subsidiaries not indefinitely reinvested
—

 
—

Other
(2,006
)
 
(3,546
)
Total deferred tax liabilities
(2,247
)
 
(3,736
)
Valuation allowance
(131,731
)
 
(125,760
)
Net deferred tax liabilities
$
(1,792
)
 
$
(1,702
)

The Company maintains a valuation allowance against its deferred tax assets because management is not able to conclude that it is more likely than not that these deferred tax assets will be realized. The Company reached this decision based on judgment, which included consideration of historical losses and projections of future profits. The Company will continue to monitor the need for the valuation allowance on a quarterly basis and may, with further evidence, determine that the valuation allowance is no longer required.  The valuation allowance is based on the Company’s analysis that it is more likely than not that certain deferred tax assets will be realized in the foreseeable future. The net deferred tax liability of $1.8 million relates primarily to book to tax basis differences in various foreign jurisdictions.

The valuation allowance for deferred tax assets increased by $6.0 million and decreased by $16.0 million in fiscal 2012 and fiscal 2011 , respectively.

As of April 1, 2012 , the Company had federal and state net operating loss (NOL) carryforwards, net of ASC 740-10 unrecognized tax benefits, of approximately $60.5 million and $86.4 million , respectively, which include excess tax benefits related to stock option exercises.  The Company has approximately $26.1 million of net tax benefits related to excess stock compensation benefits, which are not recorded as deferred tax assets.  These excess stock compensation benefits will be credited to additional paid-in capital when recognized. The federal net operating loss carryforwards will expire in various fiscal years through 2032, if not utilized.  The state net operating loss carryforwards will expire in various fiscal years through 2032, if not utilized.  The utilization of NOLs created by acquired companies is subject to annual limitations under Section 382 of the Internal Revenue Code. However, the Company does not expect that such annual limitation will impair the realization of these NOLs.

As of April 1, 2012 , the Company had approximately $51.9 million of federal research and development tax credit carryforwards, and $7.3 million of foreign tax credit carryforwards. The federal research tax credit carryforwards will expire from fiscal years 2013 through 2032, if not utilized and the foreign tax credit carryforwards will expire from fiscal years 2013 to 2021, if not utilized. The Company also had, as of April 1, 2012 , approximately $69.5 million of state income tax credit carryforwards, of which $3.5 million will expire in various fiscal years through 2015 , if not utilized.

40


Reconciliation between the statutory U.S. income tax rate of 35% and the effective rate is as follows:
 
Fiscal Year Ended
(in thousands)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Provision (benefit) at 35% U.S. statutory rate
$
20,756

 
$
18,648

 
$
14,898

State tax, net of federal benefit
85

 
120

 
(49
)
Foreign income taxed at lower rates
(22,059
)
 
(22,368
)
 
(16,144
)
Impact of rate change and extension of incentive in foreign jurisdiction
—

 
(3
)
 
(94
)
Repatriation of foreign earnings
1,048

 
—

 
254

Net operating losses and tax credits (benefited) not benefited
(1,201
)
 
335

 
(802
)
Goodwill and intangible assets impairment
—

 
4,379

 
—

Stock-based compensation related to foreign jurisdictions and incentive stock options
4,198

 
—

 
2,989

Liquidation of US subsidiary
(1,218
)
 
—

 
—

IRS settlement
—

 
(20,056
)
 
—

Other
(1,430
)
 
(412
)
 
1,496

Income tax expense (benefit)
$
179

 
$
(19,357
)
 
$
2,548


The Company benefits from tax incentives granted by local tax authorities in certain foreign jurisdictions.  All non-passive income earned in its Malaysia subsidiary is not subject to tax.  The Company was granted a tax holiday in Malaysia during fiscal 2009 .  The tax holiday was contingent upon the Company continuing to meet specified investment criteria in fixed assets, and to operate as an APAC regional headquarters center.  In the fourth quarter of fiscal 2011 , the Company agreed with the Malaysia Industrial Development Board to cancel this tax holiday and enter into a new tax holiday which is a full tax exemption on statutory income for a period of 10 years commencing April 4, 2011.  This new tax holiday is subject to the Company meeting certain financial targets, investment, headcounts and activities in Malaysia. The impact of the Malaysia tax holiday was an increase in net income of approximately $21.6 million in fiscal 2012 ( $0.15 per diluted share), $0.9 million in fiscal 2011 (less than $0.01 per diluted share) and $0.6 million in fiscal 2010 (less than $0.01 per diluted share), respectively.

The Company intends to reinvest certain of its foreign earnings indefinitely. Accordingly, no U.S. income taxes have been provided for approximately $443.2 million of undistributed earnings of foreign subsidiaries. It is not practicable for the Company to determine the tax impact of remitting these earnings.

The amount of unrecognized tax benefits that would favorably impact the effective tax rate were approximately $0.4 million and $0.4 million as of April 1, 2012 and April 3, 2011 , respectively.  As of April 1, 2012 , approximately $29.3 million of unrecognized tax benefits would be offset by a change in valuation allowance.  The Company recognizes potential interest and penalties related to the income tax on the unrecognized tax benefits as a component of income tax expense and accrued  approximately $0.3 million and $0.3 million for these items in fiscal 2012 and 2011 .

In the fourth quarter of fiscal 2011 , the Company entered into a Closing Agreement with the IRS on the “buy-in payment” for the tax structure and Extraterritorial Income Exclusion for the exported products outside the U.S.  The total adjustments increased taxable income and reduced the Company’s net operating loss carryforward by $59.5 million for the fiscal year from 2006 through 2010 . 

As of  April 1, 2012 , the Company could be subject to examination in the U.S. federal tax jurisdiction for the fiscal years 2009, 2010, and 2011.  The Company is not currently under examination by the Internal Revenue Service, but if the Company was audited, based on currently available information, the Company believes that an audit by the Internal Revenue Service would not have a material adverse effect on its financial position, cash flows or results of operations.

As of April 1, 2012 , the Company was subject to examination in various state and foreign jurisdictions for tax years 2006 forward, none of which were individually material.

During the twelve months beginning April 1, 2012 , the Company does not expect its unrecognized tax benefits will materially change from April 1, 2012 balances.  However, the Company notes that the resolution and/or closure of open audits are highly uncertain.

41


The following tables summarize the activities of gross unrecognized tax benefits:
 
(in thousands)
Fiscal
2012
 
Fiscal
2011
 
Fiscal
2010
Beginning balance
$
28,471

 
$
53,795

 
$
44,972

Increases related to prior year tax positions
443

 
6,243

 
3,480

Decreases related to prior year tax positions
—

 
—

 
(862
)
Increases related to current year tax positions
937

 
2,435

 
6,227

Decrease related to the IRS tax settlement
—

 
(34,002
)
 
—

Decreases related to the lapsing of statute of limitations
(133
)
 
—

 
(22
)
Ending balance
$
29,718

 
$
28,471

 
$
53,795

Note 19. Segment Information

The Chief Operating Decision Maker is the Company’s President and Chief Executive Officer.
 
Our reportable segments include the following:

•
Communications segment: includes clock and timing solutions, Serial RapidIO ® switching solutions, flow-control management devices, FIFOs, integrated communications processors, high-speed SRAM, digital logic and telecommunications.
•
Computing and Consumer segment: includes clock generation and distribution products, PCI Express switching and bridging solutions, high-performance server memory interfaces, multi-port products and PC audio products.

The tables below provide information about these segments:
  Revenues by segment
Fiscal Year Ended
(in thousands)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Communications
$
248,370

 
$
291,426

 
$
245,438

Computing and Consumer
278,326

 
313,963

 
278,724

Total revenues
$
526,696

 
$
605,389

 
$
524,162

 
 Income (Loss) by segment from continuing operations
Fiscal Year Ended
 
(in thousands)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Communications
$
82,178

 
$
126,050

 
$
83,291

Computing and Consumer
(21,247
)
 
(7,394
)
 
(12,727
)
Unallocated expenses:
 
 
 
 
 
Amortization of intangible assets
(16,355
)
 
(19,298
)
 
(20,805
)
Inventory fair market value adjustment
—

 
(379
)
 
(16,058
)
Gain on divestitures
20,656

 
—

 
78,306

Fabrication production transfer costs
(4,572
)
 
(5,263
)
 
(2,344
)
Assets impairment
315

 
447

 
(1,536
)
Amortization of stock-based compensation
(16,333
)
 
(14,668
)
 
(14,429
)
Severance, retention and facility closure costs
(2,151
)
 
(4,898
)
 
(22,500
)
Acquisition-related costs and other
(798
)
 
(1,932
)
 
(4,822
)
Deferred compensation plan expense (benefit)
(187
)
 
(1,808
)
 
(2,892
)
Other-than-temporary loss on investments
(2,797
)
 
—

 
—

Interest income and other, net
(1,118
)
 
3,697

 
3,877

Income from continuing operations, before income taxes
$
37,591

 
$
74,554

 
$
67,361


The Company does not allocate goodwill and intangible assets impairment charge, IPR&D, severance and retention costs, acquisition-related costs, stock-based compensation, interest income and other, and interest expense to its segments.  In addition, the Company does not allocate assets to its segments. The Company excludes these items consistent with the manner in which it internally evaluates its results of operations.

Revenues from unaffiliated customers by geographic area, based on the customers' shipment locations, were as follows:
 
Fiscal Year Ended
(in thousands)
April 1,
2012
 
April 3,
2011
 
March 28,
2010
Asia Pacific
$
350,105

 
$
394,771

 
$
346,425

Americas (1)
76,711

 
95,885

 
93,264

Japan
41,586

 
55,874

 
42,423

Europe
58,294

 
58,859

 
42,050

Total revenues
$
526,696

 
$
605,389

 
$
524,162


(1)
The revenues from the customers in the U.S. were $70.4 million , $91.0 million and $79.9 million in fiscal 2012 , 2011 and 2010 , respectively.

The Company’s significant operations outside of the United States include test facility in Malaysia, design centers in the U.S., Canada and China, and sales subsidiaries in Japan, Asia Pacific and Europe. The Company's net property, plant and equipment are summarized below by geographic area: 
 
(in thousands)
April 1,
2012
 
April 3,
2011
United States
$
50,741

 
$
51,642

Canada
4,508

 
5,613

Malaysia
13,658

 
8,599

All other countries
1,077

 
1,900

Total property, plant and equipment, net
$
69,984

 
$
67,754


 
Note 20. Derivative Financial Instruments

As a result of its international operations, sales and purchase transactions, the Company is subject to risks associated with fluctuating currency exchange rates. The Company may use derivative financial instruments to hedge these risks when instruments are available and cost effective, in an attempt to minimize the impact of currency exchange rate movements on its operating results and on the cost of capital equipment purchases. As of April 1, 2012 and April 3, 2011 , the Company did not have any outstanding foreign currency contracts that were designated as hedges of forecasted cash flows or capital equipment purchases.  The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company also has foreign exchange facilities used for hedging arrangements with banks that allow the Company to enter into foreign exchange contracts totaling approximately $20.0 million , all of which was available at April 1, 2012 .


Note 21. Credit Facility
On June 13, 2011 , the Company entered into a Master Repurchase Agreement (the Repurchase Agreement) with Bank of America, N.A. (Bank of America), pursuant to which the Company has the right, subject to the terms and conditions of the Repurchase Agreement, to sell to Bank of America up to 1,431 shares of Class A preferred shares of one of its wholly owned subsidiaries (the Subsidiary), in one or more transactions prior to June 13, 2012 , for an aggregate purchase price of $135 million in cash. Pursuant to the Repurchase Agreement, to the extent it sells any such shares to Bank of America, the Company will be obligated to repurchase from Bank of America and Bank of America will be obligated to resell to the Company, those preferred shares for the aggregate purchase price paid by Bank of America. In such case, and while such shares are outstanding, the Company will also be obligated to make monthly payments to Bank of America at a floating interest rate of LIBOR plus 2.125% and will have the right to accelerate the repurchase of all or any portion of the shares prior to June 13, 2016 . In addition, the Company is obligated to pay retention fees associated with amounts available under the Repurchase Agreement. These retention fees have been recorded as interest expense in the Company’s Statement of Operations. The Repurchase Agreement also contains certain customary events of default. As of April 1, 2012 , the Company has not sold any preferred stock to Bank of America. On May 17, 2012, the Company entered into an amendment to the Repurchase Agreement which, among other things, extended the availability of the transactions under the Repurchase Agreement until December 13, 2012.
In connection with the Repurchase Agreement, the Company has entered into an agreement dated June 13, 2011 in favor of Bank of America and certain additional parties (the IDTI Agreement), which contains certain representations and various affirmative and negative covenants of the Company, including an obligation that the Company and its Subsidiary each maintain adequate capital in light of contemplated business operations. This agreement contains certain agreements by the Company intended to maintain the status of its Subsidiary as an entity distinct from the Company and its other subsidiaries, with separate assets and liabilities, as well as an indemnity by the Company.

Note 22. Related Party Transaction

On December 4, 2009, in line with the Company’s strategy to exit engineering services business acquired as part of the Tundra acquisition, the Company completed the sale of certain assets and transferred certain liabilities related to its Silicon Logic Engineering business to Open Silicon, Inc (OSI) for $1 in cash.  Please see Note 6 – “Divestitures” for further discussion.  Richard D. Crowley, Jr., the Company’s Vice President and Chief Financial Officer, is a member of the board of directors of OSI. The Company paid approximately $0.1 million and $0.6 million for services from OSI in fiscal 2012 and 2011 .

Note 23. Subsequent Events

Acquisition
On April 30, 2012, the Company completed the acquisition of Fox Electronics (Fox), a leading supplier of frequency control products including crystals and crystal oscillators, in an all-cash transaction for approximately $30 million , of which $26 million was paid at closing. The Company believes that the combination of Fox's product portfolio with the Company's award-winning CrystalFree™ oscillators make the Company the industry's most comprehensive one-stop shop for frequency control products. In addition, the Company expects that this acquisition will help accelerate the adoption of CrystalFree™ by enabling customers to purchase pMEMS and CMOS solid-state oscillators alongside traditional quartz-based components through an established and trusted sales channel.
Due to the closing of this acquisition subsequent to the Company's fiscal year end, the Company is currently determining the fair value of assets acquired and liabilities assumed necessary to develop the purchase price allocation. Therefore, disclosure of the purchase consideration allocation to the tangible and intangible assets acquired and liabilities assumed as well as disclosure of pro forma information is not practicable. The Company expects to complete the purchase price allocation for this acquisition during the first quarter of fiscal 2013.
Proposed acquisition
On April 30, 2012, the Company entered into an Agreement and Plan of Merger with PLX Technology, Inc (PLX). The Merger Agreement provides that, on and subject to the terms of the Merger Agreement, the Company will commence an exchange offer to purchase all of the outstanding shares of PLX common stock, $0.001 par value, in exchange for consideration, per share of PLX common stock, comprised of (i) $3.50 in cash plus (ii) 0.525 of a share of IDT common stock, without interest and less any applicable withholding taxes. The Company expects the proposed acquisition to expand the Company's core serial switching and interface business.The Company and PLX have complementary product sets, technologies and customer bases.
As of the filing date of this Form 10-K, the exchange offer had not yet commenced.

SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
 
QUARTERLY RESULTS OF OPERATIONS
(in thousands, except per share data) 
 
Fiscal Year Ended April 1, 2012
 
First
Quarter
 
Second
Quarter (1)
 
Third
Quarter
 
Fourth
Quarter (2)
Revenues
$
149,285

 
$
138,318

 
$
119,977

 
$
119,116

Gross profit
79,436

 
73,633

 
63,884

 
63,553

Net income (loss) from continuing operations
12,769

 
8,100

 
(903
)
 
17,357

Net income (loss) from discontinued operations
(7,615
)
 
38,647

 
(5,290
)
 
(4,605
)
Net income (loss)
5,154

 
46,747

 
(6,193
)
 
12,752

 
 
 
 
 
 
 
 
Basic net income (loss) per share- continuing operations
0.09

 
0.06

 
(0.01
)
 
0.12

Basic net income (loss) per share -discontinued operations
$
(0.06
)
 
$
0.26

 
$
(0.03
)
 
$
(0.03
)
Basic net income (loss) per share
$
0.03

 
$
0.32

 
$
(0.04
)
 
$
0.09

 
 
 
 
 
 
 
 
Diluted net income (loss) per share - continuing operations
$
0.08

 
$
0.06

 
$
(0.01
)
 
$
0.12

Diluted net income (loss) per share -discontinued operations
$
(0.05
)
 
$
0.26

 
$
(0.03
)
 
$
(0.03
)
Diluted net income (loss) per share
$
0.03

 
$
0.32

 
$
(0.04
)
 
$
0.09

 
 
Fiscal Year Ended April 3, 2011
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Revenues
$
153,621

 
$
159,570

 
$
147,524

 
$
144,674

Gross profit
79,695

 
87,451

 
80,347

 
81,449

Net income (loss) from continuing operations
14,809

 
24,415

 
14,897

 
39,705

Net income (loss) from discontinued operations
(5,219
)
 
(5,018
)
 
(5,103
)
 
(8,835
)
Net income (loss)
9,590

 
19,397

 
9,794

 
30,870

 
 
 
 
 
 
 
 
Basic net income (loss) per share- continuing operations
0.09

 
0.16

 
0.10

 
0.27

Basic net income (loss) per share -discontinued operations
(0.03
)
 
(0.04
)
 
(0.04
)
 
(0.06
)
Basic net income (loss) per share
0.06

 
0.12

 
0.06

 
0.21

 
 
 
 
 
 
 
 
Diluted net income (loss) per share - continuing operations
0.09

 
0.15

 
0.10

 
0.26

Diluted net income (loss) per share -discontinued operations
(0.03
)
 
(0.03
)
 
(0.04
)
 
(0.06
)
Diluted net income (loss) per share
0.06

 
0.12

 
0.06

 
0.20

 
[1]
In the second quarter of fiscal 2012 , the Company recorded a gain of $45.9 million in net income from discontinued operations related to the divestiture of IDT’s Hollywood Quality Video (“HQV”) and Frame Rate Conversion (“FRC”) video processing product lines to Qualcomm.
[2]
In the fourth quarter of fiscal 2012 , the Company recorded a gain of $20.7 million in net income from continuing operations related to the sale of wafer fabrication facility located in Hillsboro, Oregon.
[3]
As described in Note 2 to the consolidated financial statements, the Company has revised previously issued financial statements. The effect of the revision on net income (loss) for the first, second, and third quarter of fiscal 2011 is $0.8 million in each of the three quarters and $0.5 million in the fourth quarter of fiscal 2011. The effect of the revision for the first and second quarter of fiscal 2012 is $2.5 million and $0.3 million, respectively. The errors did not impact net income (loss) from discontinued operations. The revision is considered a correction of immaterial errors.


42


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as amended (the Exchange Act), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief Executive Officer and Chief Financial Officer, is engaged in a comprehensive effort to review, evaluate and improve our controls; however, management does not expect that our disclosure controls will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of April 1, 2012. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework.

Based on our management’s assessment using those criteria, management concluded that our internal control over financial reporting was effective as of April 1, 2012.

PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this report, has issued a report on our management’s assessment of our internal control over financial reporting as of April 1, 2012, which report appears under Item 8 of this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

None.


43
Table of Contents

PART III


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our executive officers, and their respective ages as of April 1, 2012 , are as follows:

Name
 
Age
 
Position
Ted Tewksbury
 
55
 
President and Chief Executive Officer
Richard D. Crowley, Jr.
 
55
 
Vice President, Chief Financial Officer
Mike Hunter
 
60
 
Vice President, Worldwide Manufacturing
Chuen-Der Lien
 
55
 
Vice President, Technology Development
Mario Montana
 
50
 
Vice President, Enterprise Computing Division
Arman Naghavi
 
49
 
Vice President and General Manager, Analog and Power Division
Thomas Sparkman
 
51
 
Vice President and General Manager, Communications Division
Kelley Steven-Waiss
 
42
 
Vice President, Worldwide Human Resources
Vince Tortolano
 
62
 
Vice President, General Counsel and Secretary
Fred Zust
 
42
 
Vice President and General Manager, Timing and Synchronization Division

Mr. Tewksbury joined IDT as President and Chief Executive Officer in March 2008. Prior to joining IDT, Mr. Tewksbury served as the President and Chief Operating Officer of AMI Semiconductor from October 2006 to February 2008.  Prior to August 2006, Mr. Tewksbury held a managing director position at Maxim Integrated Products, a semiconductor company.

Mr. Crowley joined IDT as Vice President and Chief Financial Officer in October 2008.  Prior to joining IDT, Mr. Crowley served as the Vice President, Finance and Chief Financial Officer of Micrel Inc., a semiconductor company from 1999 to September 2008. From 1998 to 1999, Mr. Crowley served as Vice President and Chief Financial Officer of Vantis Corporation, a semiconductor company. From 1980 to 1998, Mr. Crowley was employed by National Semiconductor Corporation, where his last position was Vice President and Corporate Controller.

Mr. Hunter has been with IDT since 1996 and was appointed Vice President, Worldwide Manufacturing in February 1998.   Prior to joining IDT, Mr. Hunter held management positions at Chartered Semiconductor Manufacturing Ltd., Fujitsu Personal Systems, Fairchild Semiconductor and Texas Instruments Incorporated, a semiconductor company.

Dr. Lien joined IDT in 1987 and was appointed to his current position in 1996. Prior to joining IDT, he held engineering positions at Digital Equipment Corporation, a computer company and AMD, a semiconductor company.

Mr. Montana joined IDT in 1997 and became General Manager, Enterprise Computing Division (formerly Serial Switching Division) in 2005. Mr. Montana was promoted to Vice President in February 2007.  Prior to his current role, Mr. Montana was Director, IDT Serial-Switching Division. Before transitioning to the Enterprise Computing Division, Montana was Director, IDT Strategic Marketing Group. Mr. Montana also served as Product Line Director, IDT Telecommunications, FIFO, Logic and Timing groups, respectively.

Mr. Naghavi joined IDT in 2009 and was appointed to his current position in 2010.  Prior to joining IDT Mr. Naghavi served as Vice President and General Manager of the Analog, Mixed-signal, and Power Division at Freescale Semiconductor.  Prior to Freescale, Mr. Naghavi held various engineering and management positions at Intersil Corporation, a semiconductor company and Analog Devices, Inc., a semiconductor company.

Mr. Sparkman joined IDT in November 2011, as Vice President and General Manager for the Communications Division. Prior to joining IDT, Mr. Sparkman was CEO of Samplify Systems, a leader in data compression technologies, in which IDT was a strategic investor.  Mr. Sparkman joined Samplify with 23 years of semiconductor experience, mostly at Maxim Integrated Products, Inc., an international supplier of analog and mixed-signal products. Mr. Sparkman holds a BSEE from the University of California at Berkeley.

Ms. Steven-Waiss joined IDT in November 2009 as Vice President, Worldwide Human Resources.  Prior to joining IDT, Ms. Steven-Waiss was Vice President, Worldwide Human Resources at PMC-Sierra, Inc.  Prior to PMC, Ms. Steven-Waiss was on the

44
Table of Contents

leadership team of a boutique communications consulting firm, ROI Communication, Inc.

Mr. Tortolano joined IDT in 2009 as Vice President, General Counsel and Secretary.  Prior to joining IDT, Mr. Tortolano held the position of General Counsel at Micrel, Inc. from 2000 to 2009.  Prior to Micrel, Mr. Tortolano held the position of Vice President, Co-General Counsel of Lattice Semiconductor Corporation.

Mr. Zust joined IDT in 2003 as a result of our merger with ICS. At ICS, he served as vice president for the NetCom Timing Division.  Prior to ICS, Mr. Zust held various leadership and technical positions at Texas Instruments and AT&T/NCR Corporation.
 
The information required by this item concerning our directors is incorporated by reference from the information set forth in the sections titled “Proposal 1—Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement for the 2012 Annual Meeting of Stockholders.
 
Other information required by this item concerning our executive officers is incorporated by reference from the information set forth in this section titled “Section 16(a) Beneficial Ownership Reporting Compliance” in our Proxy Statement for the 2012 Annual Meeting of Stockholders.
 
The information required by this item concerning our audit committee and its financial expert is incorporated by reference from the information set forth in the section titled “Corporate Governance-Board of Directors Meetings and Committees” in our Proxy Statement for the 2012 Annual Meeting of Stockholders.

We have adopted a written code of business ethics that applies to all of our employees and to our Board of Directors. A copy of the code is available on our website at http://www.IDT.com .   If we make any substantive amendments to the code of business ethics or grant any waiver from a provision of the code of business ethics to any of our directors or officers, we will promptly disclose the nature of the amendment or waiver on our website.

The information required by this item concerning recommendations of director nominees by security holders is incorporated by reference from the information set forth in the section titled "Consideration of Stockholder Nominees for Director” and “Corporate Governance—Board of Directors Meetings and Committees"  in our Proxy Statement for the 2012 Annual Meeting of Stockholders.
 
ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference from the Company's Proxy Statement for the 2012 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference from the Company's Proxy Statement for the 2012 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2012 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 
The information required by this item is incorporated herein by reference from the Company’s Proxy Statement for the 2012 Annual Meeting of Stockholders.


45
Table of Contents

PART IV
  ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a)
1. Financial Statements.   See "Index to Consolidated Financial Statements" under Part II, Item 8 of this Annual Report.

2. Financial Statement Schedules.   See Schedule II, "Valuation and Qualifying Accounts" included with this Annual Report.

3. Exhibits.  The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report.
 




 


46
Table of Contents

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
INTEGRATED DEVICE TECHNOLOGY, INC.
Registrant
 
By:
/s/  THEODORE L. TEWKSBURY III
May 21, 2012
 
Theodore L.Tewksbury III
President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature
 
Title
 
Date
 
 
 
 
 
/s/  THEODORE L. TEWKSBURY III
 
Chief Executive Officer , President and Director
 
May 21, 2012
Theodore L. Tewksbury III
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/  RICHARD D. CROWLEY, JR.
 
Vice President, Chief Financial Officer
 
May 21, 2012
Richard D. Crowley, JR.
 
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
/s/  JOHN SCHOFIELD
 
Chairman of the Board
 
May 21, 2012
John Schofield
 
 
 
 
 
 
 
 
 
/s/   GORDON PARNELL
 
Director
 
May 21, 2012
Gordon Parnell
 
 
 
 
 
 
 
 
 
/s/  LEWIS EGGEBRECHT
 
Director
 
May 21, 2012
Lewis Eggebrecht
 
 
 
 
 
 
 
 
 
/s/  RON SMITH
 
Director
 
May 21, 2012
Ron Smith
 
 
 
 
 
 
 
 
 
/s/  DONALD SCHROCK
 
Director
 
May 21, 2012
Donald Schrock
 
 
 
 
 
 
 
 
 
/s/  UMESH PADVAL
 
Director
 
May 21, 2012
Umesh Padval
 
 
 
 


INTEGRATED DEVICE TECHNOLOGY, INC.
SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(in thousands)  
Balance at
Beginning
of Period
 
Additions
 Charged
 (Credited) to
 Revenues,
 Costs and
Expenses
 
Charged
 (Credited) to
 Other
Accounts
 
Deductions
and
 Write-offs
 
Balance at
End of Period
Allowance for returns, pricing credits and doubtful accounts
 
 
 
 
 
 
 
 
 
Year ended March 28, 2010
$
7,351

 
$
8,706

 
$
1,466

 
$
(10,867
)
 
$
6,656

Year ended April 3, 2011
$
6,656

 
$
7,700

 
$
1,819

 
$
(11,607
)
 
$
4,568

Year ended April 1, 2012
$
4,568

 
$
(772
)
 
$
124

 
$
(911
)
 
$
3,009

Tax valuation allowance
 
 
 
 
 
 
 
 
 
Year ended March 28, 2010
$
117,589

 
$
(10,197
)
 
$
—

 
$
1,954

 
$
109,346

Year ended April 3, 2011
$
109,346

 
$
2,584

 
$
—

 
$
13,830

 
$
125,760

Year ended April 1, 2012
$
125,760

 
$
22,508

 
$
—

 
$
(16,537
)
 
$
131,731



47
Table of Contents

EXHIBIT INDEX
 
 
Exhibit Number
 
Exhibit Description
 
Incorporated by Reference
Form
 
File
 Number
 
Exhibit/
Appendix
 
Filing
Date
 
Filed/
Furnished
Herewith
 2.1*
 
Agreement and Plan of Merger by and among Integrated Device Technology, Inc., Integrated Circuit Systems, Inc., and Colonial Merger Sub I, Inc.
 
 8-K
 
00-12695
 
—
 
6/20/2005
 
 
 2.2*
 
Asset Purchase Agreement, dated as of April 30, 2009 between the Company and NetLogic Microsystems, Inc.
 
 8-K
 
 00-12695
 
—
 
5/9/2009
 
 
 2.3*
 
Arrangement Agreement, dated as of April 30, 2009 by and among Integrated Device Technology Inc., 4440471 Canada Inc. and Tundra Semiconductor Corporation.
 
 8-K
 
 00-12695
 
—
 
4/30/2009
 
 
3.1*
 
Restated Certificate of Incorporation, as amended to date
 
—

 
—

 
—
 
—

 
X
 3.2*
 
Certificate of Designations specifying the terms of the Series A Junior Participating Preferred Stock of IDT, as filed with the Secretary of State of Delaware.
 
 8-A
 
 00-12695
 
—
 
12/23/1998
 
 
 3.6*
 
Amended and Restated Bylaws of the Company, as amended and restated effective July 22, 2009.
 
 8-K
 
 00-12695
 
—
 
7/28/2009
 
 
10.5*
 
1994 Stock Option Plan, as amended as of September 22, 2000.**
 
10-Q
 
00-12695
 
10.1
 
10/1/2000
 
 
10.6*
 
1994 Directors Stock Option Plan and related documents.**
 
10-Q
 
00-12695
 
10.18
 
10/2/1994
 
 
10.7*
 
Form of Indemnification Agreement between the Company and its directors and officers.**
 
10-K
 
00-12695
 
10.68
 
4/2/1989
 
 
10.12*
 
Incentive Compensation Plan.**
 
10-Q
 
00-12695
 
10.27
 
7/3/2005
 
 
10.13*
 
Form of Change of Control Agreement between the Company and certain of its officers **
 
 10-K
 
 00-12695
 
10.13
 
6/23/2003
 
 
 
10.14*
 
Lease dated December 2002 between the Company and LaGuardia Associates relating to 710 LaGuardia Street, Salinas, California.
 
 10-K
 
 00-12695
 
10.14
 
6/23/2003
 
 
10.16*
 
1997 Stock Option Plan **
 
10-Q
 
00-12695
 
10.23
 
6/30/2002
 
 
 10.17*
 
Purchase and Sale Agreement and Joint Escrow Instructions between the Company and Cadence Design Systems, Inc., dated December 1998.
 
 S-4
 
 00-12695
 
10.27
 
3/24/1999
 
 
 10.19*
 
Agreement For Purchase And Sale Of Real Property Between Baccarat Silicon, Inc. and Dan Caputo Co. dated August 5, 2003.
 
 10-Q
 
 00-12695
 
10.19
 
6/23/2003
 
 
 10.20*
 
Lease between the Company and S.I. Hahn, LLC dated February 2000 relating to 2901 Coronado Drive, Santa Clara, California.
 
 10-K
 
 00-12695
 
10.20
 
4/2/2000
 
 





48
Table of Contents

Exhibit Number
 
Exhibit Description
 
Incorporated by Reference
Form
 
File
Number
 
Exhibit/
Appendix
 
Filing
Date
 
Filed/
Furnished
Herewith
 10.20*
 
Lease between the Company and S.I. Hahn, LLC dated February 2000 relating to 2901 Coronado Drive, Santa Clara, California.
 
 10-K
 
 00-12695
 
10.20
 
4/2/2000
 
 
10.21*
 
Non-Qualified Deferred Compensation Plan effective November 1, 2000.**
 
10-K
 
00-12695
 
10.21
 
4/1/2001
 
 
10.22*
 
Transition Agreement, dated March 30, 2006, by and between Integrated Device Technology, Inc. and Hock E. Tan.**
 
 8-K
 
 00-12695
 
10.1
 
3/30/2006
 
 
10.24*
 
1984 Employee Stock Purchase Plan, as amended and restated effective September 29, 2003.**
 
 10-Q
 
 00-12695
 
10.25
 
9/28/2003
 
 
10.25*
 
2004 Equity Plan, as amended and restated, effective September 23, 2010. **
 
DEF 14A
 
00-12695
 
A
 
7/26/2010
 
 
 10.26*
 
Agreement For Purchase And Sale of Real Property Between the Company and Electroglas, Inc. dated December 16, 2004.
 
 10-K
 
 00-12695
 
10.26
 
6/14/2005
 
 
 10.27*
 
Executive Transition Agreement, dated November 13, 2007, by and between Registrant and Gregory S. Lang.**
 
 8-K
 
 00-12695
 
10.1
 
11/16/2007
 
 
 10.28*
 
Executive Compensation Agreement, dated February 12, 2008, by and between Registrant and its President and CEO, Ted Tewksbury.**
 
 8-K
 
 00-12695
 
10.1
 
2/20/2008
 
 
 10.29*
 
Offer Letter between the Company and Richard D. Crowley, Jr., entered into on September 15, 2008.**
 
 8-K
 
 00-12695
 
10.1
 
9/23/2008
 
 
10.30
 
2009 Employee Stock Purchase Plan.**
 
 DEF 14A
 
 00-12695
 
A
 
8/7/2009
 
 
10.31
 
Asset purchase agreement dated as of December 14, 2011 by and among Alpha and Omega Semiconductor Limited, Jireh Semiconductor Incorporated and Integrated Device Technology, Inc.
 
8-K
 
00-12695
 
10.1
 
12/20/2011
 
 
10.32
 
Agreement and Plan of Merger, dated as of April 30, 2012, between Integrated Device Technology, Inc., Pinewood Acquisition Corp., Pinewood Merger Sub, LLC and PLX Technology, Inc.
 
8-K
 
00-12695
 
2.10
 
4/30/2012
 
 
10.33
 
Master Purchase Agreement, dated June 13, 2011, by and between Integrated Device Technology, Inc. and Bank of America, N.A. (Master Purchase Agreement)
 
8-K
 
00-12695
 
10.10
 
6/17/2011
 
 
10.34
 
Asset purchase agreement dated as of August 31, 2011 by and among Qualcomm, Inc and Integrated Device Technology, Inc.
 
 
 
 
 
 
 
 
 
X
10.35
 
Foundry agreement dated August 3, 2009 between the Company and Taiwan Semiconductor Manufacturing Co., Ltd .
 
 
 
 
 
 
 
 
 
X
10.36
 
Amendment No. 1 to Master Purchase Agreement
 
 
 
 
 
 
 
 
 
X
21.1
 
Subsidiaries of the Company.
 
 
 
 
 
 
 
 
 
X
23.1
 
Consent of PricewaterhouseCoopers LLP.
 
 
 
 
 
 
 
 
 
X

49
Table of Contents

Exhibit Number
 
Exhibit Description
 
Incorporated by Reference
Form
 
File
Number
 
Exhibit/
Appendix
 
Filing
Date
 
Filed/
Furnished
Herewith
31.1
 
Certification of Chief Executive Officer as required by Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
 
 
 
 
 
 
 
 
 
   
 X
31.2
 
Certification of Chief Financial Officer as required by Rule 13a-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
 
 
 
 
 
 
 
 
 
   
X
32.1
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
   
X
32.2
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
 
X
101.INS§
 
XBRL Instance Document.
 
 
 
 
 
 
 
 
 
X
101.SCH§
 
XBRL Taxonomy Extension Schema Document.
 
 
 
 
 
 
 
 
 
X
101.CAL§
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
 
 
 
 
 
 
X
 101.DEF§
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
 
 
 
 
 
 
X
 101.LAB§
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
 
 
 
 
 
 
X
 101.PRE§
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
 
 
 
 
 
 
X

*This exhibit was previously filed with the Securities and Exchange Commission (SEC) as indicated and is incorporated herein by reference.

**This exhibit is a management contract or compensatory plan or arrangement.

§ Pursuant to Rule 406T of SEC Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

50

Delaware      PAGE     1

The First State

I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF "INTEGRATED DEVICE TECHNOLOGY, INC." AS RECEIVED AND FILED IN THIS OFFICE.

THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:
CERTIFICATE OF INCORPORATION, FILED THE TENTH DAY OF JUNE, A.D. 1987, AT 1:30 O'CLOCK P.M.
RESTATED CERTIFICATE, CHANGING ITS NAME FROM "INTEGRATED DEVICE TECHNOLOGY-DELAWARE, INC." TO "INTEGRATED DEVICE TECHNOLOGY, INC.", FILED THE TWENTY-FOURTH DAY OF SEPTEMBER, A.D. 1987, AT 10 O'CLOCK A.M.
CERTIFICATE OF MERGER, FILED THE TWENTY-FOURTH DAY OF SEPTEMBER, A.D. 1987, AT 10:01 0'CLOCK A.M.
CERTIFICATE OF DESIGNATION, FILED THE TWENTY-FIRST DAY OF DECEMBER, A.D. 1988, AT 12:45 O'CLOCK P.M.
CERTIFICATE OF AMENDMENT, FILED THE TWENTY-SECOND DAY OF DECEMBER, A.D. 1988, AT 12:10 O'CLOCK P.M.
CERTIFICATE OF AMENDMENT, FILED THE TWENTY-FOURTH DAY OF AUGUST, A.D. 1995, AT 2 O'CLOCK P.M.
CERTIFICATE OF DESIGNATION, FILED THE TWENTY-FIRST DAY OF

2128846 8100H    

120205290
You may verify this certificate online at corp.deleware.gov/authver.shtml
 

Jeffrey W. Bullock, Secretary of State
AUTHENTICATION: 9381610
DATE:: 02-22-12



Delaware      PAGE     2

The First State

DECEMBER, A.D. 1998, AT 9 O'CLOCK A.M.

CERTIFICATE OF DESIGNATION, FILED THE TWENTY-SECOND DAY OF DECEMBER, A.D. 1998, AT 9 O'CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE THIRTIETH DAY OF OCTOBER, A.D. 2000, AT 4:30 O'CLOCK P.M.
CERTIFICATE OF AMENDMENT, FILED THE FIFTH DAY OF NOVEMBER, A.D. 2007, AT 10:08 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION, "INTEGRATED DEVICE TECHNOLOGY, INC. ".










2128846 8100H    

120205290

You may verify this certificate online at corp.deleware.gov/authver.shtml
 


Jeffrey W. Bullock, Secretary of State
AUTHENTICATION: 9381610
DATE:: 02-22-12



CERTIFICATE OF INCORPORATION
OF
INTEGRATED DEVICE TECHNOLOGY-DELAWARE, INC.
______________________________________

ARTICLE l

The name of the corporation is Integrated Device Technology-Delaware, Inc. (the "Corporation").

ARTICLE 2

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

ARTICLE 3

The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE 4

Section 4.1. This Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock." The total number of shares which this corporation shall have authority to issue is One Thousand (l,000), of which Five Hundred (500) shall be Common Stock with a par value of $.01 per share and Five Hundred (500; shall be Preferred stock with a par value of $.01 per share.

Section 4.2. The shares of Preferred stock may be issued from time to time in one or more series. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article 4,to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and the qualifications, limitations, or restrictions thereof.

The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(i) The number of shares constituting that series and the distinctive designation of that series;

(ii) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which data or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;



(iii) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(iv) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rata in such even as the Board of Directors shall determine;

(v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after
which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(vi) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(vii) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the corporation, and the relative rights
of priority, if any, of payment of shares of that series;

(viii) Any other relative or participating rights, preferences and limitations of that series.

ARTICLE 5

The name and mailing address of the incorporator are as follows:

Lionel M. Allan
Hopkins & Carley
150 Almaden Boulevard, 15th Floor
San Jose, California 95113-2089














-2-      0 121/060987





ARTICLE 6

The Corporation is to have perpetual existence.

ARTICLE 7

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend, or repeal the Bylaws of the Corporation.

ARTICLE 8

Section 8.1. The affirmative vote of the holders of not less than 75% of the outstanding shares of "Voting Stock" (as hereinafter defined) of the Corporation, including the affirmative vote of the holders of not less than 66-2/3% of the outstanding shares of Voting Stock not owned, directly or indirectly, by any "Related Person" (as hereinafter defined), shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) of the Corporation with any Related Person; provided, however, that the 66-2/3% voting requirement referred to above shall not be applicable if the Business Combination is approved by the affirmative vote of the holders of not less than 90%t of the outstanding shares of Voting Stock; and further provided that the 75%t voting requirement shall not be applicable if:

(1) The Board of Directors of the Corporation by a vote of not less than 75% of the directors then holding office (a)have expressly approved in advance the acquisition of outstanding shares of Voting Stock of the Corporation that caused the Related Person to become a Related Person or (b) have approved the Business Combination before the Related Person involved in the Business Combination became a Related Person; or

(2) The Business Combination is solely between the Corporation and another corporation, l00%t of the Voting Stock of which is owned directly or indirectly by the Corporation; or

(3) All of the following conditions have been met: (a)the Business Combination is a merger or consolidation, the consumation of which is proposed to take place within one year of the data of the transaction pursuant to which such person became a Related Parson and the cash or fair market value of the property, securities, or other consideration to be received per share by holders of Common Stock of the Corporation in the Business Combination is not less than the highest per share price (with appropriate adjustments for recapitalizations and








-3-      OS82ll060987








for stock splits, reverse stock splits, and stock dividends) paid    by the Related Person in acquiring any of its holdings of the corporation's Common Stock; (b) the consideration to be received by such holders is either cash or, i-.f the Related Person shall have acquired the majority of its holdings of the Corporation 1 s Common Stock for a form of consideration other than cash, in the same form of consideration as the Related Person acquired such majority; (c) after such Related Person has become a Related Person and before the consummation of such Business Combination: (i) except as approved by a majority of the "Continuing Directors'·,as hereinafter defined), there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding shares of Preferred stock of the Corporation, (ii) there shall have been no reduction in the annual rate of dividends paid per share on the Corporation's Common Stock (adjusted as appropriate for recapitalizations and for stock splits, reverse stock splits, and stock dividends) except as approved by a majority of the Continuing Directors, (iii) such Related Person shall not have become the "Beneficial owner" (as hereinafter defined) of any additional shares of Voting Stock of the Corporation except as part of the transaction which resulted in such Related Person becoming a Related Person, and (iv) such Related Person shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges, or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise; and (d) a proxy statement, responsive to the requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act") and the rules and regulations thereunder (or any subsequent provisions replacing the Exchange Act, rules or regulations), shall be mailed to all stockholders of record at least 30 days before the consummation of the Business Combination for the purpose of soliciting stockholder approval of the Business Combination and shall contain at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may choose to state and, if deemed advisable by a majority of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or unfairness) of the terms of such Business Combination from the point of view of the remaining stockholders of the Corporation (such investment banking firm to be selected by a majority of the Continuing Directors and to be paid a reasonable fee for its services by the Corporation upon receipt of such opinion).











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Section 8.2.     For the purposes of this Article 8:

8.2.1. The term "Business Combination" shall mean (a) any merger or consolidation of the Corporation or a subsidiary with or into a Related Person, (b) any sale, lease, exchange, transfer, or other disposition, including without limitation a mortgage or any other security device, of all or any "Substantial Part" (as hereinafter defined) of the assets either of the Corporation (including, without limitation, any voting securities of a subsidiary) or of a subsidiary to a Related Person (other than a distribution by the Corporation or a subsidiary to the Related Person of assets in connection with a pro rata distribution by the Corporation to all stockholders), (c) any merger or consolidation of a Related Person with or into the Corporation or a subsidiary of the Corporation, (d) any sale, lease, exchange, transfer, or other disposition of all or any Substantial Part of the assets of a Related Person to the Corporation or a subsidiary of the Corporation, (e) the issuance of any securities (other than by way of pro rata distribution to all stockholders) of the Corporation or a subsidiary of the Corporation to a Related Parson, (f) the acquisition by the Corporation or a subsidiary of the Corporation of any securities of a Related Person, (g) any recapitalization that would have the effect of increasing the voting power of a Related Person, (h) any series or combination of transactions having the same effect, directly or indirectly, as any of the foregoing and (i) any agreement, contract, or arrangement providing for any of the transactions described in this definition of Business Combination.

8.2.2, The term "Continuing Director" shall mean any member of the Board of Directors of the Corporation who is not affiliated with a Related Person and who was a member of the Board of Directors immediately before the time that the Related Person became a Related Parson, and any successor to a Continuing Director who is not affiliated with the Related Person and is recommended to succeed a Continuing Director by a majority of continuing Directors then serving as members of the Board of Directors of the Corporation.

8.2.3, The term "Related Person" shall mean and include any individual, corporation, partnership, or other person or entity which, together with its "Affiliates" and "Associates" (as defined on June 1, 1987 in Rule 12b-2 under the
Exchange Act), is the "Beneficial owner" (as defined on June 1, 1987 in Rule l3d-3 under the Exchange Act) in the aggregate of l0% or more of the outstanding Voting Stock of the Corporation, and any Affiliate or Associate of any such individual, corporation, partnership, or other person or entity.










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8.2.4.     The term "Substantial Part" shall mean more than 10% of the book value of the total assets of the Corporation in question as of the end of its most recent fiscal year ending before the time the determination is being made.

8.2.5.     Without limitation, any shares of Common Stock of the Corporation that any person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants, or options, or otherwise, shall be deemed beneficially owned by such parson.

8.2.6.     For the purposes of subparagraph ( 3) of Section 8.1, the term "other consideration to be received" shall include, without limitation, Common Stock of the Corporation retained by its existing public stockholders in the event of a Business Combination in which the Corporation is the surviving corporation.

8.2.7.     The term "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation or another corporation entitled to vote generally in the election of directors and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares.

ARTICLE 9

At all elections of directors of the Corporation, each holder of stock or of any class or classes or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single candidate or may distribute them among the number to be elected, or for any two or more of them as he
may see fit.
ARTICLE 10

Meetings of stockholders may be held within or without the state of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
    
ARTICLE 11
To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be
-6-      OS821/060987






amended, 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. If the Delaware General Corporation Law is hereafter amended to authorize corporate action further reducing or eliminating the personal liability of directors, then the liability of the directors of the Corporation should be limited or eliminated to the fullest extent permitted by the Delaware General Corporation Law as so amended.Neither any amendment nor repeal of this Article 11, nor the adoption of any provision of this Certification of Incorporation inconsistent with this Article 11, shall eliminate or reduce the effect of this Article 11 in respect of any matter occurring, or any cause of action, suit, or claim that, but for this Article 11, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.

ARTICLE 12

The provisions set forth in this Article 12 and in Article 8 (dealing with the 75% vote of stockholders required for Certain Business Combinations) and Article 11 (dealing with liability of directors) herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of not less than 75% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article 12 as one class.    Amendment to the provisions set forth in this Article 12 and in Article 8 shall also require the affirmative vote of 66-2/3% of such total voting power excluding the vote of shares owned by a "Related Person" (as defined in Article 8). The voting requirements contained in Article 8 and this Article12 shall be in addition to the voting requirements imposed by law, other provisions of this Certificate of Incorporation, or any Certificate of Designation of Preferences in favor of certain classes or series of classes of shares of the Corporation.

ARTICLE 13
 
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. Notwithstanding the foregoing, the provision set forth in Articles 8, ll, and this Article 13 may not be repealed or amended in any respect unless such repeal or amendment is approved in Article 12 herein.








-7-      OS821/060987




ARTICLE 14

Elections for directors need not be by ballot unless a stockholder demands election by ballot at the meeting and before the voting begins or unless the Bylaws so require.


























-8-      OS821/060987







I, THE UNDERSIGNED, this 11 th day of June , 1987 being the sole incorporator of Integrated Device Technology-Delaware, Inc. for the purpose of forming a corporation under the laws of the State of Delaware, do make, file, and record this Certificate of Incorporation and do certify that the facts herein stated are true, and accordingly, have hereunto set my hand.





































-9-     0582i/060887









877267076
RESTATED CERTIFICATE OF INCORPORATION
OF
INTEGRATED DEVICE TECHNOLOGY-DELAWARE, INC.


Pursuant to Sections 242 and 245
of the General Corporation Law of the State of
Delaware

Integrated Device Technology-Delaware, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State Of Delaware (the "General Corporation Law") having filed its original certificate of Incorporation on June 10, 1987, does hereby certify as follows:

That the following resolutions amending and restating the Corporation's Certificate of Incorporation were duly adopted by the Corporation's Board of Directors and by the Corporation's sole stockholder in accordance with the provisions of Sections
242 and 245 of the General Corporation Law by written consent of the Board of Directors and sole stockholder given in accordance with Sections 141 and 228, respectively, of the General Corporation Law:

"NOW, THEREFORE, BE IT RESOLVED, that the Certificate of Incorporation of the Corporation be amended and restated in its entirety as follows:

ARTICLE 1

The name of the corporation is Integrated Device
Technology, Inc. (the "Corporation").

ARTICLE 2

The address of the Corporation's registered office in the State of Delaware is Corporation True': Center, 1209 0range Street, in the City of Wilmington, County of New Castle, zip code 19801.      The name of its registered agent at such address is The Corporation Trust Company.





1396I





ARTICLE 3

The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General corporation Law of Delaware.

ARTICLE 4

Section 4.1.      This Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock."    The total number of shares which this corporation shall have authority to issue is Forty-Five Million (45,000,000), of which Forty Million (40,000,000) shall be Common Stock with a par value of $.001 per share and Five Million (5,000,000) shall be Preferred Stock with a par value of $.001 per share.

Section 4.2.     The shares of Preferred Stock may be issued from time to time in one or more series.The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article 4, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such
series and the qualifications, limitations, or restrictions thereof.

The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(i) The number of shares constituting that series and the distinctive designation of that series;

(ii) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(iii) Whether that series shall have voting rights and, if so, the terms of such voting rights;















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(iv) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

(v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount
per s are payable in case of redemption, which amount
may vary under different conditions and at different redemption dates;

(vi) Whether that series shall have a sinking fund for the redemption or purchase of shares of that
series, and, if so, the terms and amount of such sinking fund;

(vii) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series;

(viii) Any other relative or participating rights, preferences and limitations of that series.

ARTICLE 5

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend, or repeal the Bylaws of the Corporation.

ARTICLE 6

Section 6.1. The affirmative vote of the holders of not less than 75% of the outstanding shares of "Voting Stock" (as hereinafter defined) of the Corporation, including the affirmative vote of the holders of not less than 66-2/3% of the outstanding shares of Voting Stock not owned, directly or indirectly, by any "Related Person" (as hereinafter defined), shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) of the Corporation with any Related Person; provided, however, that the 66-2/3% voting requirement referred to above shall not be applicable if the Business Combination is approved by the



-3-      071387/1396I









affirmative vote of the holders of not less than 90% of the outstanding shares of Voting Stock; and further provided that the 75% and 66-2/3% voting requirement shall not be applicable if the Business Combination is a merger or consolidation and the cash or fair market value of the property, securities, or other consideration to be received per share by holders of Common Stock of the Corporation in the Business Combination is not less than the highest per share price (with appropriate adjustments for recapitalizations and for stock splits, reverse stock splits, and stock dividends) paid by the Related Person in acquiring any of its holdings of the Corporation's Common stock within the two years prior to the effective date of the Business Combination.

Section 6.2.     For the purposes of this Article 6:

6.2.1.     The term "Business Combination" shall mean (a) any merger or consolidation of the corporation or a subsidiary with or into a Related Person, (b) any sale, lease, exchange, transfer, or other disposition, including without limitation a mortgage or any other security device, of all or any "Substantial Part" (as hereinafter defined) of the assets either of the Corporation (including, without limitation, any voting securities of a subsidiary) or of a subsidiary to a Related Person (other than a distribution by the Corporation or a subsidiary to the Related Person of assets in connection with a pro rata distribution by the Corporation to all stockholders), (c) any merger or consolidation of a Related Person with or into the Corporation or a subsidiary of the corporation, (d) any sale lease, exchange, transfer, or other disposition of all or any Substantial Part of the assets of a Related Person to the Corporation or a subsidiary of the Corporation, (e) the acquisition by the Corporation or a subsidiary of the Corporation of any securities of a Related Person, (f) any recapitalization that would have the effect of increasing the voting power of a Related Person, (g) any series or combination of transactions having the same effect, directly or indirectly, as any of the foregoing, and (h) any agreement, contract, or arrangement providing for any of the transactions described in this definition of Business Combination.

6.2.2.     The term "Related Person" shall mean and include any individual, corporation, partnership, or other person or entity which, together with its "Affiliates" and "Associates" (as defined on September 1, 1987 in Rule 12b-2












-4-      071387/1396I








under the securities Exchange Act of 1934), is the "Beneficial owner" (as defined on September 1, 1987 in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate of 10% or more of the outstanding Voting Stock of the Corporation, and any Affiliate or Associate of any such individual, corporation, partnership, or other person or entity.

6.2.3.     The term "Substantial Part" shall mean more than 10% of the book value of the total assets of the Corporation in question as of the end of its most recent fiscal year ending before the time the determination is being made,

6.2.4. Without limitation, any shares of Common Stock of the Corporation that any person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants, or options, or otherwise, shall be deemed beneficially owned by such person.

6.2.5.     For the purposes of Section 6.1, the term "other consideration to be received" shall include, without limitation, Common stock of the Corporation retained by its existing public stockholders in the event of a Business Combination in which the Corporation is the surviving corporation.

6.2.6.     The term "Voting Stock" shall mean all outstanding shares of capital stock of the Corporation or another corporation entitled to vote generally in the election of directors and each reference to a proportion of shares of Voting Stock shall refer to such proportion of the votes entitled to be cast by such shares.

ARTICLE 7

Section 7. 1.    The initial directors of the Corporation shall serve for a term ending on the date of the annual meeting held during the calendar year 1987.    Thereafter, the directors shall be divided into three classes, Class I, Class II, and Class III. The number of directors in each class shall be the whole number contained in the quotient arrived at by dividing the authorized number of directors by three, and if a fraction is also contained in such quotient then if such fraction is
one-third (1/3), the extra director shall be a member of Class III, and if the fraction is two-thirds (2/3), one of the extra directors shall be a member of Class III and the other shall be a member of Class II. After division of the Board of Directors
into classes, each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, however, that the director initially elected to Class I shall serve for a term










-5-      071387/1396I





ending on the date of the annual meeting held during the calendar year 1988, the director initially elected to Class II shall serve for a term ending on the date of the annual meeting held during the calendar year 1989, and the directors initially appointed to Class III shall serve for a term ending on the date of the annual meeting held during the calendar year 1990, in each case until their successors are duly elected and qualified. At the annual meeting held during the calendar year
1987, directors will be elected for each of Classes I, II, and III.    Thereafter, one class of the directors shall be elected at each annual meeting of stockholders.    If any such meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of stockholders held for that purpose.Directors who are also employees of the Corporation must resign from the Board of Directors when they leave the employ of the Corporation.    No reduction of the authorized number of directors shall have the effect of removing any director before the director's term of office expires or his prior death, resignation, or removal.The newly eliminated directorships resulting from such decrease shall be apportioned by the Board of Directors such that each class of directors most nearly contains one-third of the entire number of members of the whole Board.In the case of any increase in the number of directors, such additional director or directors shall be proposed for election to terms of office that will most nearly result in each class of directors containing one-third of the entire number of members of the whole Board. In filling vacancies in the Board of Directors occurring otherwise than by expiration of a term of office, a successor shall be elected for the unexpired term. In the case of any vacancy in the Board of Directors, however created, including a newly created directorship, the vacancy or vacancies shall be filled by majority vote of the directors remaining in the class in which the vacancy occurs or, if only one such director remains, by such director, or if no such director remains, by majority vote of the directors remaining in all classes.    In the event one or more directors shall resign, effective at a future date, such vacancy or vacancies shall be filled as provided herein.

Section 7.2. At all elections of directors of the Corporation, each holder of stock or of any class or classes or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected, and he may cast all of such votes for a single candidate or may distribute them among the number to be elected, or for any two or more of them as he may see fit.
















-6-      071387/1396I






Section 7.3.     Any director or the entire Board of Directors may be removed from office, (a) with cause by the holders of a majority of shares then entitled to vote at an election of directors or (b) without cause, by the affirmative vote of the holders of not less than 66-2/3% of shares then entitled to vote at an election of directors; provided, however, that, so long as stockholders of the Corporation are entitled to cumulative voting, if less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election at which the entire number of directors authorized at the time of the directors’ most recent election were then being elected, or if there are classes of directors, at an election of the class of directors of which he is a part.

ARTICLE 8

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

ARTICLE 9

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, provided that this provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.    Neither any amendment nor repeal of this Article 9,
nor the adoption of any provision of this Certification of Incorporation inconsistent with this Article 9, shall eliminate or reduce the effect of this Article 9 in respect of any matte r occurring, or any cause of action, suit, or claim that, but for this Article 9, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.














-7-      071387/13961






ARTICLE 10

Section 10.1.      The provisions sat forth in Article 6 (dealing with the 75% vote of stockholders required for certain Business Combinations) herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of not less than 66-2/3% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article 10 as one class. If shares of the Corporation's stock are held by one or more Related Persons (as defined in Article 6), amendment to the provisions set forth in Article 6 shall require the affirmative vote of not less than 75% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article 10 as one class, which vote shall also include the affirmative vote of 66-2/3% of such total voting power excluding the vote of shares owned by a Related Person.    This Section 10.1 may not be repealed or amended in any respect unless such repeal or amendment is approved in the manner provided for a repeal or amendment of Article 6 herein.

Section 10.2.      The provisions set forth in Article 9 (dealing with liability of directors) herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of not less than 75% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article 10 as one class. This Section 10.2 may not be repealed or amended in any respect unless such repeal or amendment is approved in the manner provided for a repeal or amendment of Article 9 herein.

Section 10.3.      The voting requirements contained in Article 6 and this Article 10 shall be in addition to the voting requirements imposed by law, other provisions of this Certificate of Incorporation, or any Certificate of Designation of Preferences in favor of certain classes or series of classes of shares of the Corporation.

ARTICLE 11

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. Notwithstanding the















-8-      071387/1396I






foregoing, the provisions set forth in Article 5, Article 9, Article 10, and this Article 11 may not be repealed or amended in any respect unless such repeal or amendment is approved in the manner provided in Article 10 herein.

ARTICLE 12

Elections for directors need not be by written ballot.

RESOLVED FURTHER, that the foregoing Restated Certificate of Incorporation is hereby approved and adopted."

IN WITNESS WHEREOF, Integrated Device Technology­ Delaware, Inc. has caused this certificate to be signed by D. John Carey, its Chief Executive Officer, and attested to by Jay R. Zerfoss, its Secretary, this 23rd day of September , 1987.

INTEGRATED DEVICE TECHNOLOGY­ DELAWARE, INC.

                        






















-9-      07l387/l396I



877267075
CERTIFICATE OF MERGER
OF
INTEGRATED DEVICE TECHNOLOGY, INC.

            (a California corporation)

into
INTEGRATED DEVICE TECHNOLOGY,INC.
(a Delaware corporation)

The undersigned corporation

DOES HEREBY CERTIFY:

FIRST:    That the name and state of incorporation of

each of the constituent corporations of the merger is as follows:

NAME                          STATE OF INCQRPORATION

Integrated Device                California
Technology, Inc.

Integrated Device                Delaware
Technology, Inc.
SECOND:    That a plan of merger, contained in an instrument entitled "Agreement and Plan of Merger," dated as of September 23, 1987, between the parties to the merger has been approved, adopted, certified, executed, and acknowledged by each of the constituent corporations in accordance with the requirements of subsection (c) of section 252 of the General Corporation Law of the State of Delaware and that the effective time of the merger shall be 11:59 a.m., Eastern Daylight Standard Time, on September 24, 1987, or as soon thereafter as possible.




-1-     0647i/092287






THIRD:    The name of the surviving corporation of the merger is Integrated Device Technology, lnc., a Delaware corporation.

FOURTH:    That the Restated Certificate of Incorporation of Integrated Device Technology, Inc., a Delaware corporation, shall be the certificate of incorporation of the surviving corporation.
FIFTH:    That the executed agreement of merger, contained in the Agreement and Plan of Merger, dated as of September 3, 1987, is on file at the principal place of business of the surviving corporation. The address of said principal place of business is 3236 Scott Boulevard, Santa Clara, California 95054.

SIXTH:    That a copy of the agreement of merger, contained in the Agreement and Plan of Merger, dated as of September 23, 1987, will be furnished on request and without cost to any stockholder of any constituent corporation.

SEVENTH:    The authorized capital stock of Integrated Device Technology, is 5,000,000 shares of undesignated Preferred Stock, $.001 par value, and 40,000,000 shares of Common stock, $.001 par value.









-2-      0647i/092287










INTEGRATED
a Delaware


By:



ATTES:

By:

                        











-3-                06471/092287















































Certificate o f Merger of the    INTEGRATED DEVICE TECHNOLOGY, INC.

a corporation organized and existing under the laws of the State of     California

merging with and into the    INTEGRATED DEVICE TECHNOLCGY, INC.

a corporation     organized and existing under the 1aws of the State of      Delaware

under the name of     " INTEGRATED DEVICE TECHNOLOGY, INC."

as received and filed in this office the     twenty-fourth     day of     September

A.D.     0 1987     at     10:01     o'clock     AM.

And I do hereby further certify that the aforesaid Corporation shall be governed by

the laws of the State of     Delaware.









































883356065     FILED





CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF
INTEGRATED DEVICE TECHNOLOGY, INC.

Pursuant to Section 151 of the General Corporation
Law of the State of Delaware




We, D. John carey, Chairman of the Board and Chief Executive Officer, and Jay R. Zerfoss, Vice President, Finance, and Secretary, of Integrated Device Technology, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:

That, pursuant to the authority conferred upon the
Board of Directors by the Restated Certificate of Incorporation of said Corporation, the said Board of Directors on December 20,1988, adopted the following resolutions creating a series of 650,000 shares of Preferred Stock, par value $.001 per share, classified as Series A Junior Participating Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the

Board of Directors of this Corporation in accordance with the provisions


of its Restated Certificate of Incorporation, a series of Preferred Stock of the Corporation be and is hereby created, and that the designation and amount thereof and the relative rights, preferences and limitations thereof are as follows:



- 1 -      0795i/121988










Section 1.      Designation and Amount.     The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred stock"), and the number of shares initially constituting such series shall be 650,000, which number of shares may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors.
Section 2.      Dividends and Distributions.     Subject to the prior and superior rights of the holders of any shares of any classes or series of preferred stock which are or may from time to time be ranking prior and superior to the shares of Series A Preferred stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first

Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $.25 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 200 times the aggregate per share amount (payable in kind) of all non-cash dividends or




- 2 -     0795i/121988






other distributions other than a dividend or distribution payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $.001 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock.    If on any Quarterly Dividend Payment Date the Corporation's Restated Certificate of Incorporation shall limit the amount of dividends which may be paid on the Series A Preferred Stock to an amount less than that provided above, such dividends will be paid in the maximum permissible amount and the shortfall from the amount provided above shall accrue and be a cumulative dividend requirement and be carried forward to subsequent Quarterly Dividend Payment Dates.
In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or a combination or consolidation of the outstanding shares of Common stock (by reclassification or otherwise than by payment of a dividend in shares of Common stock) into a greater or lesser number of shares of Common stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under the second preceding sentence shall be





- 3 -     0795i/121988









adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
When, as and if the Corporation shall declare a dividend or distribution on the Common stock, (other than a dividend payable in shares of Common stock), the Corporation shall at the same time declare a dividend or distribution on the Series A Preferred Stock as provided in this Section 2 and no such dividend or distribution on the Common stock shall be paid or set aside for payment on the Common Stock unless such
dividend or distribution on the Series A Preferred Stock shall

be simultaneously paid or set aside for payment; provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $.25 per share on

the Series A Preferred Stock shall nevertheless be payable, when, as and if declared by the Board of Directors, on such subsequent Quarterly Dividend Payment Date.
Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the date of issue of such shares of Series A Preferred Stock, unless the date of issue is a Quarterly Dividend Payment Date or is a date




- 4 -      0795i/121988








after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in which event such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.    Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the relevant Quarterly Dividend Payment Date.

Section 3.      Voting Rights.     The holders of shares of Series A Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation.    In the event the Corporation shall at any time (i) declare or pay any dividend or make any distribution on Common stock payable in shares of Common Stock, (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by




- 5 -     0795i/121988









reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock or (iii) increase by 20% or more, other than through the methods referred to in subclauses (i) and (ii)
above, the shares of Common Stock outstanding on the date hereof
(adjusted for any stock dividend, subdivision or combination to which subclauses (i) and (ii) above apply), then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred stock, the holders of shares of Common Stock and the holders of any other capital stock of the corporation at the time entitled thereto shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation and notwithstanding that the holders of Series A Preferred Stock, voting as a class, may be entitled to elect two directors as hereinafter provided, they shall be entitled to participate with the Common Stock (or any other capital stock as aforesaid), in the election of any other directors.




- 6 -      0795i/121988









(c) In case at any time six or more full quarterly dividends (whether consecutive or not) on the Series A Preferred Stock shall be in arrears, then during the period (hereinafter in this Section 3(c) called the "Voting Period") commencing with such time and ending with the time when all arrears in dividends on the Series A Preferred Stock shall have been paid and the full dividend on the Series A Preferred Stock for the then current quarterly dividend period shall have been declared and paid or set aside for payments, at any meeting of the stockholders of the Corporation held for the election of directors during the Voting Period, the holders of Series A Preferred Stock present in person or represented by proxy at said meeting, shall be entitled, as a class, to the exclusion of the holders of all other classes of stock of the Corporation, to elect two directors of the Corporation, each share of Series A Preferred Stock entitling the holder to one vote. Each of such two directors shall be elected to one of the three classes of directors so that the three classes shall be as equal in number as may be feasible and shall be elected to hold office for a term expiring at the earlier of (i) the expiration of the term of the class to which he is elected or (ii) the end of the Voting Period.    At no time shall the Board of Directors have more than two directors elected solely by the holders of the Series A Preferred Stock.







- 7 -     0795i/121988




Any director who shall have been elected by holders of Series A Preferred Stock or by any director so elected as herein contemplated, may be removed at any time during a Voting Period, either for or without cause, by, and only by, the affirmative votes of the holders of record of a majority of the outstanding shares of Series A Preferred Stock given at a special meeting of such stockholders called for the purpose, and any vacancy
thereby created may be filled during such Voting Period by the holders of Series A Preferred Stock present in person or represented by proxy at such meeting.     Any director to be elected by the Board of Directors of the Corporation to replace a director elected by holders of Series A Preferred Stock or elected by a director as in this sentence provided shall be elected by the remaining director theretofore elected by the holders of Series A Preferred Stock. At the end of the Voting Period the holders of Series A Preferred Stock shall be automatically divested of all voting power vested in them under this Section 3(c) but subject always to the subsequent vesting hereunder of voting power in the holders of Series A Preferred Stock in the event of any similar default or defaults thereafter.

(d) Except as otherwise set forth herein, holders of series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock or holders of any other class of capital stock as set forth herein) for taking any corporate action.


- 8 -     0795i/121988




Section 4.     Certain Restrictions.

(a) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
(i) declare or pay dividends on, make any other distructions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends on or make
any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the the total amounts to which the holders of all such shares are then entitled;

(iii) except as permitted by subparagraph
(iv) of this section 4(a), redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution




- 9 -     0795i/121988








or winding up) with the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any class of stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A Preferred stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of all such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes, provided that the Corporation may at any time purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred stock.

(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless




- 10 -     0795i/121988









the corporation could, under subparagraph (a) of this Section 4, purchase or otherwise acquire shares at such time and in such
manner.

(c) The Corporation shall not issue any shares of Series A Preferred Stock except upon exercise of Rights issued pursuant to that certain Rights Agreement dated as of December 20, 1988 between the Corporation and The First National Bank of Boston, a copy of which is on file with the Secretary of the Corporation at its principal executive office and shall be made available to stockholders of record without charge upon written request therefor addressed to said Secretary. Notwithstanding the foregoing sentence, nothing contained in this certificate of Designation shall prohibit or restrict the Corporation from issuing for any purpose any series of Preferred Stock with rights and privileges similar to or different from those of the Series A Preferred Stock.
Section 5.      Reacquired Shares.     Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof.    All such shares shall upon their cancellation without designation as to series become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.


- 11 -     0795i/l21988




Section 6 .     Liquidation. Dissolution or Winding Up.

Upon any voluntary liquidation, dissolution or winding up of the

Corporation, no distribution shall be made:

(1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless prior thereto, the holders of shares of Series A Preferred Stock shall have received, subject to adjustment as hereinafter provided, an aggregate amount equal to (a) $5.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment or (b) if greater, an aggregate amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount to be distributed per share to holders of
Common Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or
(2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up, disregarding for this purpose the amounts referred to in clause (1)(b) of this Section 6.


- 12 -     0795i/121988









In the event the Corporation shall at any time declare or pay any dividend or make any distribution on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7.      Consolidation. Merger. Etc.     In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such
case proper provision shall be made so that the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or




- 13 -      0795i/121988









for which each share of Common Stock is changed or exchanged. The Corporation shall not consummate any such consolidation, merger, combination or other transaction unless prior thereto the Corporation and the other party or parties to such transaction shall have so provided in any agreement related thereto. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the first sentence of this Section 7 with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8.      No Redemption.     The shares of Series A Preferred Stock shall not be redeemable. Notwithstanding the foregoing sentence, the Corporation may acquire shares of Series A Preferred Stock in any other manner permitted by law, this Certificate of Designation and the Restated Certificate of Incorporation of the Corporation, as from time to time amended.




- 14 -      0795i/121988







Section 9.     Amendment.    The Restated Certificate of Incorporation of the Corporation shall not be amended in any manner which would alter or change the powers, preferences or special rights of the shares of Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Preferred stock, voting together as a single class.
Section 10.     Ranking.    The Series A Preferred Stock shall rank junior to all other classes and series of the Corporation's preferred stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the
penalties of perjury this 20th day of December, 1988.


[Seal]

INTEGRATED DEVICE TECHNOLOGY, INC.,
a Delaware corporation
By: /s/ D. John Carey
Title: CEO
Attest: /s/ Jack Menache, Secretary











- 15 -                 0795i/121988



8883570696    
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
INTEGRATED DEVICE TECHNOLOGY, INC.

Pursuant to Section 242 of the General Corporation Law of the State of Delaware
__________________________________________________

Integrated Device Technology, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "General Corporation Law") having filed its original certificate of Incorporation on June 10, 1987, does hereby certify as follows:

That the following resolution amending the corporation's Certificate of Incorporation was duly adopted by the Corporation's Board of Directors and by the Corporation's stockholders in accordance with the provisions of Section 242 of the General corporation Law at a special meeting of the Board of Directors and at an annual meeting of the stockholders given in accordance with Sections 141 and 211, respectively, of the General Corporation Law:

"NOW, THEREFORE, BE IT RESOLVED, that Article 4, Section 4.1 of the Restated Certificate of Incorporation of the Corporation be amended in its entirety as follows:

ARTICLE 4

Section 4.1.      This Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock." The total number of shares which this corporation shall have authority to issue is Seventy Million (70,000,000), of
which Sixty-Five Million (65,000,000) shall be Common Stock with a par value of $.001 per share and Five Million (5,000,000) shall be Preferred Stock with a par value of $.001 per share.

IN WITNESS WHEREOF, Integrated Device Technology, Inc. has caused this Certificate to be signed by D. John Carey, its Chief Executive Officer, and attested to by Jay R. Zerfoss, its Secretary, this 20th day of December 1988.

INTEGRATED DEVICE
TECHNOLOGY, INC.



STATE OF DELAWARE SECRETARY OF STATE
DIVISION OF CORPORATIONS FILED 02:00 PM 08/24/1995
950193227 - 2128846
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
INTEGRATED DEVICE TECHNOLOGY, INC.


Integrated Device Technology, Inc., a Delaware corporation, does hereby certify that the following amendment to the corporation's Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law:
Article 4, Section 4.1 of the Restated Certificate of Incorporation is hereby
amended in its entirety to read as follows:

Section 4.1      This Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock." The total number
of shares which this corporation shall have authority to issue is Two Hundred Ten Million (210,000,000), of which Two Hundred Million (200,000,000) shall be Common Stock with a par value of $.001 per share and Ten Million (10,000,000) shall be Preferred Stock with a par value of $.001 per share.

IN WITNESS WHEREOF, said corporation has caused this Certificate of
Amendment to be signed and attested by its duly authorized officers this 24th day of August,
1995.









19115..()()()()4!347224.1




CERTIFICATE OF ELIMINATIONS
OF
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
OF
INTEGRATED DEVICE TECHNOLOGY, INC.
(Pursuant to Section 15l(g)
of the Delaware General Corporation Law)


Integrated Device Technology, Inc., a Delaware corporation (the "Corporation"), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Corporation as required by Section 151(g) of the Delaware General Corporation Law at a meeting duly called and held on December 8, 1998:

RESOLVED, that because no shares of the Series A Junior Participating Preferred Stock designated by the Certificate of Designations filed with the Secretary of State of the State of Delaware on December 21, 1988 are outstanding because none were issued, and that none will be issued subject to such Certificate of
Designations, pursuant to Section 151(g) of the Delaware General Corporation Law the Corporation hereby eliminates from the Corporation's Certificate of Incorporation all matters set forth in such Certificate of Designations with respect to such series of stock.

IN WITNESS WHEREOF, said corporation has caused this Certificate of Eliminations to be executed by its duly authorized officer this 17th day of December, 1998.


INTEGRATED DEVICE TECHNOLOGY,INC.





STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS FILED 09:00 AM 12/21/1998
981493603 - 2128846



STATE OF DELAWARE SECRETARY OF STATE
DIVISION OF CORPORATIONS FILED 09:00 AM 12/22/1998
981495915 - 2128846

FORM

of

CERTIFICATE OF DESIGNATIONS

of

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

INTEGRATED DEVICE TECHNOLOGY, INC.

(Pursuant to Section 151 of the

Delaware General Corporation Law)
-------------------------------------------------


Integrated Device Technology, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on December 8, 1998:

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors in accordance with the provisions of the Certificate of Incorporation of the Corporation, the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") hereby creates a series of Preferred Stock, par value $0.001 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Series A Junior Participating Preferred Stock:

Section 1. Desj gnation and Amount . The shares of such series shall be designated as "Series A Junior Participating Preferred -Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 1,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided , that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.

Section 2.      Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any other stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend


19115100510/819809



Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock. in an amount (if any) per share (rounded to the nearest cent), subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate per share amount of all cash dividends, and 1 00 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock, par value $0.001 per share (the "Common Stock"), of the Company or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).

(C) Dividends due pursuant to paragraph (A) of this Section shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata·on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3.      Voting Rjghts . The holders of shares of Series A Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time

19115/00S 10/i 19809



declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4.     Certain Restrictions.

(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears m proportion to the total amounts to which the holders of all such shares are then entitled; or

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

J911S/OOS10/819809



Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6.      Liquidation Dissolution or Winding Up.

(A) Upon any liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of Common Stock, the amount of $1.00 per share for each share of Series A Preferred Stock then held by them. Thereafter, the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) If the assets of the Corporation legally available for distribution to the holders of shares of Series A Preferred Stock upon liquidation, dissolution or winding up of the Corporation are insufficient to pay the full preferential amount set forth in the first sentence of paragraph (A) above, then the entire assets of the Corporation legally available for distribution to the holders of Series A Preferred Stock shall be distributed among such holders in proportion to the shares of Series A Preferred Stock then held by them.

(C) The foregoing rights upon liquidation, dissolution or winding up provided to the holders of Series A Preferred Stock shall be subject to the rights of the holders of any other series of Preferred Stock (or any other stock) ranking prior and superior to the Series A Preferred Stock upon liquidation, dissolution or winding up.

Section 7. Consolidation Merger etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare

19115/005 I 0/819809



or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. redeemable.

No Redemption. The shares of Series A Preferred Stock shall not be redeemable.




IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the
Corporation by its Vice President and Secretary this 17th day of December, 1998.



INTEGRATED DEVICE TECHNOLOGY, INC.



OCT 30 '00 03:49 M

CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
INTEGRATED DEVICE TECHNOLOGY, lNC.

Integrated Device Technology, Inc. a Delaware corporation, does hereby certify that the following amendment to the corporation's Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law:

Article 4, Section 4.1 of the Restated Certificate of Incorporation is hereby amended in its entirety to read as follows:

Section 4.1      This Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock." The total number of shares which the Corporation shall have authority to issue is Three Hundred Sixty Million (360,000,000), of which Three Hundred Fifty Million (350,000,000) shall be Common S tock with a par value of $.001 per share and Ten Million (10,000,000) shall be Preferred Stock with a par value of $.001 per share.

IN WITNESS WHEREOF, said corporation has caused this Certificate of Amendment to be signed and attested by its duly authorized officers this 22nd day of September, 2000.

INTEGRATED DEVICE TECHNOLOGY,lNC.


/S/Jerry G. Taylor, President and CEO

ATTEST:

/S/Jerry G. Fielder, Secretary
Jerry G. Fielder, Secretary




STATE OF DELAWARE SECRETARY OF STATE
DIVISION OF CORPORATIONS FILED 04:30 PM 10/30/2000
001546773 - 2128846



State of Delaware Secretazy of State Division ofCorporations
Delivered 10:26 AM 11/05/2007
FILED 10:08 AM 11/05/2007
SRV 071187783 - 2128846 FILE


CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF INTEGRATED DEVICE TECHNOLOGY, INC.

Integrated Device Technology, Inc., a Delaware corporation (the "Corporation"), hereby certifies as follows:

1 The name of the Corporation is Integrated Device Technology, Inc and the date on which the Restated Certificate of Incorporation of the Corporation was filed with the Secretary ot State of the State of Delaware was September 24, 1987

2 This Certificate of Amendment has been duly adopted and approved by the Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the Delaware General Corporation Law (the "DGCL")

3. This Certificate of Amendment has been duly adopted and approved by the stockholders of the Corporation, acting in accordance with the provisions of Sections 228 and
242 of the DGCL

4 Section 7.1 of Article 7 of the Restated Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:

" Section 7.1 . Each director shall serve for a term ending on the date of the first annual meeting following the annual meeting at which such director was elected until his or her successor is duly elected and qualified    All directors shall be elected at each annual meeting of stockholders. If any such meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of stockholders held for that purpose No reduction of the authorized number of directors shall have the effect of removing any director before the director's term of office expires or his prior death, resignation, or removal    In filling vacancies in the Board of Directors occuning otherwise than by expiration of a term of office, a successor shall be elected for the unexpired term    In the case of any vacancy in the Board of Directors, however created, including a newly created directorship, the vacancy or vacancies shall be filled by majority vote of the directors remaining In the event one or more directors shall resign, effective at a future date, such vacancy or vacancies shall be filled as provided herein "

****

5     All other provisions of the Restated Certificate of Incorporation shall remain in full force and effect






IN WITNESS WHEREOF, this Certificate of Amendment has been signed this 1st day of
November, 2007.

INTEGRATED DEVICE TECHNOLOGY, INC.




ASSET PURCHASE AGREEMENT
by and among
QUALCOMM INCORPORATED

and

QUALCOMM CANADA INC.
together as Purchaser,
INTEGRATED DEVICE TECHNOLOGY, INC.
as Parent Seller
and
IDT CANADA INC.
as Subsidiary Seller

Dated as of August 31, 2011


TABLE OF CONTENTS

Article I
 
DEFINITIONS
 
1

1.1

 
Definitions
 
1

1.2

 
Interpretation
 
12

Article II
 
PURCHASE & SALE OF PURCHASED ASSETS
 
12

2.1

 
Purchased Assets
 
12

2.2

 
Excluded Assets
 
14

2.3

 
Assumed Liabilities
 
15

2.4

 
Retained Liabilities
 
16

2.5

 
Purchase Price; Payment of Purchase Price
 
17

2.6

 
Allocation of Purchase Price
 
18

2.7

 
Closing
 
18

2.8

 
Transfer Taxes
 
19

Article III
 
REPRESENTATIONS AND WARRANTIES OF SELLER
 
19

3.1

 
Organization and Qualification
 
19

3.2

 
Authority Relative to this Agreement
 
19

3.3

 
No Conflict
 
20

3.4

 
Required Filings and Consents
 
20

3.5

 
Financial Statements
 
20

3.6

 
Absence of Undisclosed Liabilities
 
20

3.7

 
Absence of Certain Changes or Events
 
21

3.8

 
Properties; Title
 
22

3.9

 
Intellectual Property
 
22

3.1

 
Contracts
 
32

3.11

 
Permits
 
33

3.12

 
Compliance with Laws
 
33

3.13

 
Claims and Proceedings
 
33

3.14

 
Employee Matters
 
34

3.15

 
Employee Benefits
 
36

3.16

 
No Finder
 
37

3.17

 
Affiliate Transactions
 
37

3.18

 
Environmental Matters
 
37

3.19

 
Insurance
 
38

3.2

 
No Significant Items Excluded
 
38

3.21

 
Taxes and Tax Returns
 
38

3.22

 
Solvency
 
39

3.23

 
Certain Business Practices
 
40

3.24

 
Disclosure
 
40

3.25

 
No Suspension or Debarment
 
40

3.26

 
Canadian Matters
 
40

3.27

 
Competition Act
 
40

3.28

 
Investment Canada Act
 
40

3.29

 
Silicon Optix
 
40

Article IV
 
REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
40


i
TABLE OF CONTENTS

4.1

 
Organization and Qualification
 
41

4.2

 
Authority Relative to this Agreement
 
41

4.3

 
No Conflict
 
41

4.4

 
Required Filings and Consents
 
41

4.5

 
No Finder
 
41

Article V
 
COVENANTS
 
41

5.1

 
Conduct of Business
 
42

5.2

 
Corporate Examinations and Investigations
 
43

5.3

 
Employment Matters
 
43

5.4

 
No Shop
 
45

5.5

 
Notices of Certain Events
 
45

5.6

 
Certain Closing Certificates and Documents
 
46

5.7

 
Public Announcements
 
46

5.8

 
Confidentiality
 
46

5.9

 
Expenses
 
47

5.1

 
Consents, Filings and Authorizations; Efforts to Consummate
 
47

5.11

 
Required Contract Consents; Assignment of Contracts
 
48

5.12

 
Transfer of Equipment and Personnel
 
48

5.13

 
Commercial Relationship
 
48

5.14

 
Certain Transitional Matters
 
49

5.15

 
Employee Matters
 
49

5.16

 
Further Assurances
 
49

5.17

 
Seller's Non-Compete
 
50

5.18

 
Tax Matters
 
50

5.19

 
Supplements to Disclosure Schedules
 
51

5.2

 
Patent Matters
 
51

5.21

 
Reconciliation
 
51

5.22

 
Touchdown/Reon and Vida Processors
 
52

5.23

 
Actions Regarding Off-the-Shelf Software
 
52

5.24

 
Electronic Transfer of Software Programs
 
52

Article VI
 
CONDITIONS TO CLOSING
 
52

6.1

 
Conditions to the Obligations of Seller and Purchaser
 
52

6.2

 
Conditions to Obligations of Seller
 
53

6.3

 
Conditions to Obligations of Purchaser
 
54

Article VII
 
TERMINATION; EFFECT OF TERMINATION
 
56

7.1

 
Termination of Agreement
 
56

7.2

 
Effect of Termination; Right to Proceed
 
57

Article VIII
 
SURVIVAL; INDEMNIFICATION
 
57

8.1

 
Survival of Representations and Warranties
 
57

8.2

 
Indemnification by Seller
 
58

8.3

 
Indemnification by Purchaser
 
58

8.4

 
Notice of Claims
 
59

8.5

 
Limitation of Claims
 
59


ii
TABLE OF CONTENTS

8.6

 
Indemnification Escrow
 
61

8.7

 
Objections to Claims
 
61

8.8

 
Resolution of Conflicts
 
62

8.9

 
Third-Party Claims
 
62

8.1

 
Survival of Indemnification Claims
 
63

8.11

 
Tax Effect of Indemnification Payments
 
64

8.12

 
Effect of Investigation
 
64

8.13

 
Remedies
 
64

Article IX
 
GENERAL
 
64

9.1

 
Notices
 
64

9.2

 
Severability; Parties in Interest
 
65

9.3

 
Assignment; Binding Effect; Benefit
 
65

9.4

 
Incorporation of Exhibits
 
65

9.5

 
Governing Law
 
65

9.6

 
Waiver of Jury Trial
 
66

9.7

 
Headings; Interpretation
 
66

9.8

 
Counterparts; Facsimiles
 
66

9.9

 
Entire Agreement
 
66

9.1

 
Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies
 
66

9.11

 
Specific Performance; Preservation of Remedies
 
66

9.12

 
Attorneys' Fees
 
66



iii

EXHIBITS
Exhibit A
Escrow Agreement
Exhibit B
Form of License Agreement
Exhibit C
Retained Rights
Exhibit D
Form of Transition Services Agreement
Exhibit E
Form of Tripartite Mutual Termination and Transfer Agreement
Exhibit F
Form of Assignment and Assumption Agreement
Exhibit G
Form of Bill of Sale
Exhibit H
Form of Patent Assignment
Exhibit I
Form of Trademark Assignment
Exhibit J
Form of Toronto Sublease Agreement
Exhibit K
Form of Montreal Sublease Agreement




iv

ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of August 31, 2011 by and among QUALCOMM Incorporated, a Delaware corporation (the “ Parent Purchaser ”), Subsidiary Purchaser, Integrated Device Technology, Inc., a Delaware corporation (the “ Parent Seller ”), and Subsidiary Seller.
RECITALS
Subject to the terms and conditions set forth herein, Seller desires to sell, convey, transfer, assign and deliver to Purchaser, and Purchaser desires to purchase and acquire from Seller, free and clear of all Liens other than the Assumed Liabilities and the Permitted Exceptions, all of Seller’s right, title and interest in and to all of the Purchased Assets (the “ Acquisition ”).
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
Article I
DEFINITIONS
1.1      Definitions . As used herein, the following terms shall have the following meanings:
“ ACM’s ” means asbestos-containing materials.
“ Acquired Patents ” has the meaning given to such term in Section 3.9(b)(i).
“ Acquired Proprietary Rights ” has the meaning given to such term in Section 2.1(h).
“ Acquired Technology ” has the meaning given to such term in Section 2.1(i).
“ Acquisition ” has the meaning given to such term in the Recitals.
“ Acquisition Proposal ” has the meaning given to such term in Section 5.4(a)(i).
“ Additional Transferred Patents ” has the meaning given to such term in Section 3.9(b)(i).
“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person provided that, for purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any 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 the ownership of voting securities or by contract or otherwise.
“ Agreement ” means this Asset Purchase Agreement.
“ Approval ” has the meaning given to such term in Section 3.2.
“ Asserted Liability ” has the meaning given to such term in Section 8.4.
“ Assets ” means, with respect to any Person, any and all of such Person’s right, title and ownership interest in and to all properties, rights, claims, goodwill, interests and assets of every kind and description, real, personal or mixed, tangible and intangible, whether accrued, contingent or otherwise, and wherever located (including in the possession of vendors or other third parties or elsewhere), in each case whether or not recorded or reflected on the books and

1

records or financial statements of any Person.
“ Assigned Contracts ” has the meaning given to such term in Section 2.1(e).
“ Assignment and Assumption Agreement ” has the meaning given to such term in Section 2.5(d).
“ Assumed Liabilities ” has the meaning given to such term in Section 2.3.
“ Automatically Transferred Employees ” means those Business Employees of Seller and its Subsidiaries who are employed in Quebec and whose employment transfers to Purchaser at the Closing automatically by operation of Law.
“ Bank Act ” means Bank Act of Canada (S.C. 1991, c. 46).
“ Bankruptcy Exception ” has the meaning given to such term in Section 3.2.
“ Benefit Plans ” means all employee benefit plans as defined in Section 3(3) of ERISA under which any Transferred Employee has any right to benefits and all other employee benefit arrangements, obligations, customs, or practices (including to a payroll practice), whether or not subject to ERISA, to provide benefits, other than salary, in respect of services rendered, to Transferred Employees, including employment agreements, severance agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, repatriation or expatriation benefits, work permits, visas, salary continuation, disability, consulting or other compensation arrangements, workers’ compensation, deferred compensation, bonus, stock option, stock appreciation, stock purchase, phantom stock, or other equity right, hospitalization, medical, dental or vision benefits or insurance, life insurance, tuition reimbursement or scholarship programs, fringe benefits, cafeteria plan benefits and any plans or arrangements providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of the Business of Seller maintained by Seller for the benefit of Transferred Employees, any Subsidiary or an ERISA Affiliate or to which Seller, any Subsidiary, or an ERISA Affiliate has contributed or is or was obligated to make payments or has any Liability.
“ Bill of Sale ” has the meaning given to such term in Section 6.3(g)(viii) .
“ Books and Records ” means all information in any form primarily relating to the Purchased Assets and the Business.
“ Business ” means the design, development, sale, marketing, use, import, maintenance or support of the Business Products, and shall include all of Seller’s rights, title and interest to the Assets previously acquired by Seller from Silicon Optix.
“ Business Day ” means any day other than a Saturday, Sunday or a day on which banks in California or Ontario, Canada are authorized or obligated by applicable Law or executive Order to close or are otherwise generally closed.
“ Business Employee ” means any individual employed by Seller (including former Silicon Optix employees) or one of its Subsidiaries who is primarily engaged in the conduct of the Business, including the design, development and marketing of the Business Products, as of the date hereof, and includes the Key Employees, and in each case is set forth on Schedule 1.1(a) .
“ Business Products ” means products in Seller’s Hollywood Quality Video (“ HQV ”) and Frame Rate Conversion (“ FRC ”) product lines, as set forth on Schedule 1.1(b) .
“ Bylaws ” means the bylaws, or other similar corporate document (including articles of incorporation, where applicable), of Parent Seller and each Subsidiary Seller, each as amended to the date hereof.
" Canadian Assets " means all of the Purchased Assets used wholly or partly to carry on the Business in Canada other than the Acquired Proprietary Rights and Acquired Technology.

2

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act.
“ Certificate of Incorporation ” means the certificate of incorporation, or other similar charter document or constating document, of Parent Seller and each Subsidiary Seller, each as amended to the date hereof.
“ CIPO ” means the Canadian Intellectual Property Office.
“ Claim ” has the meaning given to such term in Section 3.13(a).
“ Closing ” has the meaning given to such term in Section 2.7.
“ Closing Date ” has the meaning given to such term in Section 2.7.
“ COBRA ” has the meaning given to such term in Section 3.15(e).
“ Code ” means the Internal Revenue Code of 1986, as it may be amended from time to time, and any successor thereto.
“ Confidentiality Agreement ” has the meaning given to such term in Section 5.8.
“ Contract ” means all legally binding agreements, whether oral or written, including contracts, contract rights, commitments, undertakings, orders, leases, guarantees, warranties and representations, franchises benefiting or relating to the Business or the ownership, construction, development, maintenance, repair, management, use, occupancy, possession or operation thereof, or the operation of any of the programs or services in conjunction with the Business and all renewals, replacements and substitutions therefore, in each case that is necessary for the conduct of and that are primarily used or primarily held for use in the Business.
“ Copyrights ” has the meaning given to such term in Section 3.9(a)(i).
“ Damages ” has the meaning given to such term in Section 8.2(a).
“ Due Diligence Period ” has the meaning given such term in Section 5.2.
“ Environmental Law ” means any Law of any applicable federal, state, provincial, local or foreign jurisdiction (including all Permits issued pursuant to such Laws) relating to pollution, hazardous substances, hazardous wastes, petroleum or otherwise relating to protection of the environment or natural resources, including, by way of example and not by way of limitation, the Clean Air Act, the Clean Water Act, the Resource Conservation Recovery Act (“ RCRA ”), CERCLA, the Toxic Substances Control Act (“ TSCA ”), the Environmental Protection Act (Ontario) (" OEPA ") and the Emergency Planning and Community Right-to-Know Act, each as may be amended from time to time, and any successor thereto.
“ Environmental Permits ” means those Permits required to be obtained by Seller under Environmental Laws in connection with its Business or the use and operation of the Purchaser Assets owned or leased by Seller.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
“ ERISA Affiliate ” means any trade or business which is or has been treated as a single employer with Seller within the meaning of Section 414(b), (c), (m) or (o) of the Code.
“ Escrow Agent ” means US Bank National Association (or such other Persons as may hereafter by reasonably acceptable to Parent Purchaser and Parent Seller).
“ Escrow Agreement ” means the Escrow Agreement by and among Parent Purchaser, Parent Seller and Escrow Agent of even date herewith in the form set forth in Exhibit A .

3

“ Escrow Period ” means the twenty-four (24) month period from and immediately after the Closing Date.
“ Escrow Release Date ” means a date no later than five (5) Business Days after the expiration of the Escrow Period.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
“ Excluded Assets ” has the meaning given to such term in Section 2.2.
“ Excluded Contracts ” has the meaning given to such term in Section 2.2(e).
“ Excluded Tangible Property ” has the meaning given to such term in Section 2.2(f).
“ Field ” has the meaning given to such term in Section 5.13.
" Financials " has the meaning given to such term in Section 3.5.
“ Foreign Plan” has the meaning given such term in Section 3.15(h).
“ Form 8594 ” means IRS Form 8594: Asset Acquisition Statement under Section 1060, including any required amendments or supplements thereto.
“ FRC ” has the meaning set forth in the definition of “Business Products”.
“ GAAP ” means generally accepted accounting principles in the United States.
“ Governmental Authorities ” means all agencies, authorities (including taxing authorities), bodies, tribunals, bureau, boards, commissions, courts, minister, governor in council, cabinet, commissioner, instrumentalities, legislatures and offices of any nature whatsoever of any government, stock exchange, quasi-governmental unit or political subdivision, whether foreign, federal, state, provincial, county, district, municipality, city or otherwise.
“ HIPAA ” has the meaning given to such term in Section 3.15(e).
“ HQV ” has the meaning set forth in the definition of “Business Products”.
“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“ Improvements ” means any improvements, enhancements, changes, modifications or derivative works.
“ Indemnification Escrow Amount ” has the meaning given to such term in Section 8.6(a).
“ Indemnification Escrow Fund ” has the meaning given to such term in Section 8.6(a).
“ Indemnified Party ” has the meaning given to such term in Section 8.4.
“ Indemnifying Party ” has the meaning given to such term in Section 8.4.
“ Insurance Policies ” means all insurance policies, fidelity and surety bonds and fiduciary liability policies covering the Purchased Assets..
“ Inventory ” means consumable inventory, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies that are necessary for the conduct of and that are primarily used or primarily held for use in the Business.
“ IRS ” means the United States Internal Revenue Service.

4

“ Issued Patents ” has the meaning given to such term in Section 3.9(a)(ii).
“ Key Employees ” means the Business Employees set forth on Schedule 1.1(c) .
“ Knowledge ” means the actual knowledge of a particular fact or other matter being possessed as of the pertinent date by James Goel, Louie Lee, Jeff Lukanc, Derry Murphy, Ji Park, Richard Crowley, Ted Tewksbury and/or Tom Kao or, if exercising reasonable care, each such individual would be expected to discover or become aware of that fact or matter in the course of carrying out his or her duties and responsibilities on behalf of Seller.
“ Laws ” means any federal, state, provincial, foreign, municipal, or local statute, law, ordinance, regulation, rule, code, Order, other requirement or rule of law and to the extent that they have the force of law, policies, guidelines, notices and protocols of any Governmental Authority.
“ Liabilities Representation ” has the meaning given to such term in Section 8.1.
“ Liability ” means any direct or indirect indebtedness, liability, assessment, expense, claim, loss, damage, deficiency, obligation or responsibility, known or unknown, disputed or undisputed, joint or several, vested or unvested, executory or not, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, determinable or undeterminable, accrued or unaccrued, absolute or not, actual or potential, contingent or otherwise (including any liability under any guarantees, letters of credit, performance credits or with respect to insurance loss accruals).
“ License Agreement ” means a license agreement by and between Parent Seller and Parent Purchaser in substantially the form set forth in Exhibit B .
“ Licensed IP ” has the meaning set forth in Section 3.9(a)(iii) .
“ Licensed Technology ” has the meaning set forth in Section 3.9(a)(iv) .
“ Lien ” means any mortgage, hypothec, prior claim, lien (statutory or otherwise, including mechanics, warehousemen, laborers and landlords liens), Bank Act security, claim, pledge, charge, community property interest, condition, equitable interest, right-of-way, easement, encroachment, servitude, security interest, preemptive right, right of first refusal, right of first negotiation, or similar restriction or right, option, judgment, title defect or encumbrance of any kind, whether accrued, contingent, absolute, or otherwise.
“ Material Adverse Effect ” means, with respect to Seller, any change in or effect on the Business that, individually or in the aggregate (taking into account all other such changes or effects), is, or is reasonably likely to be, materially adverse to the Business, Purchased Assets, Licensed IP, the Licensed Technology, Proprietary Rights owned by Seller and licensed to Purchaser pursuant to the License Agreement and Assumed Liabilities, taken as a whole; provided , however, that none of the following shall be taken into account in determining whether there has been a Material Adverse Effect: (a) the public announcement or pendency of this Agreement or any of the transactions contemplated herein or any actions taken in compliance herewith, including the impact thereof on the relationships of Seller with customers, suppliers, distributors, consultants, employees or independent contractors or other third parties with whom Seller has any relationship in connection with the Business or the Purchased Assets; (b) conditions affecting the industries in which Seller operates or operated the Business, the U.S. economy or financial markets or any foreign markets or any foreign economy or financial markets in any location where Seller operates the Business, but only to the extent that such changes or conditions do not have a disproportionate adverse effect on Seller as compared to other businesses in the industries in which it operates; (c) compliance with the terms of, or the taking of any action required by, this Agreement, or otherwise taken with the consent of Purchaser; (d) any change in GAAP or applicable Laws (or interpretation thereof); or (e) the effect of any changes arising in connection with any acts of God, calamities, acts of war, terrorism or military action or the escalation thereof, national or international political or social conditions.
" Materials Inventory " means raw material, work in process and finished goods held by Seller, Seller's subcontractors and by Seller's distributors in the case of finished goods, in each case, solely with respect to Touchdown Processors.

5

" Materials Inventory Amount " has the meaning set forth in the definition of “ Seller Materials Inventory Certificate .”
“ Montreal Sublease Agreement ” has the meaning given to such term in Section 6.2(d)(vii).
“ Moral Right ” has the meaning given to such term in Section 3.9(a)(v).
“ Multiemployer Plan ” means any multiemployer plan as defined in Section 3(37) of ERISA or a plan subject to Section 413(b) and (c) of the Code, to which Seller or an ERISA Affiliate has contributed or is or was obligated to make payments, in each case with respect to any Transferred Employee.
“ Non-Transferring Employees ” means the Business Employees who do not become employees of Purchaser (or any Subsidiary Purchaser) in connection with the transactions contemplated by this Agreement.
“ Notice of Claim ” has the meaning given to such term in Section 8.4.
“ OEPA ” has the meaning set forth in the definition of Environmental Law.
“ Off-the Shelf Software ” has the meaning given to such term in Section 3.9(a)(vi).
“ OHSA ” has the meaning given to such term in Section 3.14(h).
“ Open License Terms ” has the meaning given to such term in Section 3.9(a)(x).
“ Orders ” has the meaning given to such term in Section 3.12.
“ Parent Purchaser ” has the meaning given to such term in the preamble of this Agreement.
“ Parent Seller ” has the meaning given to such term in the preamble of this Agreement.
“ Party ” means the Parent Seller, the Subsidiary Seller, the Parent Purchaser or the Subsidiary Purchaser, individually as the context so requires , and the term “Parties” means collectively, Parent Seller, Subsidiary Seller, Parent Purchaser and Subsidiary Purchaser.
“ Patent Applications ” has the meaning given to such term in Section 3.9(a)(viii).
“ Patents ” has the meaning given to such term in Section 3.9(a)(vii).
“ PCB’s ” means polychlorinated biphenyls.
“ Pension Plan ” means a Benefit Plan that is an employee pension benefit plan as defined in Section 3(2) of ERISA.
“ Permits ” means all permits, licenses, approvals, franchises, grants, qualifications, variances, permissive uses, accreditations, certificates, certifications, establishment registrations or easements issued by a Governmental Authority.
“ Permitted Exceptions ” means Permitted Liens and the rights and limitations described in detail on Schedule 1.1(d) .
“ Permitted Liens ” means Liens for (i) Taxes, assessments and other governmental fees or other charges not yet due and payable; (ii) zoning, entitlement, building and other land use and similar Laws or regulations imposed by any Governmental Authority having jurisdiction over such parcel which have not been violated and are not violated by the current use and operation thereof; and (iii) easements, covenants, conditions, restrictions and other similar matters of record with respect to any Real Property that would not impair the use or occupancy of such parcel in the operation of the Business.

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“ Person ” means an individual, corporation, partnership, limited partnership, limited liability company, unlimited liability company, joint stock company, limited liability partnership, syndicate, person (including a “person” as defined in Section 13(d)(3) of the Exchange Act, together with the rules and regulations promulgated thereunder), trust, association, joint venture, entity or Governmental Authority.
“ Post-Closing Tax Period ” means any Tax period beginning after the Closing Date and that portion of a Straddle Period beginning after the Closing Date.
“ Pre-Closing Tax Period ” means any Tax period ending on or before the Closing Date and that portion of any Straddle Period ending on the Closing Date.
“ Prepaid Expenses ” as of any date means payments made by Seller primarily related to the Purchased Assets or its Business, which constitute prepaid expenses in accordance with GAAP.
“ Proprietary Rights ” has the meaning given to such term in Section 3.9(a)(ix).
“ Public Software ” has the meaning given to such term in Section 3.9(a)(x).
“ Purchase Price ” has the meaning given to such term in Section 2.5(a).
“ Purchase Price Allocation ” has the meaning given to such term in Section 2.6.
“ Purchased Assets ” has the meaning given to such term in Section 2.1.
“ Purchaser ” means, collectively, the Parent Purchaser and the Subsidiary Purchaser.
“ Purchaser Indemnitees ” has the meaning given to such term in Section 8.2(a).
“ RCRA ” has the meaning set forth in the definition of “Environmental Law”.
“ Real Property ” means all real or immovable property that is owned, leased or used by Seller for the use or benefit of Seller or that is an asset of Seller, in each case that is necessary for the conduct of and that is primarily used or primarily held for use with the Business.
“ Real Property Leases ” has the meaning given to such term in Section 3.8(b).
“ Reference Design Platforms ” has the meaning given to such term in Section 5.13.
“ Registered Copyrights ” has the meaning given to such term in Section 3.9(a)(xi).
“ Registered Trademarks ” has the meaning given to such term in Section 3.9(a)(xii).
“ Regulated Substances ” means any substance defined, regulated or prohibited under Environmental Laws, because of its toxic, hazardous or deleterious characteristics, including hazardous waste, as defined pursuant to RCRA, hazardous substances, as defined pursuant to CERCLA, toxic substances as defined under TSCA, hazardous materials, as defined under the Hazardous Materials Transportation Act, contaminants as defined under the OEPA, petroleum and its fractions, ACM’s and PCB’s.
“ Related Software ” has the meaning given to such term in Section 3.9(a)(x).
“ Reon and Vida Processors ” means Seller’s Reon-VX Video processors and HQV Vida video processors, in each case, as such Reon and Vida processors exist as of the Closing Date and minor Improvements mutually agreed by the Parties in writing, other than minor Improvements for purposes of implementing manufacturing yield improvements, which shall not require Purchaser’s consent for Seller to implement.

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“ Representatives ” means, with respect to any Party to this Agreement, such Party’s directors, officers, Affiliates, employees, attorneys, accountants, representatives, lenders, consultants, independent contractors and other agents.
“ Required Contract Consents ” has meaning given to such term in Section 3.10(b).
“ Retained Liabilities ” has the meaning given to such term in Section 2.4.
“ Retained Rights ” means the non-exclusive rights retained by Seller under certain of the Acquired Proprietary Rights, as set forth in Exhibit C attached hereto.
“ Security Right ” means, with respect to any security, any option, warrant, subscription right, preemptive right, other right or privilege (whether by Law, preemptive or contractual), proxy, put, call, demand, plan, commitment, agreement, understanding or arrangement of any kind relating to such security, whether issued or unissued, or any other security convertible into or exchangeable for any such security. “Security Right” includes any right relating to issuance, sale, assignment, transfer, purchase, redemption, conversion, exchange, registration or voting and includes rights conferred by statute, by the issuer’s governing documents or constating documents, or by agreement.
“ Selected Patents ” has the meaning given to such term in Section 3.9(b)(i).
“ Seller ” means, collectively, the Parent Seller and the Subsidiary Seller.
“ Seller Debts ” means, in each case, solely to the extent that any of the Purchased Assets is bound by any of the following: (i) money borrowed by Seller from any Person; (ii) any indebtedness of Seller arising under leases required to be capitalized under GAAP or evidenced by a note, bond, debenture or similar instrument; (iii) any indebtedness of Seller arising under purchase money obligations or representing the deferred purchase price of property and services (other than accounts payable and current trade payables incurred in the ordinary course of Seller’s Business); (iv) any Liability of Seller under any guaranty, letter of credit, performance credit, bankers’ acceptances, or other agreement having the effect of insuring a creditor against loss; or (v) all indebtedness of others referred to in paragraphs (i) through (iv) above guaranteed by Seller.
“ Seller Disclosure Schedules ” has the meaning given to such term in Article III.
“ Seller Employee Plans ” has the meaning given to such term in Section 3.15(a).
“ Seller Indemnitees ” has the meaning given to such term in Section 8.3(a).
“ Seller Licensed Proprietary Rights ” has the meaning given to such term in Section 3.9(a)(xiii).
“ Seller Licensed Technology ” has the meaning given to such term in Section 3.9(a)(xiv).
“ Seller Materials Inventory Certificate ” means a certificate executed by the Chief Financial Officer of the Seller, dated as of the Closing Date, certifying on behalf of the Seller an itemized list of Seller's cost of all Materials Inventory as of the close of business on the day immediately prior to the Closing Date (the " Materials Inventory Amount ").
“ Seller Proprietary Rights ” has the meaning given to such term in Section 3.9(a)(xv).
“ Seller Software ” has the meaning given to such term in Section 3.9(d)(vi).
“ Seller Source Code ” has the meaning given to such term in Section 3.9(a)(xvi).
“ Seller Vacation Certificate ” means a certificate executed by the Chief Financial Officer of the Seller, dated as of the Closing Date, certifying on behalf of the Seller the aggregate amount of all Transferred Employee Liabilities as of the close of business on the day immediately prior to the Closing Date (the “ Vacation Amount ”).

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“ Silicon Optix ” means Silicon Optix, Inc., a Delaware corporation.
“ Silicon Optix Canada ” means Silicon Optix Canada, Inc., an Ontario corporation.
“ Software Programs ” means any software, middleware, firmware, database or program owned by Seller or purported to be owned by Seller, in both source code and object code forms that are necessary for the conduct of and primarily used or primarily held for use in the Business, as listed on Schedule 1.1(e) .
“ Straddle Period ” means any Tax period beginning before or on and ending after the Closing Date.
“ Subsidiary ” means, with respect to Seller, any corporation, partnership, limited partnership, limited liability company, unlimited limited liability company, limited liability partnership, joint venture or other legal entity of which Seller (either alone or through or together with any other subsidiary) owns, directly or indirectly, a majority of the stock or other equity interests.
“ Subsidiary Purchaser ” means QUALCOMM Canada, Inc.
“ Subsidiary Seller ” means IDT Canada Inc.
“ Tangible Personal Property ” means all structures, machinery, equipment, tools, furniture, fixtures and equipment (including fixed machinery and fixed equipment), computer hardware, supplies, materials, leasehold improvements, automobiles, computing and telecommunications equipment and other items of tangible personal property (other than Inventory), of every kind owned or leased (wherever located and whether or not carried on Seller’s books), in each case that is necessary for the conduct of and that is primarily used or primarily held for use in the Business.
“ Tax Audit ” means any examination, investigation, audit, Claim or proceeding relating to Taxes conducted or initiated by a Governmental Authority.
“ Tax Deficiency ” has the meaning given to such term in Section 3.21(c).
“ Tax Return ” means any and all returns, reports, statements, forms, declarations, elections, notices, designations, filings or other documentation (including any additional or supporting material and any amendments or supplements) filed or maintained, or required to be filed or maintained, with respect to or in connection with the calculation, determination, assessment or collection of any Taxes.
“ Taxes ” means: (i) any and all taxes imposed or administered by any Governmental Authority or taxing authority, including taxes on, measured by, or with respect to income, capital gains, franchise, windfall or other profits, gross receipts, property, sales, use, capital, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, government pension plan and employment insurance premiums or contributions, or net worth; taxes in the nature of excise, withholding, ad valorem, stamp, transfer, land transfer, sales, goods and services, harmonized sales, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges and (ii) any and all interest, penalties, additions to tax and additional amounts imposed in connection with or with respect to any amounts described in (i).
“ Technology ” has the meaning given to such term in Section 3.9(a)(xvii).
“ Third-Party Claims ” has the meaning given to such term in Section 8.4.
“ Timing Controller ” means any portion of an integrated circuit, product or application, the function of which is to generate control signals, synchronization signals, and/or clock signals (independently or in conjunction with other circuitry or devices) required for interfacing to a display panel of any kind (LCD panels, TV panels, etc.). Timing Controller shall include any circuitry or functionality for processing of the type that is used for bit compensation for the purpose of adjusting contrast and brightness, color compensation, overdrive compensation, line brightness compensation, plane brightness compensation, response time compensation, dithering such as 10 bit to 8 bit, or 12 bit

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to 8 bit conversion, frame buffering and similar panel-glass specific characteristics.
“ Touchdown Processors ” means Seller’s FRC video processors code-named Touchdown and more specifically identified as part numbers VHD1200ZBHG479, VHD2400ZBLG479, VHD2400ZBBHG479, VHD1200ZDBHG479, VHD2400ZDBHG479, in each case, as such Touchdown Processors exist as of the Closing Date and minor Improvements mutually agreed by the Parties in writing, other than minor Improvements for purposes of implementing manufacturing yield improvements, which shall not require Purchaser’s consent for Seller to implement.
“ Toronto Sublease Agreement ” has the meaning given to such term in Section 6.2(d)(vi).
“ Trade Secrets ” has the meaning given to such term in Section 3.9(a)(xviii).
“ Trademarks ” has the meaning given to such term in Section 3.9(a)(xix).
“ Transaction Documents ” means, collectively, this Agreement, the Escrow Agreement, the Assignment and Assumption Agreement, the Patent Assignment, the Copyright Assignment, the Trademark Assignment, the License Agreement, the Bill of Sale, the Transition Services Agreement, the Tripartite Mutual Termination and Transfer Agreement, the Toronto Sublease Agreement and the Montreal Sublease Agreement.
“ Transfer Taxes ” means all federal, state, provincial, local or foreign sales, harmonized sales, use, transfer, real property transfer, mortgage recording, stamp duty, goods and services and other value-added or similar Taxes that may be imposed in connection with the transfer of Purchased Assets or assumption of Assumed Liabilities.
“ Transferred Employee Liabilities ” means those Liabilities incurred or accrued as a result of the employment of a Transferred Employee with the Seller that solely relates to accrued vacation pay; provided , however , that in no event shall the amount of such Liabilities for any individual Transferred Employee not employed by Subsidiary Seller include the value of more than ten (10) days of vacation time.
“ Transferred Employees ” means (i) those Business Employees who accept Purchaser’s offer of employment pursuant to Section 5.3(a) and commence employment with Purchaser or any Subsidiary Purchaser and (ii) Automatically Transferred Employees.
“ Transition Services Agreement ” means the Transition Services Agreement by and between Parent Seller and Parent Purchaser, in the form set forth in Exhibit D .
“ Tripartite Mutual Termination and Transfer Agreement ” means the Tripartite Mutual Termination and Transfer Agreement by and among Qualcomm Wireless Semi Conductor Technologies Limited, Integrated Device Technology (Shanghai) Co., Ltd. and each of the Business Employees located in China, in the form set forth in Exhibit E .
“ TSCA ” has the meaning set forth in the definition of Environmental Law.
“ USPTO ” has the meaning given to such term in Section 3.9(a)(xii).
" Vacation Amount " has the meaning set forth in the definition of " Seller Vacation Certificate ".
“ Video Interface and Timing Business ” means the design, development, sale, marketing, use, import, maintenance or support of Video Interface products and Timing Controller products.
“ Video Interface ” means any portion of an integrated circuit, product or application, the function of which is to receive, transmit and/or sample (using a clock signal) raw or compressed digital or analog data streams containing/representing video and or still images. Video Interface shall not include any circuitry or functionality to process the content of the data stream, other than processing of the type that is required to comply with industry video interface standards existing as of the Effective Date (and evolutions of such standards) for video receivers and transmitters. Video Interface circuitry may also include a reverse function of transmitting a data stream containing video and or still images.

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“ Withholding Taxes ” means any Taxes required to be withheld and paid by either of the Purchasers for the account of either of the Sellers with respect to the Purchase Price.
“ Work ” has the meaning given to such term in Section 3.9(a)(x).
1.2      Interpretation . Unless the context otherwise requires, the terms defined in Section 1.1 shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms defined herein. All accounting terms defined in Section 1.1 , and those accounting terms used in this Agreement not defined in Section 1.1 , except as otherwise expressly provided herein, shall have the meanings customarily given thereto in accordance with GAAP. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”
ARTICLE II     
PURCHASE & SALE OF PURCHASED ASSETS
2.1      Purchased Assets . Except for Seller’s Retained Rights and subject to the terms and conditions of this Agreement and in reliance upon the representations, warranties, covenants and agreements of Seller contained herein, at the Closing, Parent Seller (or Subsidiary Seller) shall sell, convey, transfer, assign and deliver to Parent Purchaser (or Subsidiary Purchaser, if so designated by Parent Purchaser), and Parent Purchaser shall purchase and acquire (and shall cause Subsidiary Purchaser, if so designated by Parent Purchaser, to purchase and acquire) from Parent Seller (or Subsidiary Seller), free and clear of all Liens other than the Permitted Exceptions, all of Parent Seller’s (or Subsidiary Seller) right, title and interest in and to the following Assets (collectively, the “ Purchased Assets ”):
(a)      All Assets that were previously acquired by Seller or its respective Affiliates from Silicon Optix and its Affiliates, including as set forth on Schedule 2.1(a)(i) , but excluding any Assets specified on Schedule 2.1(a)(ii) ;  
(b)      All Assets directly related to and primarily used in connection with the Seller’s HQV and FRC product lines as set forth on Schedule 2.1(b) ;
(c)      All Tangible Personal Property, including Tangible Personal Property set forth on Schedule 2.1(c) ;
(d)      All Seller Source Code;
(e)      All of Seller’s rights under the Contracts that are set forth on Schedule 2.1(e) (the “ Assigned Contracts ”), including Seller’s rights and licenses in and to any Licensed Technology or Licensed IP under such Assigned Contracts and Seller’s possession of any such Licensed Technology;
(f)      All Permits and Environmental Permits set forth on Schedule 2.1(f) ;
(g)      All data, information, records, files, manuals, blueprints and other documentation, in each case, that are necessary for the conduct of and that are primarily used or held for use in the Business, including: (i) service and warranty records; (ii) technical and design notes, test cases and suites, test scripts, characterization data, studies, reports, correspondence and other similar documents and records, whether in electronic form or otherwise; (iii) all Books and Records; (iv) purchasing records and records relating to suppliers, (v) records and files primarily related to the prosecution and maintenance of the Acquired Proprietary Rights and (vi) subject to applicable Law, copies of all personnel records of all Transferred Employees; provided, however, that (1) with respect to any such books and records that also relate to or are also required for the operation of the assets and businesses retained by Seller, Seller may retain the originals of such books and records and deliver copies thereof to Purchaser, and (2) with

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respect to Tax Returns, Purchased Assets shall include only copies of Tax Returns required to be disclosed or shared pursuant to Section 5.18;
(h)      All Patents (subject to Seller’s Retained Rights as set forth in Exhibit C ) domain names and Trademarks set forth on Schedule 2.1(h) , and all other Proprietary Rights (other than Patents, domain names and Trademarks) owned or purported to be owned by Seller that are necessary for the conduct of and that are primarily used or held for use in the Business, including such other Proprietary Rights in the Acquired Technology and Software Programs, and all transferable rights to sue or assert claims against or seek remedies against past, present or future infringements or misappropriation of any or all of such Proprietary Rights owned by or purported to be owned by Seller and rights of priority and protection of interests therein and to retain any and all amounts therefrom (collectively, the “ Acquired Proprietary Rights ”);
(i)      All Technology, including Software Programs, owned or purported to be owned by Seller and that is necessary for the conduct of and that is primarily used or held for use in the Business (the “ Acquired Technology ”);
(j)      All Prepaid Expenses and security deposits solely related to the Purchased Assets;
(k)      All of the Assets related to immigration matters, including LCA’s and petitions previously filed, involving both Seller and any Transferred Employee; and
(l)      All Claims, including warranty and product liability Claims, made or asserted against any Person primarily related to the Purchased Assets, whether arising out of actions or conditions occurring prior to, on, or after the Closing Date.
Subject to Seller’s rights pursuant to Section 5 of the License Agreement, promptly following the receipt of a written request from Purchaser following the Closing, Seller will use reasonable efforts to remove and delete from any Excluded Tangible Property all Purchased Assets and any information pertaining or related to Purchased Assets.
2.2      Excluded Assets . Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere in this Agreement, all Assets other than the Purchased Assets, including the following Assets (collectively, the “ Excluded Assets ”), shall not be part of the sale and purchase contemplated hereunder and shall remain the property of Seller after the Closing:
(a)      All minute books and corporate seals of Seller;
(b)      The capital stock or other equity securities of Seller, whether held in treasury or otherwise;
(c)      The consideration paid to Seller pursuant to this Agreement;
(d)      (i) Originals of all personnel records and (ii) originals of all other records that Seller is required by Law to retain in its possession;
(e)      All Contracts not expressly assigned to and assumed by Purchaser pursuant to Section 2.1(e) (the “ Excluded Contracts ”);
(f)      All structures, machinery, equipment, tools, furniture, fixtures and equipment (including fixed machinery and fixed equipment), computer hardware, supplies, materials, leasehold improvements, automobiles, computing and telecommunications equipment and other items of tangible personal property, of every kind owned or leased wherever located and whether or not carried on Seller’s books other than as set forth in Section 2.1(c) (the “ Excluded Tangible Property ”);

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(g)      All Benefit Plans and any assets of such Benefit Plans, including the rights, title and interests of Seller and its Subsidiaries in any (i) assets of a defined benefit or defined contribution retirement plan and (ii) assets of a non-qualified deferred compensation plan;
(h)      All human resources documents related to any Non-Transferring Employee;
(i)      All Tax identification numbers, Tax Returns and Tax refunds;
(j)      All Real Property Leases;
(k)      All cash, cash equivalents on hand or in bank accounts and short term investments;
(l)      All products that are not Business Products;
(m)      The Reon and Vida Processors, other than any Acquired Proprietary Rights and any Acquired Technology related to such products;
(n)      All Inventory; and
(o)      All Proprietary Rights owned or purported to be owned by Seller that are not Acquired Proprietary Rights (including the Seller Licensed Proprietary Rights).
2.3      Assumed Liabilities . Except for the Assumed Liabilities and subject to the Permitted Exceptions, (i) Seller shall transfer the Purchased Assets to Parent Purchaser (or Subsidiary Purchaser, if so designated by Seller) on the Closing Date free and clear of all Liens other than the Permitted Exceptions, and (ii) except as set forth in this Section 2.3, Purchaser shall not, by virtue of its purchase of the Purchased Assets, assume or become responsible for any Liabilities of Seller or any other Person. Upon and subject to the terms and conditions of this Agreement (including the indemnification obligations of Seller set forth in Article VII), and subject to Section 2.4, Parent Purchaser (or Subsidiary Purchaser, if so designated by Purchaser) hereby assumes and agrees to pay, perform, and discharge when due the following (collectively referred to as the “ Assumed Liabilities ”):
(a)      any Liability that arises out of or relates to the ownership, use or exercise of rights by Purchaser or any of its Affiliates of or under the Purchased Assets at any time after the Closing but excluding any Liability that arises out of or relates to the ownership, use or exercise of rights by Seller or any of its Affiliates of or under the Purchased Assets at any time on or prior to the Closing;
(b)      any Liability that arises out of or relates to the sale, marketing, maintenance or support by Purchaser after the Closing of any products developed or produced using the Acquired Proprietary Rights, Acquired Technology, Licensed Technology or Licensed IP or any products incorporating the Acquired Proprietary Rights, Acquired Technology, Licensed Technology or Licensed IP and sold in the ordinary course of business by Purchaser after the Closing, provided that Purchaser shall not assume any Liabilities related to the sale or licensing by Seller of the Business Products after the Closing;
(c)      any Liability under the Assigned Contracts that, by the terms of such Assigned Contracts, arises after the Closing, relates to periods following the Closing and are to be observed, paid, performed or discharged, as the case may be, in each case at any time after the Closing, provided that Purchaser shall not assume any Liability for breaches, defaults or non-performance by Seller under any Assigned Contract occurring prior to the Closing;
(d)      any Liability that arises out of or relates to the use or exercise of rights by Purchaser, its Affiliates or their sublicensees of or under the Licensed IP or Licensed Technology at any time after the Closing;

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(e)      any Liability relating to the maintenance of the Real Property listed on Schedule 2.3(e) that either (i) by the terms of any sublease or assignment of such Real Property, arises after the Closing, relates to periods following the Closing and is to be observed, paid, performed or discharged, as the case may be, in each case at any time after the Closing or (ii) relates to normal wear and tear and may be satisfied by recourse to any security deposits on such Real Property; provided that Purchaser shall not assume any Liability for breaches, defaults or non-performance under any lease or sublease by Seller underlying any of the Real Property occurring prior to Closing or for maintenance of the Real Property with respect to repairs not in the ordinary course of business that do not primarily arise out of or relate to the ownership, use or exercise of rights by Purchaser or any of its Affiliates of or under the Real Property at any time after the Closing;
(f)      (i) all Transferred Employee Liabilities, and (ii) any Liability that arises after the Closing with respect to Transferred Employees (but excluding Liabilities resulting from matters, facts or circumstances, other than length of service, accrued vacation or accrued severance, existing at, or prior to, Closing), including all severance and other amounts payable upon the termination of any Transferred Employee’s employment with Purchaser or any Affiliate of Purchaser or, solely with respect to Automatically Transferred Employees, with Seller or any Affiliate of Seller;
(g)      any Liability of Purchaser incurred in connection with the performance of this Agreement, any Transaction Document or any other document executed in connection with the Acquisition, including expenses or fees incident to or arising out of the negotiation, preparation, approval or authorization of this Agreement and the consummation of the Acquisition, except as otherwise specifically provided in this Agreement, the Transaction Documents or any other document or instrument executed in connection with the Acquisition;
(h)      any Liability for Taxes allocated to Purchaser pursuant to Section 2.8 or Section 5.18; and
(i)      fifty percent (50%) of any Liability of Seller under the Contract set forth on Schedule 2.3(i) arising from or relating to the termination of such Contract in connection with the Closing other than any Liability with respect to the reimbursement of non-recurring engineering fees under such Contract, provided that any Liabilities assumed by Purchaser pursuant to this Section 2.3(i) shall not exceed $100,000.
2.4      Retained Liabilities . Except for the Assumed Liabilities, Purchaser shall not assume, and shall have no liability for, any Liabilities, Taxes or Contracts of Seller, it being understood that Purchaser is expressly disclaiming any express or implied assumption of any Liabilities other than the Assumed Liabilities. Notwithstanding Section 2.3 or any other provision contained herein, and regardless of whether any of the following may be disclosed to Purchaser or whether Purchaser may have actual knowledge of the same, Purchaser shall not assume, and Seller shall pay, perform, and discharge when due and remain exclusively liable for the following (collectively, the “ Retained Liabilities ”):
(a)      any Liability that is not an Assumed Liability;
(b)      any Liability of Seller with respect to the Excluded Assets, excluding any Liability that arises out of or relates to the use or exercise of rights by Purchaser, its Affiliates or their sublicensees of or under the Licensed IP after the Closing;
(c)      any Liability of Seller under, or directly or indirectly relating to, any Environmental Law or Environmental Permit, excluding any Liability arising out of or related to Purchaser’s use or occupation of any Real Property after the Closing Date that is unrelated to matters, facts or circumstances existing at, prior to or as a consequence of Closing;
(d)      any Liability of Seller for Taxes and any Taxes allocated to Seller pursuant to Section 5.18, but excluding any Taxes allocated to Purchaser pursuant to Section 2.8;
(e)      any Liability of Seller, its Affiliates or ERISA Affiliates under the Benefit Plans, other than

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Transferred Employee Liabilities and Liabilities that transfer to Purchaser by operation of law with respect to Transferred Employees;
(f)      any Liability of Seller for claims covered by Seller’s Insurance Policies arising out of any act or omission occurring or state of facts existing prior to the Closing, including workers’ compensation (including claims made in respect of any period during which Seller was a self-insurer), general liability, fire and property insurance policies, and any Liability of Seller for premiums which may be due or are payable under any such insurance policy;
(g)      any Liability of Seller under any Contract of Seller other than the Assigned Contracts;
(h)      any Liability of Seller under any Assigned Contract that arises after the Closing and that (i) arises out of or relates to a breach by Seller of such Contract occurring prior to the Closing or (ii) is attributable to obligations required, by the terms thereof, to be observed, paid, performed or discharged, as the case may be, in each case by Seller at any time on or prior to the Closing;
(i)      other than as set forth in Section 2.3(f), any Liability (including severance payments, damages for wrongful dismissal and all related costs that become payable in connection with an employee’s termination of employment by Seller) incurred on or prior to the Closing which may be owed, or which has otherwise accrued (including all unused vacation time accrued), with respect to any employee or former employee of Seller or any of its Subsidiaries as of the Closing (or which relates to any period prior to Closing) under any policy of Seller or its Subsidiaries, as well as under any other employment, severance, retention or termination policy, Contract or Law in relation to any employee or former employee of Seller or any of its Subsidiaries or arising out of or relating to any employee or former employee grievance with respect to Seller or any of its Subsidiaries including all severance payments, damages for wrongful dismissal and all related costs in respect of the termination by Seller of the employment of any Business Employee who does not become a Transferred Employee;
(j)      any Liability of Seller to any stockholder or Affiliate of Seller, including any Liability (i) relating to dividends, distributions, redemptions, or Security Rights with respect to any security of Seller and (ii) to distribute to any of Seller’s stockholders or otherwise apply all or any part of the Purchase Price;
(k)      other than as set forth in Section 2.3(a) or Section 2.3(b), any Liability arising out of any Claims pending as of the Closing or arising out of any Claims commenced after the Closing and to the extent arising out of, or relating to, any occurrence or event happening prior to the Closing;
(l)      any Liability of Seller incurred in connection with the performance of this Agreement, any Transaction Document or any other document executed in connection with the Acquisition, including expenses or fees incident to or arising out of the negotiation, preparation, approval or authorization of this Agreement and the consummation of the Acquisition, except as otherwise specifically provided in this Agreement, the Transaction Documents or any other document or instrument executed in connection with the Acquisition;
(m)      any Liability for claims for injury, disability, death or workers’ compensation arising from or related to employment in the Business which occurred prior to the Closing Date; and
(n)      any employment-related claims, penalties or assessments in respect of the Business arising out of matters, facts or circumstances which occurred on or prior to the Closing Date, in each case other than as set forth in Section 2.3(f).
2.5      Purchase Price; Payment of Purchase Price .
(a)      The aggregate consideration for the Purchased Assets and Seller’s Business related thereto shall be the assumption of the Assumed Liabilities and Sixty Million Dollars ($60,000,000.00), less the Vacation

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Amount and the Materials Inventory Amount (collectively, the “ Purchase Price ”), subject to adjustment as set forth in this Agreement.
(b)      At Closing, the applicable Purchaser shall pay to (A) the Parent Seller, the Parent Seller’s portion of the Purchase Price (as mutually agreed to by the Purchaser and Seller at the Closing) less (i) any Withholding Taxes deducted pursuant to Section 2.5(c) and (ii) the Indemnification Escrow Amount, and (B) the Subsidiary Seller, the Subsidiary Seller's portion of the Purchase Price (as mutually agreed to by the Purchaser and Seller at the Closing) less any Withholding Taxes deducted pursuant to Section 2.5(c), in each case via wire transfer of immediately available funds to an account of Parent Seller (or the Subsidiary Seller) which shall be specified by Parent Seller to Parent Purchaser no less than three (3) Business Days prior to the Closing. At the Closing, Parent Purchaser shall transfer the Indemnification Escrow Amount via wire transfer of immediately available funds to an account specified by the Escrow Agent.
(c)      Purchaser may deduct from the Purchase Price any Withholding Taxes required to be withheld and paid by Purchaser for the account of Seller with respect to the consideration; provided, however , (a) before making any such deduction or withholding, Purchaser shall give Seller notice of the intention to make such deduction or withholding (such notice, which shall include the authority, basis and method of calculation for the proposed deduction or withholding, shall be given at least a commercially reasonable period of time before such deduction or withholding is required, in order for Seller to obtain reduction of or relief from such deduction or withholding); (b) Purchaser shall cooperate with Seller to the extent reasonable in efforts to obtain reduction of or relief from such deduction or withholding; and (c) Purchaser shall timely remit to the appropriate Governmental Authority any and all amounts so deducted or withheld and timely file all Tax Returns and provide to Seller such information statements and other documents required to be filed or provided under applicable Tax Law. Purchaser shall provide Seller with evidence of payment to the appropriate taxing authorities of the withheld Withholding Taxes. If for any reason the appropriate amount of Withholding Taxes is not withheld from the Purchase Price, such required Withholding Taxes not withheld shall remain Retained Liabilities despite such non-withholding.
(d)      Purchaser shall execute and deliver an Assignment and Assumption Agreement, a form of which is attached hereto as Exhibit F (the “ Assignment and Assumption Agreement ”), evidencing the assignment by Seller of certain of the Purchased Assets and the assumption by Purchaser of the Assumed Liabilities.
2.6      Allocation of Purchase Price . For a period of up to sixty (60) days following the Closing, the Purchaser and Seller agree to use commercially reasonable efforts to jointly prepare in good faith an allocation of the Purchase Price (including any Assumed Liabilities that are required to be treated as part of the Purchase Price for income tax purposes) among the Purchased Assets in accordance with Section 1060 of the Code and Treasury Regulations promulgated thereunder (and any other similar provision of state, local or foreign law, as appropriate) (the “ Purchase Price Allocation ”). If the Purchaser and Seller agree on such Purchase Price Allocation in accordance with the provisions of this Section 2.6, they shall report the Purchase Price Allocation in the filing of all Tax Returns, including IRS Form 8594 and any supplemental or amended Form 8594 (and in the filing of any similar state, local or foreign Tax Returns), and shall take no position and cause their affiliates to take no position inconsistent with the Purchase Price Allocation for Tax purposes, unless otherwise required by applicable Law.
2.7      Closing . The consummation of the purchase and sale of the Purchased Assets in accordance with this Agreement (the “ Closing ”) shall take place at 10:00 a.m., California time, at the offices of DLA Piper LLP (US), 4365 Executive Drive, Suite 1100, San Diego, CA 92121, on or prior to the third (3rd) Business Day after all of the conditions precedent to Closing hereunder shall have been satisfied or waived, or at such other date, time and place as the Parties shall mutually agree upon. The date of the Closing shall be referred to as the “ Closing Date .” The Parties hereby agree to deliver at the Closing such documents, certificates of officers and other instruments as are set forth in Article VI hereof and as may reasonably be required to effect the transfer by Seller of the Purchased Assets pursuant to and as contemplated by this Agreement and to consummate the Acquisition. All events which shall occur at the Closing shall be deemed to occur simultaneously.

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2.8      Transfer Taxes . Other than Canadian Federal Goods and Services Tax (GST), Ontario Harmonized Sales Tax (HST), and Quebec Sales Tax (QST) imposed on the transfer of the Canadian Assets to Purchaser (which shall be paid 100% by Purchaser), each of Purchaser and Seller shall be responsible for 50% of any Transfer Taxes arising out of or in connection with the Acquisition.
ARTICLE III     
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that the statements contained in this Article III are true and correct as of the date hereof, except as specifically disclosed in a document of even date herewith and delivered by Seller to Purchaser referring to the representations and warranties in this Agreement (the “ Seller Disclosure Schedules ”). Seller represents and warrants to Purchaser that the statements contained in this Article III are true and correct as of the Closing Date (as if each such representation and warranty were made on the Closing Date), except as specifically disclosed in the Seller Disclosure Schedules as may supplemented pursuant to Section 5.19 herein; provided, however, that any supplements to such Seller Disclosure Schedules delivered by Seller after the date hereof and prior to Closing shall not modify Seller’s representations and warranties as of the date hereof. The Seller Disclosure Schedules, including any supplements delivered pursuant to Section 5.19 herein, will correspond to the numbered and lettered paragraphs contained in this Article III, and the disclosure in any such specified schedule of the Seller Disclosure Schedules, including as may be supplemented, shall qualify only the corresponding subsection in this Article III (except to the extent that the relevance of such disclosure to other sections of the Seller Disclosure Schedules is readily apparent on its face from the content).
3.1      Organization and Qualification . Parent Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and corporate authority to own, lease and operate the properties of the Business and to carry on the Business as it is now being conducted. Parent Seller is duly qualified to do business, and is in good standing as a foreign corporation, in each jurisdiction where the properties of the Business owned, leased or operated by it or the operation of the Business makes such qualification necessary.
(a)      Subsidiaries . Subsidiary Seller is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all corporate, partnership or other similar powers required to carry on the Business as now conducted, other than such exceptions as have not had and would not be reasonably expected to have a Material Adverse Effect. Subsidiary Seller is duly qualified to do business as a foreign corporation or other foreign legal entity and is in good standing in each jurisdiction where such qualification is necessary, with such exceptions as have not had and would not be reasonably expected to have a Material Adverse Effect. Section 3.1(a) of the Seller Disclosure Schedules sets forth a list of all Subsidiaries of Parent Seller that own any of the Purchased Assets or Proprietary Rights licensed to Purchaser pursuant to the License Agreement as well as the respective jurisdictions of organization of such Subsidiaries and Parent Seller’s (direct or indirect) percentage ownership interest therein. The copies of the organization documents for Subsidiary Seller previously provided by Seller to Purchaser, including any amendments to each of the foregoing are true, complete and correct copies thereof.
(b)      Certificate of Incorporation and Bylaws; Organization Documents . The Certificate of Incorporation and Bylaws are in full force and effect.
3.2      Authority Relative to this Agreement . Seller has all necessary corporate power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, to perform its obligations hereunder and to consummate the Acquisition. The execution, delivery and performance of this Agreement and the other Transaction Documents by Seller and the consummation by Seller of the Acquisition have been duly and validly authorized by all necessary corporate action of the Parent Seller, Subsidiary Seller and the stockholders of Subsidiary Seller, and no other corporate proceedings or action on the part of Parent Seller or any Subsidiary Seller or any holders of the Seller’s capital stock or other security holders are necessary to authorize this Agreement and the other Transaction

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Documents or to consummate the Acquisition (the “ Approval ”). This Agreement and the other Transaction Documents have been or will be duly executed and delivered by Seller and, assuming the due authorization, execution and delivery by the other Parties hereto, each such agreement constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors’ rights generally and to the effect of general principles of equity which may limit the availability of remedies (whether in a proceeding at Law or in equity) (the “ Bankruptcy Exception ”).
3.3      No Conflict . The execution and delivery of this Agreement and the other Transaction Documents by Seller do not, and the performance by Seller of its obligations hereunder and the consummation of the Acquisition and the transactions contemplated by the other Transaction Documents will not: (a) conflict with or violate any provision of the Certificate of Incorporation or Bylaws or any resolutions adopted by the board of directors or stockholders of Seller; (b) assuming that all filings and notifications described in Section 3.4 have been made, conflict with or violate any Law or Order applicable to the Business or by which any of the Purchased Assets, the Seller Licensed Technology (within the scope of the license granted under the License Agreement), the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement), the Licensed IP, the Licensed Technology or the Business is bound or affected; or (c) result in any breach of or constitute a default (or an event which with the giving of notice or lapse of time or both would reasonably be expected to become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (other than a Permitted Exception) on any of the Purchased Assets, the Seller Licensed Technology (to the extent that it would adversely affect the scope of the license granted under the License Agreement), the Seller Licensed Proprietary Rights (to the extent that it would adversely affect the scope of the license granted under the License Agreement), the Assumed Liabilities or the Assigned Contracts pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation.
3.4      Required Filings and Consents . The execution and delivery of this Agreement and the other Transaction Documents by Seller do not, and the performance by Seller of its obligations hereunder and thereunder and the consummation of the Acquisition will not, require (a) the consent of its stockholders or (b) any consent, approval, authorization or permit of, or filing by Seller with or notification by Seller to, any Governmental Authority other than compliance with the applicable requirements of the HSR Act and the rules and regulations thereunder.
3.5      Financial Statements . Statements setting forth Seller’s revenue and direct expenses attributable to the Business for each of Seller’s four fiscal quarters ending April 3, 2011 are set forth on Schedule 3.5 (the “ Financials ”). The revenues and direct expenses set forth in the Financials were recognized in accordance with Seller’s historical revenue recognition and expense policies and practices. Any allocations made by Seller and applicable to the expenses recorded on the Financials have been made and recorded on a systematic and rational basis.
3.6      Absence of Undisclosed Liabilities . Except as set forth in the Financials, there are no advance payments from Seller’s customers that are primarily related to any Purchased Assets that are individually or in the aggregate material to the Business. There are no Seller Debts that constitute an Assumed Liability.
3.7      Absence of Certain Changes or Events . Since April 3, 2011, Seller has conducted the Business in the ordinary course consistent with past practice and there has not been:
(a)      Any change in the Business, or any event, occurrence or circumstance that would reasonably be expected to cause a Material Adverse Effect;
(b)      Any event that would reasonably be expected to prevent or materially delay the performance of Seller’s obligations pursuant to this Agreement or the Transaction Documents and the consummation of the Acquisition;

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(c)      Any change by Seller in its accounting methods, principles or practices directly affecting the Business and the Purchased Assets;
(d)      Except for changes in the ordinary course of the Business consistent with past practice or otherwise required by applicable Laws or the terms of any Contract or Benefit Plans, any material increase in the compensation or benefits of Business Employees or the establishment for the benefit of any Business Employee of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, incentive option, stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any Business Employee;
(e)      Any damage, destruction or other casualty loss (whether or not covered by insurance), condemnation or other taking affecting the Business other than ordinary course wear and tear;
(f)      Any incurrence of any Liability relating to the Business, except for current Liabilities incurred in the ordinary course of the Business consistent with past practice;
(g)      Any transaction with respect to the purchase, acquisition, lease, sale, disposition or transfer of any Purchased Assets or to any material capital expenditure (in each case, other than in the ordinary course of Seller’s Business in accordance with past practice) or creation of any Lien, other than Permitted Exceptions, on any of the Purchased Assets;
(h)      Permitted or allowed the Purchased Assets to be subjected to any Lien, except for Permitted Exceptions;
(i)      Cancellation of any debt with respect to the Business or waiver of any claims or rights of substantial value with respect to the Business;
(j)      Any material modification, termination, waiver or amendment in the terms or provisions of any Assigned Contract or Permit included in the Purchased Assets;
(k)      Any disposition, transfer or grant to any Person of any of Seller’s rights to any Acquired Proprietary Rights, except for grants of non-exclusive licenses in the ordinary course of business of Seller;
(l)      Any material personnel changes or employee turnover with respect to Business Employees;
(m)      Any adverse change in Seller’s relations (in respect of the Business) with its customers, clients and suppliers that would reasonably be expected to cause a Material Adverse Effect;
(n)      Any discharge or satisfaction of any Lien affecting any of the Purchased Assets, other than Permitted Exceptions, or payment of any material Liabilities that are Assumed Liabilities, other than in the ordinary course of the Business consistent with past practice, or failure to pay or discharge when due any Liabilities, the failure to pay or discharge of which has caused or will cause any actual damage or risk of loss to Seller; or
(o)      Any Contract by Seller to do any of the foregoing.
3.8      Properties; Title .
(a)      Section 3.8(a) of the Seller Disclosure Schedules sets forth a complete list and the location of all Real Property. Seller has good and marketable title to the owned Real Property free and clear of all Liens, except Permitted Exceptions. To the Knowledge of Seller, there are no proceedings, claims, or disputes affecting any Real

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Property that might interfere with the current use of Seller’s Real Property. No proceeding is pending or, to Seller’s Knowledge, threatened for the taking, expropriation or condemnation of all or any portion of the Real Property. The Real Property is all of the real or immovable property owned, leased or used by Seller and primarily used in Seller’s Business. No Person other than Seller has any oral or written right to lease, sublease or otherwise occupy any portion of the Real Property.
(b)      Seller possesses a good and valid interest in each leasehold estate relating to the Real Property and described on Section 3.8(b) of the Seller Disclosure Schedules (collectively, the “ Real Property Leases ”), free and clear of any Liens except for the Permitted Exceptions. Each Real Property Lease is in full force and effect. No proceeding is pending or, to Seller’s Knowledge, threatened for the taking or condemnation of all or any portion of the property demised under the Real Property Leases. There is no brokerage commission or finder’s fee due from Seller and unpaid with regard to any of the Real Property Leases, or which will become due at any time in the future with regard to any Real Property Lease.
(c)      The Real Property and the premises demised under the Real Property Leases are sufficient for the current operations of Seller’s Business, and such properties now being used by Seller in its Business, whether leased or owned, are in good working order, repair and operating condition, are without any structural defects other than minimal structural defects which do not affect the value or use of such properties and have been maintained in accordance with generally accepted industry practices.
(d)      Seller has good and marketable title to all Tangible Personal Property. A true, correct and complete list of all Tangible Personal Property with a book value of over $5,000 and the location of such Tangible Personal Property is set forth on Section 3.8(d) of the Seller Disclosure Schedules. All Tangible Personal Property is free and clear of all Liens except for Permitted Exceptions. The Tangible Personal Property now being used by Seller in its Business, whether leased or owned, is in good working order in all material respects, ordinary wear and tear excepted, and has been maintained in accordance with generally accepted industry practices.
3.9      Intellectual Property .
(a)      Definitions . For purposes of this Agreement, the following terms shall be defined as follows:
(i)      “ Copyrights ” means all copyrights, semiconductor topography, integrated circuit topography, mask works and mask work rights, and applications for registration of any of the foregoing, including all rights of authorship, use, publication, publicity, reproduction, distribution, performance, transformation, Moral Rights, rights of ownership of copyrightable works, semiconductor topography works and mask works, and all rights to register and obtain renewals and extensions of registrations, together with all other rights accruing to the extent assignable by reason of international copyright, semiconductor topography and mask work conventions and treaties.
(ii)      “ Issued Patents ” means all issued patents, reissued or reexamined patents, revivals of patents, utility models, certificates of invention, registrations of patents and extensions thereof, regardless of country or formal name, issued by the USPTO, CIPO and any other applicable Governmental Authority, including design patents and industrial design registrations.
(iii)      “ Licensed IP ” means all Proprietary Rights licensed to Seller under Assigned Contracts.
(iv)      “ Licensed Technology ” means the Technology provided to Seller under Assigned Contracts.
(v)      “ Moral Right ” means collectively, rights of attribution and integrity, the right to claim authorship of a work, to object to or prevent any modification of a work, to withdraw from circulation or control the

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publication or distribution of a work, and any similar rights, including rights of paternity and integrity, whether existing under judicial or statutory law of any country or jurisdiction worldwide, or under any treaty or similar legal authority, regardless of whether such right is called or generally referred to as a “moral right.”
(vi)      “ Off-the-Shelf Software ” means any software (other than Public Software) that is generally and widely available to the public through regular commercial distribution channels and is licensed on a non-exclusive basis on standard terms and conditions for a one-time license fee less than $25,000 and that was obtained by Seller in the ordinary course of business.
(vii)      “ Patents ” means the Issued Patents and the Patent Applications.
(viii)      “ Patent Applications ” means all published and all unpublished non-provisional and provisional patent applications, reexamination proceedings, invention disclosures or records of invention filed with any Governmental Authority, applications for certificates of invention and priority rights, in any country and regardless of formal name, including substitutions, continuations, continuations-in-part, divisions, divisionals, renewals, revivals, reissues, re-examinations and extensions thereof and including design patent applications and industrial design patent applications.
(ix)      “ Proprietary Rights ” means any and all of the following in any country: (a)(i) Issued Patents, (ii) Patent Applications, (iii) Trademarks, (iv) domain names, domain name registrations and social networking names and tags, (v) Copyrights, (vi) Trade Secrets, and (vii) all other intellectual property rights.
(x)      “ Public Software ” means any software, libraries or other code that is licensed under or is otherwise subject to Open License Terms. The term “ Open License Terms ” means terms in any license, distribution model or other agreement for software, libraries or other code (including middleware and firmware) (a “ Work ”) which require, as a condition of use, reproduction, modification or distribution of the Work (or any portion thereof) or of any other software, libraries or other code (or a portion of any of the foregoing) in each case that is incorporated into or includes, relies on, linked to or with, derived from in any manner (in whole or in part), or distributed with a Work (collectively, “ Related Software ”), any of the following: (a) the making available of source code regarding the Work or any Related Software; (b) the granting of permission for creating modifications to or derivative works of the Work or any Related Software; (c) the express granting of a royalty-free license to any Person under Proprietary Rights (including Patents) regarding the Work alone, any Related Software alone or the Work or Related Software in combination with other hardware or software; (d) expressly imposes restrictions on future Patent licensing terms; or (e) the express obligation to include disclaimer language, including warranty disclaimers and disclaimers of consequential damages. By means of example only and without limitation, Open License Terms includes any versions of the following agreements, licenses or distribution models: (i) the GNU General Public License (GPL); (ii) Lesser/Library GPL (LGPL); (iii) the Common Development and Distribution License (CDDL); (iv) the Artistic License (including PERL); (v) the Netscape Public License; (vi) the Sun Community Source License (SCSL) or the Sun Industry Standards License (SISL); (vii) the Apache License; (viii) the Common Public License; (ix) the Affero GPL (AGPL); (x) the Berkeley Software Distribution (BSD); (xi) the Mozilla Public License (MPL), or (xii) any licenses that are defined as OSI (Open Source Initiative) licenses as listed on the open source.org website. Software distributed under less restrictive free or open source licensing and distribution models such as those obtained under the MIT, Boost Software License, and the Beer-Ware Public Software licenses or any similar licenses, and any software that is a public domain dedication are also “Public Software.”
(xi)      “ Registered Copyrights ” means all Copyrights for which registrations have been obtained or applications for registration have been filed in the United States Copyright Office, CIPO and any other applicable Governmental Authority.
(xii)      “ Registered Trademarks ” means all Trademarks for which registrations have been obtained or applications for registration have been filed in the United States Patent and Trademark Office (the “ USPTO ”), CIPO and any applicable Governmental Authority.

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(xiii)      “ Seller Licensed Proprietary Rights ” means certain Proprietary Rights that are owned by or purported to be owned by Seller, that are not included in the Acquired Proprietary Rights, and which are used in connection with the conduct of the Business.
(xiv)      “ Seller Licensed Technology ” means Technology (other than the Acquired Technology) that is owned by Seller or purported to be owned by Seller and that is used in connection with the conduct of the Business.
(xv)      “ Seller Proprietary Rights ” means the Acquired Proprietary Rights and the Seller Licensed Proprietary Rights.
(xvi)      “ Seller Source Code ” means the source code of any algorithm, software, middleware, firmware or program (i.e., software code in its original, human readable, un-compiled, form), owned by Seller or purported to be owned by Seller that is necessary for the conduct of and primarily used in or held for use in the Business, including, the source code for each Business Product and Software Program and the source code listed on Schedule 3.9(a)(xvi).
(xvii)      “ Technology ” means all tangible embodiments of Proprietary Rights whether in electronic, written or other media, including tangible embodiments of inventions disclosed in invention disclosures, data (including technical data), directories, software, middleware, firmware, database or programs in both source code and object code forms, technical documentation, specifications (including manufacturing and operations specifications), manufacturing, engineering and technical drawings, designs, schematics, diagrams, bills of material, build instructions, test reports, mask works, integrated circuit topographies, design files, data sheets, reference designs, test vectors, algorithms, application programming interfaces, user interfaces, formulae, test vectors, net lists, photomasks, databases, lab notebooks, manuscripts, records, processes, prototypes, samples, studies, know-how, product trees, logs and access control mechanisms relating thereto.
(xviii)      “ Trade Secrets ” means all information, however documented, that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, including product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, research and development, manufacturing or distribution methods, processes and specifications, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, source code for computer software, databases, algorithms, structures and architectures and related processes, formulae, composition, improvements, devices, discoveries, concepts, and ideas.
(xix)      “ Trademarks ” means all (i) trademarks, service marks, marks, logos, insignias, designs, trade dress, other symbols, trade names and fictitious business names, (ii) applications for registration of trademarks, service marks, marks, logos, insignias, designs, trade dress, other symbols, trade names and fictitious business names, (iii) trademarks, service marks, marks, logos, insignias, designs, trade dress, other symbols, trade names and fictitious business names for which registrations have been obtained and (iv) all goodwill associated with each of the foregoing.
(b)      Disclosure of Certain Acquired Proprietary Rights . Section 3.9(b) of the Seller Disclosure Schedules is a complete and accurate list of the following with respect to the Acquired Proprietary Rights:
(i)      Disclosure of Patents . Section 3.9(b)(i)(A) of the Seller Disclosure Schedules lists all of the Patents owned by or purported to be owned by Seller or any of its Affiliates and included in the Acquired Proprietary Rights (the “ Acquired Patents ”), setting forth in each case the jurisdictions in which Issued Patents have been issued and Patent Applications have been filed and a list of any filings or payment of fees that are due to any Governmental Authority during the ninety (90) day period following the Closing. For the avoidance of doubt, the term “ Acquired Patents ” means and includes (i) the Patents listed in Section 3.9(b)(i)(A) of the Seller Disclosure Schedules

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and all foreign counterparts of such Patents (collectively, the “ Selected Patents ”) and (ii) all siblings (divisional, continuation, continuation-in-part, reexaminations, revivals, utility models, registrations, extensions, and reissues) of the Selected Patents issued by, or applied for with, any Governmental Authority in any country or jurisdiction (“ Additional Transferred Patents ”).
(ii)      Disclosure of Trademarks and Domain Names . Section 3.9(b)(ii)(A) of the Seller Disclosure Schedules lists (A) all of the Registered Trademarks, domain names and domain name registrations, social networking names and tags owned by or purported to be owned by Seller or any of its Affiliates which are included in the Acquired Proprietary Rights, setting forth in each case the jurisdictions in which Registered Trademarks and domain names and domain name registrations have been registered and applications for registration have been filed and a list of any filings or payment of fees that are due to any Governmental Authority during the ninety (90) day period following the Closing and (B) other Trademarks owned by or purported to be owned by Seller and used in connection with any Business Product or in the conduct of the Business. Section 3.9(b)(ii)(B) of the Seller Disclosure Schedules lists all other Trademarks and all domain names licensed from third parties and used in connection with any Business Product or in the conduct of the Business.
(iii)      Disclosure of Registered Copyrights and Software . Section 3.9(b)(iii)(A) of the Seller Disclosure Schedules lists all of the Registered Copyrights owned by or purported to be owned by Seller or any of its Affiliates and included in the Acquired Proprietary Rights, setting forth in each case the jurisdictions in which Copyrights have been registered and applications for copyright registration have been filed and a list of any filings or payment of fees that are due to any Governmental Authority during the ninety (90) day period following the Closing, and Section 3.9(b)(iii)(B) of the Seller Disclosure Schedules lists all Software Programs.
(iv)      Seller has made available to Parent Purchaser correct and complete copies of all registrations and applications for Registered Copyright, Registered Trademarks and Patents included in the Acquired Proprietary Rights, as amended to date, with all correspondence and file wrapper materials related thereto.
(c)      Ownership of and Right to Use Proprietary Rights; No Encumbrances . Seller is the sole and exclusive owner of and has good, valid and marketable title to, free and clear of all Liens other than Permitted Exceptions, all right, title and interest in (i) all of the Seller Licensed Proprietary Rights and the Acquired Proprietary Rights, (ii) all Copyrights and other Proprietary Rights in the Software Programs, other Acquired Technology and the Seller Licensed Technology, and (iii) all Trade Secrets included in the Seller Licensed Proprietary Rights and the Acquired Proprietary Rights. The Acquired Proprietary Rights, the Seller Licensed Proprietary Rights and the Licensed IP constitute all the Proprietary Rights currently used or held for use in the conduct of the Business as currently conducted. Seller has the right and power to grant the licenses and other rights granted pursuant to the License Agreement, and there are no Contracts that would prevent Seller from granting any of the licenses or rights granted pursuant to the License Agreement, or that would prevent Seller from performing its obligations set forth in the License Agreement.
(d)      Agreements Related to Seller Proprietary Rights and Licensed IP . Section 3.9(d) of the Seller Disclosure Schedules is a complete and accurate list of the following types of Contracts:
(i)      Disclosure of Outbound Licenses as to Business Products . Section 3.9(d)(i) of the Seller Disclosure Schedules lists all Contracts pursuant to which Seller granted or is required to grant to any Person any right or license to make, have made, manufacture, use, sell, offer to sell, import, export, or otherwise distribute any Business Product, with or without the right to sublicense the same, other than (A) Contracts listed in Section 3.9(d)(ii) of the Seller Disclosure Schedules and (B) Contracts for the sale of Business Products to customers in the ordinary course of business of Seller consistent with past practices that only grant a non-exclusive express license, an implied license under the first sale doctrine or exhaustion doctrine, or a non-exclusive license to embedded firmware or incorporated software, to such customers as a result of the customer’s purchase of Business Products (the “ Business Product Sale Contract ”).
(ii)      Disclosure of Outbound Patent Licenses . Section 3.9(d)(ii) of the Seller Disclosure

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Schedules lists all Contracts other than Business Product Sale Contracts, pursuant to which Seller granted or is required to grant to any Person any right under or license of, any covenant not to assert/sue or other immunity from suit under or any other rights to any Acquired Patents, with or without the right to sublicense the same.
(iii)      Disclosure of Inbound Patent Licenses . Section 3.9(d)(iii) of the Seller Disclosure Schedules lists all Contracts pursuant to which any Person expressly granted or is expressly required to grant to Seller any right under or license to, any covenant not to assert/sue or other immunity from suit under or any other rights to any Patents that are used or practiced by Seller in connection with the conduct of the Business, with or without the right to sublicense the same, other than implied licenses granted to Seller in connection with Contracts for the sale of products or components or the license of software to Seller in the ordinary course of business.
(iv)      Disclosure of Proprietary Rights Agreements . Section 3.9(d)(iv) of the Seller Disclosure Schedules lists all Contracts (a) pursuant to which Seller granted any Person any license of, any covenant not to assert/sue or other immunity from suit under or any other rights to any Acquired Proprietary Rights (other than Patents), with or without the right to sublicense the same, other than non-exclusive licenses granted by Seller in Business Product Sale Contracts; (b) pursuant to which Seller is granted any license of or any covenant not to assert/sue or other immunity from suit under or other rights to any Proprietary Rights (other than Patents), with or without the right to sublicense the same, (other than licenses granted to Seller for Off-the-Shelf Software) and which Proprietary Rights are (x) used, practiced or otherwise exploited in, and are necessary for, the conduct of the Business, or (y) used in connection with, and necessary for, the developing, using, making or selling Business Products, including Proprietary Rights in Technology necessary for and included in the Business Products; (c) regarding joint development by Seller and a third party of any Business Products, Acquired Technology or Acquired Proprietary Rights; (d) by which Seller grants, granted or is required to grant any ownership right or title to any Acquired Proprietary Rights or by which Seller is assigned or granted an ownership interest in any Acquired Proprietary Rights other than agreements with employees and contractors that assign or grant to Seller ownership of Proprietary Rights developed in the course of providing services by such employees and contractors; (e) under which Seller granted or received an option or right of first refusal or right of first negotiation relating to the acquisition or license of any Acquired Technology and Acquired Proprietary Rights; (f) under which any Person (other than employees and contractors, of Seller) is granted any right to access Seller Source Code or to use Seller Source Code, including to modify or create derivative works of Business Products; (g) pursuant to which Seller has deposited or is required to deposit with an escrow agent or any other Person the Seller Source Code, Software Program or other Acquired Technology; and (h) limiting Seller’s ability to transact business in the field of the Business in any market, field or geographical area or with any Person, or that restricts the use, sale, transfer, delivery or licensing of Acquired Proprietary Rights or Business Products, including any covenant not to compete.
(v)      Royalties . Except for payment for Off-the-Shelf Software, Seller has no obligation to pay any royalties, license fees or other amounts to any Person specifically for the use, license, exploitation, practice, sale or disposition of the Acquired Technology, the Seller Licensed Technology (within the scope of the license granted under the License Agreement) or the Acquired Proprietary Rights or the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement) or the reproducing, making, using, selling, offering for sale, distributing or importing any Business Product.
(vi)      Public Software . Section 3.9(d)(vi)(A) of the Seller Disclosure Schedules is a complete and accurate list of: (i) each Software Program, Business Product, and any other software included in the Acquired Technology, Seller Licensed Technology or incorporated into or used for the development or production of a Business Product (collectively, “ Seller Software ”) by name and version number that is Public Software or that is derived from in any manner (in whole or in part) or that links to, includes, forms any part of, relies on in order to function as intended, is distributed with, incorporates or contains any Public Software; (ii) a list of the Open License Terms applicable to each such Seller Software and Public Software and the Open License Terms or a reference to where the Open License Terms may be found (e.g., a link to a site that has the applicable Open License Terms); (iii) whether such Public Software has been distributed by Seller or only used internally by Seller; (iv) whether Seller has modified any such Public Software; and (v)  how Public Software is linked to or with or used within the Seller Software

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(e.g., dynamically, statically, etc.) and with what portion of the Seller Software the Public Software is linked or used. Except as set forth in Section 3.9(d)(vi)(B) of the Seller Disclosure Schedules, Seller has not distributed any Public Software with, in whole or in part, any Seller Software. Seller is in compliance in all material respects with all Open License Terms applicable to any Public Software licensed to or used by Seller either as incorporated in Seller Software or otherwise in connection with the Business. Seller has not received any written notice in connection with the Business alleging that Seller is in violation or breach of any Open License Terms. Section 3.9(d)(vi)(C) of the Seller Disclosure Schedules sets forth a complete and accurate list of all software used, reproduce, modified or distributed by Seller that is a commercial version of software that is also available as Public Software. To Seller’s Knowledge, (a) none of the inventions claimed in any of the Acquired Patents are practiced by any of the software described in Section 3.9(d)(vi) of the Seller Disclosure Schedule and (b) none of the inventions claimed in any of the Acquired Patents are practiced by or infringed by any other software that is Public Software.
(vii)      No Breach . Seller is not in breach of in any material respect, and to Seller’s Knowledge no other Person is in breach in any material respect of any Contract described in this Section 3.9(d) and since October 20, 2008, Seller has not received or sent any written notice of any such breach.
(e)      No Third Party Rights in Acquired Proprietary Rights .
(i)      No Challenges . To Seller’s Knowledge prior to October 20, 2008 and without respect to Seller’s Knowledge since October 20, 2008, no Person has challenged or threatened to challenge in writing and no Person has asserted or threatened a claim or made a demand in writing, nor is there any pending proceeding, which would adversely affect (a) Seller’s right, title or interest in, to or under the Acquired Technology, the Acquired Proprietary Rights the Seller Licensed Technology (within the scope of the license granted under the License Agreement) or the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement), (b) any Contract, license or and other arrangement under which Seller claims any right, title or interest under the Acquired Proprietary Rights or the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement) or which restricts the use, manufacture, transfer, sale, delivery or licensing by Seller of any Acquired Proprietary Rights, Acquired Technology, any Business Products, the Seller Licensed Technology (within the scope of the license granted under the License Agreement) or the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement), or (c) the validity, enforceability or claim construction of any Acquired Patents.
(ii)      No Restrictions . The Seller is not currently subject to any proceeding or outstanding decree, order, judgment or stipulation restricting the use, transfer or licensing of the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement), Acquired Proprietary Rights by Seller or the use, manufacture, transfer, sale, importation or licensing of any Business Product, Acquired Technology or Seller Licensed Technology (within the scope of the license granted under the License Agreement). There are no restrictions on Seller pursuant to any Contract between Seller and any other Person on the transferability, use, exploitation or ownership of any Acquired Technology, Acquired Proprietary Rights, Seller Licensed Technology (within the scope of the license granted under the License Agreement) or any Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement) or of the right to grant the licenses to the Seller Licensed Technology and the Seller Licensed Proprietary Rights within the scope of the license granted under the License Agreement. To Seller’s Knowledge, there are no requirements imposed by any Governmental Authority that the Seller Licensed Technology (within the scope of the license granted under the License Agreement) or the Acquired Technology be manufactured substantially in any jurisdiction. To Seller’s knowledge, there are no current proceedings or actions pending as of the date hereof before any court or tribunal (including the USPTO or equivalent Governmental Authority anywhere in the world) related to any of the Acquired Proprietary Rights. Seller has not received written notice of any such proceeding or action.
(iii)      No Infringement by Other Persons . To Seller’s Knowledge, no Acquired Proprietary Rights have been infringed or misappropriated by any Person. Since October 20, 2008, Seller has not brought or resolved any action, suit, claim or proceeding for infringement of any Acquired Proprietary Rights or breach of any

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license or other Contract involving the Acquired Proprietary Rights against any Person.
(iv)      Copyrights and Trademarks . Since October 20, 2008, and to Seller’s Knowledge prior to October 20, 2008, all Registered Copyrights, Registered Trademarks and domain names included in the Acquired Proprietary Rights (a) have been duly filed or registered (as applicable) with the applicable Governmental Authority, and maintained, including the timely submission of all necessary filings and payment of fees in accordance with the legal and administrative requirements or the appropriate jurisdictions, (b) have not lapsed, expired or been abandoned and (c) to Seller’s Knowledge, no opposition, re-examination, cancellation, or invalidity proceedings have been commenced related thereto in any jurisdictions which such procedures are available.
(f)      Patents .
(i)      Proper Filing . Since October 20, 2008, and to Seller’s Knowledge prior to October 20, 2008, all Acquired Patents have been duly filed or registered (as applicable) with the applicable Governmental Authority, and maintained, including the timely submission of all necessary filings and fees in accordance with the legal and administrative requirements of the appropriate Governmental Authority, and have not lapsed, expired or been abandoned. To Seller’s knowledge prior to October 20, 2008 and without respect to Seller’s Knowledge since October 20, 2008, Seller and its patent counsel have complied with their duty of candor and disclosure to the USPTO and any relevant foreign patent office with respect to all such Acquired Patents. Seller has not made any and, to Seller’s Knowledge, Seller’s patent counsel has not made any misrepresentations in formal communications with the USPTO and any relevant foreign patent office with the prosecution or maintenance of any such Patent; provided that the foregoing does not guarantee that any Patents will issue from such Patent Applications.
(ii)      No Challenges . Since October 20, 2008, Seller has not received any written notice of any inventorship challenge, interference, opposition proceeding, invalidity or unenforceability with respect to the Acquired Patents and, to Seller’s Knowledge, no predecessor in interest prior to October 20, 2008 received any such written notice. All Issued Patents comprising such Acquired Patents are, to Seller’s Knowledge, valid and enforceable. Since October 20, 2008, all maintenance and annuity fees have been fully and timely paid, and all fees paid, during prosecution and after issuance of any such Acquired Patent have been paid in the correct amounts.
(g)      No Infringement by Seller . To Seller’s Knowledge, the Business Products, the Acquired Technology, the Seller Licensed Technology (as used by Seller in the conduct of the Business) and the conduct of the Business (including, the using, making or selling of Business Products) do not infringe any Patent rights of any Person. Since October 20, 2008, and to Seller’s Knowledge prior to October 20, 2008, the Acquired Technology, the Seller Licensed Technology (as used by Seller in the conduct of the Business) and the conduct of the Business do not infringe or misappropriate any Proprietary Rights of any Person (other than Patent rights) or constitute unfair competition, an unfair trade practice or unlawful use of any Proprietary Rights of any Person. Since October 20, 2008, no Person has asserted in writing or to Seller’s knowledge threatened a claim that any Business Product, the Seller Licensed Technology or the Acquired Technology (or the Proprietary Rights embodied in any the foregoing) or the Business infringes (directly or indirectly) or misappropriates the Proprietary Rights of such Person. Since October 20, 2008, no Person has notified Seller in writing that Seller requires a license to any of Person’s Proprietary Rights and Seller has not received any unsolicited written offer to license (or any other notice of) any Person’s Proprietary Rights, in either case, relating to the Business Products, the Acquired Technology, the Seller Licensed Technology (as used by Seller in the conduct of the Business), or the conduct of the Business. Seller has not obtained any non-infringement, freedom to operate, clearances or invalidity opinions from counsel (inside or outside counsel) regarding the Business or any Business Product. Seller has identified to Parent Purchaser each such opinion done by Seller or its counsel.
(h)      Trademarks . Since October 20, 2008, Seller has taken all commercially reasonable measures to protect and maintain the Trademarks included in the Acquired Proprietary Rights.
(i)      Trade Secrets . Since October 20, 2008, Seller has taken all commercially reasonable measures to protect and maintain the confidentiality of the material Trade Secrets currently included in the Acquired Proprietary

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Rights. Seller has not disclosed any material Trade Secrets in which Seller has (or purports to have) any right, title or interest (or any tangible embodiment thereof) and that are included in the Acquired Proprietary Rights to any Person without having the recipient thereof execute a written agreement regarding the non-disclosure and non-use thereof, except as permitted by such agreement. No Person that has received any Trade Secrets included in the Acquired Proprietary Rights from Seller has refused to provide to Seller, after Seller’s formal written request therefore, a certificate of return or destruction of any documents or materials containing such Trade Secrets.
(j)      Employee and Contractor Agreements . Except as set forth in Schedule 3.9(j) :
(i)      Employees . Since October 20, 2008, all current and former employees of Seller, who are or were involved in, or who have contributed to, the creation or development of any Acquired Proprietary Rights, Acquired Technology or any Business Product have executed and delivered to Seller a written agreement (containing no exceptions to or exclusions from the scope of its coverage applicable to the Business Products, the Acquired Proprietary Rights) regarding the protection of proprietary information and, subject to applicable Laws, the irrevocable assignment to Seller of any Proprietary Rights arising from services performed by such Persons. To Seller’s Knowledge, no such employee is in violation in any material respect of any material term of any such agreement.
(ii)      Contractors . Since October 20, 2008, all current and former consultants and independent contractors to Seller who have contributed to the creation or development of any Acquired Proprietary Rights, Acquired Technology or any Business Product have executed and delivered to the applicable Seller a written agreement (containing no exceptions to or exclusions from the scope of its coverage applicable to the Business Products, the Acquired Proprietary Rights) regarding the protection of proprietary information and, subject to applicable Laws, the irrevocable assignment to Seller of any Proprietary Rights arising from services performed by such Persons. Section 3.9(j)(ii) of the Seller Disclosure Schedule sets forth a complete and accurate list of consultants and independent contractors used by Seller since October 20,2008 in connection with the conception, reduction to practice, creation, derivation, development, or making of the Acquired Proprietary Rights, Acquired Technology or any Business Product. To Seller’s Knowledge, no current or former consultant or independent contractor of Seller is in violation in any material respect of any material term of any such agreement.
(iii)      Moral Rights . Since October 20, 2008, all authors retained by Seller of any works of authorship in the Acquired Proprietary Rights, Acquired Technology and Business Products, whether as an employee, contractor or otherwise have irrevocably and in writing expressly waived their Moral Rights in such Acquired Proprietary Rights and have agreed to a covenant not to assert their Moral Rights, in each case, to the extent permitted by applicable Law or such authors prepared such works in jurisdictions that do not recognize Moral Rights.
(k)      No Release of Source Code . Since October 20, 2008, Seller has not, and to Seller’s Knowledge prior to the October 20, 2008 no other Person has, disclosed or delivered to any Person who is not an employee or contractor of Seller or such other Person, or permitted the disclosure or delivery to any escrow agent or other Person who is not an employee or contractor of Seller or such other Person, of the Seller Source Code. Since October 20, 2008, no event has occurred that will require the disclosure or delivery to any Person who is not an employee or contractor of Seller of the Seller Source Code.
(l)      No Viruses in Business Products . Except with respect to demonstration or trial copies, to Seller’s Knowledge, no Business Product, Acquired Technology or Seller Licensed Technology (as currently used in the Business or licensed within the scope of the license granted under the License Agreement) currently contains any material “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other software routines or hardware components designed to permit unauthorized access or to disable or erase software, hardware or data without the consent of the user.
(m)      Business Products .
(i)      Each Business Product manufactured and sold after October 20, 2008, conforms and

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complies in all material respects with the terms and requirements of any applicable warranty, the agreement related to such Business Product and with all applicable Laws.
(ii)      Since October 20, 2008, a no customer or other Person has asserted in writing or threatened in writing to assert any claim against Seller under or based upon any other warranty for a Business Product.
(iii)      Each Business Product manufactured and sold after October 20, 2008 is free of any material design defect or other material defect or deficiency at the time it was sold or otherwise made available, other than any immaterial bug that would not adversely affect in any material respect such Business Product.
(iv)      All installation services, programming services, repair services, maintenance services, support services, training services, upgrade services and other services that have been performed by Seller in connection with the conduct of the Business since October 20, 2008 were performed in all material respects in accordance with the terms and requirements of all applicable warranties and the agreement related to such services and with all applicable Laws.
(v)      To Seller’s Knowledge, since October 20, 2008, no product liability claims have been threatened, alleged or filed against Seller related to any Business Product.
(vi)      Those certain electronic databases titled “td.tar.gz,” “gd.tar.gz” and “sland.tar.gz.” provided by Seller to Parent Purchaser on August 30, 2011 included a listing as of such date of the bugs, defects and errors in the Business Products or Software Programs logged in Seller’s standard database for tracking bugs, defects and errors.
(n)      No Standards Bodies . The Seller is not and has never been, and to Seller’s Knowledge no previous owner of the Acquired Proprietary Rights was, a member or promoter of, or a contributor to or made any commitments or agreements regarding any patent pool, industry standards body, standard setting organization, industry or other trade association or similar organization, in each case that requires or obligates Seller to grant or offer to any other Person any license or right to the Acquired Proprietary Rights.
(o)      No Government Funding . No funding, facilities or personnel of any Governmental Authority, including any university or college, were used to develop or create, in whole or in part, any Acquired Proprietary Rights or any Business Product.
(p)      No Limits on Purchaser’s Rights . The execution, delivery or performance of this Agreement or any ancillary agreement contemplated hereby, the consummation of the transactions contemplated by this Agreement or such ancillary agreements and the satisfaction of any closing condition will not contravene, conflict with or result in any termination of or new or additional limitations on the Purchaser’s right, title or interest in or to the Acquired Proprietary Rights.
(q)      Privacy . Seller has complied with all Laws regarding the collection, storage, use and distribution of any personal information collected or received by Seller in connection with the conduct of the Business.
3.10      Contracts .
(a)      Section 3.10(a) of the Seller Disclosure Schedules hereto contains a true and accurate list of all Contracts pursuant to which Seller enjoys any right or benefit or undertakes any obligation (i) that is necessary for the conduct of and (ii) that primarily relates to, is used or held for use in the Business, or is primarily related to the Acquired Proprietary Rights, the Assumed Liabilities or the Purchased Assets. Each of the Assigned Contracts is (assuming due authorization and execution by the other party or parties hereto) valid, binding and in full force and effect and enforceable by Seller in accordance with its terms, except as enforcement may be limited by general equitable

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principles and the exercise of judicial discretion in accordance with such principles.
(b)      No consents are necessary for the effective assignment to and assumption by the Purchaser of any of the Assigned Contracts or the transactions contemplated hereby (the “ Required Contract Consents ”).
(c)      There are no unresolved disputes between Seller and another contracting party to an Assigned Contract, and no event which would reasonably be expected to result in (i) a request for a material accommodation or concession with respect to any term of an Assigned Contract or (ii) a material impairment of the relationships between Seller with the other contracting party to an Assigned Contract.  
(d)      Section 3.10(d) of the Seller Disclosure Schedules hereto contains a true and accurate list of any Assigned Contract (i) that, to Seller’s Knowledge, has or would reasonably be expected to have the effect of prohibiting or impairing the conduct of the Business by Seller or Purchaser, (ii) limiting the freedom of Seller to engage in any line of business or to compete with any other Person, (iii) under which Seller is restricted from selling, licensing, manufacturing or otherwise distributing any of its technology or products to, or providing services to, customers or potential customers or any class of customers, in any geographic area (iv) that may be terminable as a result of Seller’s status as a competitor of any party to such contract or (v) that any Affiliate of Seller is a party to (in respect of the Business).
(e)      Section 3.10(e) of the Seller Disclosure Schedules hereto contains a true and accurate list of any Assigned Contract providing for an agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the Liabilities of any other Person other than customary customer agreements made in the ordinary course of the Business.
(f)      Section 3.10(f) of the Seller Disclosure Schedules hereto contains a true and accurate list of any Assigned Contract providing for a joint venture or partnership with any other Person.
(g)      Seller has performed all of the obligations required to be performed by it and is entitled to all benefits under, and, to Seller’s Knowledge, is not alleged to be in default in respect of any Assigned Contract. Each of the Assigned Contracts is valid and binding and in full force and effect, and except as disclosed on Section 3.10(g) of the Seller Disclosure Schedules, there exists no default or event of default or event, occurrence, condition or act, with respect to Seller, or to Seller’s Knowledge, with respect to the other contracting party, which, with the giving of notice, the lapse of the time or both would constitute a default or event of default under any Assigned Contract. Seller has not received written notice of any intent to effect, the cancellation, modification or termination of any Assigned Contract. True, correct and complete copies of all Assigned Contracts have been delivered to Purchaser.
(h)      All license fees due and payable pursuant to the terms of the Assigned Contracts have been paid by Seller.

3.11      Permits . Seller has obtained all Permits and all Environmental Permits of, and has made all required registrations and filings with, any Governmental Authorities that are necessary for the conduct of the Business as it is now being conducted. All Permits and Environmental Permits that are necessary for the conduct of and that are primarily used or primarily held for use in connection with the Business are listed on Section 3.11 of the Seller Disclosure Schedules and are in full force and effect. None of such Permits or Environmental Permits has been suspended or cancelled nor is any such suspension or cancellation pending or, to Seller’s Knowledge, threatened. None of such Permits or Environmental Permits will, pursuant to their terms, terminate by reason of the Acquisition. All of such Permits and Environmental Permits are assignable to Purchaser and, based on applicable of Law as of the date of this Agreement and assuming the conduct of the Business as currently conducted, renewable by their terms or in the ordinary course of business without the need for Seller or Purchaser to comply with any special rules or procedures, agree to any materially different terms or conditions or pay any amounts other than routine filing fees. Seller is not in conflict

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in any respect with or in default or violation of, in any material respect, any such Permits or Environmental Permits. Section 3.11 of the Seller Disclosure Schedules sets forth, as of the date of this Agreement, all actions, proceedings, investigations or surveys pending or, to Seller’s Knowledge, threatened against Seller that would reasonably be expected to result in the suspension or cancellation of any such Permit or Environmental Permit.
3.12      Compliance with Laws . Since October 20, 2008, Seller is not in conflict in any respect with or in default or violation of any: (a) order, judgment, preliminary or permanent injunction, temporary restraining order, award, citation, decree, consent decree or writ (collectively, “ Orders ”) of any Governmental Authority affect or relating to the Purchased Assets, Seller Licensed Technology (within the scope of the license granted under the License Agreement), the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement), the Licensed IP, the Licensed Technology or the Business; or (b) Laws, affecting or relating to the Purchased Assets, Seller Licensed Technology (within the scope of the license granted under the License Agreement), the Seller Licensed Proprietary Rights (within the scope of the license granted under the License Agreement), the Licensed IP, the Licensed Technology or the Business. Except as set forth on Section 3.12 of the Seller Disclosure Schedules, Seller has not received from any Governmental Authority any notification with respect to possible conflicts, defaults or violations of Laws affecting or relating to the Purchased Assets or the Business.
3.13      Claims and Proceedings .
(a)      There is no outstanding Order of any Governmental Authority against or involving Seller (in respect of the Business), the Purchased Assets, the Assumed Liabilities or the Business. There is no action, suit, grievance, claim or counterclaim or legal, administrative or arbitral proceeding or investigation (collectively, “ Claim ”) (whether or not the defense thereof or Liabilities in respect thereof are covered by insurance), pending or, to Seller’s Knowledge, threatened against or involving Seller (in respect of the Business), the Purchased Assets, the Assumed Liabilities or the Business. To Seller’s Knowledge, on the date hereof, no fact, event or circumstance exists that would give rise to any Claim that, if pending or threatened on the date hereof or on the Closing Date, would reasonably be expected to have a Material Adverse Effect in respect of the Business.
(b)      Neither Seller nor any of Seller’s Affiliates have assigned, sold, conveyed or transferred to any Person any rights to sue for or assert claims against Purchaser or its Affiliates.
3.14      Employee Matters .
(a)      Section 3.14(a) of the Seller Disclosure Schedules contains a list of the names of all current Business Employees, independent contractors and consultants (who work primarily in the Business or are necessary for the current conduct of the Business by Seller) together with each Business Employee’s (i) employment status (i.e., full time, part time, temporary, casual, seasonal, etc.), (ii) employment authorization or work visa status, to the extent required for employment authorization and/or verification purposes in the applicable jurisdiction and permitted by applicable Laws, (iii) date of hire and date of service, if different, (iv) current wages, salaries or hourly rate of pay, benefits (both statutory and non-statutory), vacation entitlement, commissions and bonus (whether monetary or otherwise), (v) other material compensation paid or payable since the beginning of the most recently completed fiscal year, (vi) for any benefit that takes into account length of service to Seller and its Subsidiaries, the date upon which each such term of employment with Parent Seller or any Subsidiary became effective, and (vii) jurisdiction of current employment. Seller has made available to Purchaser copies of all written agreements and/or forms of agreements between Seller or any of its Subsidiaries, on the one hand, and a Business Employee, independent contractor and consultant (providing services to the Business), on the other hand. Subject to the requirements of applicable employment and data privacy Laws, Section 3.14(a) of the Seller Disclosure Schedules contains a description of all existing severance, accrued vacation obligations or retiree benefits of any Business Employee and a listing of any Business Employee on leave, together with the type of leave and their expected date of return to work, if known. Except as set forth on Section 3.14(a) of the Seller Disclosure Schedules, the employment or consulting arrangement of all Business Employees employed in the United States is terminable at will.

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(b)      (i) Seller is not a party to any Contract with any labor organization, trade union or other representative of its Business Employees and no labor organization, trade union or affiliated bargaining agent hold bargaining rights with respect to the any of the Business Employees by way of certification, interim certification, voluntary recognition, or succession rights, or has applied or, to Seller’s Knowledge, threatened to apply to be certified as the bargaining agent of the Business Employees in the past three (3) years; (ii) there is no unfair labor practice charge, application or complaint pending or, to Seller’s Knowledge, threatened against Seller (with respect to Business Employees); (iii) Seller has not experienced any labor dispute, strike, slowdown, work stoppage or similar labor controversy with respect to Business Employees within the past three (3) years; (iv) no representation question has been raised respecting Business Employees working within the past three (3) years, nor, to Seller’s Knowledge, are there any campaigns being conducted to solicit authorization from Business Employees to be represented by any labor organization and no trade union has applied to have the Seller declared a common or related employer pursuant to the Labour Relations Act (Ontario) or any similar legislation in any jurisdiction in which Seller carries on business; (v) no Claim before any Governmental Authority brought by or on behalf of any Business Employee, labor organization or other representative of Business Employees, is pending or, to Seller’s Knowledge, threatened against Seller; (vi) Seller is not a party to, or, otherwise bound by, any Order relating to Business Employees or employment practices with respect to any Business Employees; and (vii) Seller has paid (or will have paid within the earlier of 20 days following Closing or such period of time as otherwise required by applicable law) in full to all of its Business Employees all wages, salaries, commissions, bonuses, benefits and other compensation due and payable to such Business Employees and are accurately reflected in the Books and Records.
(c)      With respect to Business Employees, Seller is in material compliance with all Laws respecting terms and conditions of employment including applicant and employee background checking, immigration laws, discrimination laws, human rights, verification of employment eligibility, employee leave laws, classification of workers as employees and independent contractors, pay equity, wage and hour laws, and occupational safety and health laws. There are no proceedings pending or, to Seller’s Knowledge, reasonably expected or threatened, between Seller, on the one hand, and any or all of its Business Employees, on the other hand, including to any claims for actual or alleged harassment or discrimination based on race, national origin, age, sex, sexual orientation, religion, disability, or any applicable enumerated ground under the relevant human rights legislation or similar tortious conduct, breach of contract, wrongful termination, defamation, intentional or negligent infliction of emotional distress, interference with contract or interference with actual or prospective economic disadvantage. To Seller’s Knowledge, no Business Employee has any present intention to terminate employment with Seller, other than in connection with the transactions contemplated by this Agreement.
(d)      To Seller’s Knowledge, no Business Employee has, within the three (3) years preceding the Closing Date, been convicted of or had a civil judgment rendered against him or her for commission of a fraud or criminal offense in connection with obtaining, attempting to obtain or performing a public (federal, state, provincial or local) contract or subcontract, violating federal, provincial or state antitrust statutes relating to the submission of offers, or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property, or is presently indicted for or otherwise criminally or civilly charged by a Governmental Authority with commission of any of the above offenses.
(e)      Section 3.14(e) of the Seller Disclosure Schedules discloses in respect of each Business Employee who is employed in Canada pursuant to a work permit the expiry date of such work permit and whether Seller has made any attempts to renew such work permit.
(f)      Each independent contractor who is disclosed on Schedule 3.14(a) and who will become an employee or independent contractor of Purchaser in connection with the Acquisition has been properly classified by the Seller as an independent contractor and Seller has not received any notice from any Governmental Authority disputing such classification.
(g)      To Seller’s Knowledge, there are no outstanding assessments, penalties, fines, liens, charges, surcharges, or other amounts due or owing pursuant to any workplace safety and insurance legislation in respect of

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the Business and Seller has not been reassessed in any material respect under such legislation during the past three (3) years and, to Seller’s Knowledge, no audit of the Business is currently being performed pursuant to any applicable workplace safety and insurance legislation. There are no claims or potential claims which may materially adversely affect Seller’s accident cost experience in respect of the Business.
(h)      Seller has provided to the Purchaser all orders and inspection reports under applicable occupational health and safety legislation (“ OHSA ”) relating to the Business together with the minutes of the Seller’s joint health and safety committee meetings for the past three (3) years. There are no charges pending under OHSA in respect of the Business. Seller has complied in all material respects with any orders issued under OHSA in respect of the Business and there are no appeals of any orders under OHSA currently outstanding.
3.15      Employee Benefits .
(a)      Section 3.15(a) of the Seller Disclosure Schedules contains a complete and accurate list of each Benefit Plan (collectively, the “ Seller Employee Plans ”).
(b)      Subject to applicable employment and data privacy Laws, Seller has furnished or made available to Purchaser true and complete copies of all material documents embodying each of the Seller Employee Plans (including plan summaries and employee handbooks). With respect to each Seller Employee Plan which is subject to ERISA reporting requirements. Seller has provided a copy of the Form 5500 report filed for the most recent plan year for which a filing was required. Seller has furnished Purchaser with the most recent IRS determination or opinion letter issued with respect to each such Seller Employee Plan, and, to the Knowledge of Seller, nothing has occurred since the issuance of each such letter which would reasonably be expected to cause the loss of the tax-qualified status of any Seller Employee Plan subject to Code Section 401(a).
(c)      Compliance . Except as would not reasonably be expected to result in material Liability to Purchaser, (i) each Seller Employee Plan (in respect of the Business) has been administered in accordance with its terms and in compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), and Seller and each subsidiary or ERISA Affiliate have performed all material obligations required to be performed by them under, are not in material respect in default under or violation of, and have no Knowledge of any material default or violation by any other party to, any of the Seller Employee Plans; (ii)  none of the Seller Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person; and (iii) there has been no amendment to, written interpretation or announcement by Seller, any subsidiary or ERISA Affiliate which would materially increase the expense of maintaining any Seller Employee Plan with respect to Business Employees above the level of expense incurred with respect to Business Employees for the most recent fiscal year included in Seller’s financial statements.
(d)      No Title IV or Multiemployer Plan . Except as would not reasonably be expected to result in material Liability to Purchaser, neither Seller nor any Subsidiary or any ERISA Affiliate has ever maintained, established, sponsored, participated in, contributed to, or is obligated to contribute to, or otherwise incurred any obligation or liability (including any contingent liability) under any Multiemployer Plan or to any Pension Plan subject to Title IV of ERISA or Section 412 of the Code. Except as would not reasonably be expected to result in material Liability to Purchaser, neither Seller nor any ERISA Affiliate has any actual or potential withdrawal liability (including any contingent liability) for any complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA) from any Multiemployer Plan.
(e)      COBRA, FMLA, HIPAA, Cancer Rights . Except as would not reasonably be expected to result in material Liability to Purchaser, with respect to each Seller Employee Plan, Seller and each of its United States subsidiaries have complied with (i) the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”) and the regulations thereunder or any state law governing health care coverage extension or continuation; (ii) the applicable requirements of the Family and Medical Leave Act of 1993 and the regulations thereunder; (iii) the applicable requirements of the Health Insurance Portability and

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Accountability Act of 1996 (“ HIPAA ”); and (iv) the applicable requirements of the Cancer Rights Act of 1998. Except as would not reasonably be expected to result in Liability to Purchaser, Seller has no material unsatisfied obligations to any Business Employees or qualified beneficiaries of Business Employees pursuant to COBRA, HIPAA, or any state law governing health care coverage extension or continuation.
(f)      Effect of Acquisition . The consummation of the transactions contemplated by this Agreement will not (i) entitle any Business Employee to severance benefits or any other payment (including unemployment compensation, golden parachute, bonus or benefits under any Seller Employee Plan), except as expressly provided in this Agreement or (ii) accelerate the time of payment or vesting of any such benefits or increase the amount of compensation due any such Business Employee. No benefit payable or which may become payable by Seller or any ERISA Affiliate pursuant to any Seller Employee Plan or as a result of or arising under this Agreement shall constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code) which is subject to the imposition of an excise Tax under Section 4999 of the Code or the deduction for which would be disallowed by reason of Section 280G of the Code.
(g)      Section 409A Compliance . No Seller Employee Plan would require Purchaser or any Affiliate of Purchaser to gross up a payment to any Business Employee for tax related payments or cause a penalty tax under Section 409A of the Code.
(h)      Foreign Plans .     With respect to each Seller Employee Plan which is subject to the laws of any jurisdiction outside of the United States (the “ Foreign Plans ”), except as would not reasonably be expected to result in material Liability to Purchaser: (i) such Foreign Plan has been maintained in all material respects in accordance with all applicable requirements and all applicable Laws, (ii) if intended to qualify for special tax treatment, such Foreign Plan meets all requirements for such treatment, (iii) no Foreign Plan is a “registered pension plan” as such term is defined in the Income Tax Act (Canada); and (iv) no Foreign Plan provides for retiree benefits or benefits to the spouse or dependent of a retiree.
3.16      No Finder . Neither Seller nor any Person acting on behalf of Seller has agreed to pay to any broker, finder, investment banker or any other Person, a brokerage, finder’s or other fee or commission in connection with this Agreement or any matter related hereto, nor has any broker, finder, investment banker or any other Person taken any action on which a Claim for any such payment would be based.
3.17      Affiliate Transactions . No Assumed Liability arises out of any Contract or Liability between Seller, on the one hand, and any stockholder (to Seller’s Knowledge), officer, director or employee (to Seller’s Knowledge) thereof, on the other hand, including any contract or arrangement providing for the furnishing of services to or by, providing for rental of Real Property or Tangible Personal Property (including Seller Proprietary Rights) to or from, or otherwise requiring payments to or from Seller, or any Affiliate thereof.
3.18      Environmental Matters . Seller has not released, emitted, buried or otherwise disposed of Regulated Substances on the Real Property. To Seller’s Knowledge, no one else has released, emitted, buried or otherwise disposed of Regulated Substances on any Real Property. Except as set forth on Section 3.18 of the Seller Disclosure Schedules, to Seller’s Knowledge, no storage tanks, underground or otherwise, are or have been located on any Real Property. Seller has complied with all applicable Environmental Laws relating to its operations or Real Property. Seller (in respect of the Business) has not received any written notice, demand, Claim or information request indicating that Seller is in violation of, or is potentially liable under any Environmental Law. No Real Property is listed on any regulatory list of contaminated properties, including but not limited to the National Priorities List promulgated pursuant to CERCLA, the CERCLIS or any federal, state, provincial or local counterpart. Seller (in respect of the Business) has no existing or potential Liability under any Environmental Laws. No material environmental approvals, clearances or consents are required under applicable Law from any Governmental Authority or authority in order for Purchaser and Seller to consummate the Acquisition or for Purchaser to continue the Business after the Closing. Except as set forth on Section 3.18 of the Seller Disclosure Schedules, Seller (in respect of the Business) is not required to have, nor does it have, any Permits issued under any Environmental Laws. Seller has disclosed, prior to the date of this

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Agreement, all material reports, assessments, remedial action plans or other similar material documents relating to any environmental condition, whether or not material, of any Real Property or operations.
3.19      Insurance . Section 3.19 of the Seller Disclosure Schedules sets forth a list of the Insurance Policies and a true and complete list of material claims made in respect of Insurance Policies during the three (3) years prior to the date hereof. Seller has not received written notice of any claim pending under any of such Insurance Policies as to which coverage has been questioned, denied or disputed by the underwriters of such Insurance Policies. Seller has timely filed claims under the Insurance Policies with respect to all material matters and occurrences for which it believes it has coverage. All premiums due under all Insurance Policies have been paid and Seller is in compliance with the terms and conditions of all such Insurance Policies. All Insurance Policies are in full force and effect. Seller has no Knowledge of any threatened termination of, premium increase with respect to, or uncompleted requirements under, any Insurance Policy. Seller has received no written notice of any threatened termination of any Insurance Policy. No premiums are or will be payable by Purchaser under the Insurance Policies after the Closing in respect of insurance provided for periods prior to the Closing Date. All Purchased Assets are insured under such Insurance Policies in amounts and against risks usually insured against by Persons operating businesses similar to the Business.
3.20      No Significant Items Excluded . Except for Assets (other than Proprietary Rights owned by Seller) necessary for and primarily used in Seller’s manufacture and support of Reon and Vida Processors and any third party intellectual property licenses primarily used in the design of such products, the Purchased Assets, the Licensed IP and the Licensed Technology include all Assets that are (i) primarily used or held for use in the Business and (ii) necessary for Purchaser and its Subsidiaries to conduct the Business in substantially the same manner in which the Business has been conducted by Seller immediately prior to the date of this Agreement. Except for Purchaser under this Agreement, Seller is not a party to any Contract pursuant to which a Person other than Purchaser may purchase or acquire from Seller any of the Purchased Assets other than in the ordinary course of business .
3.21      Taxes and Tax Returns .
(a)      Seller has timely filed or timely requested extensions to file all Tax Returns related to the Purchased Assets which are currently due or, if not yet due, will timely file or timely request extensions to file all such Tax Returns required to be filed by it for all taxable periods ending on or before the Closing Date and all such Tax Returns are, or will be when filed, true, correct and complete in all material respects. Copies of all such Tax Returns requested by Purchaser for taxable years that remain open under the applicable statute of limitations have been made available to Purchaser;
(b)      Seller has paid to the appropriate Governmental Authority, or, if payment is not yet due, will pay, to the appropriate Governmental Authority all Taxes related to the Purchased Assets shown as due on the Tax Returns referred to in Section 3.21(a);
(c)      No extension of time has been requested or granted for Seller to file any Tax Return related to the Purchased Assets that has not yet been filed or to pay any Tax related to the Purchased Assets that has not yet been paid;
(d)      Seller has not received notice in writing of a determination or reassessment by a Governmental Authority that Taxes are owed by Seller related to the Purchased Assets (such determination to be referred to as a “ Tax Deficiency ”) that has not been resolved and, to Seller’s Knowledge, no Tax Deficiency related to the Purchased Assets is proposed or threatened;
(e)      All Tax Deficiencies related to the Purchased Assets have been paid or finally settled and all amounts determined by settlement to be owed have been paid;
(f)      Except in the case of a Lien for Taxes not yet due and payable, there is no unpaid Tax that

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constitutes a Lien upon any of the Purchased Assets;
(g)      There are no presently outstanding waivers or extensions, or requests for waiver, or extension of the time relating to the Purchased Assets within which a Tax Deficiency may be asserted or assessed;
(h)      There are no pending or, to Seller’s Knowledge, threatened, Tax Audits of Seller regarding the Purchased Assets;
(i)      There are no requests for rulings in respect of any Tax pending between Seller and any Governmental Authority relating to the Purchased Assets;
(j)      None of the Purchased Assets owned by Subsidiary Seller constitutes a “United States Real Property Interest” within the meaning of Section 897(c)(1) of the Code;
(k)      Subsidiary Seller has collected or self-assessed and remitted to the appropriate Governmental Authority all sales, harmonized sales, goods and services, and use or similar Taxes required to have been collected or self-assessed;
(l)      Subsidiary Seller is registered for goods and services and tax/harmonized sales tax purposes under Part IX of the Excise Tax Act (Canada) and its GST/HST registration number is #888536687RT0001; and
(m)      Seller has, with respect to the Business, withheld from each payment made to other persons the amount of all Taxes and other deductions required to be withheld and has remitted such amounts when due, in the form required under appropriate laws, or made adequate provision for the payment of such amounts, to the appropriate Governmental Authority.  
3.22      Solvency . No insolvency proceeding of any character, including bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting Seller (in respect of the Business, other than as a creditor) or any of the Seller Proprietary Rights or other Purchased Assets are pending or are being contemplated by Seller, or, to the Knowledge of Seller, are being threatened against Seller by any other Person, and Seller has not made any assignment for the benefit of creditors or taken any action in contemplation of which that would constitute the basis for the institution of such insolvency proceedings. Immediately after giving effect to the consummation of the Acquisition: (a) Seller will be able to pay the Retained Liabilities as they become due; (b) the Excluded Assets (calculated at fair market value) will exceed the Retained Liabilities; and (c) taking into account all pending litigation, final judgments against Seller in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, Seller will be unable to satisfy any such judgments in accordance with their terms (taking into account the probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). Subsidiary Seller is not an insolvent person within the meaning of the Bankruptcy and Insolvency Act (Canada) and will not be an insolvent person as a result of the Closing.
3.23      Certain Business Practices . No Business Employee has, in respect of the Business: (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended or any other Law; or (iii) made any other unlawful payment.
3.24      Disclosure . True, complete and accurate copies of all Contracts and all other documents listed in the Seller Disclosure Schedule were made available to Purchaser or its Representatives.
3.25      No Suspension or Debarment . Neither Seller nor any of its Affiliates are presently debarred, suspended, proposed for debarment, or declared ineligible for the award of contracts by any federal agency; have,

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within the three (3) year preceding the Closing, been convicted of or had a civil judgment rendered against any of them for commission of a fraud or criminal offense in connection with obtaining, attempting to obtain or performing a public (federal, state, provincial or local) contract or subcontract, violation of federal, state or provincial antitrust statutes relating to the submission of offers or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements or receiving stolen property; are presently indicted for or otherwise criminally or civilly charged by a Governmental Authority with, commission of any of the above offenses; and, within the three (3) years preceding the Closing, have had one or more contracts terminated for default by any Federal agency.
3.26      Canadian Matters .
(a)      Subsidiary Seller is the sole owner of the Canadian Assets and is not a non-resident of Canada for the purposes of the Income Tax Act (Canada).
(b)      None of the Purchased Assets acquired hereunder by Purchaser from the Parent Seller constitutes “taxable Canadian property” for purposes of the Income Tax Act (Canada) or “taxable Quebec property” for purposes of the Taxation Act (Quebec).
3.27      Competition Act . For the purposes of s. 110(2) of the Competition Act (Canada), each of (a) the total value of the Purchased Assets in Canada; and (b) the gross revenues from sales in or from Canada generated from the assets referred to in (a) above; measured in accordance with the Competition Act (Canada), are less than C$73 million or such other amount as is determined pursuant to ss. 110(8) and 110(9) of the Competition Act (Canada).
3.28      Investment Canada Act . Seller does not provide any of the services or engage in any of the activities of a “cultural business” within the meaning of the Investment Canada Act.  
3.29      Silicon Optix . Section 3.29 of the Seller Disclosure Schedules contains a true, complete and correct list of the Assets Seller or its respective Affiliates acquired from Silicon Optix and its Affiliates that are material to the Business as currently conducted and such Assets are included in the Purchased Assets (except for Assets retired, replaced and/or substituted in the ordinary course of business).
ARTICLE IV     
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller, that each of the following representations and warranties is true and correct as of the date hereof:
4.1      Organization and Qualification . Parent Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate and corporate authority to own, lease and operate its properties and to carry on its business as now being conducted. Parent Purchaser is duly qualified to do business, and is in good standing as a foreign corporation, in each jurisdiction where the properties of its business owned, leased or operated by it or the operation of its business makes such qualification necessary. Each Subsidiary Purchaser is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all corporate, partnership or other similar powers required to own, lease and operate its properties and to carry on its business as now being conducted. Each Subsidiary Purchaser is duly qualified to do business as a foreign corporation or other foreign legal entity and is in good standing in each jurisdiction where such qualification is necessary.
4.2      Authority Relative to this Agreement . Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party, to perform its obligations hereunder and to consummate the Acquisition. The execution, delivery and performance of this Agreement and the other Transaction Documents by Purchaser and the consummation by Purchaser of the Acquisition have been

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duly and validly authorized by all necessary corporate action of the Parent Purchaser and each Subsidiary Purchaser, and no other corporate proceedings or action on the part of Parent Purchaser or any Subsidiary Purchaser or any holders of Purchaser’s capital stock or other security holders are necessary to authorize this Agreement and the other Transaction Documents or to consummate the Acquisition. This Agreement and the other Transaction Documents have been or will be duly executed and delivered by Purchaser and, assuming the due authorization, execution and delivery by the other Parties hereto, each such agreement constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the Bankruptcy Exception.
4.3      No Conflict . The execution and delivery of this Agreement and the other Transaction Documents by Purchaser do not, and the performance by Purchaser of its obligations hereunder and the consummation of the Acquisition and the transactions contemplated by the other Transaction Documents will not: (i) conflict with or violate any provision of the Purchaser’s certificate of incorporation, articles of incorporation or bylaws, each as amended to date or (ii) assuming that all filings and notifications described in Section 4.4 have been made, materially conflict with or materially violate any Law or Order applicable to Purchaser or by which Purchaser is bound or affected.
4.4      Required Filings and Consents . The execution and delivery of this Agreement and the other Transaction Documents by Purchaser do not, and the performance by Purchaser of its obligations hereunder and thereunder and the consummation of the Acquisition will not, require (a) the consent of its stockholders or (b) any material consent, approval, authorization or permit of, or filing by Purchaser with or notification by Purchaser to, any Governmental Authority other than compliance with the applicable requirements of the HSR Act and the rules and regulations thereunder.
4.5      No Finder . Neither Purchaser nor any Person acting on behalf of Purchaser has agreed to pay to any broker, finder, investment banker or any other Person, a brokerage, finder’s or other fee or commission in connection with this Agreement or any matter related hereto, nor has any broker, finder, investment banker or any other Person taken any action on which a Claim for any such payment would be based.
ARTICLE V     
COVENANTS
Covenants Prior To Closing Date
5.1      Conduct of Business . From the date hereof through the Closing Date, except as contemplated by this Agreement, Seller agrees, unless Seller has obtained the prior written consent of Parent Purchaser, in each case, only with respect to the Purchased Assets:
(a)      Not to undertake (nor permit to be undertaken) any of the actions specified in Section 3.7(a), 3.7(b), 3.7(k), 3.7(n) or 3.7(o);
(b)      To conduct the Business in all material respects according to Seller’s ordinary course of business consistent with past practice, to keep available in all respects the services of Seller’s present officers, agents and full-time employees primarily engaged in the Business, including taking commercially reasonable efforts to retain the Business Employees (except as otherwise contemplated by this Agreement), to use commercially reasonable best efforts to preserve and maintain the Purchased Assets and the goodwill of the Business in all material respects, to preserve Seller’s rights to be assigned to Purchaser hereunder, and to use commercially reasonable efforts to preserve in all material respects Seller’s relationships with customers, suppliers, independent contractors, employees and other Persons material to the operation of the Business;
(c)      To maintain in all respects in the ordinary course of the Business, consistent with past practice and in accordance with all Assigned Contracts, the Tangible Personal Property and the Real Property, substantially in their present repair, order and condition, subject to ordinary wear and tear;

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(d)      To maintain the Books and Records in the usual and ordinary manner consistent with past practice and in a manner that fairly and correctly reflects the income, expenses, Purchased Assets and Liabilities of Seller in accordance with GAAP;
(e)      To pay all account and trade payables on a current basis related to the Business, but in no event later than forty-five (45) days after they become due;
(f)      Not to incur any Liability that would be an Assumed Liability, other than Liabilities incurred in the ordinary course of its Business, consistent with past practice, which are not in the aggregate material to the Business;
(g)      Not to sell, transfer, convey, or assign ownership of any Purchased Assets, or create, incur, assume or suffer to exist any Lien, other than Permitted Exceptions, on any Purchased Assets, other than the granting of non-exclusive licenses under Business Product Sales Contracts to customers in the ordinary course of business of Seller consistent with past practices;
(h)      Not to waive, release or cancel any Claims against third parties or debts owing to Seller as it relates to the Business;
(i)      Not to terminate, modify, amend, waive or otherwise alter or change any of the material terms or provisions of any Assigned Contract or create any material default under the terms of any Assigned Contract or pay any amount not required by Law or by the terms of any Assigned Contract;
(j)      Not to increase the compensation or other remuneration payable or to become payable to any Business Employee, or alter the benefits payable to any Business Employee thereof, or pay any bonuses or compensation to any such Business Employee other than in the ordinary course of business consistent with past practice or otherwise required by applicable Laws or the terms of any Contract or Benefit Plans;
(k)      To consult with Purchaser at least three (3) Business Days prior to any renewal, amendment, modification, extension or termination of, waiver of any material right under or other material terms or provisions of, or any failure to renew, any Assigned Contract and not to take any such action if Purchaser objects thereto in writing, provided that Purchaser’s approval shall not be unreasonably withheld or delayed;
(l)      To keep in full force and effect all of the Insurance Policies and shall not allow any breach, default, termination or cancellation of such Insurance Policies to occur or exist;
(m)      Not to adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, except as would not prevent or materially the transactions contemplated by this Agreement;
(n)      To file, on a timely basis, with appropriate taxing authorities all Tax Returns required to be filed prior to the Closing Date and pay all Taxes when due; and
(o)      To continue the prosecution and registration process with respect to any Acquired Proprietary Rights in which Seller has (or purports to have) any right, title or interest.
5.2      Corporate Examinations and Investigations . Commencing on the date hereof through the earlier of the Closing Date or the termination of this Agreement as provided herein (the “ Due Diligence Period ”), Seller agrees that Purchaser shall be entitled, through its Representatives, to make reasonable investigation of the Purchased Assets (including the full file wrappers for all Seller Patent Applications and all other Acquired Proprietary Rights), and the Business, and such examination of the Books and Records and financial condition of Seller primarily related to the

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Business. Any such investigation and examination shall be conducted upon reasonable prior notice with Seller’s cooperation during normal business hours. During the Due Diligence Period, Seller agrees to: (a) make available to the Representatives of Purchaser all such information and copies of such documents and records concerning the affairs of Seller primarily related to the Business as such Representatives may reasonably request; (b) permit reasonable access by the Representatives of Purchaser to the Purchased Assets and all parts thereof and to Seller’s Representatives and its Business Employees, customers and suppliers; and (c) use commercially reasonable efforts to cause its Representatives to reasonably cooperate in connection with such review and examination. No investigation by Purchaser shall diminish or obviate or otherwise affect any of the representations, warranties, covenants or agreements of Seller contained in this Agreement. Purchaser shall have a right to designate certain of its Representatives as a transition team which may work from the applicable Seller’s premises as reasonably agreed to by Seller in order to facilitate the orderly transfer of the Purchased Assets to Purchaser in accordance with the terms of this Agreement. Such transition team shall be given reasonable access to Seller’s management and other Business Employees during normal business hours, including through attendance by such management and Business Employees at meetings with the transition team.
5.3      Employment Matters .
(a)      Purchaser (or its respective Affiliates) shall offer employment to each Key Employee who is not an Automatically Transferred Employee and may, at its election, offer employment to those other Business Employees as Purchaser (or its respective Affiliates) may deem desirable or in its best interests to hire, but shall not be obligated to offer employment to any Business Employees other than Key Employees and Automatically Transferred Employees. Each such offer shall be (i) at the same general location (other than for the three Business Employees located in San Jose, California who will receive offers to work in San Diego), (ii) at the same or superior base salary or base wage rate, (iii) with eligibility for a retention bonus, (iv) with a restricted stock unit award and (v) the benefits programs currently offered to employees of Purchaser in the applicable jurisdiction. From the date hereof through the Closing, Seller shall cooperate with and, subject to the prior review and approval of Seller, which shall not be unreasonably withheld, permit Purchaser to communicate in writing with the Business Employees, at reasonable times and upon reasonable notice, concerning Purchaser’s plans, operations and general personnel matters and to interview the Business Employees and review the personnel records and such other information concerning the Business Employees as Purchaser may reasonably request (subject to obtaining any legally required permission and to other applicable Laws). All offers shall be effective as of the Closing and communicated to the Key Employees and to other Business Employees who have been selected within three (3) days of the date of this Agreement. Seller shall remain liable for any Business Employees who do not become Transferred Employees.
(b)      The Parties acknowledge and agree that the employment of the Automatically Transferred Employees will transfer to Purchaser by operation of law at the Closing. Effective as of the Closing, Purchaser shall continue the employment of such Automatically Transferred Employees in substantially similar terms and conditions in the aggregate to those in effect with Seller immediately prior to the Closing, and Purchaser shall recognize the service of such Automatically Transferred Employees with Seller for all purposes related to their employment with Purchaser, in accordance with applicable Laws.
(c)      With respect to any plan that is a “welfare benefit plan” (as defined in Section 3(1) of ERISA), or any plan that would be a “welfare benefit plan” (as defined in Section 3(1) of ERISA) if it were subject to ERISA, maintained by Purchaser or Purchaser’s Affiliate, Purchaser shall cause there to be waived any pre-existing condition and waiting periods.
(d)      Transferred Employees shall be given credit for the number of years of service with Seller, its Subsidiaries and any predecessor employer for which Seller or its Subsidiaries credited service (in each case excluding credit for service towards Purchaser service awards), to the same extent as such service was credited for such purpose by Seller, under each plan maintained by Purchaser or Purchaser’s Affiliates in which such Transferred Employees are eligible to participate for purposes of eligibility, vesting and vacation accrual (other than under any equity or quasi-equity compensation plan or under a defined benefit pension plan or which would result in the duplication

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of benefits accrual for the same period of service); provided, such service shall not be recognized to the extent that such recognition would result in a duplication of benefits or to the extent that such service was not recognized under the applicable Benefit Plan of Seller or its Subsidiaries.
(e)      Purchaser shall take all steps necessary to permit each Transferred Employee who has received an eligible rollover distribution (as defined in Section 402(c)(4) of the Code) from the 401(k) plan maintained by Seller, if any, to roll such eligible rollover distribution, including any associated loans, as part of any lump sum distribution to the extent permitted by the 401(k) plan maintained by Seller into an account under a 401(k) plan maintained by Purchaser.
(f)      The vacation time accrued with Seller with respect to any Automatically Transferred Employee shall be transferred to Purchaser and/or Purchaser’s Affiliates in accordance with applicable Law.
(g)      Except for Automatically Transferred Employees, no provision of this Section 5.3 shall create any third party beneficiary or other rights in any Business Employee or former employee in respect of continued or resumed employment in Seller’s Business, or with Purchaser, and no provision of this Section 5.3 shall create any rights in any such persons in respect of any benefits that may be provided under any plan or arrangement which may be established by Purchaser. Nothing contained herein shall be construed as requiring, and Seller, Purchaser and their Affiliates shall take no action that would have the effect of requiring, Seller, Purchaser or their Affiliates to continue any specific Seller Employee Plan. The provisions of this Section 5.3 are for the sole benefit of Seller and Purchaser and nothing in this Section 5.3, expressed or implied, is intended or shall be construed to constitute an amendment of any Seller Employee Plan or any plan maintained Purchaser or its Affiliate (or an undertaking to amend any such plan) or other compensation and benefits plan maintained for or provided to Seller employees or any employees of its Subsidiaries, including Transferred Employees, prior to, on or following the Closing.
5.4      No Shop .
(a)      At all times after the execution of this Agreement and prior to the earlier of the Closing and the termination of this Agreement pursuant to Article VII:
(i)      Seller (including any Affiliate of Seller) shall not (and Seller (including any Affiliate of Seller) shall take reasonable action such that its Representatives, including investment bankers, attorneys and accountants, do not, on its behalf), directly or indirectly, take any action to solicit, initiate or knowingly encourage any inquiry, proposal or offer from, furnish any non-public information to, or participate in any negotiations with, any corporate, partnership, Person or other entity or group other than Purchaser regarding (x) any acquisition, sale, disposition or grant of any exclusive license to all or any portion of the Purchased Assets, the Business, or the Proprietary Rights owned by Seller and to be licensed to Purchaser pursuant to the License Agreement except to the extent such transaction would not affect Seller’s ability to license such Proprietary Rights to Purchaser pursuant to the License Agreement or (y) any agreement, arrangement or understanding requiring Seller or any Affiliate of Seller to abandon, terminate or fail to consummate any of the transactions contemplated hereby (each, an “ Acquisition Proposal ”).
(ii)      Upon execution of this Agreement, Seller shall immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal and Seller shall request (or if Seller has the contractual right to do so, demand) the return of all documents and other data furnished to others prior to the execution of this Agreement in connection with any Acquisition Proposal. Seller shall promptly notify Purchaser of the existence of any Acquisition Proposal received by Seller after the execution of this Agreement, and Seller shall promptly communicate to Purchaser the terms of any such Acquisition Proposal and the identity of the party making such Acquisition Proposal, and shall promptly provide to Purchaser copies of any written materials received by Seller in connection with such Acquisition Proposal.
(iii)      None of Seller’s board of directors or any committee thereof shall (i) after approval

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by Seller’s board of directors or any committee thereof of this Agreement and the Acquisition, withdraw or modify, or propose to withdraw or modify, in a manner adverse to Purchaser, the approval by such board of directors or any such committee of this Agreement or the Acquisition, (ii) approve or recommend or propose to approve or recommend any Acquisition Proposal or (iii) authorize Seller to enter into any agreement with respect to any Acquisition Proposal.
(b)      Notwithstanding anything to the contrary in this Section 5.4, the covenants contained in Sections 5.4(a)(i)-(iii) shall not apply to any actions or discussions with respect to a sale, disposition, merger or other business combination of Seller or any part of Seller’s or any of its Affiliates’ businesses that does not include the Purchased Assets, the Business and/or the Proprietary Rights owned by Seller and to be licensed to Purchaser pursuant to the License Agreement, if such action, discussion or transaction does not prohibit Seller (and each Subsidiary Seller) from complying with their obligations under this Agreement or the other Transaction Documents.
5.5      Notices of Certain Events . Prior to the Closing Date, Seller, on the one hand, and Purchaser, on the other hand, as applicable, shall promptly notify the other of:
(a)      any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Acquisition;
(b)      any notice or other oral or written communication from any Governmental Authority in connection with the Acquisition or relating to Seller;
(c)      any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of any representation or warranty, whether made as of the date hereof or as of the Closing Date, or that would constitute a violation or breach of any covenant of any Party;
(d)      any failure of Seller or Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder;
(e)      any material developments adversely affecting the Business, the Business Employees, Purchased Assets, Proprietary Rights owned by Seller and to be licensed to Purchaser pursuant to the License Agreement and Assumed Liabilities; and
(f)      any change that would reasonably be expected to have a Material Adverse Effect, or would materially delay or impede the ability of Seller or Purchaser to perform its obligations pursuant to this Agreement and to consummate the Acquisition.
5.6      Certain Closing Certificates and Documents . Seller shall prepare and deliver to Purchaser a draft of each of the Seller Vacation Certificate and the Seller Materials Inventory Certificate not later than three (3) Business Days prior to the Closing Date. Without limiting the generality or effect of the foregoing, Seller shall provide to Purchaser, promptly after Purchaser's request, copies of the documents or instruments evidencing the amounts set forth on any such draft or final certificate. In addition, during Seller’s regular business hours and upon reasonable advance notice, Purchaser shall be entitled to conduct (either itself or through a designated auditor) a review of the Seller’s and its Affiliates’ books and records to confirm the accuracy of the amounts set forth on any such draft or final certificate.
Additional Covenants
5.7      Public Announcements . After complying with this Section 5.7, Purchaser shall make a public announcement concerning the matters described in Section 5.13. After complying with this Section 5.7, each of Purchaser and Seller may make a public announcement or other disclosure concerning this Agreement or the transactions contemplated herein. Each of Purchaser and Seller agrees that they will consult with each other prior to issuing any public announcement or other disclosure concerning this Agreement or the transactions contemplated herein and any

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such announcement or disclosure shall be subject to their mutual agreement, except, in each case, as may be required by applicable securities Laws or the rules and regulations of any stock exchange.
5.8      Confidentiality . Except as otherwise set forth in this Agreement, the provisions of that certain Mutual Non-Disclosure Agreement dated September 29, 2009 by and between Purchaser and Seller, as amended (the “ Confidentiality Agreement ”) are hereby incorporated herein and shall remain binding and in full force and effect, except that the Confidentiality Agreement shall not apply to any documents prepared in connection with a proceeding before or filed with, or other disclosure made to, a court, arbitration tribunal or mediation service in order to enforce any party’s rights arising in connection with the termination of this Agreement pursuant to Section 7.2. All obligations of the Purchaser under the Confidentiality Agreement with respect to the Purchased Assets and Assigned Contracts shall terminate simultaneously with the Closing. Except as otherwise provided herein or in the other Transaction Documents, Seller shall, and shall cause its employees, consultants, advisors and representatives of itself to treat after the date hereof as strictly confidential (unless compelled to disclose by judicial or administrative process or, in the opinion of legal counsel, by other requirements of law) all nonpublic, confidential or proprietary information concerning the Purchased Assets, and Seller shall not, and shall cause its employees consultants, advisors and representatives not to, after the date hereof, use such information for any purpose whatsoever, including to the detriment of the Purchaser or disclose such information to any Person.
5.9      Expenses . Except as otherwise specifically provided in this Agreement, each of the Parties shall bear its own expenses incurred in connection with the preparation, execution and performance of this Agreement and the Acquisition, including all fees and expenses of its Representatives.
5.10      Consents, Filings and Authorizations; Efforts to Consummate .
(a)      As promptly as practicable after the date hereof, Purchaser and Seller shall make all filings and submissions under such Laws as are applicable to them or to their respective Affiliates and as may otherwise be required for them to consummate the Acquisition in accordance with the terms of this Agreement and shall consult with each other prior to such filing and shall not make any such filing or submission to which Seller or Purchaser, as the case may be, reasonably objects in writing. All such filings shall comply in form and content in all material respects with applicable Laws. Subject to the terms and conditions herein, each Party, without payment or further consideration, shall use its best efforts to take or cause to be taken all actions and to do or cause to be done all things necessary, proper or advisable under applicable Laws, Permits and Orders, to consummate and make effective, as soon as reasonably practicable, the Acquisition, including obtaining all required consents, whether private or governmental, required in connection with such Party’s performance of such transactions and each Party shall cooperate with the other in all of the foregoing.
(b)      Each of Seller and Purchaser shall (A) give the other party prompt notice of the commencement of any legal proceeding by or before any Governmental Authority relating to the Acquisition or any of the other transactions contemplated by this Agreement; (B) keep the other party informed as to the status of any such legal proceeding; and (C) promptly inform the other party of any communication to or from any Governmental Authority regarding the Acquisition, this Agreement, or any other transaction contemplated hereby. To the extent permitted by Law, Seller and Purchaser shall consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted to a Governmental Authority in connection with any proceeding under or relating to the any antitrust or competition law. To the extent permitted by Law, each party shall promptly deliver to the other a copy of each such filing analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted to a Governmental Authority, and of each communication received from any Governmental Authority relating to the Acquisition, this Agreement, or any of the transactions contemplated hereby.
(c)      Purchaser and Seller shall use commercially reasonable efforts to take, or cause to be taken, all actions necessary to effectuate the Acquisition and make effective the other transactions contemplated by this Agreement. Without limiting the generality of the foregoing, each party to this Agreement shall use commercially

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reasonable efforts (i) to obtain any action or inaction, waiver, consent, clearance, or approval of a Governmental Authority required to be obtained by the party in connection with the consummation of the Acquisition or any of the other transactions contemplated by this Agreement; and (ii) to prevent any Governmental Authority from blocking, in whole or in part, the Acquisition or any other transaction contemplated hereby. Notwithstanding anything to the contrary contained in this Agreement, neither Seller nor Purchaser shall not have any obligation under this Agreement to (i) dispose of or transfer any assets; (ii) license or otherwise make available to any Person, any technology or other intellectual property rights; (iii) hold separate any assets or operations (either before or after the Closing Date); (iv) make any commitment (to any Governmental Authority or otherwise) regarding its future operations or the future operation of the Purchased Assets; (v) to discontinue offering any product or service; (vi) modify or terminate any existing contractual rights or commercial relationships; (vii) engage in litigation or other adversary proceedings, whether judicial or administrative, concerning the legality of this Agreement or any other transaction contemplated hereby; or (viii) commit to any of the foregoing or cause any of its Subsidiaries or Affiliates to do or commit to doing any of the foregoing.
5.11      Required Contract Consents; Assignment of Contracts .
(a)      Seller shall use its commercially reasonable efforts to obtain all Required Contract Consents set forth on Schedule 5.11(a) and to deliver such consents to Purchaser.
(b)      Following the date hereof, Seller shall not without Purchaser’s prior written consent modify, amend or alter the terms of any license granted under any Contract listed on Schedule 5.11(b) in a manner so as to increase or alter the scope of such license to Acquired Proprietary Rights or Acquired Technology; provided that Seller may assign any of Seller’s right, title, interest or obligations, in whole or in part (whether by operation of law, merger or otherwise), in any Contract listed on Schedule 5.11(b) , or consent to the assignment of any such Contract listed on Schedule 5.11(b) , in whole or in part (whether by operation of law, merger or otherwise), by any counter party to any such listed Contract. For a period commencing on the date hereof and ending on the five (5) year anniversary of the Closing Date, Seller shall notify Purchaser of any action taken by Seller to assign any of Seller’s right, title, interest or obligations, in whole or in part (whether by operation of law, merger or otherwise), in any Contract listed on Schedule 5.11(b) , or to consent to the assignment of any such Contract, in whole or in part (whether by operation of law, merger or otherwise), by any counter party to any such listed Contract.
5.12      Transfer of Equipment and Personnel . Purchaser shall pay all out-of-pocket costs and expenses actually incurred solely as a result of the transfer of personnel and equipment to Purchaser’s facilities at or following the Closing.
5.13      Commercial Relationship . For a three-year period following the Closing Date, Parent Purchaser shall host meetings with representatives of Parent Seller at least twice a year, during which Parent Purchaser shall provide to Parent Seller, subject to the execution of a confidentiality agreement reasonably acceptable to Parent Purchaser and Parent Seller (a) an overview of its current relevant reference design development roadmaps in the markets of cell phones, tablet/e-books, monitors, terminals, and televisions and other relevant future products of Purchaser’s QCT business unit (the “ Field ”) and (b) the opportunity to present and market to Purchaser either then existing Seller products or Seller products in development that are compatible with the applicable reference design platforms in the Field (“ Reference Design Platforms ”). In addition, Purchaser shall use commercially reasonable efforts to provide sufficient information on opportunities related to such products in development and access to Purchaser’s applicable design personnel for Seller to either develop or supply product solutions, including companion chips, for Purchaser’s Reference Design Platforms. Notwithstanding anything to the contrary in this Agreement, none of Purchaser or any its Affiliates shall be required to disclose or provide to Seller or its authorized Representatives any information (i) which Purchaser believes in good faith that doing so is reasonably likely to violate any contract or Law to which Purchaser or any of its Affiliates is a party or is subject or cause a privilege which Purchaser or any of its Affiliates would be reasonably entitled to assert to be undermined with respect to such information, (ii) if Purchaser or any of its Affiliates, on the one hand, and Seller or any of its Affiliates, on the other hand, are adverse parties in a litigation and such information is pertinent thereto or (iii) if Purchaser or any of its Affiliates reasonably determines

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in good faith that such information is competitively sensitive.
5.14      Certain Transitional Matters . From and after the Closing Date:
(a)      Subject to Section 8.9, Purchaser shall have complete control over the payment, settlement or other disposition of, or any dispute involving any Assumed Liabilities, and Purchaser shall have the right to conduct and control all negotiations and proceedings with respect thereto. Subject to Section 8.9, Seller shall notify Purchaser promptly of any Claim with respect to any Assumed Liabilities and shall not, except with the prior written consent of Purchaser, voluntarily make any payment of, or settle or offer to settle, or consent to any compromise with respect to, any such Assumed Liabilities. Seller shall cooperate with Purchaser in connection with any negotiations or proceedings involving any Assumed Liabilities.
(b)      If the Closing occurs at a time when not all Permits and Environmental Permits have been transferred to Purchaser, the Parties shall continue to abide by their obligations hereunder to obtain all such transfers, as soon as practicable, and Seller authorizes Purchaser to use any such Permits and Environmental Permits in its business operations after the Closing.
5.15      Employee Matters . From and after the date of this Agreement:
(a)      Seller shall be solely responsible for compliance with, and any notification and Liability under, the Worker Adjustment and Restraining Notification Act, as well as all other applicable local, state, federal, provincial and foreign laws relating to any termination of any of the employees of Seller or any Affiliate thereof from employment with Seller or any Affiliate of Seller occurring prior to or after the date of this Agreement, whether or not in connection with the Acquisition. Seller shall be responsible for all Liabilities for employee or independent contractor compensation and benefits accrued or otherwise arising out of services rendered by its Business Employees, directors and independent contractors prior to the Closing or arising by reason of actual, constructive or deemed termination of their service relationship with Seller at Closing (except where such Liabilities result from Purchaser’s non-compliance with the provisions of Section 5.3 with respect to Transferred Employees), and all costs relating to the continuation of health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (or any similar foreign equivalent Laws), with respect to Non-Transferring Employees.
(b)      Upon termination of any Business Employees by Seller, Seller shall promptly, and in any event within any time periods prescribed by applicable Law, comply with all severance, retrenchment or other similar or related requirements and obligations triggered in connection with such termination as provided by applicable Law.
5.16      Further Assurances . Seller hereby agrees, without further consideration, to execute and deliver following the Closing such other instruments of transfer and take such other action as Purchaser or its counsel may reasonably request in order to put Purchaser in possession of, and to vest in Purchaser, good, valid and unencumbered title to the Purchased Assets in accordance with this Agreement and to consummate the Acquisition. In addition to the foregoing, (i) Seller shall execute and deliver, and shall use commercially reasonable efforts to cause its Affiliates and any subject patent inventors to execute and deliver, as applicable, to Purchaser within five (5) Business Days following the Closing, such documentation as shall be requested and approved by Purchaser, including assignments in substantially the forms agreed upon by each of Purchaser and Seller at Closing, in order to transfer to Purchaser and put Purchaser in possession of and to vest in Purchaser good, valid and unencumbered title to any Acquired Proprietary Rights in any jurisdiction to the extent an assignment or other similar documentation with respect thereto and sufficient in Purchaser’s good faith determination to effect such transfer is not executed and delivered to Purchaser at Closing; and (ii) Seller shall take, and shall use commercially reasonable efforts to cause its Affiliates and any subject patent inventors to take, such action as Purchaser or its counsel may reasonably request to enable Purchaser to provide for the continuing prosecution, maintenance and enforcement of any Acquired Proprietary Rights. Purchaser hereby agrees, without further consideration, to take such other action following the Closing and execute and deliver such other documents as Seller or its legal counsel may reasonably request in order to consummate the Acquisition in accordance with this Agreement.

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5.17      Seller’s Non-Compete . Without the express prior written consent of Purchaser, Seller and each of its Affiliates shall not, at any time during the three-year period from and immediately following the Closing Date, directly or indirectly, engage in, own, manage, control or participate in the ownership, management or control of any business that designs, develops, manufactures, markets, sells, installs or distributes products in competition with the Business, except that Seller may (i) continue the activities of its Video Interface and Timing Business, (ii) fulfill its obligations under the Transition Services Agreement and comply with the rights set forth in Section 5.22(b) and (iii) purchase or otherwise acquire by merger, purchase of assets, stock acquisition (including investing as a minority shareholder or acquiring a controlling interest) or otherwise any Person or business or engage in any similar merger and acquisition activity with any Person the primary business of which is not in competition with the Business, provided that, after the effective date of such merger and acquisition transaction, Seller may not use any assets of the business so acquired to design, develop, manufacture, market, sell, install or distribute products in competition with the Business. For the purposes of this Section 5.17, ownership of securities of a company whose securities are publicly traded under a recognized securities exchange not in excess of 5% of any class of such securities shall not be considered to be competition with the Business. Seller hereby agrees that neither Seller nor any Subsidiary of Seller will at any time during the three‑year period from and immediately following the Closing Date, solicit, seek to employ or otherwise hire any Transferred Employee, unless Purchaser or any Subsidiary of Purchaser gives its written consent to such employment or offer of employment. Seller acknowledges that the provisions of this Section 5.17 are reasonable and necessary to protect the interests of Purchaser, that any violation of this Section 5.17 may result in an irreparable injury to Purchaser and that damages at Law may not be reasonable or adequate compensation to Purchaser for violation of this Section 5.17 and that, in addition to any other available remedies, Purchaser shall be entitled to seek to have the provisions of this Section 5.17 specifically enforced by preliminary and permanent injunctive relief without the necessity of proving actual damages or posting a bond or other security to an equitable accounting of all earnings, profits and other benefits arising out of any violation of this Section 5.17. In the event that the provision of this Section 5.17 shall ever be deemed to exceed the time, geographic scope or other limitations permitted by applicable Law, then the provisions shall be deemed reformed to the maximum extent permitted by applicable Law.
5.18      Tax Matters .
(a)      Purchaser and Seller agree to furnish or cause to be furnished to the other, upon request, as promptly as reasonably practicable, such information and assistance relating to the Purchased Assets, including access to books and records, as is reasonably necessary for the filing of all Tax Returns by Purchaser or Seller, the making of any election relating to Taxes, the preparation for any audit by any taxing authority and the prosecution or defense of any claim, suit or proceeding relating to any Tax. Each of Purchaser and Seller shall retain all books and records with respect to Taxes pertaining to the Purchased Assets for a period of at least seven (7) years following the Closing Date. Purchaser and Seller shall reasonably cooperate with each other in the conduct of any audit, litigation or other proceeding relating to Taxes involving the Purchased Assets or the Purchase Price Allocation.
(b)      Seller shall be responsible for and shall pay or cause to be paid all Taxes that relate to the Purchased Assets for Pre-Closing Tax Periods. Purchaser shall be responsible for and shall pay all Taxes that relate to the Purchased Assets for Post-Closing Tax Periods. In the case of any Taxes for Straddle Periods, the portion of such Tax that relates to the portion of such Tax period ending on the Closing Date shall (i) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of such Tax for the entire Tax period multiplied by a fraction the numerator of which is the number of days in the Tax period ending on the Closing Date and the denominator of which is the number of days in the entire Tax period, and (ii) in the case of any Tax based upon or related to income or receipts, be deemed equal to the amount which would by payable if the relevant Tax period ended on the Closing Date.
5.19      Supplements to Disclosure Schedules . It is understood and agreed that Seller has a continuing obligation until the Closing Date to amend or supplement the Seller Disclosure Schedules with respect to any matter arising or discovered hereafter which, if existing or known as of the date of this Agreement, would have been required to be set forth or described in the Seller Disclosure Schedules or that is necessary to complete or correct any information in any representation or warranty of Seller contained in this Agreement. No supplement of the Seller Disclosure

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Schedules made after the execution hereof by Purchaser pursuant to this section or otherwise, or any notification delivered pursuant to Section 5.5 hereof, shall be deemed to cure any breach, modify or qualify any representation of or warranty made pursuant to this Agreement.
5.20      Patent Matters . If any of the Selected Patents or Additional Transferred Patents is subject to a terminal disclaimer, then (a) the parent of such Selected Patent or Additional Transferred Patent shall be deemed an Additional Transferred Patent and (b) any other Issued Patent that could not be enforced if such other Issued Patent is owned by someone other than the owner of the Selected Patent or Additional Transferred Patent that is the subject of the terminal disclaimer shall be deemed an Additional Transferred Patent. If subsequent to the transfer of the Acquired Patents on the Closing Date as described in this Agreement, any of the Selected Patents or Additional Transferred Patents becomes subject to a terminal disclaimer, then any other Issued Patent(s) that are affected by that terminal disclaimer (i.e., the Issued Patent could not be enforced as a result of being owned by someone other than the owner of the applicable Selected Patent or Additional Transferred Patent that is subject to a terminal disclaimer) shall be an Additional Transferred Patent and shall be deemed transferred to Parent Purchaser as an Acquired Patent under this Agreement.
5.21      Reconciliation .
(a)      For six (6) months after the Closing Date, either Purchaser or Seller may notify the other party of any Asset retained by Seller following the Closing Date that Purchaser or Seller believes should have been transferred to Purchaser under this Agreement as Assets necessary for the conduct of and that are primarily used or primarily held for use in the Business. If the Parties determine in good faith that such Asset was intended to be transferred to Purchaser as Assets necessary for the conduct of and that are primarily used or primarily held for use in the Business under this Agreement, such Asset shall be assigned by Seller to Purchaser or an affiliate of Purchaser designated by Purchaser without any additional consideration, and Seller agrees to use commercially reasonable efforts during such period to promptly deliver any such Asset to Purchaser.
(b)      For six (6) months after the Closing Date, Seller may notify Purchaser of any Asset transferred to Purchaser in connection with the transactions contemplated herein that Seller believes should have been retained by Seller under this Agreement as part of the Excluded Assets. If the Parties determine in good faith that such Asset was intended to be retained by Seller as part of the Excluded Assets under this Agreement, such Asset shall be assigned by Purchaser to Seller or an affiliate of Seller designated by Seller without any additional consideration, and Purchaser agrees to use commercially reasonable efforts during such period to promptly deliver any such Asset to Seller or such affiliate, as applicable.  
5.22      Touchdown/Reon and Vida Processors .
(a)      Touchdown . Following the Closing Date until the Cutover Date (as defined in the Transition Services Agreement), Seller shall not without Purchaser’s prior written consent (i) modify, amend or alter the terms of any Contract related to the Touchdown Processors or (ii) enter into any new Contracts related to the Touchdown Processors.
(b)      Reon and Vida Processors . Following the Closing Date, Seller shall not without Purchaser’s prior written consent (i) modify, amend or alter the terms of any Contract related to the Reon and Vida Processors, or (ii) enter into any new Contracts for the sale of the Reon and Vida Processors. Notwithstanding the foregoing, for a period of two (2) years following the Closing Date, Seller shall be entitled to modify, amend or alter the terms of any existing Contract or enter into any new Contract with an existing customer, in each case, for the purpose of the manufacture, test, sales and/or support of Reon and Vida Processors after the Closing. On or prior to the first anniversary of the Closing Date, Seller shall provide requisite “end of life” notice to all customers of the Reon and Vida Processors advising such customers that Seller will cease the manufacture and sale of the Reon and Vida Processors on or prior to the second anniversary of the Closing Date. Beginning on the second anniversary of the Closing Date, Seller shall cease any activities for the manufacture and sale of the Reon and Vida Processors. For the avoidance of doubt and notwithstanding the foregoing, Seller may continue to fulfill warranty obligations under Contracts related to the Reon

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and Vida Processors in effect as of the second anniversary of the Closing Date.
(c)      Notwithstanding the foregoing Sections 5.22(a) and (b), Seller may modify, amend or alter the terms of any existing Contract or enter into any new Contract with an existing customer for the purpose of fulfilling its obligations under the Transition Services Agreement.
5.23      Actions Regarding Off-the-Shelf Software . As soon as practicable following the Closing, Parent Purchaser shall delete and remove all copies of the Off-the-Shelf Software set forth on Schedule 2.1(c) from all Tangible Personal Property transferred to Parent Purchaser pursuant to the terms of this Agreement.  Alternately, Parent Purchaser may independently secure a license for all copies of the Off-the-Shelf Software set forth on Schedule 2.1(c) included in the Tangible Personal Property transferred to Parent Purchaser pursuant to the terms of this Agreement.
5.24      Electronic Transfer of Software Programs . The Parties shall cooperate in using commercially reasonable efforts to effect the delivery of any Software Programs to be transferred by Seller to Parent Purchaser within or into the United States through means to minimize otherwise applicable use Taxes with respect to the delivery of any such Software Programs pursuant to the terms of this Agreement.

ARTICLE VI     
CONDITIONS TO CLOSING
6.1      Conditions to the Obligations of Seller and Purchaser . The obligations of Seller and Purchaser to consummate the Acquisition are subject to the satisfaction or, if permitted by applicable Law, waiver by Parent Seller and Parent Purchaser of the following conditions on or prior to the Closing Date:
(a)      No Injunction . No Governmental Authority of competent jurisdiction shall have issued any order, injunction or other decree or taken any other similar action, in each case, which has become final and non-appealable and which permanently prohibits the consummation of the Acquisition.
(b)      No Litigation . No Claim instituted by any Person shall have been commenced or pending against Seller or Purchaser or any of their respective Affiliates or Representatives, which Claim seeks to restrain, prevent, change or delay in any material respect the Acquisition or seeks to challenge any of the material terms or provisions of this Agreement or seeks material damages in connection with any of such transactions.
(c)      Consents . All waiting periods (and any extensions thereof) applicable to the consummation of the Acquisition under the HSR Act shall have expired or been terminated; and all other consents, approvals and authorizations legally required to be obtained from any Governmental Authorities to consummate the Acquisition shall have been obtained from all such Governmental Authorities, except where the failure to obtain any such consent, approval or authorization would not reasonably be expected to result in a Material Adverse Effect.
6.2      Conditions to Obligations of Seller . The obligations of Seller to consummate the Acquisition is subject to the fulfillment prior to or at Closing of the following conditions with respect to Purchaser, any one or more of which may be waived in writing in whole or in part by Parent Seller:
(a)      Accuracy of Representations and Warranties . Each of the representations and warranties of Purchaser contained in this Agreement and in any certificate delivered by Purchaser pursuant hereto shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or “Material Adverse Effect”, which representations and warranties as so qualified shall be true and correct in all respects) as if made at and as of the Closing (other than representations and warranties which address matters only as of a certain date which shall have been true, complete and correct in all material respects as of such certain date).

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(b)      Performance . Purchaser shall have performed and complied in all material respects with all agreements, obligations and covenants required to be performed or complied with by it on or prior to the Closing Date.
(c)      Purchase Price . The Purchase Price shall have been paid by Purchaser in accordance with Section 2.5.
(d)      Deliveries . Purchaser shall have delivered to Seller the following:
(i)      A certificate, dated the Closing Date, executed on behalf of Parent Purchaser by an officer of Parent Purchaser and certifying that the matters set forth in Section 6.2(a) and (b) hereof have been satisfied;
(ii)      A duly executed Assignment and Assumption Agreement by Parent Purchaser;
(iii)      A duly executed Escrow Agreement by Parent Purchaser;
(iv)      A duly executed Tripartite Mutual Termination and Transfer Agreement by Parent Purchaser;
(v)      A duly executed Transition Services Agreement by Parent Purchaser;
(vi)      A duly executed sublease agreement by Subsidiary Purchaser for the Real Property designated on Schedule 2.3(e) as the Toronto Real Property, in the form attached hereto as Exhibit J (the “ Toronto Sublease Agreement ”);
(vii)      A duly executed sublease agreement by Subsidiary Purchaser for the Real Property designated on Schedule 2.3(e) as the Montreal Real Property, in the form attached hereto as Exhibit K (the “ Montreal Sublease Agreement ”); and
(viii)      Duly executed copies of each other Transaction Document to be executed and delivered by the Purchaser.
6.3      Conditions to Obligations of Purchaser . The obligations of Purchaser to consummate the Acquisition is subject to the fulfillment prior to or at Closing of the following conditions with respect to Seller, any one or more of which may be waived in writing in whole or in part by Parent Purchaser:
(a)      Accuracy of Representations and Warranties . Each of the representations and warranties of Seller contained in this Agreement and in any certificate delivered by Seller pursuant hereto shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or “Material Adverse Effect”, which representations and warranties as so qualified shall be true and correct in all respects) as if made at and as of the Closing (other than representations and warranties which address matters only as of a certain date which shall have been true, complete and correct in all material respects as of such certain date).
(b)      Performance . Seller shall have performed and complied in all material respects with all agreements, obligations and covenants required to be performed or complied with by it on or prior to the Closing Date.
(c)      No Material Adverse Change . During the period from the date hereof to the Closing Date, there shall not have occurred any Material Adverse Effect.
(d)      Business Employees . As of Closing, at least ninety percent (90%) of the Business Employees

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that have been offered employment with Purchaser following the Closing (including each of the Key Employees) that meets the requirements of Section 5.3(c) shall have accepted employment with Purchaser on terms acceptable to Purchaser and set forth in an offer letter in the form provided by Purchaser and executed and delivered by each such Business Employee to Purchaser, and each such individual shall have also resigned from their employment with Seller and shall have executed and delivered to Purchaser a Proprietary Rights and Non-Disclosure agreement in the form provided by Purchaser. Each such Business Employee shall remain employed by Seller immediately prior to the Closing, and shall have the legal right to work for Purchaser (or its designated Subsidiary Purchaser). For the purposes of this Section 6.3(d), all Automatically Transferred Employees who have the legal right to work for Purchaser (or its designated Subsidiary Purchaser), and have executed and delivered to Purchaser a Proprietary Rights and Non-Disclosure agreement in the form provided by Purchaser shall be deemed to have met all the requirements listed in the foregoing sentences. For the purposes of this Section 6.3(d), Business Employees who die or become permanently disabled prior to the Closing shall be deemed not to have received an offer of employment with Purchaser.
(e)      Release and Termination of Security Interests . The Purchased Assets shall have been released from all security interests thereon, other than the Permitted Exceptions, and Seller shall have taken reasonable steps to terminate all UCC financing statements other than with respect to Permitted Exceptions, and financing statements under applicable personal property security statutes which have been filed with respect to such security interests and evidence thereof in a form reasonably satisfactory to Purchaser has been delivered to Purchaser.
(f)      Consents Obtained . All consents and approvals set forth on Schedule 5.11(a) shall have been obtained, and a copy of each such consent or approval shall have been provided to Purchaser at or prior to the Closing.
(g)      Deliveries . Seller shall have delivered to Purchaser the following:
(i)      A certificate, dated the Closing Date, executed on behalf of Parent Seller by an authorized executive officer of Parent Seller and certifying that the matters set forth in Section 6.3(a), (b) and (c) hereof have been satisfied;
(ii)      A certificate, dated the Closing Date, of the Secretary or Assistant Secretary of Parent Seller certifying, among other things, that attached or appended to such certificate: (A) is a true copy of all corporate actions taken by it, including resolutions of its board of directors or its authorized committee authorizing the consummation of the Acquisition and the execution, delivery and performance of this Agreement and each of the Transaction Documents to be delivered by Seller pursuant hereto; and (B) are the names and signatures of its duly elected or appointed officers who are authorized to execute and deliver this Agreement, the Transaction Documents to which Seller is a party and any certificate, document or other instrument in connection herewith;
(iii)      An Escrow Agreement, substantially in the form attached hereto as Exhibit A , duly executed by Parent Seller and Escrow Agent;
(iv)      An executed Assignment and Assumption Agreement by Parent Seller in the form attached hereto as Exhibit F ;
(v)      A duly executed License Agreement;
(vi)      Certificates of good standing or the equivalent thereof (including tax good standings) from the appropriate Governmental Authorities, if reasonably available, dated as of a date not more than five (5) days prior to Closing, certifying that Parent Seller and Subsidiary Seller is in good standing in its respective jurisdiction of incorporation or organization and in each jurisdiction in which Parent Seller and Subsidiary Seller is qualified to do business as a foreign limited liability company, corporation or other relevant entity;
(vii)      True, correct and complete copies of all required consents set forth on Schedule 5.11

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(a) ;
(viii)      An executed bill of sale for all Tangible Personal Property owned by Seller included in the Purchased Assets, in the form attached hereto as Exhibit G (the “ Bill of Sale ”);
(ix)      A certification of non-foreign status from Parent Seller in the form and manner which complies with the requirements of Section 1445 of the Code and the regulations promulgated thereunder;
(x)      Assignments of all of Acquired Proprietary Rights, including the Patent Assignment in the form attached hereto as Exhibit H and the Trademark Assignment in the form attached hereto as Exhibit I ;
(xi)      Evidence of the release and/or termination of security interests referenced in Section 6.3(e) above;
(xii)      A duly executed Transition Services Agreement by Parent Seller;
(xiii)      A duly executed Seller Vacation Certificate;
(xiv)      A duly executed Materials Inventory Certificate;
(xv)      A duly executed Toronto Sublease Agreement by Parent Seller and consent to such sublease by the master landlord for the Toronto Real Property;
(xvi)      A duly executed Montreal Sublease Agreement by Subsidiary Seller and consent to such sublease by the master landlord for the Montreal Real Property;
(xvii)      A duly executed Tripartite Mutual Termination and Transfer Agreement by Integrated Device Technology (Shanghai) Co., Ltd. and each Business Employee located in China;
(xviii)      Duly executed agreement(s) with Synopsys, Inc. providing for a license to Purchaser with respect to DDR3/2 PHY Global FoundrySRAM and DDR3/2 Protocol ControllerEDRAM on terms satisfactory to Purchaser and at no cost to Purchaser;
(xix)      Written assurance, which shall not be deemed to require an executed, binding agreement, and may be provided via electronic transmission, from Synopsys, Inc. that it shall license to Purchaser the SRAMVirage Logic software on terms satisfactory to Purchaser and at no cost to Purchaser;
(xx)      Written assurance, which shall not be deemed to require an executed, binding agreement, and may be provided via electronic transmission, from True Circuits, Inc. that it shall license PLL and DLL to Purchaser on terms that are substantially similar to Seller's existing terms with True Circuit, Inc. and satisfactory to Purchaser and at no cost to Purchaser;
(xxi)      Written assurance, which shall not be deemed to require an executed, binding agreement, and may be provided via electronic transmission, from Tensilica Inc. satisfactory to Purchaser that Tensilica Inc. shall license Diamond Mini 108 to Purchaser at no cost to Purchaser.
(h)      Boards of Directors and Subsidiary Stockholder Approval . The Approval shall have been obtained.
ARTICLE VII     

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TERMINATION; EFFECT OF TERMINATION
7.1      Termination of Agreement . This Agreement may be terminated and the Acquisition may be abandoned at any time prior to the Closing:
(a)      By mutual written consent of Parent Seller and Parent Purchaser;
(b)      By either Parent Seller or Parent Purchaser if the Closing has not occurred on or prior to October 31, 2011 and if failure of the Closing to occur is not the result of a breach of this Agreement or a willful failure to complete the closing conditions by such Party;
(c)      By Parent Seller, if: (i) there has been a material breach by Purchaser of any representation or warranty contained herein, such material breach, if curable, is not cured within fifteen (15) Business Days after receipt by Purchaser of written notice thereof from Parent Seller and if not cured within the timeframe above and at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 6.1 or Section 6.2 to be satisfied; (ii) Purchaser has committed a material breach of any covenant imposed upon it hereunder and, if curable, fails to cure such breach within fifteen (15) Business Days after written notice thereof from Parent Seller, and if not cured within the timeframe above and at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 6.1 or Section 6.2 to be satisfied; or (iii) any condition to Seller’s obligations hereunder becomes incapable of fulfillment through no fault of Seller and is not waived by Seller;
(d)      By Parent Purchaser, if: (i) there has been a material breach by Seller of any representation or warranty contained herein, such material breach, if curable, is not cured within fifteen (15) Business Days after receipt by Seller of written notice thereof from Parent Purchaser and if not cured within the timeframe above and at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 6.1 and Section 6.3 to be satisfied; (ii) Seller has committed a material breach of any covenant imposed upon it hereunder and, if curable, fails to cure such breach within fifteen (15) Business Days after written notice thereof from Parent Purchaser and if not cured within the timeframe above and at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 6.1 and Section 6.3 to be satisfied; or (iii) any condition to Purchaser’s obligations hereunder becomes incapable of fulfillment through no fault of Purchaser and is not waived by Purchaser; or
(e)      By Parent Purchaser, on the one hand, or Parent Seller, on the other hand, if there shall be any Law that makes consummation of the Acquisition illegal or otherwise prohibited, or if any Order enjoining Purchaser, on the one hand, or Seller, on the other hand, from consummating the Acquisition is entered and such Order shall have become final and nonappealable, provided that the Party seeking to terminate this Agreement pursuant to this provision shall have used all reasonable efforts to remove or vacate such Order.
7.2      Effect of Termination; Right to Proceed . In the event of the termination or abandonment of this Agreement and the Acquisition by any party hereto pursuant to the terms of this Agreement, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination or abandonment of the Acquisition is made, and there shall be no liability or obligation thereafter on the part of Purchaser or Seller except (A) for fraud and (B) for willful misconduct prior to such termination or abandonment of the Acquisition; provided, however, that the provisions of Sections 5.7, 5.8, 5.9 and Article IX shall remain in full force and effect and survive any termination of this Agreement.
ARTICLE VIII     
SURVIVAL; INDEMNIFICATION
8.1      Survival of Representations and Warranties . Notwithstanding any right of Purchaser to fully investigate the Business, the Purchased Assets, the Assumed Liabilities, the Licensed IP and the Licensed Technology

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and any knowledge of facts determined or determinable by Purchaser pursuant to such investigation or right of investigation, Purchaser has the right to rely fully upon the representations, warranties, covenants and agreements of Seller contained in this Agreement, or listed or disclosed on any Schedule hereto or in any instrument delivered in connection with or pursuant to any of the foregoing. All of the representations and warranties made by Seller and Purchaser in this Agreement, or listed or disclosed on any Schedule hereto or in any certificate delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall expire on the date which is the twenty‑four (24) month anniversary of the Closing Date; provided, however, that the representations or warranties of Seller contained in Section 3.13(b) and in any certificate delivered by Seller regarding any matter set forth in such section pursuant to this Agreement (the “ Liabilities Representation ”) shall survive until the expiration of the applicable statute of limitations.
8.2      Indemnification by Seller .
(a)      Subject to the limitations set forth in Section 8.1 and Section 8.5, from and after the Closing, Seller shall indemnify, defend, save and hold Purchaser and its Representatives (collectively, “ Purchaser Indemnitees ”) harmless from and against all demands, claims, actions or causes of action, losses, damages, diminution in value, deficiencies, Liabilities, costs and expenses (including reasonable legal fees, interest, penalties, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing; collectively, “ Damages ”) suffered or incurred by any Purchaser Indemnitee, directly or indirectly, in connection with or arising out of the following:
(i)      Seller’s breach of, or any inaccuracy in, any representation or warranty contained in this Agreement or in any certificate delivered by Seller pursuant to this Agreement;
(ii)      Seller’s breach or nonfulfillment of any covenant or agreement made by Seller in this Agreement;
(iii)      the Retained Liabilities;
(iv)      the failure of the Parties to comply with any bulk sales (including Section 6 of the Retail Sales Act (Ontario) and any other similar legislation of another province, as applicable) or fraudulent transfer laws that may be applicable to the Acquisition; or
(v)      any and all actions, suits, proceedings, demands, judgments, damages, awards, costs and expenses (including reasonable legal fees, as well as reasonable third-party fees and expenses) incurred in connection with the enforcement of the rights of any such Purchaser Indemnitee with respect to clauses (i) through (iv) above.
Notwithstanding anything in this Agreement to the contrary, for the purposes of Article VIII, the representations and warranties of Seller in this Agreement that are qualified by materiality or Material Adverse Effect shall be deemed to be made with such materiality or Material Adverse Effect qualifiers for purposes of determining whether a breach of any such representation or warranty has occurred, but shall be deemed disregarded for purposes of determining the amount of any related indemnifiable Damages.
8.3      Indemnification by Purchaser .
(a)      Subject to the limitations set forth in Section 8.1 and Section 8.5, Purchaser shall indemnify, defend, save and hold Seller and its Representatives (collectively, “ Seller Indemnitees ”) harmless from and against all Damages suffered or incurred by any Seller Indemnitees, directly or indirectly, in connection with or arising out of the following:
(i)      Purchaser’s breach of, or any inaccuracy in, any representation or warranty contained

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in this Agreement or in any certificate delivered by Purchaser pursuant to this Agreement;
(ii)      Purchaser’s breach or nonfulfillment of any covenant or agreement made by Purchaser in this Agreement;
(iii)      the Assumed Liabilities; or
(iv)      any and all actions, suits, proceedings, demands, judgments, damages, awards, costs and expenses (including reasonable legal fees, as well as reasonable third-party fees and expenses) incurred in connection with the enforcement of the rights of any such Seller Indemnitee with respect to clauses (i) through (iii) above.
Notwithstanding anything in this Agreement to the contrary, for the purposes of Article VIII, the representations and warranties of Purchaser in this Agreement that are qualified by materiality shall be deemed to be made with such materiality qualifiers for purposes of determining whether a breach of any such representation or warranty has occurred, but shall be deemed disregarded for purposes of determining the amount of any related indemnifiable Damages.
8.4      Notice of Claims . If (a) any Purchaser Indemnitee or Seller Indemnitee (an “ Indemnified Party ”) has suffered or incurred or reasonably believes it will suffer or incur any Damages for which it is entitled to indemnification under this Article VIII, (b) any Claim is instituted against a third party with respect to which any Indemnified Party intends to claim any Damages or (c) any Indemnified Party receives written notice of any Claim that has been brought or asserted by a third party against such Indemnified Party and that may be subject to indemnification hereunder (a “ Third-Party Claim ”), the Indemnified Party shall so notify the party or parties from whom indemnification is being claimed (the “ Indemnifying Party ”) with reasonable promptness and reasonable particularity in light of the circumstances then existing (the “ Notice of Claim ”). The Notice of Claim delivered pursuant to this Section 8.4 shall describe the Damages and/or Claim (the “ Asserted Liability ”) in reasonable detail and shall indicate the amount (estimated, if necessary, and to the extent feasible) of the Damages that have been or may be suffered by the Indemnified Party. The failure of an Indemnified Party to give any notice required by this Section 8.4 shall not affect any of such Party’s rights under this Article VIII or otherwise except and to the extent that such failure is materially prejudicial to the rights or obligations of the Indemnifying Party.
8.5      Limitation of Claims .
(a)      No claim for the recovery of Damages by any Indemnified Party pursuant to Sections 8.2(a)(i) or 8.3(a)(i) (or 8.2(a)(v) or 8.3(a)(iv) to the extent incurred in connection with the enforcement of the rights of such Indemnified Party with respect to Section 8.2(a)(i) or 8.3(a)(i), as applicable), may be asserted by such Indemnified Party after the expiration of the applicable survival period set forth in Section 8.1; provided , however that claims for the recovery of Damages by such Indemnified Party pursuant to Sections 8.2(a)(ii) through 8.2(a)(iv), inclusive (or Section 8.2(a)(v) to the extent incurred in connection with the enforcement of the rights of such Indemnified Party with respect to Sections 8.2(a)(ii) through 8.2(a)(iv) inclusive), or Sections 8.3(a)(ii) or (iii) (or Section 8.3(a)(iv) to the extent incurred in connection with the enforcement of the rights of such Indemnified Party with respect to Sections 8.3(a)(ii) or (iii)) may be asserted by such Indemnified Party until the expiration of the applicable statute of limitations; provided , further, that claims first asserted in writing in a Notice of Claim delivered to an Indemnifying Party prior to the expiration of the applicable survival period shall survive until such claim is fully and finally resolved. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, any Indemnified Party under Article VIII may seek to recover Damages arising out of any fraud or willful misconduct by or on behalf of Seller or Purchaser, as applicable, until the expiration of the applicable statute of limitations. For the purposes of this Article VIII, there shall be deemed “willful misconduct” by a Party only if such Party had actual knowledge at the time of taking an action or omitting to take an action and that such action or omission constituted a breach of such Party’s covenants or agreements under this Agreement.

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(b)      The Liability of Seller for indemnifiable Damages pursuant to this Article VIII shall not be payable unless and until the aggregate amount of Damages suffered or incurred by Purchaser Indemnitees exceeds $300,000; thereafter, Purchaser Indemnitee shall be entitled to seek compensation for all Damages, and Seller shall be responsible for the payment of all Damages, without regard to such $300,000 limitation set forth in this Section 8.5(b); provided , that the limitation set forth in this Section 8.5(b) shall not apply to any Damages arising from (i) any fraud or willful misconduct by or on behalf of Seller, (ii) any inaccuracies in the Seller Vacation Certificate or the Seller Materials Inventory Certificate, (iii) Seller’s indemnification obligations pursuant to Sections 8.2(a)(iii) or 8.2(a)(iv), or (iv) Section 8.2(a)(v) to the extent incurred in connection with the enforcement of the rights of such Indemnified Party with respect to Sections 8.2(a)(iii) or 8.2(a)(iv).
(c)      The Liability of Seller for indemnifiable Damages pursuant to this Article VIII shall in no event exceed the Indemnification Escrow Amount; provided , that the liability of Seller for indemnifable Damages pursuant to Section 8.2(a)(iii) or 8.2(a)(iv) (and Section 8.2(a)(v) to the extent incurred in connection with the enforcement of the rights of any Indemnified Party with respect to Section 8.2(a)(iii) or 8.2(a)(iv)) shall not be subject to any such limitations. Indemnifable Damages pursuant to Section 8.2(a)(i) (and Section 8.2(a)(v) to the extent incurred in connection with the enforcement of the rights of any Indemnified Party with respect to Section 8.2(a)(i)) shall only be recoverable from the Indemnification Escrow Fund; provided, however, indemnifable Damages pursuant to (A) Section 8.2(a)(i) and Section 8.2(a)(v), in each case, arising from a breach of or inaccuracy in the Liabilities Representation and (B) Sections 8.2(a)(ii) (and Section 8.2(a)(v) to the extent incurred in connection with the enforcement of the rights of any Indemnified Party with respect to Sections 8.2(a)(ii)) shall initially only be recoverable from the Indemnification Escrow Fund during the Escrow Period in accordance with the terms of this Agreement and the Escrow Agreement, and only after the end of the Escrow Period shall any Purchaser Indemnitee have any recourse against Seller for such Damages, subject to the limitations set forth above. Indemnifiable Damages pursuant to Section 8.2(a)(iii) or 8.2(a)(iv) or Section 8.2(a)(v) to the extent incurred in connection with the enforcement of the rights of any Indemnified Party with respect to Section 8.2(a)(iii) or 8.2(a)(iv) shall initially only be recoverable from the Indemnification Escrow Fund in accordance with the terms of this Agreement and the Escrow Agreement, and only after the earlier of the end of the Escrow Period and claims made for recovery of Damages in excess of the funds remaining in the Indemnification Escrow Fund shall any Purchaser Indemnitee have any recourse against Seller directly for such Damages, subject to the limitations set forth above, provided that any recovery of Damages shall first be recovered from the Indemnification Escrow Fund until it is fully depleted.
(d)      The Liability of Purchaser for indemnifiable Damages pursuant to this Article VIII shall not be payable unless and until the aggregate amount of Damages suffered or incurred by Seller Indemnitees exceeds $300,000; thereafter, Seller Indemnitee shall be entitled to seek compensation for all Damages, and Purchaser shall be responsible for the payment of all Damages, without regard to such $300,000 limitation set forth in this Section 8.5(d); provided , that the limitation set forth in this Section 8.5(d) shall not apply to any Damages arising from (i) any fraud or willful misconduct by or on behalf of Purchaser or (ii) Purchaser’s indemnification obligations pursuant to Section 8.3(a)(iii) (or Section 8.3(a)(iv) to the extent incurred in connection with the enforcement of the rights of any Indemnified Party with respect to Section 8.3(a)(iii)).
(e)      The liability of Purchaser for indemnifiable Damages pursuant to this Article VIII shall in no event exceed the Indemnification Escrow Amount; provided , that the liability of Purchaser for indemnifable Damages pursuant to 8.3(a)(iii) (or Section 8.3(a)(iv) to the extent incurred in connection with the enforcement of the rights of any Indemnified Party with respect to Section 8.3(a)(iii)) shall not be subject to any such limitations.
(f)      The amount of any Damage subject to indemnification under this Article VIII shall be calculated net of any insurance proceeds actually received by an Indemnified Party in connection with such Damages. If an Indemnified Party receives insurance proceeds on account of such Damage after an indemnification payment is made to it, such Indemnified Party shall promptly pay to the Indemnifying Party that made such indemnification payment the amount of such insurance proceeds at such time or times as and to the extent that such insurance proceeds are received by such Indemnified Party.

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8.6      Indemnification Escrow .
(a)      At Closing, Purchaser will deposit, in accordance with Section 2.5(b), Six Million Dollars ($6,000,000.00) of the Purchase Price (the “ Indemnification Escrow Amount ”) with the Escrow Agent as security for the indemnification obligations of Seller under Section 8.2 hereof. The Indemnification Escrow Amount shall be held by the Escrow Agent in accordance with the terms and conditions set forth herein and in the Escrow Agreement (the “ Indemnification Escrow Fund ”). All costs and expenses of the Indemnification Escrow Fund shall be split equally by Seller and Purchaser. Any portion of the Indemnification Escrow Amount not previously released by the Escrow Agent to Purchaser as a result of an indemnification claim by Purchaser Indemnitee shall be released to Seller or its designees on the Escrow Release Date; provided, however, that a portion of the Indemnification Escrow Fund, which, in the good faith, reasonable judgment of Purchaser, is necessary to satisfy any pending but unresolved or unsatisfied claims specified in any Notice of Claim theretofore delivered to Seller pursuant to Section 8.4 prior to termination of the Escrow Period with respect to facts and circumstances existing prior to expiration of the Escrow Period, shall be retained by the Escrow Agent until such claims have been resolved.
(b)      Any portion of the Indemnification Escrow Amount accordingly retained on or after the Escrow Release Date shall be released to Seller or Purchaser (as appropriate) by the Escrow Agent promptly upon resolution of each specific claim involved.
8.7      Objections to Claims .
(a)      For a period of twenty (20) Business Days from and after delivery of any Notice of Claim to Seller, Escrow Agent shall take no action regarding the Indemnification Escrow Amount hereof unless Escrow Agent shall have received written authorization from Seller to release such portion of the Indemnification Escrow Amount to the Purchaser Indemnitee. After the expiration of such twenty (20) Business Day period, Escrow Agent shall release the portion of the Indemnification Escrow Amount to the Purchaser Indemnitee in accordance with Section 8.6 hereof and Seller shall no longer have any right in, or be entitled to receive, such portion of the Indemnification Escrow Amount, provided that no such release may be made if Seller shall object in a written statement to the claim made in the Notice of Claim, and such statement shall have been delivered to the Escrow Agent and Purchaser prior to the expiration of such twenty (20) Business Day period.
(b)      In case Seller shall so object in writing to any claim or claims by Purchaser made in any Notice of Claim, Purchaser Indemnitee shall have twenty (20) Business Days following the receipt of such written objection to respond in a written statement to the objection of Seller. If after such twenty (20) Business Day period there remains a dispute as to any claims, Parent Seller and Parent Purchaser shall attempt in good faith for thirty (30) Business Days to agree upon the rights of the respective parties with respect to each of such claims. If Parent Seller and Parent Purchaser should so agree, a memorandum setting forth such agreement shall be prepared by Parent Purchaser and signed by Parent Purchaser and Parent Seller. The Escrow Agent shall be entitled to rely on any such memorandum and shall retain or release the cash from the Indemnification Escrow Fund in accordance with the terms thereof.
(c)      In the event of a Notice of Claim to Purchaser, Purchaser shall have twenty (20) Business Days from and after delivery of such Notice of Claim to Purchaser to respond in a written statement to the claim made in the Notice of Claim and deliver such written response to Parent Seller. Parent Seller shall have twenty (20) Business Days following the receipt of such written objection to respond in a written statement to the objection of Purchaser. If after such twenty (20) Business Day period there remains a dispute as to any claims, Parent Seller and Parent Purchaser shall attempt in good faith for thirty (30) Business Days to agree upon the rights of the respective parties with respect to each of such claims. If Parent Seller and Parent Purchaser should so agree, a memorandum setting forth such agreement shall be prepared by Parent Purchaser and signed by Parent Purchaser and Parent Seller.
8.8      Resolution of Conflicts . If no agreement can be reached after good faith negotiation between the Parties pursuant to Section 8.7, Purchaser or Seller may initiate formal legal action with the applicable court in the State of California to resolve such dispute. The decision of the court as to the validity and amount of any claim in

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such Notice of Claim shall be binding and conclusive upon the Parties, and notwithstanding anything in Article VIII hereof, the Parties shall be entitled to act in accordance with such decision and the Escrow Agent shall be entitled to rely on any such decision and shall release the cash from the Indemnification Escrow Fund in accordance with the terms thereof.
8.9      Third-Party Claims .
(a)      In the event an Indemnified Party becomes aware of a Third-Party Claim, such Indemnified Party shall provide notice to the Indemnifying Party of such claim in writing with reasonable promptness and reasonable particularity in light of the circumstances then existing. The notice provided shall describe the Third-Party Claim in reasonable detail and shall indicate the amount (estimated, if necessary, and to the extent feasible) of the Damages that have been or may be suffered by the third party. The failure to give any notice required by this Section 8.9 shall not affect any of Purchaser’s rights under this Article VIII or otherwise except and to the extent that such failure is materially prejudicial to the rights or obligations of Seller. Subject to Section 8.9(d), the Indemnifying Party shall have thirty (30) days after receipt of such notice to elect, at its option, to assume the defense of any such Third-Party Claim in which case: (i) the attorneys’ fees, other professionals’ and experts’ fees and court or arbitration costs incurred by the Indemnifying Party in connection with defending such Third-Party Claim shall be payable by such Indemnifying Party; and (ii) the Indemnified Party shall cooperate as reasonably requested by the Indemnifying Party in the defense of such Third-Party Claim (at the expense of the Indemnifying Party).
(b)      The Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement except with the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed) to which the Indemnifying Party is obligated to furnish indemnification pursuant to this Agreement; provided that the consent of the Indemnified Party shall not be required if all of the following conditions are met: (i) the terms of the judgment or proposed settlement include, as an unconditional term thereof, the giving to the Indemnified Parties by the third party of a release of the Indemnified Parties from all Liability in respect of such Third-Party Claim, (ii) there is no finding or admission of (A) any violation of Law by the Indemnified Parties (or any Affiliate thereof) or (B) any violation of the rights of any Person, (iii) there is no effect on any other action or claims of a similar nature that may be made against the Indemnified Parties (or any Affiliate thereof), (iv) the sole form of relief is monetary damages which are paid in full by the Indemnifying Party and (v) the Third-Party Claim is not related to, either directly or indirectly, the Acquired Proprietary Rights or the Acquired Technology. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle, admit liability or otherwise dispose of any such Third-Party Claim without prior written consent; provided that, in such event, it shall waive any right to indemnity therefor by the Indemnifying Party for such Claim unless the Indemnifying Party shall have consented to such payment or settlement, admission of liability or disposition of any such Third-Party Claim (such consent not to be unreasonably withheld or delayed).
(c)      In the event that (i) an Indemnified Party gives Notice of Claim to the Indemnifying Party and the Indemnifying Party fails or elects not to assume the defense of a Third-Party Claim which the Indemnifying Party had the right to assume under this Section 8.9, (ii) the Indemnifying Party is not entitled to assume the defense of such Third-Party Claim pursuant to this Section 8.9 or (iii) the Indemnified Party and the Indemnifying Party are both named parties to the proceedings and the Indemnified Party reasonably concludes that the representation of both parties by the same counsel would be inappropriate due to the actual or potential differing interests between the Indemnifying Party and the Indemnified Party, the Indemnified Party shall have the right, with counsel of its choice, to defend, conduct and control the defense of such Third-Party Claim. The Indemnifying Party will provide reasonable cooperation in the defense of such Third-Party Claim. The Indemnified Party shall have the right to consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim on such terms as it may deem appropriate; provided, however, that the amount of any settlement made or entry of any judgment consented to by the Indemnified Party without the consent of the Indemnifying Party shall not be determinative of the validity of the claim, except with the consent of the Indemnified Party (not to be unreasonably withheld or delayed). If the Indemnifying Party does not elect to assume a defense of such Third-Party Claim which it has the right to assume hereunder, the Indemnified Party shall have no obligation to do so.

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(d)      Notwithstanding anything to the contrary contained herein, the Indemnifying Party will not be entitled to assume (or in the case of Section 8.9(d)(iv), to continue to be entitled to assume) the defense of such Third-Party Claim if:
(i)      the Third-Party Claim seeks, in addition to or in lieu of monetary damages, any injunctive or other equitable relief (except where non-monetary relief is merely incidental to a primary claim or claims for monetary damages);
(ii)      the Third-Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation;
(iii)      the Third-Party Claim would reasonably be expected to give rise to Damages which are more than the amount indemnifiable by the Indemnifying Party pursuant to this Article 8; or
(iv)      upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such Third-Party Claim.
(e)      Notwithstanding anything to the contrary contained herein, Seller will not be entitled to assume the defense of any Third-Party Claim related to, either directly or indirectly, the Acquired Proprietary Rights or the Acquired Technology.
8.10      Survival of Indemnification Claims . The indemnification obligations set forth in this Article VIII shall survive the Closing as provided herein.
8.11      Tax Effect of Indemnification Payments . All indemnity payments made by Seller to Purchaser Indemnitees pursuant to this Agreement shall be treated for all Tax purposes as adjustments to the Purchase Price, unless otherwise required by Law.
8.12      Effect of Investigation . The right to indemnification, payment of Damages or for other remedies based on any representation, warranty, covenant or obligation of Seller or Purchaser contained in or made pursuant to this Agreement shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at anytime, whether before or after the execution and delivery of this Agreement or the date the Closing occurs, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation. The waiver of any condition to the obligation of Seller or Purchaser to consummate the Acquisition, where such condition is based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, shall not affect the right to indemnification, payment of Damages, or other remedy based on such representation, warranty, covenant or obligation.
8.13      Remedies . Following the Closing, this Article VIII shall provide the sole and exclusive remedy of an Indemnified Party for any Damages arising under the matters set forth in Sections 8.2 or 8.3 as applicable (and as so limited herein); provided, however, that this Section 8.13 shall not apply in the case of fraud or willful misconduct; provided, further, that nothing in this Section 8.13 or elsewhere in this Agreement shall affect the Parties’ rights to specific performance or other equitable remedies that do not involve payment or other monetary compensation from the Indemnifying Party to the Indemnified Party with respect to the covenants and agreements in this Agreement that are to be performed at or after the Closing.
ARTICLE IX     
GENERAL
9.1      Notices . All notices, requests, claims, demands or other communications that are required or may be

57

given pursuant to the terms of this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered, if delivered by hand, (b) one Business Day after transmitted, if transmitted by a nationally recognized overnight courier service (providing written proof of delivery), (c) when sent by facsimile (with confirmation of receipt), or (d) three Business Days after mailing, if mailed by registered or certified mail (return receipt requested), to the parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.1):
(a)      If to Purchaser:
QUALCOMM Incorporated
5775 Morehouse Drive
San Diego, California 92121
Attention: General Counsel
Fax: (858) 658-2503
With a simultaneous copy to:
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: David R. Young
Fax: (858) 638-5121
Tel: (858) 638-6821
(b)      If to Seller:
Integrated Device Technology, Inc.
6024 Silver Creek Valley Road
San Jose, CA 95138
Attention: General Counsel
Fax: (408) 284-2775
With a simultaneous copy to:
Latham & Watkins LLP
140 Scott Dr.
Menlo Park, CA 94025
Attention: Mark V. Roeder
Telephone: (650) 328-4600
Fax: (650) 463-2600
9.2      Severability; Parties in Interest . If any provision of this Agreement for any reason shall be held to be illegal, invalid or unenforceable, such illegality shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such illegal, invalid or unenforceable provision had never been included herein. Nothing in this Agreement, express or implied, is intended to confer upon any Person not a Party to this Agreement any rights or remedies of any nature whatsoever under or by reason of this Agreement.
9.3      Assignment; Binding Effect; Benefit . Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party (whether by operation of Law or otherwise) without the prior written consent of the other Parties except that Purchaser shall be permitted to assign its rights, interests and obligations

58

to an Affiliate of Purchaser without obtaining any consent from the other Parties (provided however, without the prior written consent of Seller, Purchaser shall not make any such assignment if such assignment would reasonably be expected to have adverse tax consequences to Seller or a Seller Affiliate). Any purported assignment, unless so consented to or permitted as provided herein, shall be void and without effect. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the Parties or their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement.
9.4      Incorporation of Exhibits . All Exhibits and Schedules attached hereto and referred to herein are hereby incorporated herein and made a part of this Agreement for all purposes as if fully set forth herein.
9.5      Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF CALIFORNIA. COURTS WITHIN THE STATE OF CALIFORNIA WILL HAVE JURISDICTION OVER ALL DISPUTES BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES HEREBY CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HERETO WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY’S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
9.6      Waiver of Jury Trial . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
9.7      Headings; Interpretation . The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.
9.8      Counterparts; Facsimiles . This Agreement may be executed and delivered (including by facsimile or electronic transmission) in two or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
9.9      Entire Agreement . This Agreement (including the Schedules and Exhibits attached hereto) and the Transaction Documents executed in connection with the consummation of the Acquisition contain the entire agreement between the Parties with respect to the subject matter hereof and related transactions and supersede all prior agreements, written or oral, with respect thereto.
9.10      Waivers and Amendments; Non-Contractual Remedies; Preservation of Remedies . This Agreement may be amended, superseded, cancelled, renewed or extended only by a written instrument signed by all of the Parties. The provisions hereof may be waived only in writing signed by all of the Parties. No delay on the part

59

of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege. Except as otherwise provided herein, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any Party may otherwise have at Law or in equity.
9.11      Specific Performance; Preservation of Remedies . The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is agreed that the Parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at Law or in equity. Except as otherwise provided herein, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any Party may otherwise have at Law or in equity.
9.12      Attorneys’ Fees. If any party to this Agreement brings an action to enforce its rights under this Agreement, the prevailing party shall be entitled to recover its costs and expenses, including reasonable attorneys’ fees, out-of-pocket expenses and court costs incurred in connection with such action, including any appeal therefrom.


[ Signatures appear on next page ]



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IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties have caused this Asset Purchase Agreement to be signed in their respective names by their duly authorized representatives as of the date first above written.
 
 
QUALCOMM INCORPORATED
 
By:
/s/William E. Keitel
 
Name:
William E. Keitel
 
Title:
Executive Vice President and
Chief Financial Officer

 
 
QUALCOMM CANADA INC.
 
By:
/s/William E. Keitel
 
Name:
William E. Keitel
 
Title:
Vice President and
Chief Financial Officer














[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties have caused this Asset Purchase Agreement to be signed in their respective names by their duly authorized representatives as of the date first above written.

 
 
INTEGRATED DEVICE TECHNOLOGY, INC.
 
By:
/s/Theodore L. Tewksbury III
 
Name:
Theodore L. Tewksbury III
 
Title:
President and Chief Executive Officer


 
 
IDT CANADA INC.
 
By:
/s/Theodore L. Tewksbury III
 
Name:
Theodore L. Tewksbury III
 
Title:
President


[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

EXHIBIT A

FORM OF ESCROW AGREEMENT


EXHIBIT B
FORM OF LICENSE AGREEMENT






EXHIBIT C
RETAINED RIGHTS




EXHIBIT D

FORM OF TRANSITION SERVICES AGREEMENT




EXHIBIT E

FORM OF TRIPARTITE MUTUAL TERMINATION AND TRANSFER AGREEMENT




EXHIBIT F
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT



EXHIBIT G

FORM OF BILL OF SALE


EXHIBIT H

FORM OF PATENT ASSIGNMENT


EXHIBIT I

FORM OF TRADEMARK ASSIGNMENT


EXHIBIT J

FORM OF TORONTO SUBLEASE AGREEMENT


EXHIBIT K

FORM OF MONTREAL SUBLEASE AGREEMENT










FOUNDRY AGREEMENT
This FOUNDRY AGREEMENT (the “Agreement”) is made this 3 rd day of August, 2009, (the “Effective Date”), by and between INTEGRATED DEVICE TECHNOLOGY, INC ., a Delaware corporation with its principal place of business at 6024 Silver Creek Valley Road, San Jose, CA 95138 (“ IDT ”), Taiwan Semiconductor Manufacturing Co., Ltd., a company duly incorporated under the laws of the Republic of China with its principal place of business at No. 8, Li-Hsin Rd., 6, Science-Based Industrial Park, Hsin-Chu, Taiwan 300-77, R.O.C., and TSMC North America, a California corporation with its principal place of business at 2585 Junction Avenue, San Jose, CA 95014 (together with Taiwan Semiconductor Manufacturing Co., Ltd., “ TSMC ”).
WHEREAS, IDT has designed and developed certain semiconductor products which it sells to the commercial market and wishes to contract with TSMC for the manufacture of such products;
WHEREAS, IDT has developed certain proprietary semiconductor manufacturing process technology associated with such semiconductor products, and desires to provide, license and qualify such process technology for use by TSMC at TSMC facilities solely for the purpose of manufacturing products for IDT;
WHEREAS, TSMC has the capacity and skill to manufacture high quality semiconductor products in volume;
WHEREAS, IDT and TSMC desire to establish a strategic supplier relationship where TSMC will utilize its capacity and proprietary process technology to manufacture certain semiconductor products for IDT; and
WHEREAS, the parties now wish to establish the terms and conditions for the licensing and provision of manufacturing process technology from IDT to TSMC, the qualification of TSMC processes and facilities for manufacture of IDT products, the fabrication of semiconductor products by TSMC and provision of related services, and the purchase of the same by IDT from TSMC, as more specifically set forth herein;

NOW, THEREFORE, in consideration of the mutual promises of the parties, and of good and valuable consideration, it is agreed by and among the parties as follows:
1. DEFINITIONS
The following capitalized terms, and other capitalized terms defined elsewhere in this Agreement, will have the meanings ascribed thereto wherever used in this Agreement and terms in the singular shall encompass and include the plural and words in the plural shall encompass and include the singular. Terms not defined herein shall be given their plain English meaning; provided, however, those terms, acronyms and phrases known in the semiconductor industry that are not defined shall be interpreted in accordance with their generally accepted industry meaning:
1.1      “Affiliate” means an entity that, through one or more intermediaries, controls, is controlled by or is under common control with IDT or TSMC. For this purpose, “control” will mean either, ownership of more than 50% of the voting securities of the entity, or having possession, of the power to direct or cause the direction of the management and policies of such entity. An entity shall be deemed an Affiliate only for so long as such control exists.


1.2      “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions located in the jurisdiction in which the person to whom notice is to be provided is located are authorized or obligated by law or executive order to close.
1.3      “Change of Control” means a merger or consolidation with another entity resulting in a change in the possession, directly or indirectly, of the power, vote more than fifty percent (50%) of the voting securities with respect to such party.
1.4      “Confidential Information” shall mean any information disclosed by one party to the other in connection with this Agreement, whether in electronic, written, graphic, oral, machine readable or other tangible or intangible form, that is marked or identified at the time of disclosure as “Confidential” or “Proprietary” or in some other manner so as to clearly indicate its confidential nature.
1.5      “ Current Forecast ” shall mean, at any given time, the most recently accepted Forecast by TSMC.
1.6      “Die” shall mean one of the integrated circuit devices on a Wafer.
1.7      “Engineering Change” shall mean any change to the process, materials, equipment, Technology, location and any other items listed in TSMC’s standard specifications for a Qualified Process, including those changes that would affect the performance, function, Yield or reliability of the Wafers.
1.8      “Engineering Wafers” shall mean prototype Wafer or Wafers required for a Qualification Plan or delivered to IDT for testing pursuant to IDT’s request.
1.9      “Epidemic Failure” shall mean Wafer failures (i) having the same or similar cause, (ii) occurring within three (3) years after the date of delivery of the Wafers to IDT, (iii) resulting from defects in materials, TSMC’s workmanship, TSMC Manufacturing Process Technology , (iv) having a consecutive two-month failure rate equal to or in excess of 1.0% of total number of Wafers delivered to IDT during applicable period (“Threshold Failure Rate”), and (v) not caused by any Exclusive Event (as defined in Section 8.3). The Threshold Failure Rate shall apply to all Wafers unless IDT and TSMC have agreed in writing to an alternative metric for a particular Lot.
1.10      “Gross Die per Wafer” means the total quantity of Die candidates on each Wafer, whether or not the Die is operational when the Wafer has completed the manufacturing process.
1.11      “IDT Manufacturing Process Technology” means (a) the IDT-proprietary manufacturing process Technology applicable to the manufacture of the current Products as further described in the Transfer Plan or otherwise provided by IDT to TSMC during the term of this Agreement. and (b) any Improvements to such Technology made by IDT.
1.12      “ Improvements ” means with respect to any Technology, all discoveries, innovations, improvements, enhancements, derivative works, or modifications of or to such Technology
1.13      “Intellectual Property Rights” shall mean rights in and to all (a) Patents, (b) copyrights, (c) unpatented information, trade secrets, data, or materials, (d) mask work rights, and (e) any other intellectual or other proprietary rights of any kind now known or hereafter recognized in any jurisdiction, but not for purposes of this Agreement, any trademarks, service marks, trade names, trade dress, domain names and similar rights.


1.14      “Lot” means a group of Wafers which are processed simultaneously. Each Lot will be assigned a specific alpha/numeric identification that distinguishes it from any other group that contains the same type of Die so that each Lot can be separately identified.
1.15      “Lead Time” shall mean the time between the date an order is accepted by TSMC and the date the Wafers are made available for shipment by TSMC. The Lead Time will vary depending on the Wafers ordered and will be established in advance by mutual agreement of the parties.
1.16      “Minimum Yield” means, with respect to a particular Wafer, the minimum acceptable Yield for such Wafer as set forth in the applicable Specifications. If the Minimum Yield is not set forth in the applicable Specifications, the Minimum Yield shall be set to sixty-five percent (65%) of the average Yield of the first three hundred (300) completed Wafers for such Product.
1.17      "Net Die per Wafer" means the total quantity of Die on a Wafer that pass the Probe Program applicable to that Wafer.
1.18      “Patent” means U.S. and foreign patents and patent applications claiming any inventions or discoveries made, developed, conceived, or reduced to practice, including all divisions, substitutions, continuations, continuations-in-part, and any reissues, re-examinations and extensions thereof.
1.19      "Probe Program" means the specific set of electrical and mechanical tests provided by IDT to perform Wafer level test respecting the conformance of Wafers to the applicable Specifications.
1.20      “Product” shall mean certain specific IDT-proprietary integrated circuit devices to be manufactured as Dies on Wafers by TSMC.
1.21      “Qualification Plan” shall mean the qualification tests and schedules to be agreed upon by the parties under which a Qualified Process is established and tested at the TSMC Facilities and the Wafers are manufactured using the Qualified Process to meet the Specifications, as may be amended by the parties for each Qualified Process.
1.22      “Qualification” or “Qualified” shall mean the mutual determination that the Wafers meet the Specifications in accordance with the Qualification Plan.
1.23      “Qualified Process” shall mean the Wafer manufacturing processes used at the TSMC Facilities for production of Wafers and any other Wafer manufacturing process approved by the parties to produce Wafers on IDT’s behalf.
1.24      “ Scrap ” means any Wafer that either (a) is not in conformance with the requirements of this Agreement for Wafers to be sold to IDT, (b) that IDT notifies TSMC may be scrapped if it has been in the Wafer Bank for within fifteen (15) months from creation, or (c) has been in the Wafer Bank for more than fifteen (15) months from creation.
1.25      “Specifications” shall mean the IDT specifications that are agreed upon by TSMC, including design and performance specifications, Yield requirements and reliability metrics, for each Product. The initial Specifications are attached hereto as Exhibit A.
1.26      “Technology” means any and all technical information, specifications, drawings, records, documentation, works of authorship or other creative works, ideas, algorithms, models, databases, ciphers/


keys, systems architecture, network protocols, research, development, and manufacturing information, software (including object code and source code), application programming interfaces (APIs), innovations, logic designs, circuit designs, technical data, manufacturing processes, recipes and methods.
1.27      “Transfer Plan” means the plan agreed upon by the parties in writing and attached hereto as Exhibit C describing the process by which IDT will provide TSMC access to the applicable IDT Process Technology for modification and implementation by the parties at the applicable TSMC Facilities to manufacture Wafers for IDT.
1.28      “ TSMC Direct Competitor ” means a company that derives a significant portion of its annual revenue from performing wafer foundry services.
1.29      “TSMC Facilities ” means the TSMC physical manufacturing and managed facilities located at Fab 3 in Hsin-chu, Fab 8 in Hsin-chu, and such other facilities owned or controlled by TSMC as may be qualified by IDT (and specifically approved by IDT in writing) to produce Wafers for IDT.
1.30      “ TSMC Manufacturing Process Technology ” shall mean (a) a semiconductor manufacturing method or technology conceived, developed, licensed or owned by TSMC either independently or jointly with a third party and (b) any Improvements to such Technology made by TSMC.
1.31      Wafer Bank” means an inventory of Wafers manufactured by TSMC and held in inventory prior to metallization for release and purchase by IDT in accordance with the terms and conditions of this Agreement.
1.32      “Wafers” shall mean the direct material substrate (raw material) which as a result of the semiconductor fabrication process are incrementally transformed to consist of several operational Dies in unpackaged form for the Products to be manufactured by TSMC using the Qualified Processes.
1.33      “Yield” means the percentage represented by Net Die per Wafer divided by Gross Die per Wafer.
2.      PROCESS IMPLEMENTATION AND QUALIFICATION
2.1      IDT Process Technology Transfer. IDT will deliver to TSMC the IDT Process Technology to be implemented at the TSMC Facilities in accordance with the provisions of the Transfer Plan. Without limiting the foregoing, it is the intention of IDT to transfer all masks for .35 micron and larger geometry IDT Process Technologies from IDT Fab 4 to a TSMC Facility solely for use in the manufacture of Wafers by TSMC. With respect to 0.18 micron and below IDT Manufacturing Process Technologies that are transferred to TSMC Facilities, TSMC will create new masks at IDT’s expense. For masks provided by IDT, TSMC may use such masks or at TSMC’s sole discretion and expense choose to build new masks, except that if any single mask provided by IDT is defective upon receipt by TSMC during the process transfer time period, then TSMC shall build a new mask to replace the defective mask at IDT’s expense with IDT’s approval. Both IDT and TSMC will contribute necessary technical resources and personnel for successfully implementing the Transfer Plan and incorporating the IDT Process Technology, as modified per the Transfer Plan, at the TSMC Facilities within the applicable schedule set forth in the Transfer Plan.
2.2      Engineering Wafer Run. In accordance with the mutually agreed Specifications and Qualification Plan for a particular Product and pricing terms, TSMC will fabricate Engineering Wafers for such Product based on the applicable process Technology at the designated TSMC Facility and deliver the


Engineering Wafers to IDT.
2.3      Evaluation. IDT will evaluate the Engineering Wafers provided by TSMC in accordance with the applicable Qualification Plan. If the Engineering Wafers meet the Specifications, the manufacturing process at the designated TSMC Facility shall be deemed a “Qualified Process” for the applicable Product.
2.4      Engineering Changes .
(a)      TSMC will give IDT prior written notice of any Engineering Change, and will supply engineering and experimental data supporting such change and obtain IDT’s written approval, all in accordance with TSMC’s standard Engineering Change Notice procedure.
(b)      In addition, IDT may also request, in writing, that TSMC incorporate Engineering Changes into Wafers or the manufacturing processes to manufacture Wafers. Such requests will include a description of the proposed change reasonably sufficient to permit TSMC to evaluate the feasibility of making such Engineering Changes. TSMC will use commercially reasonable efforts to, within five (5) business days, advise IDT in writing of the feasibility of the requested Engineering Change and the terms and conditions under which TSMC would achieve the requested Engineering Change. The requested Engineering Change would only be implemented after IDT and TSMC reach mutual agreement that such requested Engineering Change is warranted and feasible and on a plan to implement such requested Engineering Change. If an Engineering Change, as determined by the parties, is required for safety or regulatory requirements, TSMC will immediately implement such Engineering Change according to the terms and conditions as mutually agreed upon by the parties in writing.
2.5      Technical Assistance . TSMC agrees to provide IDT with commercially reasonable technical assistance and advice on an ongoing as needed basis at no extra cost to IDT unless agreed to by IDT in writing. Such technical assistance shall include providing reasonable information, failure analysis support, device engineering or other expertise needed to handle Product returns, field failure analysis, design support, and device engineering and process improvement and implementation support.
2.6      Tooling . Tooling purchased or manufactured by TSMC and paid for by IDT shall become and remain the property of IDT, including all Intellectual Property Rights related thereto that is not created, owned or licensed by TSMC. TSMC agrees that such tooling will be used by TSMC only for the benefit of IDT and shall be delivered to IDT upon request. TSMC agrees to provide IDT with a complete inventory of all such tooling upon written request. All tooling shall be properly used subject to ordinary wear and tear, shall be maintained and/or repaired at TSMC’s expense and shall bear a label (in conspicuous letters so as to be readily seen and not readily removable or defaceable) indicating that such Tooling is the property of IDT.
3.      QUALITY MANUFACTURING AND REPORTING REQUIREMENTS
3.1      Quality Requirements .
(a)      Without limiting any other provision set forth in this Agreement, TSMC will manufacture Wafers in compliance with the Specifications and, to the extent agreed in writing by TSMC, as well the following additional IDT specifications: (i) 9.1.QCC-4000, Quality System Requirements for Manufacturing Subcontractors, Material Companies and Services Group and (ii) 9.1.2.SOC-0601, Company Requirements for the Manufacture of Foundry Wafers. IDT may adopt additional requirements


from time to time and IDT will notify TSMC in advance regarding any such requirements, and to the extent agreed in writing by TSMC, such requirement may be included into a part of the Specifications.
(b)      At all times during the term of this Agreement, TSMC shall maintain certifications under ISO 9001, TS16949 and ISO 14001. Upon request by IDT, TSMC shall provide IDT with copies of the appropriate certificates of registration verifying TSMC’s compliance with the foregoing certifications.
3.2      Failure and Defect Reporting . The parties will notify each other in writing of any detected failure mechanisms and/or defects which are present, or which they suspect might be present, in completed Wafers.
3.3      Non-Conforming Wafers ; Scrap Disposal. TSMC shall have established, documented, and maintained procedures to ensure that Wafers that do not conform to the Specifications are prevented from unintended use or shipment to IDT and from potential unauthorized use by any third party. Nonconforming Wafers shall otherwise be held in a secure location until they can be promptly scrapped by TSMC. TSMC shall destroy and properly dispose of all Scrap or recycle in such a way in order to prevent any unauthorized sale of any Wafers, subject to IDT approval. TSMC will maintain Scrap procedures and will record all Wafers scrapped including Lot history, reason for scrap and IDT's approval for scrap. IDT shall have the right to audit the scrap procedures and to witness scrap of IDT's material with reasonable notice.
3.4      Business Continuity. TSMC shall implement and maintain at all times during the term of this Agreement a business continuity program that is reasonably calculated to minimize the impact of potential interruptions on TSMC’s operations, including to the extent reasonable, as a result of force majeure events. TSMC shall share details of its business continuity program with IDT upon IDT’s request. In the actual event of a business interruption, TSMC shall use commercially reasonable efforts to implement the measures identified in its business continuity plan. TSMC also agrees to keep IDT reasonably informed of the progress of any such undertakings.
3.5      Manufacturing Metrics. TSMC agrees to provide reasonable customary manufacturing metrics to IDT including data applicable to Wafers as mutually agreed. In addition, TSMC agrees to provide reasonable raw data for these metrics such that the data could be calculated using IDT’s standard formulae, and to enable IDT to access this data from TSMC in real time.
3.6      Work In Process Reporting. On a daily basis, TSMC will provide IDT with data feeds regarding with the work in process, including information such as the purchase order number, the Release Request number, Lot number, total number of process steps, number of process steps completed, process step name (provided that the process step name for Wafers at the Wafer Bank shall be “Wafer Bank”), total number of masking steps, number of masking steps completed, start date, expected ship date and committed ship date.
3.7      Reliability Records and Data . TSMC agrees to provide the following information relating to the quality or reliability of the Wafers and the quality systems used to comply with the required standards and specifications:
(a)      TSMC will maintain history records for all Lots during the term of this Agreement and for a period of five (5) years from the termination of this Agreement. TSMC will provide IDT with access to all Lot history records, upon reasonable notice to TSMC, both during and after the term of this Agreement, and if mutually agreed in writing, TSMC will transfer all Lot history records to IDT.


(b)      TSMC agrees to provide reasonable reliability data which demonstrates the ability of the Qualified Processes used for all Wafers to meet the agreed-upon reliability criteria set forth in the applicable Specifications. Any exceptions to these criteria will be reviewed on a Product-by-Product basis. IDT shall have the right to use reliability data concerning the Wafers for the purposes of preparing sales and promotional information concerning the Wafers for IDT’s customers, provided however that such reliability data will be transmitted subject to a non-disclosure agreement having terms and conditions no less restrictive than those terms with respect to confidentiality in this Agreement. TSMC’s reliability testing methods and conditions shall be subject to the review of IDT, and shall be changed as mutually agreed in writing.
(c)      TSMC agrees to maintain sufficient documentation regarding all Wafers sold to IDT for five (5) years after the applicable shipment. All Wafers shall be traceable to a unique Lot number assigned by TSMC. Lot traceability for Wafers shall be maintained throughout the entire process from fabrication through verification testing, packing and shipment. Traceability and full history for Wafers shall include substrate vendor identification and lot number, quality control data, and process deviation notes.
(d)      Subject to TSMC’s reasonable security, confidentiality and personal conduct requirements, on at least seven (7) days prior written notice and the schedules and agenda as mutually agreed upon by the parties in writing, IDT may conduct an on-site inspection and audit of the process and manufacturing records relevant to the Wafers, provided that the audits will occur no more often than twice annually. Upon prior notice to TSMC of at least thirty (30) days and with TSMC’s prior consent, such consent not to be unreasonably withheld, IDT may bring IDT customers to conduct on-site visits and inspection of the TSMC Facilities and applicable process and manufacturing records relevant to the Wafers, provided IDT and its customers have executed a non-disclosure agreement relating thereto with TSMC.
3.8      Process Control Information, On-Line Information Access . On an ongoing basis as reasonably requested by IDT, TSMC will provide IDT with process control information using a communication mechanism that is mutually agreed. Such information may include: process and electrical test Yield results, calibration schedules, environmental monitor information for air, gases and DI water, documentation of operator qualification and training, documentation of traceability, process verification information, and trouble report currently available from TSMC’s document control center in a format pursuant to TSMC’s standard document retention policy. IDT will have access to the foregoing information and reports and other relevant information.
4.      CAPACITY PLANNING AND ORDERING PROCESS
4.1      Manufacturing Relationship. IDT agrees to purchase Wafers from TSMC throughout the term of this Agreement in accordance with the terms and conditions of this Agreement as may be ordered by IDT from time to time at its sole discretion. Except for the right of first negotiation set forth in Section 4.2, and subject to TSMC’s Intellectual Property Rights including trademarks, this Agreement shall not be construed to limit in any way IDT’s rights to contract with other parties to manufacture, assemble, test, design or develop products, or to engage in such activities itself.
4.2      Right of First Negotiation. During the term of this Agreement, TSMC shall have a right of first negotiation with respect to all future business related to the manufacture of wafers for IDT. Notwithstanding the foregoing, TSMC shall have no right of first negotiation with respect to any future business related to the manufacture of wafers for IDT if (i) IDT previously granted such business to a third party or (ii) the manufacture of wafers requires the reuse of Technology that is only available at the facilities of an existing third party supplier and TSMC is unable to provide a solution that is compatible


therewith.
4.3      Forecasts and Capacity Commitment. In July of each year, IDT and TSMC will agree to a twelve (12) month demand support plan by technology and by TSMC fab for the subsequent year (the “Annual Capacity Support Plan”). By the fifteen (15 th ) day of each calendar month during the term of this Agreement, IDT will provide to TSMC, in writing, a rolling 1 year forecast by quarter for IDT’s volume requirements for Wafers by technology and by TSMC fab (a “ Forecast ”), with each Forecast covering the one (1) year period commencing at the beginning of the immediately subsequent month. The Forecast will be divided into quarterly segments, wherein the first quarter of the Forecast will be binding to IDT, the second quarter will be subject to IDT’s commercially reasonable efforts to follow through with orders, and the third and fourth quarters of the Forecast will be considered budgetary. TSMC may only reject a Forecast in writing within ten (10) days of receipt thereof if:
(a)      The forecast has an increase over the last accepted forecast at the same technology and fab of greater than 5% for the first quarter period or;
(b)      The forecast has an increase over the last accepted forecast at the same technology and fab of greater than 15% for the second quarter period or;
(c)      The forecast has an increase over the last accepted forecast at the same technology and fab of greater than 20% for the third and forth quarter or;
(d)      The total one (1) year forecast is greater than greatest of the last accepted forecast or 36,000 wafers per quarter.
(e)    For any one month during the first six (6) months of the forecast, IDT’s forecast is equivalent to or greater than one hundred forty percent (140%) of Annual Capacity Support Plan for that given month at the same technology and same fab, This condition (e) shall apply until such time as IDT has sufficiently qualified a second .18 micron fab facility at TSMC at which time the parties shall agree on an increase in the planning capacity.
Any forecast not specifically rejected in writing by TSMC during such period shall be deemed accepted by TSMC. The accepted forecast shall constitute TSMC’s minimum supply commitment for the applicable period, provided that the volumes in such accepted forecast is equivalent to or less than fourteen thousand (14,000) pieces of 8-inch wafers per calendar month and thirty-six thousand (36,000) pieces of 8-inch wafers per calendar quarter (the “TSMC Maximum Capacity Support”). The foregoing Forecast and TSMC Maximum Capacity Support shall only apply to the Products defined in Exhibit B.
4.4      Cycle Times.
(a)      TSMC shall use commercially reasonable efforts to ensure the following: (i) Wafers released from the Wafer Bank in accordance with Section 4.6(a) below will be processed at 1.0 days per masking layer provided the daily release quantity does not exceed 500 wafers per day in Fab 8 and 300 wafers per day in Fab 3 and (ii) non-bank Wafers shall be processed at 1.3 days per masking layer for the Products defined in Exhibit B Section 1.3; and at 1.4 days per masking layer for the Products defined in Exhibit B Section 1.4;1.5 and 1.6.
(b)      Notwithstanding the foregoing, at each TSMC Facility qualified for running IDT products utilizing wafer banking, TSMC reserve three (3) “hot lots” for Engineering Wafers to be


processed at a maximum of 0.8 days per masking layer, for no additional expediting fee.
(c)     The foregoing cycle time in this Section 4.4 shall only apply to the Products defined in Exhibit B.
4.5      Purchase Orders.
(a)      IDT will purchase Wafers from TSMC pursuant to purchase orders issued by IDT referencing this Agreement that specify the purchase order number, type and quantity of Wafers ordered, the place(s) of delivery, and required delivery date(s). IDT may issue either individual purchase orders or blanket purchase orders. Purchase orders may take the form of electronic submissions in a mutually-acceptable format so long as they contain the same information specified above for purchase orders, even if such submissions may not be referred to specifically as “purchase orders” when transmitted.
(b)      TSMC shall provide written order acknowledgements by confirmed facsimile, electronic transmission, or other mutually-agreed means within three (3) Business Days of receipt of purchase orders, and any purchase order not specifically rejected in writing by TSMC during such period shall be deemed accepted.
(c)      TSMC shall accept any purchase order submitted by IDT to the extent that such purchase order is consistent with the Forecast (plus any agreed upon upside support), Lead Times, and minimum Lot size requirements. The minimum starting Lot size for production Wafers is twenty-five (25) Wafers. The minimum starting Lot size for Engineering Wafers shall be twelve (12) Wafers. From time to time both parties will meet and discuss minimum starting lot size for specific bank products.
(d)      IDT will provide final Product definitions no later than one (1) week prior to the start date of production for such Product. In the event that IDT fails to provide final Wafer definitions by such date, then the parties shall mutually agree upon a revised production schedule for such Wafer.
(e)      In the event of any discrepancy between a purchase order or sales acknowledgment form or other notice and the terms of this Agreement, this Agreement shall prevail and any different or additional terms shall be deemed rejected.






4.6      Wafer Bank.
(a)      Blanket Purchase Orders . TSMC agrees to maintain the Wafer Bank in the amounts requested by IDT pursuant to written purchase orders referencing this Agreement that specify the type and


quantity of Wafers to placed in the Wafer Bank. TSMC agrees to start Wafers as requested and process to a mutually-agreed Wafer Bank process step to hold for future Release Requests (as defined below). Notwithstanding the foregoing, the total of number of Wafers in the Wafer Bank during any calendar quarter shall be equal to or less than fifty percent (50%) of the volume of Wafers set forth in the Current Forecast for the following quarter as requested by IDT for each TSMC Facility. The Wafer Bank will be arranged such that inventory carried in the Wafer Bank will be deemed inventory of TSMC for financial accounting purposes.
(b)      Release Requests . IDT may from time to time submit written requests to TSMC that specify the type and quantity of Wafers to be released from the Wafer Bank and further processing instructions (the “ Release Requests ”). TSMC will release the requested Wafers within twenty-four (24) hours of receipt of a Release Request, provided that such Release Request is received by TSMC during normal business hours on a Business Day. The minimum Lot size for a Release Request is five (5) Wafers for production releases or two (2). Wafers for engineering releases. Wafers released from the Wafer Bank will be invoiced at the current production pricing on the expected date of shipment.
(c)      Unused Inventory . After Wafers have been in the Wafer Bank for fifteen (15) months, IDT may then elect to either (i) instruct TSMC to designate such Wafers as Scrap, in which case TSMC will invoice IDT fifty percent (50%) of the then-current price of such Wafers, or (ii) submit a Release Request for such Wafers in accordance with Section 4.6 (b).
4.7      Cancellations . IDT may cancel any purchase order or portion thereof for Wafers upon written notice to TSMC prior to the date of shipment by TSMC. Where notice of cancellation is given prior to the start of production of the ordered Wafers, IDT will not liable for any cancellations charge. Where notice of cancellation is given after the start of production of the ordered Wafers, IDT agrees in such instance to pay TSMC as TSMC’s sole and exclusive remedy and IDT’s sole and exclusive obligation for such cancellation all verified, a prorated price of Wafers based upon the layers completed.
4.8      Reschedules . IDT may reschedule the delivery of any purchase order or portion thereof for Wafers, without charge, upon notice to TSMC prior to the start of production of the ordered Wafers.
4.9      Materials/Capacity Shortage. If the materials or components used by TSMC to manufacture the Wafers are in short supply or if TSMC’s production capacity is constrained such that TSMC is unable to completely fulfill IDT’s then current Wafer forecast and accepted purchase orders, TSMC will provide timely notice thereof to IDT, which notice will include the expected duration of the shortage or constrained capacity and the impact on the Forecast. For IDT production orders above thirty-six 36,000 pieces of 8-inch wafer per quarter (“quarter” specified in this Section 4.9 shall mean the three consecutive month period during any calendar year commencing on the first day of each of the months of January, April, July and October), TSMC will allocate available materials for production of Wafers for IDT at the minimum level of twelve thousand 12,000 pieces of 8-inch wafer per month (“month” specified in this Section 4.9 shall mean a calendar month) and will use commercially reasonable efforts to support any previously accepted up-side in a manner that is consistent with TSMC’s top fifteen (15) contract customers during the same time period.
4.10      Reticle Holds. TSMC agrees to retain reticles for Wafers for at least eighteen (18) months following the last applicable Wafer delivery for the applicable reticle. At the end of such eighteen (18) month period, TSMC may notify IDT in writing that the reticle has not been used during such period. The parties agree to discuss in such event whether IDT anticipates any further Wafer orders requiring use of such reticle. If IDT in good faith does anticipate future orders, or is required by a commitment to a customer to maintain the availability of a Product requiring such reticle, then TSMC shall continue to hold


and maintain such reticle. If IDT agrees in writing that the reticle is no longer needed to produce Wafers, TSMC agrees to deliver such reticle to IDT or destroy such reticle, at IDT’s direction.
5.      DELIVERY
5.1      Packaging. TSMC will mark and package the Wafers for shipment to IDT in accordance with the mutually agreed specifications at TSMC’s expense. If packaging is not specified, then the following terms shall apply: All Wafers shipped by TSMC pursuant to this Agreement shall be packaged, marked, and otherwise prepared for shipment in a manner that is (a) in accordance with good commercial practice; and (b) adequate to ensure safe arrival of the Wafers at IDT’s requested destination.
5.2      Delivery. TSMC will use commercially reasonable efforts to cooperate with IDT to determine delivery logistics that will ensure safe and timely delivery of Wafers to IDT. TSMC will deliver the Wafers EXW (Ex Works Incoterms 2000) TSMC’s factory. Title and risk of loss to the Wafers shall pass to IDT upon delivery to a carrier or forwarder. TSMC shall deliver the Wafers to IDT with ninety-six percent (96%) on time delivery (“OTD”). OTD shall means delivery up to seven (7) days before but zero (0) days after the scheduled delivery date. If TSMC wants to make shipments prior to the requested ship date, TSMC must first receive approval to do so in writing from IDT. TSMC agrees to notify IDT in writing as soon as possible upon learning of any circumstances that may delay delivery of Wafer to IDT. In the event that TSMC is unable to prevent a delay and thus is unable to make timely delivery of an order through no fault of IDT, then IDT shall have the option to either (a) cancel the affected order for which costs will be settled between the parties, or (b) accept late delivery of the Wafer and TSMC will make delivery as soon as possible, utilizing an expedited shipping method at no additional cost to IDT. Time is of the essence for all delivery obligations under this Agreement. If TSMC wants to make partial lot shipments, TSMC must first receive approval to do so in writing from IDT
5.3      Wafer Acceptance Testing by IDT. TSMC will certify to IDT with each shipment that the Wafers contained in the shipment have successfully passed the applicable Probe Program and comply with the applicable Specifications. Acceptance testing of Wafers delivered to IDT or a third party designated by IDT may be performed by IDT following receipt. If IDT rejects any Wafers or determines that a Wafer has a different Net Die per Wafer than certified by TSMC, then IDT and TSMC will confer and determine the reason for the rejection or the inaccurate count of Net Die per Wafer. TSMC will immediately exercise its commercially reasonable efforts to develop and implement a corrective action plan for any errors, including manufacturing errors or defects identified in its systems.
5.4      Wafer Acceptance Testing by TSMC.
(a)      Outgoing Visual Inspection. TSMC will perform an outgoing visual inspection on all wafers manufactured by TSMC prior to shipment to IDT. TSMC will certify that all such wafers meet TSMC’s then applicable outgoing visual defect specification.
(b)      If TSMC detects any significant fabrication-related defects in any Wafers, TSMC with IDT assistance will, use commercially reasonable efforts to perform failure analysis, and provide a corrective action plan to correct the failure mechanisms and/or defects.
(c)      Results from TSMC testing processes will be accessible and available to IDT for review. These results must be available in electronic form at the conclusion of each test Lot and must conform to the summary structure agreed upon by the parties.


5.5      Minimum Yields. A standard Yield will be established and agreed to by the parties for each Product based on the average Yield of the first three hundred (300) Wafers of each Product manufactured using Qualified Processes and passing all production tests. Any Wafer manufactured by TSMC that yields less than sixty five percent (65%) of the standard Yield for such Product shall, if sorted by TSMC, be scrapped, or, if sorted or if blind built and final tested by IDT, be deemed defective and returnable for replacement pursuant to Section 8.3 below.
(a)      Within 6 months of successful Product qualification, it is expected that TSMC will meet or exceed the yield that IDT experiences. If this is not the case, or if in the future the yield is not consistent with the yield of current products manufactured by IDT, TSMC will support IDT in determining the root cause and implement process fixes as needed.
5.6      Scribeline Electrical Test . Unless otherwise stated in the Specifications for a particular Product, and without limiting any other testing and acceptance procedures, all Wafers manufactured by TSMC will be measured at five (5) test sites distributed across each Wafer. Both parties shall agree on a set of wafer acceptance test (“WAT”) parameters and limits. Any Wafer failing more than two (2) sites on any given WAT parameter shall be scrapped by TSMC, at TSMC’s sole cost and expense.
5.7      Maverick Lot/Wafer Program. TSMC and IDT will work together to implement a program to eliminate shipment of any non standard material, regardless of the wafer yield requirement of Sec 5.5.
6.      PRICING, COST ALLOCATION AND PAYMENT
6.1      Pre-Production Cost Allocation. Except as otherwise set forth herein, TSMC shall bear all costs associated with establishing facilities capable of implementing Qualified Processes and producing Wafers.
(a)      Non-Recurring Engineering Payment . In connection with the accomplishment of the Transfer Plan, IDT agrees to make a one-time non-recurring engineering ( “NRE” ) payment to TSMC as specifically set forth in the Transfer Plan.
(b)     Mask Costs . For the avoidance of doubt, mask costs are not included in the NRE payment. The pricing for masks purchased for the manufacture of Products is set forth in Exhibit B attached hereto.
6.2      Wafer Pricing
(a)      Pricing . The pricing for all Products and associated mask sets purchased under this Agreement is set forth in Exhibit B attached hereto, and such Product pricing will be in effect from the Effective Date until the fifth (5 th ) anniversary of the Effective Date (the “ Initial Pricing Term ”), unless such pricing is earlier adjusted by the mutual agreement of the parties. Separate pricing will apply and be mutually agreed upon in advance in writing by the parties for any Products run on 150mm or 300mm Wafers. The pricing set forth in Exhibit B includes all manufacturing and operating expenses, excluding freight costs, and IDT shall not be separately charged for any costs or expenses for any raw materials, labor, equipment expenses, supplies, depreciation, overhead, or any other special requirements unless an exception has been agreed to in writing in advance by IDT. For the second half of the term of this agreement and any subsequent renewed term, TSMC and IDT will negotiate in good faith for wafer pricing as commercially reasonable in a competitive market. However, except as stipulated in Section 6.2 (b), in


no event shall subsequently negotiated pricing per Product be higher than the previously agreed upon prices.

(b)      Pricing Reviews . For the duration of the 5-year pricing offered by TSMC, TSMC shall have the right to meet on each anniversary of the effective date to review pricing efficiencies. In the event of the occurrence of a material event which TSMC reasonably believes causes severe hardship to TSMC, TSMC may request to meet in good faith with IDT and, with appropriate executive-level involvement, to consider and/or negotiate a commercially reasonable adjustment to the prices set forth in this Agreement. Neither party shall have any obligation to the other party with regard to the terms set forth in this Section if the parties fail to reach a mutually acceptable agreement after good faith negotiation (but for the avoidance of doubt, the parties' obligations under the remainder of this Agreement shall continue in full force and effect).
6.3      Shipping Costs. IDT shall bear, in addition to the Wafer pricing agreed upon by the parties, the amount of any freight, insurance, handling and other duties levied on the shipment of Wafers.
6.4      Invoicing and Payment. For each shipment of Wafers to IDT, TSMC shall invoice IDT on or after the delivery date of such Wafers. TSMC’s invoices shall set forth the amounts due from IDT for such shipment and shall contain sufficient detail to allow IDT to determine the accuracy of the amounts billed. Payment by IDT shall be made in U.S. Dollars through wire transfer in cash within thirty (30) days after invoice date.
6.5      Taxes. Unless otherwise explicitly stated, the prices specified in this Agreement are exclusive of any sales, use, excise, royalty, consumption or similar taxes, and of any export and import duties, which may be levied upon or collectible by TSMC as a result of the sale or shipment of the products to IDT or its customers. IDT agrees to pay and otherwise be fully responsible for any such taxes and duties, unless in lieu thereof IDT provides TSMC with an exemption certificate acceptable to the relevant governmental authorities.
7.      AUDIT AND INSPECTION
7.1      Site Visits . IDT may send its employees or customers, who have executed a non-disclosure agreement related to site visits specified in this Section, at any time upon at least seven (7) days prior written notice and according to the schedules and agenda as mutually agreed upon by the parties to visit TSMC Facilities to inspect fabrication of Wafers and conduct other activities contemplated by this Agreement. Such visits shall be conducted during TSMC’s normal working hours. While visiting TSMC’s facilities, each visitor shall at all times fully comply with TSMC’s plant rules and regulations as well as all reasonable instructions that may be issued by TSMC employees and personnel accompanying any such visitor. TSMC agrees to grant these employees reasonable access the factory and support facilities. At the reasonable request of IDT, TSMC will assist IDT in obtaining the appropriate visas for any IDT employees to participate in a site visit. IDT will have the right to audit the TSMC Facilities upon at least seven (7) days prior written notice during normal business hours of the applicable TSMC Facility, subject to the requirements of this Section 7.1.
7.2      Program Reviews . IDT and TSMC agree to participate in regular monthly program reviews by a program review committee established by IDT and TSMC to focus on operational details of the installation, qualification, and ongoing performance of the manufacturing processes.


7.3      Business Review Meetings. The parties will plan and schedule business reviews at least quarterly. The review will focus on current and forecasted business activities, feedback on performance and factory metrics, key improvement programs and activities focused on enabling the relationship between the parties and will review the status of open issues and action items.
8.      LIMITED WARRANTY; WARRANTY DISCLAIMER
8.1      Limited Warranty. TSMC represents and warrants that all Wafers: (a) shall be clear of any liens, restrictions, encumbrances, and other claims; (b) shall be manufactured in accordance with applicable laws; and (c) for a period of thirty-six (36) months from the delivery date , for those Wafers for which IDT’s customer requires such 36-month period, or for twenty-four (24) months for those Wafers for which IDT’s customer requires such 24-month period, and otherwise for twelve (12) months from the delivery date (as for given Wafers, the “Warranty Period”), that such Wafers shall meet the applicable Specifications and shall be free from any defects in material and workmanship under normal use. All Engineering Wafers are delivered “AS IS,” without any warranty of any kind.
8.2      Remedies for Breach of Warranty. If, during any Warranty Period, any Wafers purchased hereunder do not meet the warranties specified herein without involving any Exclusive Event (as defined in Section 8.3 below), IDT may, at IDT's option (i) require TSMC to replace or correct at no cost to IDT any defective or nonconforming Wafers pursuant to the Product return procedures set forth in Section 8.3 below, or (ii) return any nonconforming Wafers to TSMC at TSMC's expense for credit of the amounts invoiced to IDT by TSMC and shipping costs thereof. TSMC shall bear all transportation costs incurred in connection with the replacement or repair of defective Products. The warranty specified in Sections 8.1 through 8.3 constitutes TSMC's exclusive liability and IDT's exclusive remedy for any non-conforming Wafers or for any defects in material or workmanship of the Wafers. In addition to TSMC’s obligation to replace or correct wafers at no cost to IDT, TSMC shall be responsible for reimbursement in the form of credit, for one half (1/2) of IDT’s reasonable out of pocket costs and expenses incurred in connection with a Warranty claim, including but not limited to rework and assembly costs, but IN NO EVENT SHALL TSMC’S LIABILITY HEREUNDER EXCEED THE SUM OF FIVE HUNDRED THOUSAND US DOLLARS (USD $500,000) PER CALENDAR YEAR.
8.3      Return of Wafers. In the event that IDT elects to return nonconforming Wafers to TSMC, IDT will notify TSMC of the nonconformance and of IDT’s intent to return the nonconforming Wafers. Upon receipt of IDT’s notification to TSMC of the nonconformance, if TSMC determines that such nonconforming Wafers contain defects which are not due to any event caused by IDT or any third party not authorized by TSMC including but not limited to, accident, abuse, misuse, neglect, improper installation, handling or packing, repair or alteration by IDT , IDT’s representative or agent or any third party not authorized by TSMC or by improper testing or usage contrary to any instructions issued by TSMC (the “Exclusive Event”), TSMC will deliver replacement Wafers according to mutually agreed schedules, and will provide all the assistance and authorization required to return the nonconforming Wafers to TSMC according to mutually agreed schedules. The nonconforming Wafers will be returned to TSMC at TSMC’s expense and TSMC will be liable and will assume all title and responsibility for all Wafers during return transport, including liability caused by hazardous substance releases during such transport. TSMC will immediately investigate to determine the cause of the nonconformance and will promptly notify IDT in writing of its findings.
8.4      Additional Warranties. In addition, TSMC and IDT make the following representations and warranties:
(a)      Each party has the right to enter into this Agreement and its performance of this


Agreement will comply, at its own expense, with the terms of any contract, obligation, law, regulation or ordinance to which it is or becomes subject; and
(b)      No claim, lien, or action exists or is threatened against either party that would interfere with the applicable party’s manufacture, use or sale of the Products.
(c)      None of the Products contain nor are any of the Products manufactured using ozone depleting substances such as halons, chlorofluorocarbons, hydrochlorofluorocarbons, methyl chloroform and carbon tetrachloride as defined by the Montreal Protocol. TSMC shall comply with all requirements of applicable laws relating to restrictions on use of lead and other hazardous materials in electronic Products (including without limitation, the RoHS and WEEE directives).
8.5      No Waiver . No inspection or acceptance, approval or acquiescence by IDT with respect to the Wafers shall relieve TSMC from any portion of its warranty obligation nor will waiver by IDT of any specification requirement for one or more items constitute a waiver of such requirements for remaining items unless expressly agreed by IDT in writing.
8.6      Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 8, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TSMC EXPRESSLY DISCLAIMS ALL WARRANTIES AND CONDITIONS REGARDING THE WAFERS PROVIDED HEREUNDER, WHETHER EXPRESS, IMPLIED OR STATUTORY, AND INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE. THE REMEDIES PROVIDED IN THIS SECTION 8 SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO BREACH OF WARRANTY.
9.      EPIDEMIC FAILURE
9.1      Affected Product. Upon the occurrence of an Epidemic Failure, the remedies of Sections 9.2 and 9.3 shall apply to the entire Product(s) affected or potentially affected by the same root cause failure (“ Affected Product ”) as so identified pursuant to Section 9.2. For clarification purpose, the parties shall discuss in good faith to identify and screen out whether the aforementioned Affected Product shall be applicable to the level and scope of affected Lot or Wafer or Die.
9.2      Failure Analysis; Corrective Action Program. In the event of a suspected Epidemic Failure, IDT shall promptly notify TSMC in writing, and provide, if known and as may then exist, a description of the failure, and the suspected Lot numbers, serial numbers or other identifiers, and delivery dates, of the Affected Product. IDT shall also deliver or make available to TSMC samples of the failed Wafers for testing and analysis. Upon receipt of such Wafers from IDT, TSMC shall promptly provide its preliminary findings regarding the cause of the failure. The parties shall cooperate and work together to determine the root cause. Thereafter, TSMC shall promptly provide the results of its root cause analysis, its proposed plan for the identification of and the repair and/or replacement of the Affected Product which may be affected Lot or affected Wafer or affected Die, and such other appropriate information. TSMC shall recommend a corrective action program, subject to IDT’s written approval, that identifies the Affected Product for repair or replacement, and minimizes disruption to the end user. Upon receipt of IDT’s written approval, TSMC shall implement the corrective action program.
9.3      Remedy. Upon the occurrence of an Epidemic Failure, TSMC shall: (1) at IDT's option: (i) either repair and/or replace the Affected Product at no cost to IDT, or (ii) provide a credit to IDT in an amount equal to the cost to IDT for qualified replacement of Product acceptable to IDT; and (2) credit IDT for all necessary rework, assembly, labor, equipment and processing costs reasonably incurred by IDT or


third parties in the implementation of the corrective action program, including reasonable test procedures, test equipment, the testing of Wafers, reasonable freight, transportation, customs, duties, insurance, storage, handling and other necessary incidental shipping costs incurred by IDT in connection with the repair and/or replacement of the Affected Product . TSMC’S ANNUAL MAXIMUM LIABILITY TO IDT WITH RESPECT TO EPIDEMIC FAILURES SHALL BE AS FOLLOWS: THE AMOUNT OF FIVE MILLION US DOLLARS (USD 5,000,000) DURING THE FIRST 12 MONTHS AFTER THE EFFECTIVE DATE, AND THE AMOUNT OF FIVE MILLION US DOLLARS (USD 5,000,000) DURING THE NEXT 12 MONTH PERIOD, AND THE GREATER OF FIVE MILLION US DOLLARS (USD 5,000,000) OR THE SUM OF TWENTY PERCENT (20%) OF THE AGGREGATE PAYMENTS MADE TO TSMC BY IDT OR MADE ON BEHALF OF IDT DURING THE PRIOR CONTRACT YEAR FOR EACH CONTRACT YEAR THEREAFTER. THE REMEDIES IN THIS SECTION 9 CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO EPIDEMIC FAILURE.

10.      INDEMNIFICATION
10.1      IDT Indemnity. Except as provided for in Section 10.2 below, IDT shall, at its own expense, indemnify, defend and hold TSMC harmless from and against any liabilities, losses, damages, costs or expenses, including reasonable attorneys’ fees, arising from any third party action, claim, suit or proceeding alleging infringement or misappropriation of such third party’s Intellectual Property Rights only to the extent arising from TSMC making Wafers for IDT in compliance with any IDT Product designs or use of any IDT Manufacturing Process Technology, or TSMC’s compliance with or implementation of any of IDT’s specific instructions if such claim, suit or proceeding would not have arisen but for such compliance with IDT’s specific instructions and/or IDT’s Product designs, provided that TSMC (a) gives IDT prompt written notice of any such claim, (b) gives IDT through counsel of its choice, sole control of the defense or settlement of such claim; (c) gives IDT all necessary information, assistance and authority to defend such claim, at IDT’s request and reasonable expense; and (d) IDT shall not be responsible for any settlement made by TSMC without IDT's written permission.
10.2      TSMC Indemnity. Except as provided for in Section 10.1, TSMC shall, at its own expense, indemnify, defend and hold IDT harmless from and against any liabilities, losses, damages, costs or expenses, including reasonable attorneys’ fees, arising from any third party action, claim, suit or proceeding alleging infringement or misappropriation of such third party’s Intellectual Property Rights only to the extent arising from use of TSMC Manufacturing Process Technology for manufacturing the applicable Wafers; provided that IDT (a) gives TSMC prompt written notice of any such claim, (b) gives TSMC through counsel of its choice, sole control of the defense or settlement of such claim; (c) gives TSMC all necessary information, assistance and authority to defend such claim, at TSMC’s request and reasonable expense; and (d) TSMC shall not be responsible for any settlement made by IDT without TSMC's written permission. If the use and sale of any of the Wafers or Products is prohibited by court order as a result of a suit within the scope of this Section 10.2, TSMC, at no expense to IDT, will, at TSMC’s option, (a) obtain for IDT the right to use and sell the Wafers and Products or (b) substitute an equivalent method for manufacturing the Wafers and Products which are acceptable to and qualified by IDT or (c) if neither of the foregoing is possible on commercially reasonable terms, then TSMC shall credit IDT an amount equivalent to the payments actually made by IDT to TSMC for the affected Wafers or Products.
10.3      Order By Law. Notwithstanding the foregoing, IDT also agrees that if TSMC is required by law to respond as a third party to any formal discovery request in a proceeding or suit involving a claim arising solely from IDT’s Product designs or any IDT Manufacturing Process Technology by any judicial


or administrative authority or agent who has competent jurisdiction over disputes related to the Product, IDT shall indemnify and hold TSMC harmless from and against any and all actual expenses, including reasonable attorneys’ fees and costs, reasonably incurred by TSMC in responding to such request(s). In such event, TSMC shall give IDT a reasonably prompt written notice of the discovery requests and TSMC shall be represented by counsel of its choice. IDT agrees not to sue TSMC in connection with TSMC's provision of information pursuant to and in compliance with the procedures set forth in the foregoing.
10.4      Process for Alleged Infringement to Products. If any Product is alleged to infringe any Intellectual Property Rights of a third party for reasons attributable to IDT, the parties will discuss in good faith and agree upon certain necessary measures to deal with such allegation. If the parties are unable to come to aforementioned agreement, they will refer resolution of the issue to the Senior Management Representatives. For the avoidance of doubt in the event that IDT directs TSMC to continue the manufacture of Wafers affected by such claim, IDT shall indemnify and hold TSMC harmless in accordance with section 10.1 and provide with assurance measures as reasonably requested by TSMC.
10.5      The remedies provided in this Section 10 shall constitute the sole and exclusive remedy with respect to claims, suits or proceedings alleging infringement or misappropriation of Intellectual Property Rights.
11.      INTELLECTUAL PROPERTY OWNERSHIP
11.1      Technology Owned by IDT. As between TSMC and IDT, IDT shall own all rights, title and interest (including all Intellectual Property Rights) to any and all:
(a)      IDT Technology . Technology developed or acquired by IDT or any of its Affiliates prior to or independently of this Agreement, including any IDT Manufacturing Process Technology, as well as any Technology expressly described in any Specifications as “IDT Technology” or otherwise provided by IDT to TSMC, including any Improvements made by IDT to this technology in the future.
11.2      Technology Owned by TSMC. As between TSMC and IDT, TSMC shall own all rights, title and interest (including all Intellectual Property Rights) to any and all:
(a)      TSMC Technology . Technology developed or acquired by TSMC or any of its Affiliates prior to or independently of this Agreement, including TSMC Manufacturing Process Technology as well as Technology expressly described in any Specifications as “TSMC Technology” or otherwise provided by TSMC to IDT, including any Improvements made by TSMC to this technology in the future.
12.      INTELLECTUAL PROPERTY LICENSES
12.1      License Grant to TSMC. Subject to the terms and conditions of this Agreement, IDT hereby grants to TSMC under all applicable Intellectual Property Rights in IDT Technology a worldwide, fully-paid, royalty-free, non-transferable, non-exclusive, revocable, license, without right to sublicense, to make, import, offer to sell and sell Wafers only to IDT for as long as such Wafers remain in production for IDT at TSMC.
12.2      Embedded Third Party Technology. TSMC acknowledges and agrees that IDT may incorporate or otherwise include third party software or hardware as part of the IDT Technology and/or in Improvements thereto, such as open source software (“ Embedded Third Party Technology ”). Such


Embedded Third Party Technology may only be used as part of the IDT Technology, and subject to any terms applicable thereto. IDT shall notify TSMC in writing of any requirements to use the Embedded Third Party Technology that is not otherwise explicitly provided in this Agreement.
12.3      Reservation of Rights. No right, title or interest is granted by either party whether expressly or by implication to or under any of its Intellectual Property Rights or rights in Technology, other than those rights and licenses expressly granted in this Agreement. Each party reserves to itself all rights not expressly granted under this Agreement.
13.      INSURANCE:
13.1      TSMC shall maintain insurance covering its assumed obligations and risks pursuant to this Agreement. TSMC shall obtain and maintain at TSMC’s expense the following minimum insurance:
(a)      Comprehensive general liability with limits not less than $20,000,000.
(b)      Employer’s liability insurance covering employees in compliance with all statutory regulations in each location where Products are being manufactured and TSMC is located.
(c)      Appropriate levels of mitigation for environmental and errors and omissions risks either through insurance programs or self retention.
14.      TERM AND TERMINATION
14.1      Term. This Agreement shall commence on the Effective Date and shall continue until the tenth anniversary of the Effective Date, unless terminated earlier by either party pursuant to Section 14.2. This Agreement shall automatically be renewed thereafter for additional [two (2)] year terms unless a party delivers to the other party at least [one (1)] year prior written notice of intent not to renew the Agreement.
14.2      Termination of Agreement. This Agreement may be terminated as follows:
(a)      The parties may terminate this Agreement upon mutual written consent at any time.
(b)      This Agreement may be terminated by either party upon the material breach of this Agreement by the other party and the failure to cure such breach within thirty (30) days after receipt of notice of intended termination.
(c)      Starting five (5) years after the Effective Date, IDT may terminate this Agreement for convenience upon six (6) months prior written notice to TSMC.
(d)      Each party reserves the right to immediately terminate this Agreement in writing in the event that:
 
i. upon or after the bankruptcy, insolvency, dissolution or winding up of the other party;

ii. there is any change in the other party's business operations, ownership or management, whether from a consolidation or merger with, or sale or transfer of substantially all assets or


otherwise to, a TSMC Direct Competitor.
 
The parties agree that this Section shall not apply if the party whose business is changing as described above has obtained the other party’s prior written approval, which shall not be unreasonably withheld or delayed, to proceed and conclude the above events.

14.3      Effect of Termination.
(a)      Upon termination of this Agreement, TSMC shall have no further delivery obligations other than continuing to manufacture and deliver all confirmed purchase orders accepted prior to of the termination of this Agreement. The termination of this Agreement shall not affect any payment rights accrued as of the date such termination, including payment of any work-in-process. The termination of this Agreement shall not release either party from any liability which has already accrued to the other party as of the date of such termination.
(b)      Upon termination of this agreement, if TSMC intends to obsolete or cease manufacturing of any process required to manufacture IDT Products, TSMC will provide Twelve (12) month notification of the last date a purchase order can be placed for delivery of wafers in the following twelve (12) months.
(c)      In the event of termination for convenience by TSMC or by IDT as a result of TSMC’s breach of this Agreement, TSMC will grant to IDT on reasonable terms and conditions under Intellectual Property Rights in TSMC’s Improvements to IDT’s Manufacturing Process Technology a worldwide, fully-paid, royalty-free, non-exclusive, license, without right to sublicense, as necessary to make, have made, import, offer to sell and sell IDT products using the IDT Manufacturing Process Technology.
14.4      Survival. Notwithstanding any termination of this Agreement, Sections 1, 8, 9, 10, 11, 12.1, 12.3, 14.3, 14.4, 15, 16 and 17 shall survive any termination of this Agreement.

15.      CONFIDENTIALITY
(a)      Confidentiality . The terms and conditions under the Non-disclosure Agreement (the "NDA") dated January 15, 2006, and as amended by the parties, shall govern any information disclosed under this Agreement that meets the definition of "Confidential Information" under the NDA, and such information shall be used only for the purposes specified herein.
15.2      Effect of the NDA. In the event the NDA terminates or expires before the term of this Agreement, the term of the NDA shall be deemed co-existent with this Agreement for all purposes hereunder.
15.3      Publicity . The parties agree to issue a mutually-acceptable press release regarding the existence of this Agreement and the other agreements referenced herein promptly following the Effective Date. All other press releases regarding the relationship envisioned by this Agreement shall be subject to


the mutual written acceptance of the parties, such acceptance not to be unreasonably conditioned, delayed or withheld.
16.      LIMITATION OF LIABILITY
16.1      EXCEPT FOR A BREACH OF A LICENSE GRANT OR A CONFIDENTIALITY OBLIGATION, OR AS OTHERWISE SPECIFICALLY REQUIRED IN SECTIONS 8, 9 AND 10 IN NO EVENT SHALL EITHER PARTY OR ITS RESPECTIVE AFFILIATES BE LIABLE FOR ANY LOST PROFITS, OR FOR ANY SPECIAL, INDIRECT, EXEMPLARY, CONSEQUENTIAL OR INCIDENTAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF NOTIFIED OF THE LIKELIHOOD OF SUCH A CLAIM. NOTWITHSTANDING FOREGOING, FOR CLARIFCATION PURPOSE , THE REMEDIES PROVIDED IN SECTION 8 SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO BREACH OF WARRANTY AND THE REMEDIES PROVIDED IN SECTION 9 SHALL CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO EPIDEMTIC FAILURE.
EXCEPT FOR A BREACH OF A LICENSE GRANT, A CONFIDENTIALITY OBLIGATION, OR AS OTHERWISE SPECIFICALLY SET FORTH SECTIONS 8 AND 9, EACH PARTY’S LIABILITY TO THE OTHER PARTY FOR ANY CLAIM ARISING FROM ANY CAUSE INCLUDING, BUT NOT LIMITED TO, THE MANUFACTURE, SALE, DELIVERY, NON-DELIVERY, USE OF OR INABILITY TO USE ANY PRODUCTS, EITHER SEPARATELY OR IN COMBINATION WITH ANY OTHER GOODS OR EQUIPMENT, SHALL IN NO EVENT EXCEED .
(A) THE SUM OF $5 MILLION FOR THE FIRST CONTRACT YEAR;
(B) THE SUM OF $5 MILLION FOR THE SECOND CONTRACT YEAR; AND
(C) THE GREATER OF FIVE MILLION US DOLLARS (USD 5,000,000) OR THE AVERAGE AMOUNT OF THE SUM OF TWENTY PERCENT (20%) OF THE AGGREGATE PAYMENTS MADE TO TSMC BY IDT OR MADE ON BEHALF OF IDT DURING THE PRIOR CONTRACT YEAR AND THE TOTAL AMOUNT OF PRICES PAID BY IDT FOR THE PURCHASE ORDER(S) IN WHICH THE SPECIFIC PRODUCT THAT DIRECTLY GIVES RISE TO THE INDEMNITY OR CLAIM WAS INCLUDED FOR EACH CONTRACT YEARS THEREAFTER.

The parties acknowledge and agree that the foregoing limitations of liability are an essential element of this Agreement and that in their absence the terms of this Agreement would be substantially different.

17.      MISCELLANEOUS
17.1      Rights in Bankruptcy . All rights and licenses granted to either party under or pursuant to this Agreement are, and will otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined under Section 101 of the Bankruptcy Code. The parties agree that each party, as licensee of such rights under this Agreement, will retain and may fully exercise all of its rights and elections as a licensee of intellectual


property under the Bankruptcy Code.
17.2      Governing Law. This Agreement and any dispute arising from the construction, performance or breach hereof shall be governed by and construed and enforced in accordance with the laws of the State of California, without reference to its conflict of law principles. TSMC agrees that upon IDT’s request, all disputes arising hereunder shall be adjudicated in the state and federal courts having jurisdiction over disputes arising in Santa Clara County, California, and TSMC hereby agrees to consent to the personal jurisdiction of such courts.
17.3      Assignment. Neither party may assign this Agreement, in whole or in part, whether directly or by operation of law, or as part of a Change of Control event, without the prior written consent of the other party, which consent shall not be unreasonably conditioned, delayed or withheld. Any purported assignment without such consent shall be void and of no effect. Subject to the foregoing sentence, this Agreement will be binding on and inure to the benefit of the parties and their respective successors and permitted assigns. For the avoidance of doubt TSMC will not withhold consent if the Assignee is not a TSMC Direct Competitor.
17.4      Representation by Legal Counsel. Each party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the parties agree that no presumption shall exist or be implied against the party that drafted such terms and provisions.
17.5      Waiver. It is agreed that no waiver by either party hereto of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent and/or similar breach or default.
17.6      Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect to the fullest extent permitted by law without said provision, and the parties shall amend the Agreement to the extent feasible to lawfully include the substance of the excluded term to as fully as possible realize the intent of the parties and their commercial bargain except to the extent that such amendment can not preserve the essential purpose of this Agreement.
17.7      Independent Contractors. The relationship of the parties hereto is that of independent contractors. The parties hereto are not deemed to be agents, partners or joint ventures of the others for any purpose as a result of this Agreement or the transactions contemplated thereby.
17.8      Compliance with Laws. In exercising their rights and performing their obligations under this Agreement, each party shall fully comply in all material respects with the requirements of any and all applicable laws, regulations, rules and orders of any governmental body having jurisdiction over the exercise of rights and the performance of obligations by either party under this Agreement.
17.9      Export Control Regulations. The rights and obligations of the parties under this Agreement, shall be subject in all respects to United States laws and regulations and applicable foreign laws and regulations as shall from time to time govern the license and delivery of Technology abroad or importation of the same, including the United States Foreign Assets Control Regulations, Transaction Control Regulations and Export Control Regulations, as amended, and any successor legislation issued by the Department of Commerce, International Trade Administration, or Office of Export Licensing. TSMC and IDT will take all appropriate measures to comply with these regulations and will defend, indemnify and hold the other party harmless from all damages arising out of or in connection with any violation


thereof.
17.10      Environmental Matters .
(a)      TSMC will indemnify and hold IDT harmless from and against any liability, loss, damage, cost or expense (including reasonable attorneys fees) arising from or caused by any toxic or hazardous substances or chemicals, as those terms are defined by applicable environmental health or safety laws or regulations, which are used in performance of this Agreement by TSMC, present in Scrap disposed of or destroyed by TSMC, or present on any of the TSMC Facilities in or during TSMC’s performance of this Agreement.
(b)      TSMC hereby represents and warrants that all products manufactured by TSMC and delivered to IDT under this Agreement will comply with applicable federal environmental laws and regulations.
17.11      Ethical Dealings. Each party will be familiar and will strictly comply with all laws and regulations on bribery, corruption, and prohibited business practices. Each party acknowledges that it will not offer, promise or make or agree to make any payments or gifts (of money or anything of value) directly or indirectly to anyone for the purpose of influencing or inducing anyone to influence decisions in favor of the other party. Without limiting any other provision of this Agreement, TSMC shall not engage in any illegal or unethical practices, including without limitation the Foreign Corrupt Practices Act of 1977 and any anti-boycott laws, as amended, and any implementing regulations. Each party shall indemnify and hold the other party harmless from and against any liabilities, damages, costs and expenses, including reasonably attorneys’ fees and costs, resulting from any of its breach of this Section 17.11.
17.12      Subcontracting. TSMC shall not subcontract its obligations under this Agreement to a third party without the prior written consent of IDT. If such consent is given, TSMC shall remain responsible for all of its obligations as specified in this Agreement.
17.13      Notices. All notices, requests and other communications hereunder shall be in writing and shall be hand delivered, or sent by express delivery service with confirmation of receipt, or sent by registered or certified mail, return receipt requested, postage prepaid, or by facsimile transmission (with written confirmation copy by registered first-class mail), in each case to the respective address or facsimile number indicated below. Any such notice shall be deemed to have been given when received. Either party may change its address or facsimile number by giving the other party written notice, delivered in accordance with this Section.
To TSMC:
Attn: General Counsel
No. 8 LiHsin Rd. 6
Science Based Industrial Park
Hsinchu, Taiwan 300-77
Republic of China

To IDT:
Integrated Device Technology, Inc.


    Attn: General Counsel
    6024 Silver Creek Valley Road
    San Jose, CA 95138
17.14      Force Majeure. Neither party shall lose any rights hereunder or be liable to the other party for damages or losses on account of failure of performance by the defaulting party if the failure is occasioned by war, strike, fire, Act of God, earthquake, flood, lockout, embargo, act of terrorism, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the reasonable control and not caused by the negligence, intentional conduct or misconduct of the non-performing party and such party has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a party be required to settle any labor dispute or disturbance.
17.15      Headings; Construction. The headings to the clauses, sub-clause and parts of this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. The terms “this Agreement,” “hereof,” “hereunder” and any similar expressions refer to this Agreement and not to any particular Section or other portion hereof. As used in this Agreement, the words “include” and “including,” and variations thereof, will be deemed to be followed by the words “without limitation” and “discretion” means sole discretion.
17.16      Governing Language. The official text of this Agreement shall be in the English language, and any interpretation or construction of this Agreement shall be based solely on the English-language text.
17.17      Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.
17.18      Complete Agreement. This Agreement with its Exhibits, constitutes the entire agreement, both written and oral, between the parties with respect to the subject matter hereof, and all prior agreements respecting the subject matter hereof (including confidentiality agreements), either written or oral, express or implied, shall be abrogated and canceled. No amendment or change hereof or addition hereto shall be effective or binding on either of the parties hereto unless reduced to writing and executed by the respective duly authorized representatives of IDT and TSMC. In the event of a conflict between the terms and conditions of this Agreement and its Exhibits, the terms and conditions of this Agreement shall prevail.

[Signature page follows]



IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the date first set forth above.
INTEGRATED DEVICE TECHNOLOGY, INC.
By: /s/  THEODORE L. TEWKSBURY III          
Name: Theodore L. Tewksbury III          
Title: Chief Executive Officer , President and Director    

TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD..
By: /s/ C.C Wei          
Name: C.C Wei          
Title: Sr. VP Mainstream Technology Business          

TSMC NORTH AMERICA.
By:/s/ R. B. Cassidy II              
Name: R.B. Cassidy II          
Title: President     


    
EXHIBIT A
IDT Transfer Product Qualification Specifications
1.
Specification requirements for twenty-six (26) IDT product qualification vehicles as defined in Exhibit D.
1.1.
All process modules must meet IDT process module specification and Process Evaluation test specifications.
1.2.
Each of the product qualification vehicles must pass standard IDT qualification requirements, based on minimum 3 separate production lots per IDT Specification FRA-0040.
1.3.
Each of the product qualification vehicles that are currently tested and binned according to operational speed, must meet or exceed current IDT speed distributions at all device corners (process, temperature and voltage).
1.4.
For each IDT product qualification vehicle that currently requires burn-in, TSMC manufactured products must meet IDT FIT rates with equal or less burn in time the IDT manufactured product currently requires.
1.5.
For each of the product qualification vehicles that currently do not require burn-in, TSMC manufactured product must meet the short term (BIM) and long term (Life Test) FIT rate (average of the past 4 quarters) of the IDT manufactured product.
1.6.
The average yield of minimum 3 wafer lots for each of the product qualification vehicles must meet 90% of current IDT product sort and final yield (average of the last 2 quarters).
2.
Specification requirements for IDT Extension products as defined in Exhibit D and all other future IDT transfer products.
2.1.
Each of the Extension products must pass standard IDT qualification requirements on a minimum of one lot per IDT Specification FRA-0040.
2.2.
Each of the Extension products that are currently tested and binned according to operational speed, must meet or exceed current IDT speed distributions at all device corners (process, temperature and voltage).
2.3.
For each IDT Extension products that currently requires burn-in, TSMC manufactured products must meet IDT FIT rates with equal or less burn in time the IDT manufactured product currently requires.
2.4.
For each of the Extension products that currently do not require burn-in, TSMC manufactured product must meet the short term (BIM) and long term (Life Test) FIT rate (average of the past 4 quarters) of the IDT manufactured product.


2.5.
The average yield of minimum 3 wafer lots for each of the Extension products will need to meet 90% of current IDT product sort and final yield (average of the last 2 quarters).
3.
BIM criteria: Total 2,500 units from 3 – 5 Fab lots will be taken to perform 40 hrs BIM. Criteria: 5 valid rejects or less from 2,500 units and no any lot has more than 2 BIM failures
FIT Rate: IDT product family FIT rate can be found at WWW.IDT.COM



EXHIBIT B -Pricing
1.      WAFER PRICING
1.34      Wafer prices will be determined by multiplying the number of process mask layers used to manufacture a Product with all of the required options including Implant, MiM, and Deep Nwell, PIP, fuse, polyimide, passivation, and HR Poly and the US$ per mask layer for a given process technology set forth below. For the purposes of the calculation of process mask layers, the ASM Zero layer and Open Frame layers will not be included.
1.35      For Wafers with more or fewer metal layers than the standard metal layers, the Wafer price shall be the price calculated for the standard metal layers plus or minus the metal adder listed for each technology below per metal layer added or subtracted. As an example only; a .18u, five layer metal process utilizing 27 masking layers would use 23 layers as a 3 layer metal product (Standard Metal Layers). Therefore in 2010 the pricing would be 23 X $20.48 + 2 X $44 (metal adder) = $559.04.
1.36      For IDT Fab 4 Products produced on IDT transfer processes and IDT Fab 4 Products that will be using TSMC Al metallization, Logic and Mix-signal processes on 200mm wafers (i.e. currently running or otherwise intended to run in IDT Fab 4, the Wafer price is equal to the product of (i) the “$ per masking layer” from Table 1 below and (ii) the number of process masking steps for products with three layer metals. The Wafer price of any Product with more than or fewer than three layer metal will be incremented or decremented, respectively, by the “$ per metal” in Table 2 below. The Epi option price is $30 per Wafer.

Table 1 - $ per masking layer
Calendar Year
2009
2010
2011
2012
2013
2014
$ per masking layer
$20.48
$20.48
$19.05
$18.1
$17.22
$16.45

Table 2 - $ per metal
Calendar Year
2009
2010
2011
2012
2013
2014
$ per metal
(2 mask layers)
$44
$44
$43
$42
$41
$40

1.37      For IDT Products using TSMC Al metallization, Logic and Mix-signal processes on 200mm wafers (i.e. currently running or otherwise intended to run at TSMC using TSMC process), the wafer price is equal to the product of (i) the “$ per masking layer” from Table 3 below and (ii) the number of process masking steps for products with three layer metals. The Wafer price of any Product with more than or


fewer that three layer metals will be incremented or decremented, respectively, by the “$ per metal” in Table 4 below. The Epi option price is $30 per Wafer.
EXHIBIT B -Pricing
Table 3 - $ per masking layer
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
-----
$20.48
$19.05
$18.1
$17.22
$16.45

Table 4 - $ per metal
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
(2 mask layers)
-----
$44
$43
$42
$41
$40

1.38      For IDT Products utilizing TSMC 0.25um and 0.18um High Voltage technology on 200mm wafers, greater than or equal to 12V, the Wafer price is equal to the product of (i) the “$ per masking layer” from Table 5 below (for 0.25um High Voltage technology) or Table 6 below (for 0.18um High Voltage technology), as applicable, and (ii) the number of process masking steps for Products with three layer metals. The Wafer price of any Product with more than or fewer than three layer metals will be incremented or decremented, respectively, by the “$ per metal” in Table 7 below. Additional $30 for Epi wafer is required for both 0.25um and 0.18um High Voltage technologies.
Table 5 - $ per masking layer (for 0.25um High Voltage technology)
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
-----
$22.53
$20.96
$19.91
$18.94
$18.1

Table 6 - $ per masking layer (for 0.18um High Voltage technology)
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
-----
$24.17
$22.48
$21.36
$20.32
$19.41



Table 7 - $ per metal
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
(2 mask layers)
-----
$44
$43
$42
$41
$40

EXHIBIT B -Pricing
1.39      For IDT Products using TSMC 0.13um Copper metallization on 200mm, the Wafer price will be equal to the product of (i) the “$ per masking layer” from Table 8 below and (ii) the number of process masking steps for Products with six layer metals. The Wafer price for any Product with more or fewer than six layer metal will be incremented or decremented, respectively, by the “$ per metal” in Table 9 below. The Epi option price is $30 per Wafer.
Table 8 - $ per masking layer
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
-----
$26.01
$24.19
$22.99
$21.87
$20.89

Table 9 - $ per metal
Calendar Year
-----
2010
2011
2012
2013
2014
$ per masking layer
(2 mask layers)
-----
$88
$86
$84
$82
$80

2.      MASK PRICING
2.7      All masks purchased for the manufacture of the Products identified in Section 1.3 of this Exhibit B will be discounted forty-five percent (45%) from latest quoted prices dated August 26, 2008 (TSMC Quotation ID:IDT-7787).
2.8      All masks purchased for the manufacture of the Products identified in Section 1.4, 1.5 and 1.6 of this Exhibit B will be discounted thirty percent (30%) from latest quoted prices dated August 26, 2008 (TSMC Quotation ID:IDT-7787).


Exhibit C - Transfer Plan
NRE: TSMC shall invoice IDT a one time Non Recurring Engineering (NRE) charge of $1,050,000 for the transfer and qualification of IDT Fab 4 IDT Manufacturing Process Technology and Products to TSMC Facilities. The NRE shall cover all short loop, full run Engineering Wafers and engineering support required for the transfer of the applicable IDT Manufacturing Process Technology and Products. Once implementation of the IDT Manufacturing Process Technology at the applicable TSMC Facilities are finalized, TSMC will provide at no additional cost 3 (three) six-wafer qualification Lots per Product vehicle for a total of twenty-six (26) Product vehicles. Mask costs are not included in the NRE.
1.
Transfer Schedule: It is expected that twenty-four (24) months after the signing of this agreement, the transfer, qualification and phase 1 products production ramp will have been completed. Exhibit E details this schedule.
 
2.
The invoice dates of the NRE payments will be based on Company meeting the following milestones.
2.1.
25% at the signing of this Agreement.
2.2.
25% upon successful qualification results of Phase 1 logic Process Qualification Vehicles as defined in Exhibit D. This is expected within Twelve (12) months of the signing this Agreement.
2.3.
25% upon successful qualification results of Phase 2 Process qualification vehicles as defined in Exhibit D. This is expected within eighteen (18) months of the signing of this Agreement.
2.4.
25% upon successful qualification and characterization of all IDT transfer products as defined in Exhibit D. This is expected within twenty-four (24) months of the signing of this Agreement.
2.5.
TSMC will use commercially reasonable efforts to work with IDT to meet the schedule.
3.
It is the intention of IDT to transfer all IDT products currently running in IDT Fab 4. After the successful qualification of the 26 Product vehicles, IDT will run qualification wafers on each extension product as defined in Exhibit D at IDT’s expense. If the transferred product does not meet IDT specifications as per Exhibit A, TSMC will provide additional engineering support as needed to provide additional qualification wafers to IDT at no additional cost until IDT specifications have been met.

4.
Process R&D. If in the future IDT determines that certain products are not meeting IDT customer requirements or if IDT determines that additional process steps will give IDT products an advantage, TSMC agrees to use commercially best effort to provide IDT the engineering support to develop and implement the process improvements required to meet IDT customer needs or improve the product.














Exhibit D – Transfer Products
Transfer Products: This is a listing of the products that IDT intends to transfer at this time. The total number may very in the future and the product classification may change from Process Qualification Vehicle to Extension Product. However, the total number of process qualification vehicles will not exceed 26.


Phase 1 Process Qualification Vehicles (11 Total)
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P1QV 1
71T756Z
F4R11651CR
2.5 DPG ISSG
1P3M
C11.5 SAC
P1QV 2
71V656Z
F4R11657
3.3
1P3M
C11.5 SAC
P1QV 3
70VP258T
F4R11670CR
3.3 ISSG
1P4M
C11.5 SAC
P1QV 4
PP341HXXXY
F4R11710
1/8/2005
2P5M PICO
C11.5 PCA
P1QV 5
70T3519Z
F4R12514
2.5
1P5M
CEMOS 12.5
P1QV 6
71P746Z
F4R14008
1.8
1P5M
CEMOS 14
P1QV 7
72V265Y
F4R8036
3.3
2P2M
CEMOS 8
P1QV 8
72265Y
F4R8041
5
2P2M
CEMOS 8
P1QV 9
70V28Y
F4R9028
3.3 N-Type
3P2M
CEMOS 9
P1QV 10
71024M
F4R9038
5
3P2M
CEMOS 9
P1QV 11
AV286HXXXZ
F4R9800
3.3
1P3M
CEMOS 9.5
Phase 1 Extension products (80 total)
 
 
 
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P1EP1
72V3690X
F4R11633
3.3
1P3M
C11.5 SAC
P1EP2
70V7519Z
F4R11633
3.3
1P3M
C11.5 SAC
P1EP3
72V36B1XB
F4R11637
3.3
1P3M
C11.5 SAC
P1EP4
72V7166Z
F4R11648
3.3
1P4M
C11.5 SAC
P1EP5
72V7327Z
F4R11648
3.3
1P4M
C11.5 SAC
P1EP6
72V5155Z
F4R11648
3.3 P/P+
1P4M
C11.5 SAC
P1EP7
70V659Z
F4R11649
3.3
1P4M
C11.5 SAC
P1EP8
70V3599Z
F4R11649
3.3
1P4M
C11.5 SAC
P1EP9
72T72B5Z
F4R11651
2.5 DPG ISSG
1P3M
C11.5 SAC
P1EP10
70V25T
F4R11654
3.3
1P4M
C11.5 SAC
P1EP11
71V124H
F4R11657
3.3
1P3M
C11.5 SAC
P1EP12
71V556X
F4R11657
3.3
1P3M
C11.5 SAC
P1EP13
71V576Y
F4R11657
3.3
1P3M
C11.5 SAC
P1EP14
71V424Y
F4R11657CR
3.3
1P3M
C11.5 SAC
P1EP15
71V676Z
F4R11659
3.3
1P3M
C11.5 SAC
P1EP16
5T9110Z
F4R11660
2.5 DPG 750
1P3M
C11.5 NONS
P1EP17
5T9316Z
F4R11660
2.5 DPG 750
1P3M
C11.5 NONS
P1EP18
PP411HXXXZ
F4R11710
1/8/2005
2P5M
C11.5 PCA
P1EP19
PP412HXXXZ
F4R11710
1/8/2005
2P5M
C11.5 PCA
P1EP20
PP399HXXXZ
F4R11710
1/8/2005
2P5M Joplin
C11.5 PCA
P1EP21
PP345HXXAY
F4R11710
1/8/2005
2P5M Yangtz
C11.5 PCA
P1EP22
PP408Hxxx_U
F4R11710
1/8/2005
2P5M
C11.5 PCA
P1EP23
PP401HXXXZ
F4R11718
1/8/2005
2P5M Cyrus
C11.5 PCA
P1EP24
71T124G
F4R12512
2.5
1P3M
CEMOS 12.5
P1EP25
70T651Z
F4R12514A
2.5
1P5M
CEMOS 12.5
P1EP26
70TP269Z
F4R12537
2.5 /514+L-18
1P5M
CEMOS 12.5
P1EP27
70P3519Z
F4R14007
1.8/3.3
1P6M
CEMOS 14
P1EP28
70V27W
F4R14007L1
1.8/3.3
1P6M
CEMOS 14
P1EP29
71V424V
F4R14009
1.8/3.3
1P4M
CEMOS 14
P1EP30
723651Y
F4R8016
5
2P2M
CEMOS 8
•
Exhibit D Transfer Products



Phase 1 Extension products (80 total)Continued
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P1EP31
7205W
F4R8016
5
2P2M
CEMOS 8
P1EP32
7206X
F4R8016
5
2P2M
CEMOS 8
P1EP33
7204S
F4R8016
5
2P2M
CEMOS 8
P1EP34
7202Q
F4R8016
5
2P2M
CEMOS 8
P1EP35
70121R
F4R8016
5
2P2M
CEMOS 8
P1EP36
7134W
F4R8016
5
2P2M
CEMOS 8
P1EP37
7132S
F4R8016
5
2P2M
CEMOS 8
P1EP38
7133W
F4R8018
5
2P2M
CEMOS 8
P1EP39
7207Y
F4R8026
5
2P1M
CEMOS 8
P1EP40
7208Y
F4R8026
5
2P1M
CEMOS 8
P1EP41
7164L
F4R8026
5
2P1M
CEMOS 8
P1EP42
71256L
F4R8026
5
2P1M
CEMOS 8
P1EP43
79341X
F4R8028
5
2P2M
CEMOS 8
P1EP44
70914Y
F4R8032
5
2P2M
CEMOS 8
P1EP45
72V02Q
F4R8035
3.3
2P2M
CEMOS 8
P1EP46
72V04S
F4R8035
3.3
2P2M
CEMOS 8
P1EP47
72V05W
F4R8035
3.3
2P2M
CEMOS 8
P1EP48
72V225U
F4R8035
3.3
2P2M
CEMOS 8
P1EP49
72V251Y
F4R8035
3.3
2P2M
CEMOS 8
P1EP50
72V245V
F4R8035
3.3
2P2M
CEMOS 8
P1EP51
72V241W
F4R8035
3.3
2P2M
CEMOS 8
P1EP52
72225U
F4R8040
5
2P2M
CEMOS 8
P1EP53
72241W
F4R8040
5
2P2M
CEMOS 8
P1EP54
7054Y
F4R8041
5
2P2M
CEMOS 8
P1EP55
72211W
F4R8046
5
2P2M
CEMOS 8
P1EP56
72245V
F4R8046
5
2P2M
CEMOS 8
P1EP57
71V256YY
F4R9008CR
3.3 N-Type
3P2M
CEMOS 9
P1EP58
72294Z
F4R9014
5
3P2M
CEMOS 9
P1EP59
72V294Z
F4R9015
3.3 N-Type
3P2M
CEMOS 9
P1EP60
70V3579Z
F4R9018
3.3 P-Type
3P2M
CEMOS 9







Exhibit D
Transfer Products



Phase 1 Extension products (80 total)Continued
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P1EP61
71V632Z
F4R9021
3.3 N-Type
3P2M
CEMOS 9
P1EP62
71V432V
F4R9021
3.3 N-Type
3P2M
CEMOS 9
P1EP63
728985Z
F4R9023
5
1P3M
CEMOS 9
P1EP64
729082Z
F4R9023
5
1P3M
CEMOS 9
P1EP65
72V3674Y
F4R9028
3.3
3P2M
CEMOS 9
P1EP66
70V25U
F4R9028
3.3
3P2M
CEMOS 9
P1EP67
70V27X
F4R9028
3.3
3P2M
CEMOS 9
P1EP68
723674Y
F4R9035
5
3P2M
CEMOS 9
P1EP69
7028Y
F4R9035
5
3P2M
CEMOS 9
P1EP70
7025U
F4R9035
5
3P2M
CEMOS 9
P1EP71
7027X
F4R9035
5
3P2M
CEMOS 9
P1EP72
71256TT
F4R9038
5
3P2M
CEMOS 9
P1EP73
71124N
F4R9038
5
3P2M
CEMOS 9
P1EP74
AV310HXXXZ
F4R9800
3.3
1P3M
CEMOS 9.5
P1EP75
AV265HXXXZ
F4R9800
3.3
1P3M
CEMOS 9.5
P1EP76
AV284HXXXZ
F4R9800
3.3
1P3M
CEMOS 9.5
P1EP77
AV264HXXXZ
F4R9800
3.3
1P3M
CEMOS 9.5
P1EP78
AV265HXXXY
F4R9802
3.3
1P4M
CEMOS 9.5
P1EP79
AV367HXXXZ
F4R9804
3.3
1P3M
CEMOS 9.5
P1EP80
AV264HXXAZ
F4R9805
3.3
1P3M
CEMOS 9.5


Phase 2 Process Qualification Vehicles (13 Total)
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P2QV1
5V9885XXXY
F4R11645
3.3 MIM CAP
1P3M
C11.5 NONS
P2QV2
4CP877Y
F4R11662
1.8
1P3M
C11.5 NONS
P2QV3
AT270HXXXZ
F4R11680
2.5 DPG N2O DNW
1P4M
C11.5 NONS
P2QV4
AV278HXXXZ
F4R11681
3.3 606+DNW
1P3M
C11.5 NONS
P2QV5
AP298HXXXZ
F4R11707NS
1.8/3.3
1P3M
C11.5 SAC
P2QV6
82P2828Z
F4R12526
1.8/3.3
1P6M
CEMOS 12.5
P2QV7
40024PB
F4R8020CR
5
1P2M N-type
CEMOS 8
P2QV8
40056X
F4R8021
5
1P2M P-type -Teos etch back
CEMOS 8
P2QV9
40V056A
F4R8022
3.3
1P2M
CEMOS 8
P2QV10
3VH2862Z
F4R8030CR
5
1P2M
CEMOS 8
P2QV11
4V3807Z
F4R8508
3.3
1P3M
CEMOS 8.5
P2QV12
AP402HXXXZ
F4R11706NS
1.8/5 OTP
2P3M Clomel
C11.5 SAC
P2QV13
AV406HXXXZ
F4R11721
3.3/12 E2 Temp Sensor2P4M +MIM
 
C11.5 NONS






Exhibit D-Transfer Products



Phase 2 Extension products (44 total)
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P2EP1
5V2310Z
F4R11606
3.3
1P3M P
C11.5 NONS
P2EP2
5V8737Z
F4R11617
3.3
1P3M P
C11.5 NONS
P2EP3
5T2110Z
F4R11628
2.5 DPG N2O
1P3M
C11.5 NONS
P2EP4
45T915Z
F4R11628
2.5 DPG N2O
1P3M
C11.5 NONS
P2EP5
5T9891Z
F4R11628
2.5 DPG N2O
1P3M
C11.5 NONS
P2EP6
5V9885Z
F4R11645
3.3 MIM CAP
1P3M
C11.5 NONS
P2EP7
AV277HXXXZ
F4R11679
3.3
1P4M
C11.5 NONS
P2EP8
AT294HXXXZ
F4R11680
2.5 DPG N2O DNW
1P4M
C11.5 NONS
P2EP9
AV279HXXXZ
F4R11681
3.3
1P3M
C11.5 NONS
P2EP10
AT311HXXXZ
F4R11687NS
2.5 DPG N2O
1P3M
C11.5 NONS
P2EP11
AP377HXXXZ
F4R11707
1.8/3.3 OTP
1P3M
C11.5 SAC
P2EP12
AP318HXXXZ
F4R11707NS
1.8/3.3
1P3M
C11.5 SAC
P2EP13
AP336Hxxx_Z
F4R11707
1.8/3.3
1P3M
C11.5 SAC
P2EP14
AP344Hxxx_Z
F4R11707
1.8/3.3
1P3M
C11.5 SAC
P2EP15
AP343HXXXZ
F4R11707
1.8/3.3
1P3M
C11.5 SAC
P2EP16
AP354HXXXZ
F4R11713
1.8/3.3 VERSA
1P3M
C11.5 SAC
P2EP17
40915NB
F4R8020
5
1P2M
CEMOS 8
P2EP18
40056NB
F4R8020
5
1P2M
CEMOS 8
P2EP19
40048LB
F4R8020
5
1P2M
CEMOS 8
P2EP20
40024PB
F4R8020CR
5
1P2M
CEMOS 8
P2EP21
40026XF
F4R8021
5
1P2M
CEMOS 8
P2EP22
40245XE
F4R8021
5
1P2M
CEMOS 8
P2EP23
47245E
F4R8021
5
1P2M
CEMOS 8
P2EP24
40V056A
F4R8022
3.3
1P2M
CEMOS 8
P2EP25
49F805Z
F4R8023
5
1P2M
CEMOS 8
P2EP26
49F805Z
F4R8023
5
1P2M
CEMOS 8
P2EP27
5991AX
F4R8030
5
1P2M
CEMOS 8
P2EP28
3VHG862Y
F4R8030
5
1P2M
CEMOS 8
P2EP29
4F3805Y
F4R8044
5
1P2M
CEMOS 8
P2EP30
A313HxxxZ
F4R8047
5
1P3M
CEMOS8
P2EP31
4V2528Z
F4R8504
3.3
1P3M
CEMOS 8.5
P2EP32
40V991Z
F4R8504
3.3
1P3M
CEMOS 8.5
P2EP33
40V5928AY
F4R8508
3.3
1P3M
CEMOS 8.5
P2EP34
40V044CG
F4R8508
3.3
1P3M
CEMOS 8.5
P2EP35
42V510Z
F4R8508
3.3
1P3M
CEMOS 8.5
P2EP36
23V08Z
F4R8508
3.3
1P3M
CEMOS 8.5
P2EP37
AP320HXXXZ
F4R11696
1.8/5 RTC
2P3M
C11.5 NONS
P2EP38
AP371HXXXZ
F4R11706
1/8/2005
2P3M Limerick
C11.5 NONS
P2EP39
AP349HZ
F4R11706
1.8/5 OTP
2P3M Ennis
C11.5 NONS
P2EP40
AV359HXXXZ
F4R11709
3.3/12 E2
1P4M
C11.5 NONS
P2EP41
AV387HXXXZ
F4R11709NS
3.3/12 E2
1P4M
C11.5 NONS
P2EP42
AP403HXXXZ
F4R11715
1.8/5 RTC
2P3M
C11.5 NONS
P2EP43
AP361HXXXZ
F4R11720
1.8/5 MIM
2P3M Clomel Test Chip
C11.5 NONS
P2EP44
Av329HxxZ
F4R11704
3.3V +MIM
1P3M, F4R11681+MIM
C11.5 NONS



Exhibit D-Transfer Products



Phase 3 Process Qualification Vehicles (2 Total)
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P3QV1
QS3861Y
F4R8025
5
1P2M
CEMOS 8
P3QV2
AV340HXXXZ
F4R9033CR1
3.3
1P3M
CEMOS 9
 
 
 
 
 
 
Phase 3 Extension products (29 total)
 
 
 
IDT Part #
IDT Flow
#P/M Layers
IDT Process Name
Technology
P3EP1
QS3390X
F4R8025
5
1P2M
CEMOS 8
P3EP2
QS3245Y
F4R8025
5
1P2M
CEMOS 8
P3EP3
QS3257X
F4R8025CR
5
1P2M
CEMOS 8
P3EP4
72V7084Z
F4R9020
3.3
1P3M
CEMOS 9
P3EP5
72V7164Z
F4R9020
3.3
1P3M
CEMOS 9
P3EP6
72V8985Z
F4R9020
3.3
1P3M
CEMOS 9
P3EP7
72V7082Z
F4R9020
3.3
1P3M
CEMOS 9
P3EP8
821054AZ
F4R9030
5
2P3M
CEMOS 9
P3EP9
CV145Z
F4R9033
3.3
1P3M
CEMOS 9
P3EP10
CV126Y
F4R9033
3.3
1P3M
CEMOS 9
P3EP11
CV110NU
F4R9033
3.3
1P3M
CEMOS 9
P3EP12
CV179Z
F4R9033
3.3
1P3M
CEMOS 9
P3EP13
CV183HXXXZ
F4R9033
3.3
1P3M
CEMOS 9
P3EP14
CV125Y
F4R9033
3.3
1P3M
CEMOS 9
P3EP15
CV128Z
F4R9033
3.3
1P3M
CEMOS 9
P3EP16
CV141Z
F4R9033
3.3
1P3M
CEMOS 9
P3EP17
CV163Z
F4R9033
3.3
1P3M
CEMOS 9
P3EP18
Cv166Z
F4R9033
3.3
1P3M
CEMOS 9
P3EP19
AV303HXXXZ
F4R9033CR1
3.3
1P3M
CEMOS 9
P3EP20
AV400HXXXZ
F4R9033NS
3.3
1P3M
CEMOS 9
P3EP21
A252HXXXZ
F4R9040
5
1P3M
CEMOS 9
P3EP22
A268HXXXZ
F4R9040
5
1P3M
CEMOS 9
P3EP23
A267HxxxZ
F4R9040
5
1P3M
CEMOS 9
P3EP24
A280HXXXZ
F4R9043
5
1P4M
CEMOS 9
P3EP25
AV299xxxZ
F4R9042
3.3
1P4M
CEMOS 9
P3EP26
AV263HXXXZ
F4R9042
3.3
1P4M
CEMOS 9
P3EP27
AV414HXXXZ
F4R9700
3.3
1P3M+MIM
CEMOS9.5
P3EP28
40V024SA
F4R8503
3.3
1P2M Schottky
CEMOS 8.5
P3EP29
3CVG800Z
F4R8503
3.3
1P2M Schottky
CEMOS 8.5














Exhibit E


Transfer Schedule






Amendment No. 1 to the Master Repurchase Agreement

AMENDMENT NO. 1 TO THE MASTER REPURCHASE AGREEMENT, dated as of May 17, 2012 (the “ Amendment ”), between Integrated Device Technology, Inc. (the “ Seller ”) and Bank of America, N.A. (the “ Buyer ”).
PRELIMINARY STATEMENTS :
WHEREAS, the Seller and the Buyer entered into that certain Master Repurchase Agreement, dated as of June 13, 2011 (the “ Master Repurchase Agreement ”);
WHEREAS, the parties hereto have agreed (i) that the Availability Period be extended to December 13, 2012, and (ii) to amend certain additional provisions of the Master Repurchase Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment hereby agree as follows:
1. Definitions . Capitalized terms used herein and not otherwise defined herein shall have the meanings provided in the Master Repurchase Agreement.
2. Amendments of the Master Repurchase Agreement . The parties hereto hereby amend the Master Repurchase Agreement as follows:
(a) The following definition of “ Agreement ” shall be added at the end of Section 2 of the Master Repurchase Agreement as new clause (u):
““ Agreement ”, the Master Repurchase Agreement between Buyer and Seller dated June 13, 2011, as amended, amended and restated, supplemented or otherwise modified in writing from time to time.”
(b) The first sentence of the introductory paragraph of Annex I of the Master Repurchase Agreement is hereby amended and restated in its entirety as follows:
“This Annex I forms a part of the Master Repurchase Agreement (as amended, amended and restated, supplemented or otherwise modified in writing from time to time, the “ Agreement ”) dated as of June 13, 2011 between Integrated Device Technology, Inc. (the “ Seller ”) and Bank of America, N.A. (the “ Buyer ”).”
(c) The definition of “ Availability Period ” set forth in Section 2 of Annex I to the Master Repurchase Agreement is hereby amended and restated in its entirety as follows:
““ Availability Period ” means the period from June 13, 2011 to


December 13, 2012.”
(d) The following definition of “ Incipient Material Affiliate Event ” shall be added to Section 2 of Annex I to the Master Repurchase Agreement in the appropriate alphabetical order:
““ Incipient Material Affiliate Event ” has the same meaning as set forth in the Certificate.”
(e) The definition of “ Undrawn Fee Payment Date ” set forth in Section 2 of Annex I to the Master Repurchase Agreement is hereby amended and restated in its entirety as follows:
““ Undrawn Fee Payment Date ” means each of June 14, 2011; September 14, 2011; December 14, 2011; March 14, 2012; June 14, 2012; September 14, 2012; and December 13, 2012.”
(f) A new Section 9A shall be added immediately following Section 9 of Annex I to the Master Repurchase Agreement, which shall provide as follows:
“ 9A. Substitution. Paragraph 9(b) of the Agreement is hereby deleted in its entirety.”
(g) The Certificate included in Exhibit III of Annex I to the Master Repurchase Agreement is hereby replaced in its entirely with the document provided in Schedule 1 attached hereto.
3. Conditions Precedent . This Amendment shall become effective as of the date hereof, when each of the conditions set forth below shall have been satisfied:
(a) Each party shall have received counterparts of this Amendment executed by the other party hereto;
(b) The Certificate shall have been amended and restated in its entirety in the form of the document provided in Schedule 1 attached hereto and the Buyer shall have received evidence satisfactory to it that such amendment and restatement has been duly authorized and adopted and is valid and effective such that the rights of the Class A Preferred Shares (as defined in the Certificate) are as set out in (i) the Amended and Restated Memorandum and Articles of Association of the Seller attached as Exhibit III to Annex I of the Master Repurchase Agreement, and (ii) the Certificate amended and restated in the form of the document provided in Schedule 1 attached hereto.
(c) The Buyer shall have received an executed counterpart of an opinion of Walkers, Cayman Islands to the Seller, addressed to the Buyer in form and substance satisfactory to it.
(d) The Seller shall have paid all reasonable out-of-pocket costs and expenses incurred by the Buyer in connection with this Amendment.
4. Representations and Warranties . (a) Each party hereby represents and warrants


for itself only that:
(i) It is duly authorized to execute and deliver this Amendment and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance.
(ii) This Amendment has been duly executed and delivered by such party.
(iii) It has obtained all authorizations of any governmental body required in connection with this Amendment and such authorizations are in full force and effect
(iv) The execution, delivery and performance of this Amendment will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected, except to the extent such violation would not reasonably be expected to result, in the case of the Seller, in a Material Adverse Effect, and in the case of the Buyer, in a material adverse effect on the business, financial condition (taking into account any liabilities (contingent or otherwise)) or assets of the Buyer and its Subsidiaries (taken as a whole).
(v) No Event of Default with respect to such party has occurred and is continuing, or would result from the effectiveness of this Amendment.
(a)      The Seller hereby represents and warrants to the Buyer that this Amendment and the Master Repurchase Agreement (after giving effect to this Amendment) are the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights generally or by general principles of equity (including implied covenants of good faith and fair dealing).
5. Reference to and Effect on the Transaction Documents .
(a)      On and after the effectiveness of this Amendment, each reference in the Master Repurchase Agreement to “this Agreement”, “hereunder”, “hereof”, or words of like import referring to the Master Repurchase Agreement, and each reference in any of the Transaction Documents to “the Master Repurchase Agreement”, “thereunder”, “thereof”, or words of like import referring to the such agreement being amended hereby, shall mean and be a reference to such agreement, as amended by this Amendment.
(b)      The Master Repurchase Agreement, as specifically amended by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects affirmed, ratified and confirmed.
(c)      The execution, delivery and effectiveness of this Amendment shall not (i) operate as a waiver of any right, power or remedy of any party under any of the Transaction Documents, or (ii) constitute a waiver of any provision of any of the Transaction Documents.


6. Governing Law . This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
7. Execution in Counterparts . This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.
INTEGRATED DEVICE TECHNOLOGY, INC.
By:___________________________
Name:
Title:

BANK OF AMERICA, N.A.
By:___________________________
Name:
Title:

SCHEDULE 1
Amended and Restated Certificate




Exhibit 21.1
LIST OF REGISTRANT'S SUBSIDIARIES


 
State of other jurisdiction or incorporation
Baccarat Silicon, Inc.
California
Bay Semiconductor, Inc.
California
IDT Asia, Limited
Hong Kong
IDT Canada Inc.
Canada
IDT Europe Limited
United Kingdom
I.D.T. France S.A.R.L.
France
IDT Integrated Device Technology AB (Sweden)
Sweden
IDT Massachusetts, Inc.
Delaware
IDT New York, Inc.
New York
IDT Singapore Pte. Ltd.
Singapore
IDT Shanghai Co. Ltd.
China
Integrated Circuit Systems, Inc.
Pennsylvania
Integrated Device Technology, Inc.
Delaware
Integrated Device Technology GmbH
Germany
Integrated Device Technology Ireland Holding, Ltd.
Ireland
Integrated Device Technology (Israel) Ltd.
Israel
Integrated Device Technology S.r.l.
Italy
Integrated Device Technology Korea, Inc.
Korea
Integrated Device Technology (Malaysia) SDN. BHD
Malaysia
Integrated Device Technology Bermuda, Ltd.
Bermuda
Nippon IDT G.K.
Japan
Newave Semiconductor Corporation
California
Quadic Systems
Maine
Tundra Semiconductor (India) Private Ltd.
India
IDTI (Cayman) Limited Cayman

Cayman
IDTI (Cayman) Subsidiary Limited     
Cayman






Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-170748, 333-160687, 333-160501, 333-154776, 333-149751, 333-138205, 333-131423, 333-128376, 333-122231, 333-112148, 333-100978, 333-61742, 333-59162, 333-42446, 333-35124, 333-77559, 333-64279, 333-45245, 333-36601, 033-63133, and 033-54937) of Integrated Device Technology, Inc. of our report dated May 21, 2012 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.


/s/ PricewaterhouseCoopers LLP
San Jose, California
May 21, 2012



Exhibit 31.1
Certification of Chief Executive Officer

I, Theodore L. Tewksbury III, certify that:
1.
I have reviewed this annual report on Form 10-K of Integrated Device Technology, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting

 
 
By:
/s/  THEODORE L. TEWKSBURY III
Date: 
 
May 21, 2012
 
Theodore L.Tewksbury III
President and Chief Executive Officer


Exhibit 31.2
Certification of Chief Financial Officer

I, Richard D. Crowley, Jr., certify that:
1.
I have reviewed this annual report on Form 10-K of Integrated Device Technology, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting

 
 
By:
/s/  RICHARD D. CROWLEY Jr.
Date: 
 
May 21, 2012
 
Richard D. Crowley, Jr.
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)


Exhibit 32.1
Certification of Chief Executive Officer


I, Theodore L. Tewksbury III, of Integrated Device Technology, Inc. (the “Company”), pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350, certify to my knowledge that:

(i)           the Annual Report on Form 10-K of the Company for the fiscal year ended April 1, 2012 (the "Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(ii)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
By:
/s/  THEODORE L. TEWKSBURY III
Date: 
 
May 21, 2012
 
Theodore L.Tewksbury III
President and Chief Executive Officer


A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.


Exhibit 32.2

Certification of Chief Financial Officer

I, Richard D. Crowley, Jr. of Integrated Device Technology, Inc. (the “Company”), pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350, certify to my knowledge that:

(i)           the Annual Report on Form 10-K of the Company for the fiscal year ended  April 1, 2012  (the "Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(ii)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 
 
By:
/s/  RICHARD D. CROWLEY, JR.
Date: 
 
May 21, 2012
 
Richard D. Crowley, Jr.
Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.