10-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Check One)

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the fiscal year ended April 1, 2001

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission File No. 0-12695

INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Delaware	94-2669985
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2975 Stender Way, Santa Clara, California	95054
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (408) 727-6116

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value 5.5%
Preferred Stock Purchase Rights
(Title of class)

    Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. / /

    The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant was approximately $3,173,315,000 as of May 25, 2001, based upon the closing sale price of $44.10 per share on the Nasdaq National Market for that date. 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.

    There were 105,817,000 shares of the Registrant's Common Stock issued and outstanding as of May 25, 2001.

DOCUMENTS INCORPORATED BY REFERENCE

    Items 10, 11, 12, and 13 of Part III incorporate information by reference from the Proxy Statement for the 2001 Annual Meeting of Stockholders.

PART I

    This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve a number of risks and uncertainties. These 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; protection of intellectual property; and the risk factors set forth in the section "Factors Affecting Future Results." As a result of these risks and uncertainties, actual results could differ from those anticipated in the forward-looking statements. We undertake no obligation to publicly revise these statements for future events or new information after the date of this Annual Report on Form 10-K.

    Forward-looking statements, which are generally identified by words such as "anticipate," "expect," "plan," and similar terms, include the statements related to revenues and gross profit, research and development ("R&D") activities, selling, general, and administrative ("SG&A") expenses, interest expense, interest income and other, taxes, capital spending and financing transactions, as well as statements regarding successful development and market acceptance of new products, industry and overall economic conditions and demand, and capacity utilization.

    Trademark notice: IDT, QuickSwitch, SwitchStar and Zero Bus Turnaround are trademarks of Integrated Device Technology, Inc. The IDT logo and ZBT are registered trademarks of Integrated Device Technology, Inc. All other brand names and product names contained in this Annual Report are trademarks, registered trademarks or trade names of their respective holders.

ITEM 1. BUSINESS

    We design, develop, manufacture and market a broad range of high-performance semiconductor products. Applications for our products include: data networking and telecommunications equipment, such as routers, hubs, switches, cellular base stations and other devices; storage area networks (SANs); other networked peripherals and servers; and personal computers.

    We market our products on a worldwide basis primarily to OEMs (original equipment manufacturers) through a variety of channels, including a direct sales force, distributors, contract electronic manufacturers (CEMs), and independent sales representatives.

    We attempt to differentiate our products from competitors' offerings through advanced architectures and features designed to enhance the performance of our customers' systems, accelerate their product development cycles, and reduce their system costs. We fabricate substantially all of our semiconductor wafers using advanced CMOS (complementary metal oxide silicon) process technology in our own fabrication facilities. We assemble or package the majority of our products in manufacturing facilities that we own in Malaysia and the Philippines, where we also conduct product test operations.

    In the first quarter of fiscal 2002, we acquired Newave Semiconductor Corp. ("Newave"), a privately held designer and marketer of integrated circuits for the telecommunications markets. In fiscal 2000, we acquired Quality Semiconductor, Inc. ("QSI"). QSI had been engaged in the design, development and marketing of high-performance logic, timing, and networking semiconductor products.

    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.

PRODUCTS AND MARKETS

    We provide a broad portfolio of communications-oriented integrated circuits focused on delivering increased bandwidth for the converging global network. Our core competency is in the development and

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integration of processor, logic and advanced memory technologies into IC (integrated circuit) solutions that enhance network performance, maximize bandwidth, enable quality of service (QoS) or "network intelligence", and speed time to market. We offer approximately 1,100 devices in over 12,000 product configurations.

    We believe that network architectures which originated in data communications are, and will continue to be, the underlying technology of the converging network of data, voice and other information media. We plan to apply our expertise to both data-oriented applications and multi-service classes of equipment to address customer needs in the following market areas:

•

Enterprise/carrier infrastructure (routers, switches, private/public multi-service access switches)



•

Wireless infrastructure (GSM and GPRS base stations, and third generation or "3G" base stations)



•

Access networks (VoIP gateways that enable voice transmission over the internet; DSLAMs that facilitate broadband data transmission over traditional voice networks; customer premises equipment (CPE); and integrated access devices, or IADs)



•

Storage area networks (SANs)

    We operated in two business segments during the fiscal year ended April 1, 2001:

•

Communications and High-Performance Logic



•

SRAMs and Other

    The Communications and High-Performance Logic segment includes multi-port and FIFO products (semiconductors which integrate logic and memory technology), communications ASSPs (applications-specific standard products) and high-performance logic and clock-management products. The SRAMs (static random access memories) and Other segment is comprised mainly of high-speed SRAMs.

    During fiscal 2001, the Communications and High-Performance Logic and SRAMs and Other segments accounted for approximately 69% and 31%, respectively, of total IDT revenues of $991.8 million.

Communications and High-Performance Logic Segment

    This segment includes Communications Products, Communications ASSP's, and Logic and Clock Management Products.

    Communications Products.  Our communications products in this segment are either proprietary or have limited alternative sources of supply. These include FIFOs and multi-ports that offer high-performance features for enterprise networks, wireless infrastructure applications, and access networks.

    FIFOs:  FIFOs are used as rate buffers to transfer large amounts of data at high speeds between separate devices or pieces of equipment operating at different speeds within a system, when the order of the data to be transferred needs to be controlled. New families of FIFOs also perform data organizing functions such as adapting the width and speed of incoming data to system requirements.

    We develop products and technologies to help designers solve inter-chip communications problems such as rate matching, data buffering, bus matching and data prioritizing. We provide an extensive product portfolio with more than 250 synchronous, asynchronous and bi-directional FIFO offerings. Our families of 9-bit, 18-bit, 36-bit and 72-bit FIFOs are used in many networking and telecommunications system designs. We believe that our FIFOs provide the highest density (9-megabit), highest performance (225 MHz) and broadest feature sets currently commercially available.

    Multi-ports:  Multi-port products are used to speed data transfers and act as the link between multiple microprocessors and the same memory bank, or between microprocessors and peripherals.

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Multiports are currently used primarily in SAN equipment such as RAID (Redundant Array of Independent Disks) controllers, and wireless communications and networking products, including switches and wireless base stations.

    Our portfolio consists of more than 100 types of asynchronous and synchronous dual-ports, FourPorts and bank-switchable dual-ports, including the highest-density (4-megabit), highest-performance (166 MHz) and widest word-width (36 bits) dual-ports currently in production.

    Communications ASSPs:  Communications ASSPs include telecom products, ATM (asynchronous transfer mode) switches and SARs, high-speed PHYs, communications processors, and IP co-processors.

    Telecom Products:  We offer a line of telecom products that includes time slot interchange (TSI) switches, transport (T1/E1) and voice-processing products. These products enable and accelerate the convergence of voice and data networks. Our telecom products are targeted at a variety of communications applications including voice-over-IP gateways, multi-service access switches, digital loop carrier (DLC) systems, central office switches and integrated access devices (IADs).

    ATM Switches and SARs:  Our SwitchStar™ switching chip set enables low-cost, high-performance cell-based switching. This two-chip set includes a switch controller and switch fabric memory, and along with a wide array of support devices, forms the core for a range of emerging access switch applications. We also develop segmentation and reassembly (SAR) controllers.

    PHYs:  We offer physical layer interface (PHY) devices for both ATM and Ethernet applications, focused on access network solutions at the 25-51 Mbps performance level.

    Communications Processors:  We offer a range of standalone and integrated communications processors and development tools. Going forward, our research and development efforts focus on integrated communications processors, which combine MIPS-based processor cores with a range of communications interface functions. We target these integrated processors at the highest-growth communications market segments, such as DSLAMs, residential gateways, small office/home office (SOHO) routers and Ethernet switches.

    IP Co-Processors:  We entered the IP co-processor market in fiscal 2001 with a custom IP (internet protocol) co-processor that Cisco Systems, Inc. ("Cisco") uses in its Catalyst family of multi-layer switches, including the Catalyst 6000 platform. Capitalizing on our expertise in integrating high-performance logic and memory, we introduced what was then the industry's fastest product combining CAM (content addressable memory) technology with a specialized, high-speed control interface. In May 2001, we announced our first standard product, designed to enable deep packet classification and packet forwarding in high-speed switches, routers and remote access concentrators (RACs).

    Logic and Clock Management Products.  Our product offerings fall into three groupings: high-performance interface logic, bus switch products, and clock management or timing products. We offer a broad range of high-performance, 3.3-volt CMOS logic interface products. Logic circuits control data communication between various elements of electronic systems, such as a microprocessor and a memory circuit. We offer logic circuits that support bus and backplane interfaces, memory interfaces and other applications where high speed and low power are critical. Our FCT, LVC, and ALVC families of logic components help solve inter-board communication problems in high-performance communications and computing equipment.

    We provide a range of high-performance bus switch products for solving circuit, bus and printed-circuit-board (PCB) interconnect problems for high-speed system designs. Our QuickSwitch™ products come in a variety of configurations to meet customer needs for low cost and high performance.

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    Finally, we supply high-performance clock management products with approximately 50 devices in more than 320 speed and skew options to support a broad range of control functions within communications systems. Our portfolio includes low-output skew drivers and buffers, PLL-based devices, and programmable skew devices.

SRAMs and Other Segment

    SRAMs are memory circuits used for storage and retrieval of data during the operation of a communications or computing system. Unlike DRAMs (dynamic random access memories), SRAMs do not require electrical refresh of the memory contents to ensure data integrity, allowing them to operate at high speeds. SRAMs include substantially more circuitry than DRAMs, resulting in higher production costs for a given amount of memory, and generally command higher selling prices than the equivalent density traditional DRAM products. The market for SRAMs includes segments with differing demands for speed, power, density, organization and packaging.

    To provide SRAM products that meet the varying needs of our customers, we offer both synchronous and asynchronous 16K, 64K, 256K, 1-Mbit, 4-Mbit and 9-Mbit SRAMs in a number of speed, organization, power and packaging configurations. Our family of ZBT® (Zero Bus Turnaround™) SRAMs eliminate wait states between read and write cycles and are targeted at meeting the specific needs of our communications customers. A limited number of higher density SRAM products and products with additional features believed to be important to our data networking customers are in the development stage.

Customers

    We market and sell our products on a worldwide basis primarily to OEMs in our two business segments. Products in the Communications and High-Performance Logic segment are sold primarily to communications customers. Although products in the SRAMs and Other segment are general purpose in nature, we also supply the majority of our products in this segment to our communications customers. Customers often purchase products from more than one of our product families. No one OEM direct customer accounted for 10% or more of our revenues in fiscal 2001, 2000 or 1999. When considering sales through all sales channels, one end customer, Cisco, accounts, in aggregate, for more than 10% of our revenues. Because of limitations in the amount of end customer data made available to us by our CEM customers, we are not able to precisely determine the aggregate percentage of our sales which are attributable to Cisco. However, based upon the best available information, we estimate that end-customer sales to Cisco represented between 16-18% of our fiscal 2001 revenues.

Sales Channels

    We use a variety of sales channels, including a direct sales force, distributors, CEMs, and independent sales representatives. A significant percentage of our sales, including sales to Cisco and other large OEM customers, are through CEMs and distributors. One distributor, Avnet, Inc., represented 14%, 19% and 22% of net revenues for fiscal 2001, 2000 and 1999, respectively. One CEM, Solectron Corporation, represented 11% of our revenues in fiscal 2001.

    Our worldwide direct sales organization consisted of approximately 235 personnel at April 1, 2001, in 18 domestic and 14 international sales offices. These personnel are primarily responsible for marketing and sales in their respective locations. We also utilize three national distributors, Avnet, Inc., Arrow Electronics, Inc. and Insight Electronics, Inc., and several regional distributors in the United States. A significant portion of our export sales are made through international distributors in Europe, Asia Pacific and Japan.

    During fiscal 2001, 2000 and 1999, sales outside of North America accounted for approximately 42%, 38% and 37%, respectively, of our total revenues.

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Manufacturing

    We believe that our internal wafer fabrication capability facilitates the implementation of advanced process technologies, particularly processes that optimize the integration of logic and memory within single silicon chips. We operate sub-micron wafer fabrication facilities in Hillsboro, Ore. and Salinas, Calif. The Hillsboro facility first contributed to revenues in fiscal 1997. The 245,000 square foot facility, which produces most of the wafers fabricated for our SRAMs and Other segment, contains a 70,000 square foot, eight-inch wafer fabrication line. The Salinas facility, which has been in production since fiscal 1986, includes a 24,000 square foot, six-inch wafer fabrication line. Most wafers for our Communications and High-Performance Logic segment are produced at the Salinas plant.

    In fiscal 2000, we acquired certain manufacturing assets as part of our merger with QSI, including a wafer fabrication facility located in Sydney, Australia ("the QSA Fab"). We completed the sale of surplus QSI manufacturing assets, including the QSA Fab, early in fiscal 2001. Wafer fabrication for most of the acquired QSI products has been transferred to our Salinas facility, although we continue to purchase a small number of wafers from the QSA Fab on an arms-length basis.

    We supplement our internal wafer fabrication capacity through relationships with subcontract wafer manufacturers, or foundries. We expect the percentage of our total wafer fabrication requirements provided by external foundries to increase in the future.

    We also operate two component assembly and test facilities, a 145,000 square foot facility in Penang, Malaysia and a 176,000 square-foot facility near Manila, the Philippines. Substantially all of our test operations and a significant portion of our assembly operations are performed at these two facilities. We also use subcontractors, principally in Korea, the Philippines and Malaysia, to perform certain assembly operations. Finally, in addition to this high-volume offshore assembly and test capability, we have the capacity for low-volume assembly in our Santa Clara, Calif. facilities as well as limited test capabilities in both Santa Clara and Salinas.

    We utilize proprietary CMOS silicon process technology permitting sub-micron geometries in our wafer fabrication facilities. The majority of our silicon production occurs using our 0.35-, 0.25- and 0.18-micron processes. We are expanding the use of our 0.18-micron CMOS processes in the Hillsboro facility. We continue to develop advanced versions of our 0.18 micron processes as well as processes below 0.18 microns.

    Our assembly and test activities and international subcontracting arrangements are subject to a number of risks associated with foreign operations (see "Factors Affecting Future Results").

Backlog

    Our backlog (which we define as all confirmed, unshipped orders) as of April 1, 2001 was approximately $168.6 million ($288.6 million as of April 2, 2000). We manufacture and market both products with limited or no second sources and industry-standard products. Sales are generally made pursuant to 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 customers. We schedule product deliveries on receipt of purchase orders under the related OEM agreements. Generally, these purchase orders and OEM agreements, especially those for standard products, also allow customers to 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 rescheduled, revised or canceled. In addition, distributor orders are subject to price adjustments both before and after shipment. For these reasons, we do not believe that backlog should be used as an indicator of future revenues.

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Research and Development

    Our research and development efforts emphasize the development of both proprietary and enhanced-performance, industry standard products, as well as the development of our advanced CMOS processes. We believe that a continued high level of research and development expenditures is necessary to maintain our competitive position. We operate research and development centers in Santa Clara, Calif.; Hillsboro, Ore.; Atlanta, Ga.; Dallas, Tex.; and Sydney, Australia. Also, with our Newave acquisition in the first quarter of fiscal 2002, we now have a design center located in Shanghai, China. Research and development expenditures, as a percentage of revenues were approximately 13%, 15% and 24% in fiscal 2001, 2000 and 1999, respectively.

    Our product development activities are focused on the design of new circuits that provide new features and enhanced performance primarily for growing communications markets applications. Additionally, we are developing advanced manufacturing process technologies, including 0.15-micron semiconductor fabrication techniques. These process technologies are designed to enable cost and performance advantages and to support higher production volumes of integrated circuits and the continued growth of our communications products.

Competition

    Intensely competitive, the semiconductor industry is characterized by rapid technological advances, cyclical market patterns, price erosion, evolving industry standards, occasional shortages of materials, intellectual property disputes, high capital equipment costs and uncertain availability of and control over manufacturing capacity. Many of our competitors have substantially greater technical, marketing, manufacturing and financial resources than we do. In addition, several foreign competitors receive assistance from their governments in the form of research and development loans and grants and reduced capital costs, 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 quality, product availability and price. As described under the heading "Products and Markets," products in the SRAMs and Other segment can generally be characterized as commodity-type items and tend to be most price sensitive.

    Our competitive strategy is to differentiate our products through high-performance, innovative configurations, proprietary features and breadth of product offerings. Price competition, introductions of new products by our competitors, delays in our own product introductions or other competitive factors could have a material adverse effect on us in the future.

    While we have a majority share in the markets for FIFO and multi-port products, some of our products compete with similar products offered by Cypress Semiconductor Corporation ("Cypress"). Our MIPS-based microprocessors compete with products offered by other vendors such as PMC-Sierra, Inc. ("PMC"), Toshiba Corporation and NEC Corporation, and with microprocessors based on other architectures, such as those offered by Intel Corp. and Motorola, Inc. Our competitors for logic sales include both U.S. and foreign manufacturers, such as Texas Instruments Incorporated and Pericom Semiconductor Corporation. Certain of our network products compete with products offered by PMC.

    In markets where we compete to sell industry standard SRAM components, market supply and pricing strategies of competitors significantly impact the price we receive for our products. Our competitors include U.S.-based companies such as Cypress, Micron Technology, Inc. and Integrated Silicon Solutions, Inc. International competitors include Samsung Electronics, and various other Taiwanese and Korean companies.

Intellectual Property and Licensing

    We recognize that our intellectual property is a valuable corporate asset, and we continue to invest in intellectual property protection. We also intend to continue our efforts to increase the breadth of our

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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 generally 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. In the past, we have been involved in patent litigation which 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 who have a broad portfolio of patents.

    We have been notified from time to time of claims that we may be infringing patents issued to others. Further, there can be no assurance that new claims alleging infringement of intellectual property rights will not be aggressively pursued in the future. Such claims could include infringement of patents or patent applications, trade secret misappropriation, and copyright or trademark infringement. In addition, there is no assurance that licenses, to the extent required, will be available. Should licenses from any such claimant be unavailable, or not be available on terms acceptable to us, we may be required to discontinue our use of certain processes or the manufacture, use and sale of certain of our products, to incur significant litigation costs and damages, or to develop non-infringing technology. If we are unable to obtain any necessary licenses, pass any increased cost of patent licenses on to our customers or develop non-infringing technology, we could be materially adversely affected. In addition, we have received patent licenses from several companies that expire over time, and the failure to renew or renegotiate certain of these licenses could have a material adverse effect on us.

Environmental Regulation

    Federal, State and local provisions, together with those of other countries, regulate the use and discharge of certain materials used in semiconductor manufacturing. Our facilities are designed to comply with applicable regulations and we believe that our operations conform to such regulations. However, there can be no assurance that future regulatory changes will not require significant capital expenditures. Also, failure to comply with environmental regulations in the future could subject us to substantial liability or cause our manufacturing operations to be interrupted.

Employees

    At April 1, 2001, we employed approximately 5,000 people worldwide, of whom 1,400 and 1,300 were in Malaysia and the Philippines, respectively. Our future success depends in part on our ability to attract and retain qualified personnel, who are generally in great demand. We have implemented policies enabling our employees to share in our success, including stock option, stock purchase and profit sharing programs, and bonus plans for key contributors. We have never had a work stoppage. No employees are currently represented by a collective bargaining agreement, and we consider our employee relations to be satisfactory.

    On June 13, 2001, we announced plans for a realignment of our workforce to be consistent with the updated revenue outlook that we announced on May 31, 2001. Under the plan, our workforce will be reduced by approximately 900 employees, primarily in our Malaysian and Philippines manufacturing facilities. We will record a charge of approximately $2.5 million in the first quarter of fiscal 2002, primarily related to severance costs.

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ITEM 2. PROPERTIES

    As of April 1, 2001, we occupied nine major facilities in California, Oregon, Malaysia and the Philippines:

Location	Facility Use	Square Feet
Salinas, California	Wafer fabrication, SRAM and communications product operations	98,000
Santa Clara, California	Logic and microprocessor operations	62,000
Santa Clara, California	Administration, quality assurance and shipping and receiving	48,000
Santa Clara, California	Administration	43,700
Santa Clara, California	Communications products and other operations	50,000
Santa Clara, California	Administration	50,400
Penang, Malaysia	Assembly and test operations	145,000
Hillsboro, Oregon	Wafer fabrication and process research	245,000
Canlubang, the Philippines	Assembly and test operations	176,000

    We lease our Santa Clara facilities under leases expiring between 2005 and 2008, including renewal options. The Oregon facility is subject to a tax ownership operating lease. Additional information about leased properties is provided in Note 6 of the Notes to Consolidated Financial Statements. We own our Malaysian and Philippines facilities, although the Malaysian facilities are subject to long-term ground leases and we have an interest in, but do not own, the Philippines land. We lease offices for our sales force in 18 domestic and 14 international locations. We also lease offices for our design centers in Australia, Georgia and Texas.

ITEM 3. LEGAL PROCEEDINGS

    None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

    Our executive officers, and their respective ages as of May 27, 2001, are as follows:

Name	Age	Position
Jerry Taylor	52	President and Chief Executive Officer
David Côté	46	Vice President, Communications ASSPs and Worldwide Marketing
Bill Franciscovich	41	Vice President, Worldwide Sales
Mike Hunter	49	Vice President, Worldwide Manufacturing
Alan F. Krock	40	Vice President and Chief Financial Officer
Jimmy J.M. Lee	48	Vice President, Logic, FIFO and Telecommunications Products
Chuen-Der Lien	45	Vice President, Chief Technical Officer
Christopher P. Schott	50	Vice President, IPC, SRAM and Multi-port Products

    Mr. Taylor joined the Company as Vice President, Memory Products in June 1996, and was elected Executive Vice President, Manufacturing and Memory Products, in January 1998. Mr. Taylor became President and was appointed to the Board of Directors in July 1999. He was named Chief Executive Officer in December 1999. Prior to joining the Company, Mr. Taylor held engineering positions at Mostek, Fairchild Semiconductor, Benchmarq Microelectronics, Plano ISD and Lattice Semiconductor.

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    Mr. Côté joined IDT in April 1997 as Vice President, Marketing. Mr. Côté was named Vice President, Communications ASSPs in March 2000. Prior to joining IDT, he was Vice President of Marketing with Meridian Data from June 1996 through December 1996. Mr. Côté previously held management positions at Zeitnet, Inc. and Synoptics, Inc.

    Mr. Franciscovich joined IDT in 1986 and has held various management, sales and marketing positions with the Company. He was appointed to his current position in August 1999. His previous positions at IDT included Vice President, SRAM Products, from August 1998 to July 1999; Director of Sales and Marketing, CEM Division, from April 1998 to August 1998; and Director of SRAM Marketing, from April 1996 to April 1998.

    Mr. Hunter was promoted to Vice President, Worldwide Manufacturing in February 1998. Previously he was Vice President, California Silicon Manufacturing, and has been with the Company since January 1996. Prior to joining IDT, Mr. Hunter held management positions at Chartered Semiconductor and Fujitsu Persona.

    Mr. Krock joined IDT in February 1996 as Corporate Controller and was appointed a Vice President in July 1997. In January 1998 he was elected Vice President, Chief Financial Officer. Prior to joining IDT, Mr. Krock held management positions at Rohm Corporation and Price Waterhouse (now PricewaterhouseCoopers LLP).

    Mr. Lee joined IDT in 1984. He was appointed to his current position in August 1999. His previous positions at IDT have included Vice President of the FIFO Products Division from 1996 to 1999. Prior to joining IDT, Mr. Lee held a management position at Intel Corp.

    Dr. Lien joined IDT in 1987 and was promoted to his current position in April 1996. Prior to joining the Company, he held engineering positions at Digital Equipment Corporation and AMD.

    Mr. Schott has been with the Company since 1981. Mr. Schott was promoted to Vice President, Multiport Products, in 1989. He assumed his current position in December 2000.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

    Our Common Stock is traded on the Nasdaq National Market under the symbol IDTI. The following table shows the high and low closing sales prices for our Common Stock as reported by the Nasdaq National Market for the fiscal periods indicated:

	High		Low
Fiscal 2001
First Quarter	$	64.38	$	35.75
Second Quarter		103.33		49.81
Third Quarter		89.44		27.81
Fourth Quarter		56.00		28.94
Fiscal 2000
First Quarter	$	10.44	$	5.41
Second Quarter		24.38		10.88
Third Quarter		29.19		15.94
Fourth Quarter		43.81		25.63

    As of May 27, 2001, there were approximately 825 record holders of our Common Stock.

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    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 anticipate paying cash dividends on our Common Stock in the foreseeable future.

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 elsewhere in this Annual Report on Form 10-K.

Statements of Operations Data

		Fiscal Year Ended
		April 1, 2001		April 2, 2000			March 28, 1999			March 29, 1998		March 30, 1997
		In thousands, except per share data
Revenues		$	991,789	$	701,722		$	601,017		$	649,827	$	581,901
Restructuring, asset impairment and other			—		(4,726	)		204,244			—		45,223
Research and development expenses			128,749		108,009			143,355			130,730		158,402
Gain on equity investments, net			86,994		11,335			—			—		—
Net income (loss)			415,203		130,611			(298,939	)		8,457		(43,582	)
Basic earnings per share:
	Net income (loss)		3.99		1.44			(3.42	)		0.10		(0.53	)
Diluted earnings per share:
	Net income (loss)		3.76		1.32			(3.42	)		0.10		(0.53	)
Shares used in computing net income (loss) per share:
Basic			104,042		90,918			87,397			84,732		82,252
Diluted			110,287		99,002			87,397			88,871		82,252

Balance Sheets and Other Data

	April 1, 2001		April 2, 2000		March 28, 1999		March 29, 1998		March 30, 1997
	In thousands, except employee data
Cash, cash equivalents and investments	$	821,092	$	422,045	$	201,114	$	233,654	$	198,229
Total assets		1,470,401		1,162,182		741,847		1,038,787		956,105
Convertible subordinated notes, net of issuance costs		—		179,550		184,354		183,756		183,157
Other long-term obligations		76,018		92,172		78,022		86,929		65,387
Stockholders' equity		1,139,897		681,151		299,326		590,028		554,583
Number of employees		4,970		4,780		4,805		5,185		4,433

    Certain amounts for fiscal 1997-1999 have been restated as a result of a pooling-of-interests merger. Cash, cash equivalents and investments exclude shares in Quantum Effect Devices, Inc. and PMC-Sierra, Inc.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    We recommend that this discussion and analysis be read in conjunction with our consolidated financial statements and the notes thereto, which are included elsewhere in this Annual Report on Form 10-K.

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Overview

    We achieved record financial results in fiscal 2001. Strong volume growth and favorable pricing in both the Communications and High Performance Logic product segment and the SRAMs and Other product segment, together with our efficient cost structure, resulted in all-time highs for revenues, gross margin and operating income. Our financial condition strengthened considerably during the year. We ended fiscal 2001 with little debt and $821.1 million in cash and investments, excluding our shares in PMC-Sierra, Inc. ("PMC").

Recent Developments

    Deteriorating business conditions, particularly in the communications infrastructure markets served by many of our largest customers, resulted in a 23.7% decrease in revenues in our fiscal fourth quarter, compared to the preceding quarter. On May 31, 2001, we announced that we expect revenues to decrease by approximately 44% in the first quarter of fiscal 2002, compared to the preceding quarter. On June 13, 2001, we announced plans to reduce our workforce to align with the lowered outlook for revenues (see "Subsequent Events," below).

Results of Operations

    Revenues.  Our revenues for fiscal 2001 were $991.8 million, an increase of $290.1 million or 41% compared to the $701.7 million recorded in fiscal 2000. From fiscal 1999 to fiscal 2000, our revenues increased by $100.7 million or 17%.

    The increase in revenues from fiscal 2000 to fiscal 2001 was primarily due to increased unit volumes and higher average selling prices in both of our product segments: Communications and High-Performance Logic, and SRAMs and Other. The increase in volume for the Communications and High-Performance Logic segment is mainly attributable to the introduction of new products, primarily for data networking and wireless communications infrastructure equipment markets, as well as continued high levels of demand for existing products serving these and other markets.

    Unit volumes for our SRAMs and Other segment also improved from fiscal 2000 to fiscal 2001, due to continuing high levels of demand for industry-standard products in this segment. Improvements in the mix of units sold, and in the level of demand for industry-standard products related to available supply, resulted in a higher ASP (average selling price) in fiscal 2001 compared to the preceding year.

    Unit volumes declined significantly for both product segments in the fourth quarter of fiscal 2001. Some of our largest customers warned of slowing end-demand, deteriorating financial prospects and large inventories of semiconductor components, including those families of integrated circuits that we supply.

    We expect that unit volumes, product pricing (particularly in the SRAM and Other product segment) and sales to major customer accounts will experience further substantial declines in the first quarter of fiscal 2002, compared with the immediately preceding quarter. While we believe that our products are being consumed in our customers' systems at a higher rate than reflected in our estimated revenue for the first quarter of fiscal 2002, we cannot determine with precision when customers will have fully consumed their excess inventories of our products.

    During fiscal 2000, we entered into a cross license with Intel Corp. ("Intel") and received as consideration $20.5 million. Of this amount, $8.5 million was recognized as revenue in the second quarter of fiscal 2000. The remaining revenue associated with the cross license with Intel is being recognized over seven years, the estimated remaining useful life of the relevant intellectual property.

    Gross Profit.  Gross profit for fiscal 2001 was $585.3 million, an increase of $243.7 million compared to the $341.6 million recorded in fiscal 2000. From fiscal 1999 to fiscal 2000, our gross profit increased by $337.6 million.

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    On an operating basis (excluding restructuring, asset impairment, and other special costs and benefits), gross margin was 59.0%, 47.6% and 35.1% in fiscal 2001, 2000 and 1999, respectively.

    Factors that contributed to the improvement in gross margin from fiscal 2000 to fiscal 2001 include: higher unit volumes and revenue, increased manufacturing capacity utilization, improved product mix within the Communication and High-Performance Logic segment, higher SRAM and logic product pricing, and manufacturing cost reductions. The latter included the sale of a wafer fabrication facility located in Sydney, Australia, that we had acquired in our merger with Quality Semiconductor, Inc. ("QSI"); and the negotiation of significantly lower subcontractor prices for assembling certain of our products, in exchange for our concentrating production volumes with a smaller group of suppliers. Average gross margin for products within the SRAMs and Other segment were significantly below our overall gross margin in fiscal 2001.

    Our gross margin percentage declined from a record 61.6% in the third quarter of fiscal 2001 to 55.2% during the fourth quarter, and is expected to decline to the mid- 30's (as a percentage of revenue) during the first quarter of fiscal 2002 (all margin percentages are on an operating basis, as described above). The near-term future declines in expected gross margin percentage relate primarily to reduced utilization of our fixed asset base as a result of expected revenue declines. To a lesser extent, lower product prices (particularly in the SRAM and Other segment) began to have an adverse impact on gross margins as we entered fiscal 2002. We expect that future improvement in quarterly gross margin percentage during fiscal 2002 will be primarily dependent upon a resumption of revenue growth.

    The improvement in our gross margin from fiscal 1999 to fiscal 2000 was due to higher revenues primarily associated with increased unit sales, and cost savings associated with the consolidation of wafer fabrication production late in fiscal 1999, including the closure of one fabrication facility. Consolidation of production allowed us to improve the utilization of our remaining fabrication facilities, resulting in a lower overall cost per unit produced. Our gross margin also improved in fiscal 2000 over fiscal 1999 because of a reduction in depreciation expense resulting from lower carrying values of impaired manufacturing assets.

    Special items impacting gross profit in fiscal 2000 included $8.5 million in Intel licensing revenue, which carried little related costs, and $4.7 million in net positive adjustments and reversals relating to the completion in fiscal 2000 of restructuring activities commenced in fiscal 1999 and finalization of the related accounting.

    In fiscal 1999, we recorded a $28.9 million charge to cost of sales which related mainly to excess SRAM manufacturing equipment ($18.9 million) and certain technology licensing matters ($10.0 million, of which $3 million was reversed later in fiscal 1999 upon settlement of certain of these matters). The net carrying value of this equipment before writedown was $17.4 million, and after writedown was $2.3 million. The excess SRAM manufacturing equipment charge represented a writedown to estimated fair market value based primarily on appraisals and third-party estimates. The charge was the result of prevailing economic conditions in the SRAM market, which had undergone declines in both demand and price. The charge for manufacturing equipment resulted in annual depreciation expense savings of approximately $4 million.

    Also in fiscal 1999, we recorded an R&D expense charge of $5.5 million relating primarily to discontinuing certain technology development initiatives (see "Research and Development" below).

    Additionally, we recorded a $131.9 million charge in fiscal 1999 which related primarily to an asset impairment reserve recorded against the manufacturing assets of our wafer fabrication facility in Hillsboro, Ore. We determined that due to excess industry capacity and low prices for semiconductor products manufactured in the Hillsboro facility, future undiscounted cash flows related to its wafer fabrication assets were insufficient to recover the carrying value of the assets. As a result, we wrote down these assets to estimated fair market value based primarily on appraisals and estimates from independent parties. Of the $131.9 million, $5.0 million was related to certain patent claims against us. We subsequently reversed

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$3.0 million in fiscal 2000 upon final settlement of these claims. As a result of asset impairment charges in fiscal 1999, which reduced the carrying value of manufacturing equipment, our annual depreciation expense was reduced by approximately $25 million.

    We incurred restructuring charges of $46.4 million in fiscal 1999 related primarily to a provision for exit and closure costs associated with our San Jose, Calif., wafer fabrication facility, which we closed in fiscal 1999. We completed the sale of this facility in fiscal 2000. During fiscal 2000, we recorded a $1.7 million reserve adjustment, benefiting gross profit, upon the settlement of a legal dispute. As a result of the restructuring actions, we realized annual cost savings in depreciation, labor, equipment and other costs of approximately $45 million, which were fully realized in fiscal 2000.

    Research and Development.  For fiscal 2001, research and development ("R&D") expenses increased by $20.7 million to $128.7 million compared to fiscal 2000. R&D expenses decreased by $35.3 million from fiscal 1999 to fiscal 2000.

    The 19.2% increase in R&D expenses from fiscal 2000 to fiscal 2001 was due to higher spending for product, process, and applications R&D to support the Communications and High-Performance Logic product segment and, to a much lesser extent, the SRAMs and Other segment. The spending growth included higher personnel and profit-dependent costs; increased expenditures on contract design services; the expansion of our remote design centers in Georgia, Texas, and Australia; and higher cost allocations to R&D from our manufacturing infrastructure related to new product introductions.

    The 24.7% decrease in R&D expenses from fiscal 1999 to fiscal 2000 was due to three principal factors. First, expenses related to process technology development were reduced because of the closure of our San Jose fabrication facility and the consolidation of all process development activities at the Hillsboro facility. Second, the allocation of manufacturing costs associated with process R&D decreased in fiscal 2000 as a result of improved manufacturing facility utilization at our remaining facilities. With increased utilization of equipment for production activities, allocations of costs to R&D activities decreased based upon the mix of activities performed. Third, expenses to develop x86 microprocessor products decreased in the second half of fiscal 2000, as we wound down our x86 microprocessor activities.

    R&D expenses in fiscal 1999 also included $5.5 million in charges, primarily related to discontinued product development efforts, including a graphics chip and a specialized logic chip. Cost savings associated with discontinuing these efforts were approximately $1 million per quarter.

    We expect that in fiscal 2002, R&D expense will remain relatively flat in absolute dollars from fiscal 2001's levels, but increase in percentage terms. Considering the weak business environment as we enter fiscal 2002, further growth in R&D headcount is expected to be modest, with new product development focused in such areas as: FIFOs and multi-ported communications products, networking and switching products, IP coprocessors incorporating CAM (content-addressable memory) technology, timing and clock products, integrated communications processors, and telecommunications products, including those which provide gateways for voice traffic over the internet. In addition, we are continuing to develop advanced manufacturing process technologies designed to enable performance advantages and to enhance production levels.

    Selling, General and Administrative.  In fiscal 2001, selling, general and administrative ("SG&A") expenses rose by $6.2 million to $124.2 million compared to fiscal 2000. SG&A expenses were essentially flat for fiscal 2000 compared to fiscal 1999.

    The 5.3% increase in SG&A expense for fiscal 2000 to fiscal 2001 was mainly the result of higher profit- and revenue-dependent personnel expenses.

    We have instituted cost control measures because of current weak business conditions as we enter fiscal 2002 (see "Subsequent Events," below). We expect that SG&A spending will decline in absolute

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dollar terms during fiscal 2002, but increase in percentage terms when measured against a smaller revenue base.

    Merger Expenses.  We incurred $4.8 million in expenses related to the QSI merger in fiscal 2000, including $4.6 million in severance and employee retention costs. In fiscal 1999, we spent approximately $1.0 million in connection with this merger.

    Gain on Equity Investments, Net.  During the second quarter of fiscal 2001, as a result of the merger between PMC and Quantum Effect Devices, Inc. ("QED"), we exchanged our QED shares for shares of PMC. As required by generally accepted accounting principles, we recorded a pretax net gain of $240.9 million based on the $238.06 closing share price of PMC on August 24, 2000, the date of the merger.

    In the third quarter of fiscal 2001, we sold 375,000 of our PMC shares, receiving $76.5 million in proceeds and recognizing a pretax net loss of $11.9 million.

    In the fourth quarter of fiscal 2001, we recorded a $141.9 million impairment charge for certain equity investments, principally our investment in PMC, that we judged to have experienced an other than temporary decline in value. We continue to hold 707,620 shares of PMC with a basis of $24.74 per share. As of May 25, 2001, the closing share price of PMC was $37.20.

    In fiscal 2000, we sold a portion of our QED shares and recorded a pretax gain of $11.3 million.

    Interest Expense.  Interest expense during fiscal 1999 and 2000 was primarily related to our 5.5% Convertible Subordinated Notes, secured equipment financing agreements which amortize over the term of the agreements, and a mortgage. Substantially all of the Notes were converted into common stock in the first quarter of fiscal 2001 (see Note 5 of the Notes to Consolidated Financial Statements). Primarily as a result of the conversion, interest expense decreased by $10.8 million in fiscal 2001 compared to fiscal 2000.

    Interest Income and Other, Net.  Changes in interest income and other, net are summarized as follows (in millions):

	Fiscal 2001		Fiscal 2000		Fiscal 1999
Interest income	$	44.6	$	20.0	$	14.0
Other income, net		2.3		9.3		(7.6	)
Interest income and other, net	$	46.9	$	29.3	$	6.4

    The increase in interest income from fiscal 2000 to fiscal 2001 and from fiscal 1999 to fiscal 2000 was mainly the result of higher average investment balances, which grew as a result of cash generated from operations.

    Special items included in other income, net, in fiscal 2000 included net gains of $19.6 million primarily related to the sale of our x86 design subsidiary and related intellectual property, and a gain of $4.6 million on the sale of our San Jose fabrication facility. Other income, net for fiscal 2000 and 1999 includes losses of $14.8 million and $11.1 million, respectively, related to our equity interest in Clear Logic, Inc. Our Clear Logic investment was fully amortized in fiscal 2000.

    Taxes.  Our effective tax rate for fiscal 2001 was 10.4%. This tax rate was lower than the 35% federal rate primarily due to deferred gains on investments, the reversal in fiscal 2001 of most of the valuation allowance reserve recorded against our net deferred tax assets, and the use of net operating loss and tax credit carryovers. In fiscal 2000, our tax rate was 5%, primarily due to the use of net operating losses and tax credit carryovers to reduce our tax liability.

    In view of the cumulative losses incurred during fiscal 1997-1999, and the significant doubt as to whether our net deferred tax assets were realizable, we recorded a reserve for all of our net deferred tax

15

assets in fiscal 1999. We realized no federal tax benefit in fiscal 1999 because of our inability to carry back losses.

    During fiscal 2001, we released the existing reserve for valuation allowances, with the exception of certain net operating loss and tax credit carryforwards relating to QSI, based on our profitability in fiscal 2001 and expectations of future profitability.

    Historically, income taxes in state jurisdictions have not been significant, due mainly to tax credits. We enjoy certain tax benefits in Malaysia and the Philippines, mainly as a result of tax holidays and certain investment incentives.

    We currently expect our tax rate to be approximately 28% for fiscal 2002, excluding the impact of costs related to acquisitions. Our estimate is based on existing tax laws and our current projections of income and distributions of income among different tax entities, and is subject to change.

Liquidity and Capital Resources

    Our financial condition is strong, as a result of substantial cash flow from operations during fiscal 2000 and 2001, combined with cautious spending on manufacturing infrastructure. Our cash and cash equivalents and short- and long-term investments, excluding our shares of PMC, grew to $821.1 million at April 1, 2001, a $399.1 million increase compared to April 2, 2000.

    Net cash provided by our operating activities totaled $480.6 million, $242.6 million and $61.0 million in fiscal 2001, 2000 and 1999, respectively. The increase in cash provided by operating activities is primarily related to growth in operating income. Cash from operating activities in fiscal 1999 was relatively low due to our net loss in that year, partially offset by noncash items related to our restructuring and asset impairment activities.

    We used $412.2 million, $37.3 million and $92.7 million for investing activities in fiscal 2001, 2000 and 1999, respectively. Significant uses of cash for investing activities in fiscal 2001 included $297.5 million for net purchases of investments, and capital expenditures of $116.2 million. In fiscal 2000, we received $44.3 million in proceeds from the sale of property, principally our San Jose wafer fabrication facility, which partially offset capital expenditures of $84.5 million. In fiscal 1999, capital expenditures of $111.9 million represented our most significant investing activity.

    Our financing activities used $43.2 million in fiscal 2001. For fiscal 2000 and 1999, they provided $22.7 million and $20.8 million, respectively. Significant financing activities in fiscal 2001 included repurchases of common stock ($73.2 million), which more than offset proceeds from the issuance of common stock under our employee option and purchase plans ($41.6 million). In fiscal 2000, proceeds from the issuance of common stock under employee option and purchase plans ($44.2 million) accounted for most of the cash provided by financing activities. In fiscal 1999, we entered into several leaseback transactions for previously purchased equipment which generated $26.7 million in cash proceeds.

    We anticipate capital expenditures of approximately $70-85 million during fiscal 2002, depending upon business conditions, to be financed primarily through cash generated from operations and existing cash and investments.

    We believe that existing cash and investment balances, together with cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs through fiscal 2002 and 2003. We may also investigate other financing alternatives; however, we cannot be certain that additional financing will be available on satisfactory terms.

Subsequent Events

    Acquisition of Newave.  On April 18, 2001 we completed the acquisition of Newave Semiconductor Corp. ("Newave"). Newave, a privately held, Santa Clara, Calif.-based company with design facilities in

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Shanghai, China, had been engaged in the design and marketing of integrated circuits for the telecommunications markets. We paid approximately $73.2 million in cash and assumed stock options valued at $12.9 million. We plan to account for this acquisition as a purchase. Based on our preliminary analysis, we anticipate a charge in the first quarter of fiscal 2002 for in-process research and development in connection with the transaction.

    Fiscal 2002 Business Developments.  On May 31, 2001, we announced that due to continued weak end-demand for communications infrastructure equipment and to ongoing inventory reductions by our customers (who supply networking and wireless infrastructure equipment), revenues for the first quarter of fiscal 2002 would likely fall by approximately 44% from the level achieved in the fourth quarter of fiscal 2001.

    On May 31, 2001, we also announced measures intended to contain costs and bolster our financial performance in light of these weak conditions. On June 13, 2001, we further announced plans for a reduction in our workforce to align with the weak business environment. The reduction, which we plan to complete during the first quarter of fiscal 2002, is expected to consist of approximately 900 employees, primarily in our facilities in Malaysia and the Philippines. In connection with the reduction in workforce, we will record a $2.5 million charge in the first quarter of fiscal 2002 for severance and other costs.

    Other.  On June 8, 2001, we repaid our mortgage loan payable related to our Salinas facility, which had been due in April 2005. We paid a total of $5.7 million to extinguish this obligation. On June 28, 2001, an IDT investee, Monolithic System Technology, Inc., went public at approximately $10 per share. The Company's holdings of approximately 2.6 million shares had a previous carrying value of zero and are subject to a six-month sales lockup.

Factors Affecting Future Results

    Our operating results can fluctuate dramatically.  For example, we had net income of $415.2 million and $130.6 million for fiscal 2001 and 2000, respectively, compared to a net loss of $298.9 million for fiscal 1999. Fluctuations in operating results can result from a wide variety of factors, including:

•

timing of new product and process technology announcements and introductions from us or our competitors;



•

competitive pricing pressures, particularly in the SRAM market;



•

fluctuations in manufacturing yields;



•

changes in the mix of products sold;



•

availability and costs of raw materials, and of foundry and other manufacturing services;



•

the cyclical nature of the semiconductor industry and industry-wide wafer processing capacity;



•

economic conditions in various geographic areas;



•

changes in demand for our products in the markets we serve; and



•

costs associated with other events, such as underutilization or expansion of production capacity, intellectual property disputes, or other litigation.

    In addition, many of these factors also impact the recoverability of the cost of manufacturing, tax and other assets. As business conditions change, future writedowns or abandonment of these assets may occur. Also, we ship a substantial portion of our products throughout each quarter. If anticipated shipments in any month do not occur, our operating results for that quarter would be harmed. Further, we may be unable to compete successfully in the future against existing or potential competitors, and our operating results could be harmed by increased competition. Our operating results are also impacted by changes in overall economic conditions, both domestically and abroad. Should economic conditions deteriorate, domestically or overseas, our sales and business results would be harmed.

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    The cyclicality of the semiconductor industry exacerbates the volatility of our operating results.  The semiconductor industry is highly cyclical. Market conditions characterized by excess supply relative to demand and resultant pricing declines have occurred in the past and may occur in the future. Such pricing declines adversely affect our operating results and force us and our competitors to modify capacity expansion programs. As an example, in prior years, a significant increase in manufacturing capacity allocated to industry standard SRAM components caused significant downward trends in pricing, which adversely affected our gross margins and operating results. We are unable to accurately estimate the amount of worldwide production capacity dedicated to or planned for the industry-standard products, such as SRAM, that we produce. Our operating results can be adversely affected by such factors in the semiconductor industry as: a material increase in industry-wide production capacity; a shift in industry capacity toward products competitive with our products; and reduced demand or other factors that may result in material declines in product pricing.

    Although we are continuing to try to reduce our dependence on revenue derived from the sale of industry-standard products, and while we carefully manage costs, these efforts may not be sufficient to offset the adverse effect the above or other industry related factors can have on our results.

    Demand for our products depends on demand in the communications, and to a lesser extent, computer markets.  The majority of our products are incorporated into customers' systems in enterprise/carrier class network, wireless infrastructure and access network applications. A percentage of our products, including high-performance logic components, serve in customers' computer storage, computer-related, and other applications. Customer applications for our products have historically been characterized by rapid technological change and significant fluctuations in demand. Demand for most of our products, and therefore potential increases in revenue, depends upon growth in the communications market, particularly in the data networking and wireless telecommunications infrastructure markets and, to a lesser extent, the computer-related markets. Any slowdown in these communications or computer-related markets could materially adversely affect our operating results. In addition, when all channels of distribution are considered, one customer in the communications market, Cisco Systems, Inc., represents more than 10% of our total revenues.

    Our product manufacturing operations are complex and subject to interruption.  From time to time, we have experienced production difficulties, including reduced manufacturing yields or products that do not meet our or our customers' specifications, that have caused delivery delays and quality problems. While production 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, complexity of manufacturing processes, changes to our process technologies (including die size reduction efforts), and ramping production and installing new equipment at our facilities.

    We have wafer fabrication facilities in Hillsboro, Ore. and Salinas, Calif. Substantially all of our revenues are derived from products manufactured at facilities which are exposed to the risk of natural disasters. Approximately 60% of our total revenues are derived from products manufactured at our fabrication facility in Salinas, which is located near an active earthquake fault. If we were unable to use our facilities, as a result of a natural disaster or otherwise, our operations would be materially adversely affected until we were able to obtain other production capability. We do not carry earthquake insurance on our California facilities or related to our business operations, as adequate protection is not offered at economically justifiable rates.

    The primary energy source for our manufacturing facilities is electric power. While we do maintain limited backup generating capability, the amount of electric power that we can generate on our own is insufficient to fully operate these facilities.

    We are dependent upon electric power generated by public utilities where we operate our manufacturing facilities. Utility power interruptions can occur at any time in any location. We have periodically experienced electrical power interruptions in the Philippines and California because utilities in these

18

geographies have failed to provide adequate power infrastructure. While to date we have successfully mitigated the impact of these interruptions, prolonged power interruptions at any of our locations could have a significant adverse impact on our business. We do not maintain insurance coverage that would help protect against the impact of power interruptions, because we do not believe that such coverage is available on cost-effective terms.

    Historically, we have utilized subcontractors for the majority of our incremental assembly requirements, typically at higher costs than at our own Malaysian and Philippines assembly and test operations. We expect to continue utilizing subcontractors extensively to supplement our own production volume capacity. Due to production lead times and potential subcontractor capacity constraints, any failure on our part to adequately forecast the mix of product demand could adversely affect our operating results.

    Our results are dependent on the success of new products.  New products and process technology associated with the Hillsboro fabrication facility will continue to require significant R&D expenditures.

    However, we may not be able to develop and introduce new products in a timely manner, our new products may not gain market acceptance, and we may not be successful in implementing new process technologies. If we are unable to develop new products in a timely manner, and to sell them at gross margins comparable to or better than our current products, our future results of operations could be adversely impacted.

    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 vendors of certain raw materials, such as silicon wafers, ultra-pure metals and certain chemicals and gases, is very limited. In addition, certain packages used by us require long lead times and are available from only a few suppliers. From time to time, vendors have extended lead times or limited supply to us due to capacity constraints. Our results of operations would be 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.

    We may require additional capital on satisfactory terms to remain competitive.  The semiconductor industry is extremely capital intensive. To remain competitive, we continue to invest in advanced manufacturing and test equipment. We could be required to seek financing to satisfy our cash and capital needs, and such financing might not be available on terms satisfactory to us. If such financing is required but unavailable on satisfactory terms, our operations could be adversely affected.

    Intellectual property claims could adversely affect our business and operations.  The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights, which have resulted in significant and often protracted and expensive litigation. In recent years, there has been a growing trend by companies to resort to litigation to protect their semiconductor technology from unauthorized use by others. We have been involved in patent litigation in the past, which 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 a broad portfolio of patents. Claims alleging infringement of intellectual property rights could be asserted in the future and could require us to discontinue the use of certain processes or cease the manufacture, use and sale of infringing products, to incur significant litigation costs and damages and to develop non-infringing technology. We might not be able to obtain such licenses on acceptable terms or to 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 adversely affect us.

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    International operations add increased volatility to our operating results.  A substantial percentage of our revenues are derived from non-U.S. sales, as summarized below:

Percentage of total revenues

	Fiscal 2001		Fiscal 2000		Fiscal 1999
North America	58	%	62	%	63	%
Asia Pacific	11	%	10	%	10	%
Japan	12	%	11	%	8	%
Europe	19	%	17	%	19	%
Total	100	%	100	%	100	%

    In addition, our offshore assembly and test operations incur payroll, facility and other expenses in local currencies. Accordingly, movements in foreign currency exchange rates can impact our cost of goods sold, as well as both pricing and demand for our products. Our offshore operations and export sales are also subject to risks associated with foreign operations, including:

•

political instability;



•

currency controls and fluctuations;



•

changes in local economic conditions and import and export controls; and



•

changes in tax laws, tariffs and freight rates.

    Contract pricing for raw materials used in the fabrication and assembly processes, as well as for subcontract assembly services, can also be impacted by currency exchange rate fluctuations. We also purchase certain semiconductor manufacturing tools, such as photolithography equipment, from overseas vendors. Such tools are typically quoted at a foreign-currency price, often equivalent to several million U.S. dollars per unit. Although we seek to mitigate currency risks through the use of hedge instruments, currency exchange rate fluctuations can have a substantial impact on our net U.S.-dollar cost for these tools.

    We are subject to a variety of environmental and other regulations related to hazardous materials used in our manufacturing process.  Any failure by us to control the use or discharge of hazardous materials under present or future regulations could subject us to substantial liability or cause our manufacturing operations to be suspended.

    Our common stock has experienced substantial price volatility.  Such volatility may occur in the future, particularly as a result of quarter-to-quarter variations in the actual or anticipated financial results of our company, other semiconductor companies, or customers. Announcements by us or by our competitors regarding new product introductions may also lead to volatility. In addition, our stock price can fluctuate due to price and volume fluctuations in the stock market, especially in the technology sector. Our product portfolio includes a mix of proprietary or limited-source products, and industry-standard or multiple-source products. Our products also employ a variety of semiconductor design technologies. Stock price volatility may also result from changes in perceptions about the various types of products we manufacture and sell.

    We are exposed to fluctuations in the market price of our investment in PMC-Sierra, Inc.  In fiscal 2000, PMC completed a merger with Quantum Effect Devices ("QED"). As a result of the merger, we exchanged our QED ownership interest for PMC common stock, which is highly volatile. In connection with the merger, as required under generally accepted accounting principles, we recorded a pretax, unrealized gain of $240.9 million during the second quarter of fiscal 2001. During the third quarter of fiscal

20

2001, we sold a portion of our PMC holdings, resulting in a realized, pretax loss of $11.9 million. In the fourth quarter of fiscal 2001, we recorded a $141.9 million impairment charge for certain equity investments, principally our investment in PMC, that we judged to have experienced an other than temporary decline in value. The amount of income and cash flow that we ultimately realize from this investment in future periods may vary materially from the previously recognized gain and the current unrealized amount.

    We are continuing to monitor and evaluate the impact of the introduction of the Single European Currency (Euro).  During the transition period ending December 31, 2001, public and private parties may pay for goods and services using either the Euro or the legacy currency of the participating country. Beginning January 1, 2002, Euro denominated bills and coins will be issued, with the legacy currencies being completely withdrawn from circulation on June 30, 2002.

    We are in the process of evaluating the impact of the Euro's introduction on our pricing policies, foreign currency hedging tactics, and administrative systems and costs. Based on our evaluation, we do not currently expect the cost of any system modifications to be material and do not expect that the Euro will have a material adverse impact on our business activities, financial condition or overall trends in results of operations.

Quantitative and Qualitative Disclosures About Market Risk

    Our investment portfolio typically consists of short-term securities that have managed maturity schedules. As a result of these factors, a hypothetical 10% move in interest rates would have an insignificant effect on our financial position, results of operations and cash flows. We do not currently use derivative financial instruments in our investment portfolio.

    As a result of the conversion of our Convertible Subordinated Notes in fiscal 2001, we had only $30.7 million in debt at April 1, 2001, most of it at fixed rates. The Tax Ownership Operating Lease related to our manufacturing facilities in Hillsboro has variable, London Interbank Offered Rate (LIBOR)-based payments. However, this synthetic lease is collateralized with investments that have similar, and thus offsetting, interest rate characteristics.

    We are exposed to foreign currency exchange rate risk as a result of international sales, assets and liabilities of foreign subsidiaries, and capital purchases denominated in foreign currencies. We use derivative financial instruments (primarily forward contracts) to help manage our foreign currency exchange exposures. We do not enter in derivatives for trading purposes. We performed a sensitivity analysis for both fiscal 2001 and 2000 and determined that a 10% change in the value of the U.S. dollar would have an insignificant near-term impact on our financial position, results of operations and cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The information required for this item is provided under the caption "Quantitative and Qualitative Disclosures about Market Risk" in Item 7 of this report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Index to Consolidated Financial Statements Covered by Report of Independent Accountants Consolidated Financial Statements included in Item 8:

Report of Independent Accountants

Consolidated Balance Sheets at April 1, 2001 and April 2, 2000

Consolidated Statements of Operations for each of the three fiscal years in the period ended
April 1, 2001

21

Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended
April 1, 2001

Consolidated Statements of Stockholders' Equity for each of the three fiscal years in the
period ended April 1, 2001

Notes to Consolidated Financial Statements

22

REPORT OF INDEPENDENT ACCOUNTANTS

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

    In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Integrated Device Technology, Inc. and its subsidiaries at April 1, 2001 and April 2, 2000, and the results of their operations and their cash flows for each of the three years in the period ended April 1, 2001 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 index appearing under Item 14(a)2 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California
April 20, 2001, except for Note 16, which is as of June 28, 2001

23

Consolidated Balance Sheets

		April 1, 2001			April 2, 2000
		(In thousands, except share amounts)
Assets
Current assets:
	Cash and cash equivalents	$	397,709		$	372,606
	Short-term investments—equity securities		17,510			223,906
	Other short-term investments		263,110			49,439
	Accounts receivable, net of allowance for returns and doubtful accounts of $9,795 and 6,045		94,362			90,957
	Inventories, net		75,614			72,279
	Deferred tax assets		81,370			22,423
	Prepayments and other current assets		25,542			18,207
Total current assets			955,217			849,817
Property, plant and equipment, net			284,702			260,107
Long-term investments			160,273			—
Other assets			70,209			52,258
Total assets		$	1,470,401		$	1,162,182
Liabilities and stockholders' equity
Current liabilities:
	Accounts payable	$	45,915		$	37,294
	Accrued compensation and related expenses		53,543			28,530
	Deferred income on shipments to distributors		91,374			74,585
	Income taxes payable		24,122			3,938
	Other accrued liabilities		29,874			31,222
	Current portion of long-term obligations		9,658			11,317
Total current liabilities			254,486			186,886
Convertible subordinated notes, net of issuance costs			—			179,550
Long-term obligations			76,018			92,172
Deferred tax liabilities			—			22,423
Commitments and contingencies (Notes 6 and 7)
Stockholders' equity:
	Preferred stock; $.001 par value: 10,000,000 shares authorized; no shares issued		—			—
	Common stock; $.001 par value: 350,000,000 shares authorized; 104,915,783 and 95,667,128 shares issued and outstanding		105			96
	Additional paid-in capital		759,236			421,785
	Treasury stock (2,257,500 and no shares)		(73,216	)		—
	Retained earnings		454,851			39,648
	Accumulated other comprehensive income (loss)		(1,079	)		219,622
Total stockholders' equity			1,139,897			681,151
Total liabilities and stockholders' equity		$	1,470,401		$	1,162,182

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

24

Consolidated Statements of Operations

		Fiscal Year Ended
		April 1, 2001			April 2, 2000			March 28, 1999
		(In thousands, except per share data)
Revenues		$	991,789		$	701,722		$	601,017
Cost of revenues			406,450			364,832			392,748
Restructuring charges, asset impairment and other			—			(4,726	)		204,244
Gross profit			585,339			341,616			4,025
Operating expenses:
	Research and development		128,749			108,009			143,355
	Selling, general and administrative		124,177			117,942			117,805
	Merger expenses		—			4,840			974
Total operating expenses			252,926			230,791			262,134
Operating income (loss)			332,413			110,825			(258,109	)
Gain on equity investments, net			86,994			11,335			—
Interest expense			(3,134	)		(13,967	)		(14,787	)
Interest income and other, net			46,948			29,293			6,413
Income (loss) before income taxes			463,221			137,486			(266,483	)
Provision for income taxes			48,018			6,875			32,456
Net income (loss)		$	415,203		$	130,611		$	(298,939	)
Basic net income (loss) per share:		$	3.99		$	1.44		$	(3.42	)
Diluted net income (loss) per share:		$	3.76		$	1.32		$	(3.42	)
Weighted average shares:
	Basic		104,042			90,918			87,397
	Diluted		110,287			99,002			87,397

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

25

Consolidated Statements of Cash Flows

			Fiscal Year Ended
			April 1, 2001			April 2, 2000			March 28, 1999
			(In thousands)
Operating activities
Net income (loss)			$	415,203		$	130,611		$	(298,939	)
Adjustments:
	Depreciation and amortization			90,914			89,045			113,596
	Restructuring, asset impairment and other			—			—			179,428
	Gain on sale of property, plant and equipment			(668	)		(12,042	)		—
	Deferred tax assets			(100,641	)		—			31,578
	Gain on equity investments, net			(86,995	)		—			—
Changes in assets and liabilities:
	Accounts receivable, net			(3,405	)		(29,585	)		18,042
	Inventories, net			(3,335	)		(14,631	)		17,091
	Income tax refund receivable			—			—			7,309
	Other assets			(6,914	)		14,855			11,993
	Accounts payable			8,621			942			(26,035	)
	Accrued compensation and related expenses			25,013			12,034			(860	)
	Deferred income on shipments to distributors			16,789			29,550			(13,603	)
	Income taxes payable			20,184			(3,304	)		(53	)
	Other accrued liabilities			(6,519	)		20,009			21,417
	Tax benefit from employee stock plans			112,345			5,129			—
		Net cash provided by operating activities		480,592			242,613			60,964
Investing activities
	QSI net cash used from 10/1/98 to 3/31/99			—			(1,146	)		—
	Purchases of property, plant and equipment			(116,195	)		(84,489	)		(111,867	)
	Proceeds from sale of property, plant and equipment			1,412			44,334			3,137
	Purchases of investments			(881,237	)		(166,969	)		(115,413	)
	Proceeds from sales of investments			583,745			170,976			131,465
		Net cash used for investing activities		(412,275	)		(37,294	)		(92,678	)
Financing activities
	Proceeds from issuance of common stock, net			41,681			44,233			9,038
	Repurchase of common stock, net			(73,218	)		—			(4,787	)
	Proceeds from secured equipment financing			—			—			31,764
	Payments on capital leases and other debt			(11,677	)		(21,544	)		(15,220	)
		Net cash (used for) provided by financing activities		(43,214	)		22,689			20,795
		Net increase (decrease) in cash and cash equivalents		25,103			228,008			(10,919	)
Cash and cash equivalents at beginning of period				372,606			144,598			155,517
Cash and cash equivalents at end of period			$	397,709		$	372,606		$	144,598
Supplemental disclosure of cash flow information
	Cash paid for:
		Interest	$	2,145		$	13,455		$	13,939
		Income taxes, net of refunds		17,418			3,798			(12,093	)
	Non-cash activities:
		Conversion of accrued liability to equity		—			—			6,293
		Capital lease obligations		—			—			6,497
		Conversion of subordinated notes to equity		183,436			—			—

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

26

Consolidated Statements of Stockholders' Equity

		Common Stock										Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)
							Additional Paid-in Capital		Treasury Stock									Total Stockholders' Equity			Comprehensive Income (Loss)
		Shares		Amount
		(In thousands)
Balance, March 29, 1998		86,450,587		$	86		$	359,953		—		$	231,342		$	(1,353	)	$	590,028
Repurchase of common stock		(856,000	)		(1	)		—		(4,630	)		—			—			(4,631	)
Issuance of common stock		1,827,777			2			6,655		2,992			(718	)		—			8,931
Issuance of common stock to extinguish accrued liability		571,731			1			6,292		—			—			—			6,293
Other comprehensive income:
	Translation adjustment	—			—			—		—			—			(2,304	)		(2,304	)	$	(2,304	)
	Unrealized loss on investments, net	—			—			—		—			—			(52	)		(52	)		(52	)
Net loss		—			—			—		—			(298,939	)		—			(298,939	)		(298,939	)
Comprehensive loss																					$	(301,295	)
Balance, March 28, 1999		87,994,095			88			372,900		(1,638	)		(68,315	)		(3,709	)		299,326
Issuance of common stock		7,673,033			8			43,756		1,638			(83	)		—			45,319
QSI loss, 10/1/1998 to 3/31/1999		—			—			—		—			(22,565	)		—			(22,565	)
Tax benefit from stock option transactions		—			—			5,129		—			—			—			5,129
Other comprehensive income:
	Translation adjustment	—			—			—		—			—			595			595		$	595
	Unrealized gain on investments, net	—			—			—		—			—			222,736			222,736			222,736
Net income		—			—			—		—			130,611			—			130,611			130,611
Comprehensive income																					$	353,942
Balance, April 2, 2000		95,667,128			96			421,785		—			39,648			219,622			681,151
Repurchase of common stock		(2,257,500	)		(2	)		—		(73,216	)		—			—			(73,218	)
Issuance of common stock		5,202,551			5			41,676		—			—			—			41,681
Conversion of convertible notes		6,303,604			6			183,430		—			—			—			183,436
Tax benefit from stock option transactions		—			—			112,345		—			—			—			112,345
Other comprehensive income:
	Translation adjustment	—			—			—		—			—			791			791		$	791
	Unrealized loss on investments, net	—			—			—		—			—			(221,492	)		(221,492	)		(221,492	)
Net income		—			—			—		—			415,203			—			415,203			415,203
Comprehensive income																					$	194,502
Balance, April 1, 2001		104,915,783		$	105		$	759,236	$	(73,216	)	$	454,851		$	(1,079	)	$	1,139,897

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

27

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 high-performance semiconductor products, primarily for communications markets. IDT's products include multi-port and FIFO products, communications application-specific standard products (ASSPs), high-speed SRAMs, and high-performance logic and clock management products.

    Fiscal Year.  The Company's fiscal year ends on the Sunday nearest March 31. Fiscal 2001 and 1999 each included 52 weeks and ended on April 1, 2001 and March 28, 1999, respectively. Fiscal 2000, a 53-week year, ended on April 2, 2000.

    Basis of Presentation.  The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

    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.

    In fiscal 2000, IDT consummated the acquisition of Quality Semiconductor, Inc. ("QSI") in a transaction accounted for as a pooling of interests. The financial statements have been retroactively restated to reflect the combined operations of IDT and QSI as if the combination had occurred at the beginning of the earliest period presented (see Note 2). There were no significant differences between the accounting policies of IDT and QSI.

    Certain reclassifications have been made to prior-year balances, none of which affected the Company's financial position or results of operations, to present the financial statements on a consistent basis.

    Cash Equivalents and Investments.  Cash equivalents are highly liquid investments with original maturities of three months or less at the time of acquisition or with guaranteed on-demand buy-back provisions. Short-term investments, other than equity securities, have remaining maturities of less than one year and are valued at amortized cost, which approximates fair market value. Long-term investments consist of debt securities with remaining maturities of greater than one year.

    The Company's investments are classified as available-for-sale at April 1, 2001 and April 2, 2000. Investment securities classified as available-for-sale are reported at market value, and net unrealized gains or losses are recorded in accumulated comprehensive income, a separate component of stockholders' equity, until realized. Realized gains and losses are computed based upon specific identification and are included in interest income and other, net. Management evaluates investments on a regular basis to determine if an other than temporary impairment has occurred. Losses related to declines in value judged to be other than temporary are included in gain on equity investments, net. Management determines the appropriate classification of debt and equity securities at the time of purchase and reassesses the classification at each reporting date.

    Inventories.  Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market.

    Property, Plant, and Equipment.  Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of the assets, which generally range from three to five years. Leasehold improvements and leasehold interests are amortized over the shorter of the estimated useful lives of the assets or the remaining term of the lease. Accelerated methods of depreciation are used for tax purposes.

28

    The Company reviews the carrying values of long-lived assets whenever events and circumstances indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. The amount of impairment loss, if any, is measured as the difference between the net book value and the estimated fair value of the asset.

    Revenue Recognition.  Revenues from product sales are generally recognized when persuasive evidence of an arrangement exists, the price is fixed or determined, collection is reasonably assured and transfer of title has occurred. A reserve is provided for estimated returns and discounts. A portion of the Company's sales are made to distributors under agreements that allow certain rights of return and price protection on products unsold by the distributors. Related revenues and costs of revenues thereon are deferred until the products are resold by the distributors. Revenues related to licensing agreements are recognized ratably over the lives of the related patents (see Note 14).

    In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles (GAAP) to revenue recognition. The Company adopted SAB 101 in the fourth quarter of fiscal 2001, effective as of the beginning of the year, with no material effects on IDT's financial position or results of operations.

    Income Taxes.  The Company accounts for income taxes under an asset and liability approach which 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. No provision for U.S. income taxes is provided on unremitted earnings of foreign subsidiaries, to the extent such earnings are deemed to be permanently reinvested.

    Net Income (Loss) Per Share.  Basic and diluted net income (loss) per share are computed using weighted-average common shares outstanding. Dilutive net income per share also includes the effect of stock options and convertible debt. The following table sets forth the computation of basic and diluted net income (loss) per share:

	Fiscal Year Ended
	April 1, 2001		April 2, 2000		March 28, 1999
	(In thousands except per share amounts)
Basic:
Net income (loss) (numerator)	$	415,203	$	130,611	$	(298,939	)
Weighted average shares outstanding (denominator)		104,042		90,918		87,397
Net income (loss) per share	$	3.99	$	1.44	$	(3.42	)
Diluted:
Net income (loss) (numerator)	$	415,203	$	130,611	$	(298,939	)
Weighted average shares outstanding		104,042		90,918		87,397
Net effect of dilutive stock options		6,245		8,084		—
Total shares (denominator)		110,287		99,002		87,397
Net income (loss) per share	$	3.76	$	1.32	$	(3.42	)

    Total stock options outstanding, including antidilutive options, were 14.0 million, 14.7 million and 19.4 million at fiscal year-ends 2001, 2000 and 1999, respectively. The Company's convertible debt was not dilutive in any of the periods presented.

29

    Comprehensive Income (Loss).  Comprehensive income (loss) is defined as the change in equity during a period from non-owner sources.

    The components of accumulated other comprehensive income (loss) were as follows:

	April 1, 2001			April 2, 2000			March 29, 1999
	(in thousands)
Cumulative translation adjustments	$	(2,271	)	$	(3,062	)	$	(3,657	)
Unrealized gain (loss) on investments, net		1,192			222,684			(52	)
	$	(1,079	)	$	219,622		$	(3,709	)

    Unrealized gain on investments, net for fiscal 2001 includes $222.7 million in reclassification adjustments related to the investment transactions described in Note 15.

    Translation of Foreign Currencies.  For subsidiaries whose 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 separate component of comprehensive income (loss). 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 other income. The effects of foreign currency exchange rate fluctuations have not been material.

    Fair Value Disclosures of Financial Instruments.  Fair values of cash, cash equivalents and short-term investments other than equity securities approximate cost due to the short period of time until maturity. Fair values of long-term investments, long-term debt and currency forward contracts are based on quoted market prices or pricing models using current market rates.

    Concentration of Credit Risk.  The Company sells integrated circuits to original equipment manufacturers (OEMs), distributors and contract electronics manufacturers (CEMs) primarily in the United States, Europe and the Far East. The Company performs on-going credit evaluations of its customers' financial condition and limits the amount of credit extended when deemed necessary and generally does not require collateral. Management believes that risk of loss is significantly reduced due to the diversity of its products, customers and geographic sales areas. The Company maintains a provision for potential credit losses. Write-offs of accounts receivable were insignificant in each of the three years ended April 1, 2001.

    One CEM's receivable balance represented 17% and 10% of total accounts receivable at April 1, 2001 and April 2, 2000, respectively, and one distributor's receivable balance represented 10% of total accounts receivable at April 2, 2000. If the financial condition or operating results of these customers were to deteriorate below critical levels, the Company's operating results could be adversely affected.

    Stock-based Compensation Plans.  The Company accounts for its stock option plans and employee stock purchase plan in accordance with provisions of the Accounting Principles Board's (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company provides additional pro forma disclosures in Note 8.

    New Accounting Pronouncements.  The Company will adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, as of the beginning of fiscal 2002. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The initial adoption of SFAS No. 133 will not have a material effect on the Company's financial statements.

    In March 2000, the Financial Accounting Standards Board issued Interpretation No. 44 (FIN 44), "Accounting for Certain Transactions Involving Stock Compensation—an Interpretation of APB 25," which was effective July 1, 2000. FIN 44 addresses issues relating to stock-based compensation, including

30

the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequences of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. The adoption of this interpretation did not have a material effect on the Company's financial position or results of operations.

    Products and Markets.  The Company operates in two segments (See Note 11) within the semiconductor industry. Significant technological changes in the industry could adversely affect operating results. The semiconductor industry is highly cyclical and has been subject to significant downturns at various times that have been characterized by diminished product demand, production overcapacity and accelerated erosion of average selling prices. Therefore, the average selling price the Company receives for industry-standard products is dependent upon industry-wide demand and capacity, and such prices have historically been subject to rapid change. While the Company considers industry technological change and industry-wide demand and capacity in estimating necessary allowances, such estimates could change in the future.

Note 2 Business Combination

    In fiscal 2000, IDT completed the acquisition of QSI, which had been engaged in the design, development and marketing of high-performance logic and networking semiconductor products.

    To consummate the merger, IDT issued approximately 5.2 million shares of its common stock in exchange for all of the outstanding common stock of QSI and granted options to purchase approximately 1.0 million shares of IDT common stock in exchange for all of the outstanding options to purchase QSI stock. The merger was accounted for as a pooling of interests, and the financial statements give effect to the merger for all periods presented.

    Because the fiscal year ends of the two companies differed, the statements of operations data for QSI have been recast by combining IDT's fiscal year ended March 28, 1999 with QSI's fiscal year ended September 30, 1998. QSI's net loss of $22.6 million for the period October 1, 1998 through March 31, 1999 was recorded as a decrease to stockholders' equity for the year ended April 2, 2000.

    IDT incurred $5.8 million in merger-related costs, including $1.0 million in fiscal 1999 and $4.8 million in fiscal 2000. Of this amount, $4.6 million related to payments for severance, retention and change-of-control agreements. The remainder consisted primarily of accounting and legal fees and printing costs.

    The results of operations previously reported by the separate companies and the combined amounts shown in the accompanying financial statements are presented below.

	Fiscal Year Ended March 28, 1999
	(In thousands)
Revenues:
IDT	$	540,199
QSI		60,818
Combined	$	601,017
Net loss:
IDT	$	(283,605	)
QSI		(15,334	)
Combined	$	(298,939	)

31

Note 3 Balance Sheet Components

Inventories, Net

	April 1, 2001		April 2, 2000
	(in thousands)
Raw materials	$	9,586	$	6,102
Work-in-process		45,601		43,632
Finished goods		20,427		22,545
	$	75,614	$	72,279

Property, Plant and Equipment

	April 1, 2001			April 2, 2000
	(in thousands)
Land	$	8,503		$	8,503
Machinery and equipment		928,316			848,566
Building and leasehold improvements		93,173			83,256
Construction-in-progress		1,928			567
		1,031,920			940,892
Less accumulated depreciation and amortization		(747,218	)		(680,785	)
	$	284,702		$	260,107

Short-term Investments

	April 1, 2001			April 2, 2000
	(in thousands)
U.S. government agency securities	$	14,931		$	12,427
State and local government securities		155,100			76,000
Corporate debt instruments		316,042			277,991
Equity securities		17,510			223,906
Bank CDs and money market instruments		163,828			43,069
Total debt and equity securities		667,411			633,393
Less cash equivalents		(386,791	)		(360,048	)
Short-term investments	$	280,620		$	273,345

Long-term Investments

	April 1, 2001		April 2, 2000
	(in thousands)
State and local government securities	$	17,660	$	—
Corporate debt instruments		142,613		—
Long-term investments	$	160,273	$	—

    At April 1, 2001, maturities for long-term investments ranged from one to five years.

32

Note 4 Restructuring Charges, Asset Impairment and Other

    During fiscal 1999, the Company recorded $207.2 million of charges in cost of sales relating primarily to asset impairment, restructuring associated with closure of a manufacturing facility and costs associated with certain technology licensing matters. The Company reversed $3 million of the costs associated with technology licensing matters upon settlement of certain of those matters in late fiscal 1999. In the third quarter of fiscal 2000, the Company reversed an additional $3.8 million in charges, due to the settlement of certain technology licensing and other matters.

    Included in the fiscal 1999 charges were $28.9 million in asset impairment and other charges. These charges consisted primarily of $15.1 million for excess SRAM manufacturing equipment and $10 million in costs associated with technology licensing matters. The excess SRAM manufacturing equipment charge represented a writedown to estimated fair market value based primarily on appraisals and estimates obtained from third parties. The charge resulted from prevailing economic conditions in the SRAM market, which had experienced declines in both demand and price.

    Separately in fiscal 1999, the Company also recorded $5.5 million in research and development expenses and $0.2 million in selling, general and administrative expenses for costs associated with discontinuance of certain development efforts, including a graphics chip and a specialized logic chip. These charges were comprised primarily of severance costs and technology license payments associated with the discontinued efforts.

    During fiscal 1999, the Company also incurred restructuring charges which aggregated $46.4 million and related primarily to a provision for exit and closure costs associated with the San Jose wafer fabrication facility, which the Company closed in the third quarter of fiscal 1999. The Company completed the sale of the San Jose facility in the first quarter of fiscal 2000.

    The Company has completed its exit plan for the San Jose facility. Adjustments include a $0.8 million reversal related to the settlement of a dispute and the release of $0.9 million in excess reserves, both of which are included in pretax income for fiscal 2000. The Company also reclassified a portion of the closure-costs reserve to cover long-term environmental indemnification for the San Jose plant.

    Also in fiscal 1999, the Company recorded a $131.9 million asset impairment and other charge which related primarily to an asset impairment reserve recorded against the manufacturing assets of IDT's eight-inch wafer fabrication facility in Hillsboro, Ore. The Company determined that due to excess industry capacity and low prices for semiconductor products manufactured in the Hillsboro facility, future undiscounted cash flows related to its wafer fabrication assets were insufficient to recover the carrying value of the assets. As a result, the Company wrote down these assets to estimated fair market value based primarily on appraisals and estimates from independent parties. Of the $131.9 million, $5.0 million was to settle certain patent claims against the Company.

33

Note 5 Debt

    The Company had no short-term borrowings, other than the current portion of long-term debt, during the two fiscal years ended April 1, 2001. Information regarding the Company's obligations under long-term debt and capital leases and equipment financing arrangements is presented below:

	April 1, 2001			April 2, 2000
	(in thousands)
Mortgage payable bearing interest at 9.625% due in monthly installments of $142 including interest through April 1, 2005, secured by related property and improvements	$	5,736		$	6,831
Capital leases and equipment financing arrangements at rates ranging from 2.125% to 8.5%, with maturities through August 2005		24,950			35,168
5.5% Convertible Subordinated Notes		—			179,550
		30,686			221,549
Less current portion		(9,658	)		(11,317	)
	$	21,028		$	210,232

    Future payments under these obligations are summarized as follows:

	Long-term debt			Capital leases and equipment financing agreements
	(in thousands)
Fiscal Year 2002	$	1,704		$	9,280
2003		1,704			6,429
2004		1,704			5,111
2005		1,704			4,470
2006 and thereafter		141			1,224
Less amount representing interest		(1,221	)		(1,564	)
Total	$	5,736		$	24,950

    Obligations under capital leases and equipment financing arrangements are collateralized by the related assets. The Company leased total assets of approximately $56.3 million at both April 1, 2001 and April 2, 2000. Accumulated depreciation on these assets was approximately $49.2 million and $44.3 million at April 1, 2001 and April 2, 2000, respectively.

    In April 2000, the Company called for redemption of its 5.5% Convertible Subordinated Notes ("Notes"), effective May 15, 2000. Substantially all holders elected to convert their Notes into IDT common stock. As a result of the conversion, shares outstanding increased by approximately 6.3 million and stockholders' equity increased by $183.4 million. The Company paid $0.4 million to holders who selected the cash option.

    During fiscal 2001, interest and other expenses attributable to the Notes totaled $0.8 million, net of taxes. During fiscal 2000, these expenses were $9.6 million, net of taxes.

    The fair value of the mortgage payable, based on current rates and time to maturity, was $6.1 million at April 1, 2001.

34

Note 6 Commitments

    The Company leases most of its administrative and some of its manufacturing facilities under operating lease agreements which expire at various dates through fiscal 2008.

    During fiscal 2000, the Company renegotiated its $64 million Tax Ownership Operating Lease and extended the lease term to May 2005. The lease relates to the Company's wafer fabrication facility in Hillsboro, Oregon. Monthly rent payments under the lease vary based on the London Interbank Offering Rate (LIBOR). Under the terms of the transaction, the Company earns interest income, also based on LIBOR, on its 79% purchase interest in the rental stream.

    The Company is required to maintain a deposit of $50.6 million with the lessor. The Company can, at its option, acquire the leased assets at original cost or, at the end of the lease, arrange for them to be acquired by others. In the event of a decline in asset residual value at lease termination, the Company could incur a liability of up to the amount of the purchase interest, or $50.6 million. In addition, the Company must comply with certain financial covenants.

    As of April 1, 2001, the aggregate future minimum rent commitments under all operating leases, including the Hillsboro facility, were as follows (in thousands): $28,266 (2002), $19,806 (2003), $13,542 (2004), $11,336 (2005), $6,371 (2006) and $4,950 (2007 and thereafter). Rent expense for the years ended April 1, 2001, April 2, 2000 and March 28, 1999 totaled approximately $26.5 million, $23.3 million and $21.4 million, respectively.

    As of April 1, 2001, two significant, secured standby letters of credit were outstanding. The first letter ($7.1 million, expiring in September 2001) is required for customs bonds related to international sales. The second letter ($2.5 million, expiring in October 2002) is required as collateral enhancement for a mortgage. The Company also has foreign exchange facilities used for hedging arrangements with several banks that allow the Company to enter into foreign exchange contracts of up to $85 million, of which $32 million was available at April 1, 2001.

    As of April 1, 2001, the Company had outstanding commitments of approximately $13 million for equipment purchases.

Note 7 Litigation

    From time to time, the Company is subject to other legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of patents and other intellectual property rights. The Company is not currently aware of any legal proceedings that the Company believes may have, individually or in the aggregate, a material adverse effect on the Company's financial condition or results of operations.

    During the normal course of business, the Company is notified of claims that it may be infringing on patents issued to other parties. Should the Company elect to enter into license agreements with other parties or should the other parties resort to litigation, the Company may be obligated in the future to make payments or to otherwise compensate these third parties, which could have an adverse effect on the Company's financial condition or results of operations.

Note 8 Stockholders' Equity

    Stock Option Plans.  Shares of common stock reserved for issuance under the Company's stock option plans include 13,500,000 shares under the 1994 Employee Stock Option Plan, 12,500,000 shares under the 1997 Employee Stock Option Plan, and 108,000 shares under the 1994 Director Stock Option Plan. At April 1, 2001, a total of 7,286,000 options were available but unissued under these plans. Also outstanding and exerciseable at April 1, 2001 were options initially granted under previous stock option plans which have not been canceled or exercised.

35

    Under the plans, options are issued with an exercise price equal to the market price of the Company's common stock on the date of grant, and the maximum option term is 10 years. Plan participants typically receive an initial grant that vests in annual and/or monthly increments over four years. Thereafter, participants generally receive a smaller annual grant which vests on the same basis as the initial grant.

    In connection with the merger with QSI (see Note 2), the Company assumed the stock option plans of QSI. No additional options will be granted under these assumed plans.

    Following is a summary of the Company's stock option activity and related weighted average exercise prices for each category:

	Fiscal 2001				Fiscal 2000				Fiscal 1999
	Shares		Price		Shares		Price		Shares		Price
	(shares in thousands)
Beginning options outstanding	14,743		$	8.97	19,401		$	6.30	18,034		$	8.88
Granted	5,173			46.01	5,165			13.66	16,986			6.88
Exercised	(4,956	)		6.85	(6,776	)		5.65	(640	)		4.14
Canceled	(1,561	)		15.28	(3,047	)		7.29	(14,979	)		10.17
Ending options outstanding	13,399		$	23.32	14,743		$	8.97	19,401		$	6.30
Ending options exerciseable	4,421		$	9.13	5,997		$	6.50	4,259		$	4.06

    In fiscal 1999, employees and officers holding options to purchase approximately 12.4 million shares of the Company's common stock were offered the opportunity to cancel options in exchange for grants of new options at an exercise price of $7.125, the fair market value of IDT stock on July 15, 1998. A total of 12.0 million shares were exchanged and are shown in the grant and cancellation activity for fiscal 1999.

    Following is summary information about stock options outstanding at April 1, 2001:

	Options Outstanding
		Weighted Average Remaining Contractual Life (in years)			Options Exerciseable
Range of Exercise Prices	Number Outstanding		Weighted Average Exercise Price		Number Exerciseable	Weighted Average Exercise Price
(shares in thousands)
$ 1.81 - $ 6.19	763	3.2	$	4.31	502	$	3.95
6.44 -  7.63	5,932	4.7		7.25	3,249		7.18
8.00 - 18.56	626	5.1		12.95	235		12.40
19.06 - 40.13	2,341	6.2		30.67	434		27.83
43.38 - 43.38	2,722	6.3		43.38	1		43.38
43.50 - 95.94	1,015	6.5		67.15	—		68.51

    Employee Stock Purchase Plan.  The Company is authorized to issue up to 8,500,000 shares of its common stock under its 1984 Employee Stock Purchase Plan (ESPP). All domestic employees are eligible to participate. Prior to October 2, 2000, the purchase price of the stock was 85% of the lower of the closing price at the beginning or at the end of each offering period. Effective October 2, 2000, the purchase price is 85% of the lower of the closing price at the beginning of the twelve-month offering period or at the end of each three-month participation period. Following is a summary of activity under the Company's ESPP:

	Fiscal 2001		Fiscal 2000		Fiscal 1999
	(shares in thousands)
Number of shares issued		247		806		1,207
Average issuance price	$	31.36	$	7.29	$	5.28
Number of shares available at year-end		1,848		2,095		1,401

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    Pro Forma Information.  Under SFAS No. 123, the Company is required to estimate the fair value of each option on the date of grant. Option valuation models, such as the Black-Scholes model, were developed in order to value freely traded options. Unlike traded options, the Company's stock option awards have vesting restrictions and are generally not transferable. Models such as Black-Scholes also require highly subjective assumptions, including future stock price volatility. The calculated fair value of an option on the grant date is highly sensitive to changes in these subjective assumptions.

    The Company has applied the Black-Scholes model to estimate the grant-date fair value of stock options, including shares issued under ESPP, based upon the following weighted average assumptions:

Employee stock options

	Fiscal 2001		Fiscal 2000		Fiscal 1999
Expected life (in years)	4.03		4.14		3.27
Risk-free interest rate	6.2	%	5.7	%	5.3	%
Volatility	83.0	%	65.0	%	62.0	%
Dividend yield	0.0	%	0.0	%	0.0	%

ESPP shares

	Fiscal 2001		Fiscal 2000		Fiscal 1999
Expected life (in years)	0.57		.25		.25
Risk-free interest rate	6.0	%	4.8	%	4.8	%
Volatility	115.0	%	65.0	%	62.0	%
Dividend yield	0.0	%	0.0	%	0.0	%

    The weighted average estimated fair value of stock options granted during fiscal 2001, 2000 and 1999 was $29.12, $7.30 and $3.21, respectively. The weighted average estimated fair value of shares granted under the ESPP during fiscal 2001, 2000 and 1999 was $23.53, $3.34 and $2.01, respectively. The Company's pro forma information for the three years ended April 1, 2001, which assumes amortization of the estimated fair values over the options' vesting periods, follows:

	Fiscal 2001		Fiscal 1999		Fiscal 2000
	(in thousands, except per share amounts)
Pro forma net income (loss)	$	374,248	$	110,043	$	(332,885	)
Pro forma basic earnings (loss) per share	$	3.60	$	1.21	$	(4.05	)
Pro forma diluted earnings (loss) per share		3.39		1.11		(4.05	)

    Stockholder Rights Plan.  In December 1998, the Board of Directors adopted a stockholder rights plan designed to protect the long-term value of the Company for its stockholders during any future unsolicited acquisition attempt. In connection with the plan, the Board declared a dividend of one preferred share purchase right for each share of the Company's common stock outstanding on January 4, 1999 and further directed the issuance of one such right with respect to each share of the Company's common stock that is issued after January 4, 1999, except in specified circumstances. The rights will expire on December 21, 2008. The rights are initially attached to the Company's common stock and will not trade separately. If a person or a group (an "Acquiring Person") acquires 15% or more of the Company's common stock, or announces an intention to make a tender offer for the Company's common stock, the consummation of which would result in a person or group becoming an Acquiring Person, then the rights will be distributed. After distribution, each right may be exercised for one-hundredth of a share of a newly designated Series A Junior Participating Preferred Stock, par value of $0.001 per share, at a price of $45.00. The preferred stock has been structured so that the value of one-hundredth of a share of such preferred stock will approximate the value of one share of common stock.

37

    Stock Repurchase Program.  In November 2000, the Company's Board of Directors authorized the repurchase of up to five million shares of IDT common stock. The Company repurchased 2,257,500 shares at an approximate aggregate cost of $73.2 million during fiscal 2001. The repurchases were recorded as treasury stock and resulted in a reduction of stockholders' equity. The Company uses a first-in, first-out method for the reissuance of treasury shares and any excess of repurchase cost over reissuance price will be recorded as a reduction of retained earnings.

    The Company repurchased 856,000 shares at an approximate aggregate cost of $4.6 million during fiscal 1999 under an earlier Board of Directors authorization. The Company completed the reissuance of these treasury shares in conjunction with IDT's stock option and employee stock purchase plans in fiscal 2000.

    Other.  In fiscal 1999, the Company issued 571,731 shares of its common stock to settle a liability under an existing cross licensing arrangement. The settlement was valued at approximately $6.3 million and was recorded as additional paid-in capital.

Note 9 Employee Benefits Plans

    Under the Company's Profit Sharing Plan, all eligible employees receive profit sharing contributions of 6% (7% in fiscal 2000 and 1999) of pretax earnings in cash, and an additional 1% of pretax earnings is divided equally among all domestic employees and contributed to the Company's 401(k) plan. The contributions for fiscal 2001, 2000 and 1999 for this plan were $32.4 million, $11.0 million and $0.3 million, respectively.

    The Company pays an annual cash bonus to certain executive officers and other key employees based on profitability and individual performance. For fiscal 2001, 2000 and 1999, the amount accrued under the bonus plan was 6% of operating income, or $19.9 million, $7.8 million and none, respectively.

    The Company sponsors a 401(k) retirement plan under which full-time domestic employees may contribute portions of their annual income, subject to limitations imposed by the Internal Revenue Code. The Company paid approximately $2.5 million in matching contributions under the plan in fiscal 2001 (none in 2000 or 1999).

    In fiscal 2001, the Company established a non-qualified deferred compensation plan, which allows executive officers and other key employees to defer salary, bonus and related payments. The Company did not incur significant costs for this plan in fiscal 2001.

Note 10 Income Taxes

    The components of income (loss) before provision (benefit) for income taxes were as follows:

	Fiscal Year Ended
	April 1, 2001		April 2, 2000		March 28, 1999
United States	$	436,270	$	108,555	$	(266,529	)
Foreign		26,951		28,931		46
	$	463,221	$	137,486	$	(266,483	)

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    The provision for income taxes consisted of the following:

	Fiscal Year Ended
	April 1, 2001			April 2, 2000		March 28, 1999
	(in thousands)
Current:
United States	$	140,777		$	3,930	$	(260	)
State		3,294			88		—
Foreign		4,889			2,857		1,138
		148,960			6,875		878
Deferred:
United States		(79,401	)		—		31,505
State		(20,896	)		—		622
Foreign		(645	)		—		(549	)
		(100,942	)		—		31,578
Provision for income taxes	$	48,018		$	6,875	$	32,456

    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. The significant components of deferred tax assets and liabilities were as follows:

	April 1, 2001			April 2, 2000
	(in thousands)
Deferred tax assets:
Deferred income on shipments to distributors	$	43,926		$	26,249
Non-deductible accruals and reserves		27,599			23,752
Capitalized inventory and other expenses		992			1,228
Net operating loss & credit carryforwards		10,503			31,803
Impairment loss and restructuring reserves		8,233			29,981
Deferred licensing revenue		9,876			11,574
Equity earnings in affiliates		13,805			13,262
Other		8,587			4,264
		123,521			142,113
Deferred tax liabilities:
Depreciation and amortization		—			(1,230	)
Unrealized gain on equity securities		(7,889	)		(89,074	)
		(7,889	)		(90,304	)
Valuation allowance		(15,475	)		(51,809	)
Net deferred tax assets	$	100,157		$	—

    As of April 1, 2001, the Company released all of the prior-year valuation allowance for its net deferred tax assets, with the exception of certain net operating loss carryforwards, tax credits carryforwards and certain other items, all relating to QSI, because of the Company's profitability in fiscal 2001 and expectations of future profitability. The decrease in valuation allowance for deferred tax assets in fiscal 2001 was approximately $36.3 million.

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    A reconciliation between the statutory U.S. income tax rate of 35% and the actual effective income tax rate is as follows:

	Fiscal Year Ended
	April 1, 2001		April 2, 2000		March 28, 1999
	(in thousands)
Provision (benefit) at U.S. statutory rate	35.0	%	35.0	%	35.0	%
Differences in U.S. and foreign taxes	(1.0	)	(5.0	)	(0.2	)
General business credits	(1.5	)	(3.3	)	2.1
Tax exempt interest	0.0		0.0		0.0
State tax, net of federal benefit	3.5		0.2		4.8
Valuation allowance	(7.8	)	(85.4	)	(52.1	)
Net operating loss carryback limitation	—		—		(2.6	)
Deferred gains on investments	(17.7	)	64.8		(0.1	)
Other	(0.1	)	(1.3	)	0.9
Provision for income tax rate	10.4		5.0		(12.2	)

    A Malaysian law change exempted the Company's Malaysia subsidiary from any income tax obligation for fiscal 1999. Under Malaysian law, in fiscal 2001 and past years, the Company generated certain tax incentive benefits and expects that a portion of these benefits will be available in years after fiscal 2001 to reduce its local tax obligations below the 28% statutory rate.

    The Company's manufacturing subsidiary in the Philippines operates under a tax holiday which expires in September 2002.

    The Company's intention is to permanently reinvest a portion of its foreign subsidiary earnings, while it intends to remit as a dividend to the U.S. parent company, at some future date, the remainder of these earnings. Accordingly, U.S. taxes have not been provided on approximately $59.7 million of permanently reinvested foreign subsidiary earnings. U.S. taxes have been provided, pursuant to APB Opinion No. 23, on $27.1 million in foreign subsidiary earnings that are intended to be remitted as a dividend at some future date. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, the Company will be subject to both U.S. income taxes and various foreign country withholding taxes.

    As of April 1, 2001, the Company had federal and state net operating loss carryforwards of approximately $20.0 million and $7.4 million, respectively, which will expire in the years 2002 through 2018 if not utilized. In addition, the Company had approximately $0.4 million of federal research and development tax credit carryforwards, which expire in various years between fiscal years 2016 and 2019. The Company also had available approximately $2.7 million of state income tax credit carryforwards having no expiration date.

    Examination by the IRS of the Company's income tax returns for the fiscal years 1995 and 1996, which began in fiscal 1998, was finalized during fiscal 2001. The finalization of the audit also included a settlement on a limited number of issues with respect to the Company's 1994, 1997, and 1998 fiscal years. The total audit settlement did not have any material adverse impact on the Company's financial condition or results of operations.

Note 11 Segment Reporting

    The Company operated in two segments during fiscal 2001: (1) Communications and High-Performance Logic and (2) SRAMs and Other. The Communications and High-Performance Logic segment includes FIFOs and multi-ports, communications applications-specific standard products (ASSPs) and high-performance logic and clock management devices. The SRAMs and Other segment consists mainly of high-speed SRAMs. During fiscal 1999-2000, the Company also operated in a third segment, x86

40

Microprocessors. In fiscal 2000, the Company completed the sale of x86 intellectual property and its Centaur design subsidiary and subsequently wound down the operations of its x86 business.

    The accounting policies for segment reporting are the same as for the Company as a whole (see Note 1). IDT evaluates segment performance on the basis of operating profit or loss, which excludes interest expense, interest and other income, and taxes. There are no intersegment revenues to be reported. IDT does not identify or allocate assets by operating segment, nor does the chief operating decision maker (the CEO of the Company) evaluate groups on the basis of these criteria.

    IDT's segments offer different products. Products that fall under the two segments are manufactured using different levels of process technology. A significant portion of the wafers produced for the SRAMs and Other segment are fabricated at IDT's technologically advanced, eight-inch wafer production facility in Hillsboro, Ore. Most wafers for the Communications and High-Performance Logic segment are produced at IDT's older, six-inch facility located in Salinas, Calif.

    Products in the SRAMs and Other segment have primarily commodity characteristics, including high unit sales volumes and lower gross margins. These commodity products are sold to a variety of customers in diverse industries, including communications. Products in the x86 Microprocessors segment were sold mainly to customers in the computing market and also tended to have commodity characteristics, including relatively low margins. Unit sales of products in the Communications and High-Performance Logic segment with the exception of logic devices, tend to be lower than those in the SRAMs and Other segment, but generally have higher margins.

    One distributor represented 14%, 19% and 22% of net revenues for fiscal 2001, 2000 and 1999, respectively. One CEM customer accounted for 11% of net revenues in fiscal 2001.

    The tables below provide information about the reportable segments for fiscal 2001, 2000 and 1999.

Segment Revenues

	Fiscal Year Ended
	April 1, 2001		April 2, 2000		March 28, 1999
	(in thousands)
Communications and High-Performance Logic	$	683,729	$	497,777	$	442,787
SRAMs and Other		308,060		194,605		126,505
x86 Microprocessors		—		9,340		31,725
Total revenues	$	991,789	$	701,722	$	601,017

Segment Profit (Loss)

	Fiscal Year Ended
	April 1, 2001			April 2, 2000			March 28, 1999
	(in thousands)
Communications and High-Performance Logic	$	255,194		$	125,357		$	89,195
SRAMs and Other		77,219			(9,163	)		(101,816	)
x86 Microprocessors		—			(10,095	)		(21,562	)
Restructuring charges, asset impairment and other		—			4,726			(204,244	)
Other nonrecurring costs		—			—			(19,682	)
Interest expense		(3,134	)		(13,967	)		(14,787	)
Interest income and other, net		133,942			40,628			6,413
Income (loss) before income taxes	$	463,221		$	137,486		$	(266,483	)

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    The Company's significant operations outside of the United States include manufacturing facilities in Malaysia and the Philippines and sales subsidiaries in Japan, Asia Pacific and Europe. Revenues from unaffiliated customers by geographic area, based on the customers' shipment locations, were as follows:

	Fiscal Year Ended
	April 1, 2001		April 2, 2000		March 28, 1999
	(in thousands)
North America	$	572,754	$	434,452	$	379,076
Europe		187,947		123,728		113,533
Japan		122,338		76,209		48,674
Asia Pacific		108,750		67,333		59,734
Total revenues	$	991,789	$	701,722	$	601,017

    The Company's long-lived assets consist primarily of property, plant and equipment, which are summarized below by geographic area:

	April 1, 2001		April 2, 2000
	(in thousands)
United States	$	217,161	$	187,967
Malaysia		30,498		34,734
Philippines		35,689		36,700
All other countries		1,354		706
Total property, plant and equipment, net	$	284,702	$	260,107

Note 12 Related Party Transactions

    In August 2000, PMC-Sierra, Inc. (PMC), completed a merger with Quantum Effect Devices, Inc. ("QED") a company in which the Company held an equity interest. A stockholder and former director of the Company also held an equity interest in QED. In connection with the merger, the Company received 1,082,620 shares of PMC common stock in exchange for its interest in QED. In the second quarter of fiscal 2001, the Company recorded a pretax net gain of $240.9 million based on the closing price of PMC common stock on the date of the merger.

    The Company paid royalty expenses of $2.6 million, $3.2 million and $3.1 million to QED in fiscal 2001, 2000 and 1999, respectively.

    Earlier in fiscal 2000, the Company sold a portion of its equity interest in connection with QED's initial public offering. IDT recognized a pretax gain of $11.3 million which was included in gain on equity investments, net.

    The Company holds an equity interest of approximately 31% on a diluted basis in Clear Logic, Inc., a corporation founded by a former IDT executive officer. The Company's losses associated with the operating results of Clear Logic were none, $14.8 million and $11.1 million in fiscal 2001, 2000 and 1999, respectively; these amounts are reported as interest income and other, net. The Company increased its investment by $10.0 million and $6.0 million in fiscal 2000 and 1999, respectively. IDT's investment in Clear Logic has now been fully amortized and the Company does not expect to record additional losses related to Clear Logic's operations in future periods.

    During fiscal 2001, as part of a severance agreement, the Company transferred Clear Logic shares valued at $0.4 million to Leonard C. Perham, IDT's former president and chief executive officer.

42

    During fiscal 1999, the Company also extended a secured loan to Clear Logic in the amount of $3.0 million. At the end of the fourth quarter of fiscal 2001, the Company recorded an impairment loss of $0.9 million on the outstanding balance of $1.5 million, based on Clear Logic's financial condition and a decline in the value of the secured assets.

    During fiscal 1998, a then-director of IDT acted as an uncompensated agent on behalf of a subsidiary of the Company in acquiring parcels of land for future corporate development. In fiscal 2000, that subsidiary sold the land at its acquisition price (approximately $11.5 million) to Acquisition Technology, Inc., of which the former director is president.

Note 13 Derivative Financial Instruments

    IDT transacts business in various foreign currencies and is subject to risks associated with fluctuating foreign exchange rates. The Company has established hedging programs, consisting primarily of foreign exchange forward contracts, to minimize the impact of foreign currency exchange rate movements on its operating results and on the cost of capital equipment purchases. The Company does not enter into derivative instruments for speculative or trading purposes.

    Foreign exchange contracts are used to hedge against the short-term impact of currency fluctuations on certain assets or liabilities denominated in foreign currencies. Gains and losses on these contracts are included in income as the exchange rates change; however, such gains and losses are offset by gains and losses on the underlying assets or liabilities being hedged.

    Forward exchange contracts related to firm purchase and sales commitments are considered identifiable hedges, and realized and unrealized gains and losses are deferred until settlement of the underlying commitments. At April 1, 2001 and April 2, 2000, deferred gains and losses were not material.

    The Company's forward exchange contracts generally mature within 12 months. At April 1, 2001, IDT had contracts for the sale of $39.4 million and purchase of $14.0 million of foreign currencies at fixed rates. Contracts in a net sale position consisted mainly of Japanese yen (88% of net contract value). These contracts were partially offset by contracts in a net purchase position, which consisted mainly of Japanese yen and the Euro (39% and 38% of net contract value, respectively.). IDT had contracts for the sale of $47.6 million and the purchase of $30.4 million of foreign currencies at April 2, 2000.

    The Company is exposed to credit-related losses if counterparties to financial instruments fail to perform their obligations. However, the Company does not expect any counterparties, which presently have high credit ratings, to fail to meet their obligations. The Company controls credit risk through credit approvals, limits and monitoring procedures including the use of high-credit quality counterparties.

Note 14 Licensing Agreements

    In fiscal 2000, the Company completed the sale of x86 intellectual property and its Centaur x86 microprocessor design subsidiary to VIA Technologies Inc. ("Via"), a Taiwanese company, and its partners for an aggregate amount of $31 million. The design subsidiary consisted mainly of x86-related employees and property, plant and equipment. IDT and Via also entered into a patent cross license agreement relating to certain IDT patents under which IDT received $20 million. The Company recorded a pretax gain of $19.6 million, net of transaction costs. The Company also deferred $20.0 million in future revenue related to the cross license agreement, which is being recognized ratably over the remaining average life of the patents, which approximates seven years.

    In fiscal 2000, the Company also entered into an intellectual property cross-license agreement with Intel Corporation for $20.5 million, $8.5 million of which was recognized as revenue during the quarter ended September 26, 1999. The remaining cross license fee is being recognized ratably over the average remaining life of the patents, which approximates seven years.

43

Note 15 Gain on Equity Investments, Net

    During the second quarter of fiscal 2001, as a result of the merger between PMC and QED, we exchanged our QED shares for shares of PMC. As required by generally accepted accounting principles, we recorded a pretax net gain of $240.9 million based on the $238.06 closing share price of PMC on August 24, 2000, the date of the merger.

    In the third quarter of fiscal 2001, we sold 375,000 of our PMC shares, receiving $76.5 million in proceeds and recognizing a pretax net loss of $11.9 million.

    In the fourth quarter of fiscal 2001, we recorded a $141.9 million impairment charge for certain equity investments, principally our investment in PMC, that we judged to have experienced an other than temporary decline in value.

    In fiscal 2000, we sold a portion of our QED shares and recorded a pretax gain of $11.3 million.

Note 16 Subsequent Events

    On April 18, 2001, the Company acquired Newave Semiconductor Corp. ("Newave"), a privately held designer and marketer of integrated circuits for the telecommunications market. Newave was based in Santa Clara, Calif., with design operations in Shanghai, China. The Company paid approximately $73.2 million in cash and assumed options with a fair value of approximately $12.9 million. The transaction will be accounted for using the purchase method of accounting.

    On June 8, 2001, the Company repaid its mortgage loan payable. The Company paid approximately $5.7 million, including a 5% prepayment premium, to retire this debt.

    On June 13, 2001, as a result of weak business conditions, the Company announced plans for a reduction in force. The Company will record a $2.5 million charge, principally related to severance and other costs, in the first quarter of fiscal 2002. The reduction in force is expected to consist of approximately 900 employees, primarily in the Company's manufacturing facilities in Malaysia and the Philippines.

    On June 28, 2001, Monolithic System Technology, Inc. ("MoSys") completed an initial public offering at approximately $10 per share. The Company's carrying value for its approximately 2.6 million MoSys shares was previously zero. The shares are subject to a six-month sales restriction.

44

SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED) QUARTERLY RESULTS OF OPERATIONS

	Fiscal Year Ended April 1, 2001
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share data)
Revenues	$	231,255	$	268,748	$	278,889	$	212,897
Gross profit		133,416		162,595		171,731		117,597
Net income		62,391		291,090		89,410		(27,688	)
Basic earnings per share		0.62		2.78		0.84		(0.26	)
Diluted earnings per share		0.58		2.60		0.80		(0.25	)

	Fiscal Year Ended April 2, 2000
	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
Revenues	$	153,981	$	173,544	$	176,698		$	197,499
Restructuring charges, asset impairment and other		—		—		(3,783	)		(943	)
Gross profit		68,369		84,298		88,993			99,956
Net income		8,478		40,467		31,231			50,435
Basic earnings per share		0.10		0.45		0.34			0.54
Diluted earnings per share		0.09		0.41		0.31			0.49

45

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

    None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this Item with respect to the Company's Directors is incorporated herein by reference from the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year ended April 1, 2001, and the information required by this item with respect to the Company's executive officers is incorporated herein by reference from the section entitled "Executive Officers of the Registrant" in Part I, Item 4A of this Report.

    The information concerning compliance with Section 16 of the Securities Exchange Act of 1934 is incorporated herein by reference from the Company's Proxy Statement for the 2001 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 2001 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item is incorporated herein by reference from the Company's Proxy Statement for the 2001 Annual Meeting of Stockholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

1. Financial Statements

    The financial statements (including the notes thereto) listed in the Index to Consolidated Financial Statements (set forth in Item 8 of Part II of this Form 10-K) are filed as part of this Annual Report on Form 10-K

(a)

2. Financial Statement Schedules

The following are filed as part of this Annual Report on Form 10-K:

    Financial Statement Schedule II—Valuation and Qualifying Accounts

    All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or notes thereto.

46

3.

(a) Listing of Exhibits

Exhibit No.	Description	Page
2.1*	Agreement and Plan of Reorganization dated as of October 1, 1996, by and among the Company, Integrated Device Technology Salinas Corp. and Baccarat Silicon, Inc. (previously filed as Exhibit 2.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 1996).
2.2*	Agreement of Merger dated as of October 1, 1996, by and among the Company, Integrated Device Technology Salinas Corp. and Baccarat Silicon, Inc. (previously filed as Exhibit 2.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 1996).
2.3*	Agreement and Plan of Merger, dated as of November 1, 1998, by and among the Company, Penguin Acquisition, Inc. and Quality Semiconductor, Inc. (previously filed as Exhibit 2.03 to the Registration Statement on Form S-4 filed on March 24, 1999).
3.1*	Restated Certificate of Incorporation (previously filed as Exhibit 3.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended October 2,2000).
3.2*	Certificate of Amendment of Restated Certificate of Incorporation (previously filed as Exhibit 3(a) to the Registration Statement on Form 8 dated March 28, 1989).
3.3*	Certificate of Amendment of Restated Certificate of Incorporation (previously filed as Exhibit 4.3 to the Registration Statement on Form S-8 (File Number 33-63133) filed on October 2, 1995).
3.4*	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 (previously filed as Exhibit 3.6 to the Registration Statement on Form 8-A filed December 23, 1998).
3.5*	Bylaws of the Company, as amended and restated effective December 21, 1998 (previously filed as Exhibit 3.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended December 27, 1998).
4.1*	Rights Agreement dated December 21, 1998 between the Company and BankBoston, N.A., as Rights Agent (previously filed as Exhibit 4.1 to the Registration Statement on Form 8-A filed December 23, 1998).
4.2*	Form of Indenture between the Company and The First National Bank of Boston, as Trustee, including Form of Notes (previously filed as Exhibit 4.6 to the Registration Statement on Form S-3 (File number 33-59443).
10.1*	Second Amendment to Lease dated September 1999 between the Company and Morton and Jeanette Rude Trust relating to 2975 Stender Way, Santa Clara, California (previously filed as Exhibit 10.1 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2000).
10.2*	Third Amendment to Lease dated August 1999 between the Company and Spieker Properties L.P. relating to 3001 Stender Way, Santa Clara, California (previously filed as Exhibit 10.2 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2000).
10.3*	Lease dated September 1999 between the Company and S.I. Hahn LLC relating to 2972 Stender Way, Santa Clara, California (previously filed as Exhibit 10.3 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2000).

47

10.4*	Amended and Restated 1984 Employee Stock Purchase Plan, as amended through August 27, 1998 (previously filed as Exhibit 4.10 to the Registration Statement on Form S-8 (File Number 333-64279) filed on September 25, 1998).**
10.5*	1994 Stock Option Plan, as amended as of September 22, 2000 (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2000).**
10.6*	1994 Directors Stock Option Plan and related documents (previously filed as Exhibit 10.18 to the Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 1994).**
10.7*	Form of Indemnification Agreement between the Company and its directors and officers (previously filed as Exhibit 10.68 to Annual Report on Form 10-K for the fiscal year ended April 2, 1989).**
10.8*	Technology License Agreement between the Company and MIPS Technologies, Inc (previously filed as Exhibit 10.8 to the Annual Report on Form 10-K for the fiscal year ended March 28, 1999).***
10.9*	Patent License Agreement between the Company and American Telephone and Telegraph Company ("AT&T") dated May 1, 1992 (previously filed as Exhibit 19.1 to Quarterly Report on Form 10-Q for the Quarter Ended June 28, 1992) (Confidential Treatment Granted).
10.10*	Master Distributor Agreement dated August 26, 1985 between the Company and Hamilton/Avnet Electronics, Division of Avnet, Inc. (previously filed as Exhibit 10.54 to the Registration Statement on Form S-1 (File Number 33-3189))
10.11*	Rent Purchase Agreement and Second Amendment to Sublease of the Land and Lease of the Improvements by and among Sumitomo Bank Leasing and Finance, Inc. and the Company dated September 1999 (previously filed as Exhibit 10.11 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2000).
10.12*	1995 Executive Performance Plan (previously filed as Exhibit 10.22 to the Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 1995).**
10.13*	Letter amending Patent License Agreement between the Company and AT&T dated December 4, 1995 (previously filed as Exhibit 10.23 to the Annual Report on Form 10-K for the fiscal year ended March 31, 1996) (Confidential Treatment Granted).
10.14*	Lease dated July 1995 between the Company and American National Insurance Company relating to 3250 Olcott Street, Santa Clara, California (previously filed as Exhibit 10.25 to the Annual Report for the fiscal year ended March 31, 1996).
10.15*	Registration Rights Agreement dated as of October 1, 1996 among the Company, Carl E. Berg and Mary Ann Berg (previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q for the Fiscal Quarter Ended December 29, 1996).
10.16*	1997 Stock Option Plan, as amended through April 21, 1998 (previously filed as Exhibit 4.9 to the Registration Statement on Form S-8 (file no. 333-64279) filed on September 25, 1998).
10.17*	Purchase and Sale Agreement and Joint Escrow Instructions between the Company and Cadence Design Systems, Inc., dated December 1998 (previously filed as Exhibit 10.27 to the Registration Statement on Form S-4 as filed on March 24, 1999).

48

10.18	Distributor Agreement dated June 22, 2000 between the Company and Arrow Electronics, Inc.***
10.19*	Lease between the Company and S.I. Hahn, LLC dated December 1999 relating to 3001 Coronado Drive, Santa Clara, California (previously filed as Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2000).
10.20*	Lease between the Company and S.I. Hahn, LLC dated February 2000 relating to 2901 Coronado Drive, Santa Clara, California (previously filed as Exhibit 10.20 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2000).
10.21	Non-Qualified Deferred Compensation Plan effective November 1, 2000.**
21.1	Subsidiaries of the Company.
23.1	Consent of PricewaterhouseCoopers LLP.

*

These exhibits were previously filed with the Commission as indicated and are incorporated herein by reference.

**

These exhibits are management contracts or compensatory plans or arrangements required to be filed pursuant to Item 14 (c) of Form 10-K.

***

Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions have been redacted and marked with a triple asterisk. The non-redacted version of this document has been sent to the Securities and Exchange Commission.

(b)

Reports on Form 8-K: Not applicable.

49

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
June 28, 2001	By:	/s/ JERRY G. TAYLOR Jerry G. Taylor 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/ JERRY G. TAYLOR Jerry G. Taylor	President, Chief Executive Officer and Director (Principal Executive Officer)	June 28, 2001
/s/ ALAN F. KROCK Alan F. Krock	Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	June 28, 2001
/s/ JOHN C. BOLGER John C. Bolger	Director	June 28, 2001
/s/ FEDERICO FAGGIN Federico Faggin	Director	June 28, 2001
/s/ KENNETH KANNAPPAN Kenneth Kannappan	Director	June 20, 2001
/s/ JOHN SCHOFIELD John Schofield	Director	June 19, 2001

50

SCHEDULE II

INTEGRATED DEVICE TECHNOLOGY, INC.

VALUATION AND QUALIFYING ACCOUNTS

		Balance at Beginning of Period		Additions Charged to Cost and Expenses		Charged to Other Accounts		Deductions and Write-offs			Balance at End of Period
		(in thousands)
Allowance for returns and doubtful accounts
	Year ended March 28, 1999	$	8,158	$	513	$	2,320	$	(5,689	)	$	5,302
	Year ended April 2, 2000		5,302		455		7,451		(7,163	)		6,045
	Year ended April 1, 2001		6,045		67		11,184		(7,501	)		9,795

51

QuickLinks

PART I

ITEM 1. BUSINESS

ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

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

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

SIGNATURES
SCHEDULE II
INTEGRATED DEVICE TECHNOLOGY, INC. VALUATION AND QUALIFYING ACCOUNTS

EX-10.18

Exhibit 10.18

REDACTED FOR
CONFIDENTIALITY

Confidential Treatment
Requested
The asterisked portions of this document have been omitted
and are filed separately with the Securities and Exchange Commission

DISTRIBUTION AGREEMENT

    This Distribution Agreement ("Agreement") is effective as of June 22, 2000, between Integrated Device Technology, Inc., a corporation having its principal place of business at 2975 Stender Way, Santa Clara, California 95054 ("Supplier"), and Arrow Electronics, Inc., a corporation having its principal place of business at 25 Hub Drive, Melville, NY 11747 ("Distributor"). The parties agree as follows:

    1.  APPOINTMENT  Supplier appoints Distributor an authorized distributor of its Products within the United States, Canada and Puerto Rico (the "Territory"). Supplier remains free to distribute its Products within the Territory either directly or through other distributors or dealers. As used in this Agreement, "Products" means all products offered for sale by Supplier generally, as set forth and described in Supplier's current price list. Products may be added to or deleted from the price list by Supplier on thirty (30) days prior written notice to Distributor.

2.  RESPONSIBILITIES OF DISTRIBUTOR  Distributor will use its reasonable best efforts to:

a.  maintain a competent and aggressive sales force and otherwise promote the sale, lease or other distribution of the Products within the Territory;

b.  maintain a representative inventory of Products in reasonably sufficient quantities to provide adequate and timely delivery to Distributor's customers;

c.  participate in such training programs as may be offered by Supplier;

d.  comply, in the conduct of its business, with all applicable laws, regulations and rulings, and to defend and indemnify Supplier against any damages, fines, penalties or other awards or sanctions arising from any violation thereof;

e.  keep current and accurate books and records in accordance with generally accepted accounting principles;

f.   advertise the Products using the funds described in section 15 of this Agreement, inform the public that Distributor is an authorized distributor of the Products, and encourage customers or potential customers for the Products to order the same from Distributor;

g.  establish and maintain quality control, handling and testing procedures, and such other programs as are necessary to ensure that the Products, as sold to customers, are reliable, are in full compliance with all applicable laws, standards, codes and regulations, are duly marked and labeled and are suitable for resale or other distribution; and

h.  submit all pricing adjustment claims within 90 days of Distributor's shipment. Claims older than 90 days will be honored at the sole discretion of Supplier. Distributor shall not take a debit for any pricing adjustments for shipments made from Distributor's inventory until an approved claim response is issued by Supplier.

3.  RESPONSIBILITIES OF SUPPLIER  Supplier will use its reasonable best efforts to:

a.  furnish Distributor with current price and product information via EDI (as hereinafter defined) and with a reasonable supply of such printed price lists, sales literature, books, catalogues and the like as Supplier may prepare and such training and technical and sales support from time to time to assist Distributor in effectively carrying out its activities under this Agreement;

b.  advertise the Products, inform the public that Distributor is an authorized distributor of the Products, encourage customers or potential customers for the Products to order the same from its distributors (including Distributor), and refer to its distributors (including Distributor) leads and orders involving quantities of Products normally handled by distribution; and

c.  establish and maintain quality control, manufacturing, handling and testing procedures, and such other programs as are necessary to ensure that the Products, as manufactured and sold to Distributor, are reliable, are in full compliance with all applicable laws, standards, codes and regulations, are duly marked and labeled and are suitable for resale or other distribution.

4.  REPORTS AND AUDITS  Within one business day after the end of each week, Distributor will send to Supplier, in a mutually agreeable electronic format, inventory, claims and POS files containing the information specified in Schedule C. No more than twice during any year, at reasonable times and upon reasonable prior notice, employees of Supplier may: i) conduct a physical inventory of Products in any stocking location (or, in automated facilities, observe cycle counts and related methodology) or ii) audit such business records, located at Distributor's corporate headquarters or other facilities, as pertain solely to the purchase and resale of Products hereunder during any such year.

5.  ORDERS; DELIVERY; RESCHEDULING; CANCELLATION

a.  Orders  Distributor will place written, telefaxed or electronically interchanged purchase orders (or do so verbally with written confirmation within thirty days), which will include the Products ordered, quantities requested, delivery dates, prices, and shipping instructions (when necessary). Supplier will acknowledge each order in writing, by telefax, or electronic interchange within ten business days of the receipt thereof and will confirm the requested shipment date or specify an alternative shipment date ("Acknowledged Shipment Date"). Supplier reserves the right to reject any order submitted, without liability to Distributor.

b.  Shipping and Packing  All shipments shall be F.O.B. Supplier's factory and will be made in accordance with Supplier's then current procedures.

c.  Rescheduling and Cancellation  Distributor may, on at least thirty (30) days prior written notice, reschedule the Acknowledged Shipment Date of, or cancel, any order without cost or penalty.

d.  Distributor's Acceptance  Distributor's acceptance of an order will occur upon its receipt of the Products, unless Distributor notifies Supplier within thirty (30) days of such receipt that the Products are damaged or do not conform to Distributor's order.

e.  Early Shipments  Products can be delivered up to fourteen (14) days prior to the Acknowledged Shipping Date without rejection or penalty. Products delivered more than fourteen (14) days prior to their Acknowledged Shipment Date may be accepted or rejected by Distributor. Distributor must notify Supplier of intent to reject within ten (10) business days. If Supplier is notified of Distributor's intention to reject any such delivery, Supplier will issue (or will be deemed to have issued) a Return Material Authorization within five days. The return will be made freight collect.

6.  PRICES  The prices for Products will be as set forth in Supplier's Price List in effect as of the date of this Agreement, subject to change from such date forward upon notice from Supplier to Distributor.

a.  Price Increases  Price increases are effective as of the date specified by Supplier. All Products shipped after the effective date of any price increase will be shipped and invoiced at the price in effect at the time of shipment. Price increases for Products in Distributor's inventory shall be in accordance with the Market Price and Special Cost Programs if such programs are added to this Agreement by a Schedule hereto.

b.  Price Decreases  In the event Supplier decreases the price of any Product, Distributor will receive a credit equal to the difference between the price paid for the Product by Distributor (less any prior credits taken by Distributor on such Product) and the new decreased price for the Product multiplied by the quantity of such Product in Distributor's inventory, or in transit to Distributor, on the effective date of the decrease. Within thirty days of the effective date of such price decrease, Supplier

shall issue a credit memo to Distributor. Distributor shall review the credit memo and inform Supplier in writing within thirty (30) days of any discrepancies. All Products shipped after the effective date of any price decrease will be shipped and invoiced at the price in effect at the time of shipment.

c.  Taxes and Other Charges  Distributor will pay any applicable sales or use taxes pertaining to its purchase of the Products (and, if Products are to be delivered to points outside the United States, the cost of packing, duties, licenses, and fees) if included as a separate item on the invoices sent by Supplier to Distributor.

d.  Terms  ******  Payment must be made either electronically by Fed Wire or Automated Clearing House (ACH) transfer for value, or by check physically delivered by 11:00 A.M. local time at the bank lockbox location specified by IDT. If the discount date falls on a weekend or a banking holiday the payment must be received on the banking day immediately prior to the weekend or holiday to obtain the discount. Supplier reserves the right to set off any amounts due to Distributor against any debts owed by Distributor.

7.  RETURN OF PRODUCT

a.  Quarterly Rotation  Once in each quarter, Distributor may return to Supplier, for credit, a quantity of Products the value of which will not exceed five percent of the amount invoiced by Supplier to Distributor for all Products purchased by Distributor during the previous quarter. Such returns, which may be made from one or more stocking locations, will be shipped F.O.B. Supplier's domestic facility, as designated by Supplier, freight prepaid. Distributor must obtain a return authorization from Supplier prior to shipment, and all Products returned must be in their original unopened packaging, undamaged, and in merchantable condition. Obsolete Products may only be returned under Paragraph 8. The following product classifications, as set forth in Supplier's price list, shall further govern allowable and non-allowable returns from Distributor:

Product Class

"A"  Return to the factory in factory sealed boxes or bags and in factory order increments

"B"  Return to the factory in factory order increments

"C"  Non-Returnable to factory

"D"  Non-Returnable to factory

"R"  Return to the factory in factory order increments

Products that change to a classification of "C" or "D" will be subject to a thirty (30) day return period after the change.

b.  Initial Purchases  Any and all initial stocking Products ordered by Distributor upon execution of this Agreement may be returned for credit within nine months of the effective date of this Agreement, subject to all of the terms and conditions of Paragraph 7(a) above, but will not be counted as a "stock rotation" for purposes of computing the amount of Products returnable under Paragraph 7(a).

c.  General Terms of Product Return  Distributor shall obtain Supplier's prior specific authorization number for any return of Product permitted hereunder. Distributor shall return all Product thus authorized within thirty (30) days after authorization, or such authorization shall lapse. Unless otherwise specified herein, all returns shall be shipped FOB Supplier's domestic facility, freight prepaid. Distributor shall return Products in the manner and to the destination directed by Supplier. Distributor may return any Products shipped to but not ordered by Distributor Ex Works Distributor (Freight Collect). Returns of Products not expressly authorized hereunder will be refused by Supplier and returned to Distributor, transportation charges collect.

8.  PRODUCT CHANGES

a.  Obsolescence and Modification  Supplier reserves the right to discontinue the manufacture or sale of, or otherwise render or treat as obsolete, any or all of the Products (or to modify the design or manufacture of any Product so as to preclude or limit Distributor's sales of such Product) upon at

least thirty days prior written notice to Distributor. Distributor may, in its discretion, within thirty days of its receipt of such notice, except for Product Classes C and D, notify Supplier in writing of its intention to return any or all such Products which remain in its inventory for a credit equal to the net price paid by Distributor for such Products. The Products must be returned within thirty days of the date of Distributor's receipt of Supplier's return authorization or such authorization will lapse. Supplier will pay all freight and shipping charges in connection with any such returns. Such returns will not be counted for computing the amount of Products returnable under Paragraph 7(a).

9.  WARRANTY  The Products will be covered by Supplier's standard warranties, copies of which are attached to this Agreement as Schedule A. The warranty period set forth in Schedule A will begin with Supplier's shipment to Distributor, and the warranty will extend directly to Distributor's customer as if it had purchased the Products directly from Supplier.

    IDT DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR THE STATUTORY WARRANTY OF TITLE, THERE ARE NO OTHER EXPRESS OR IMPLIED WARRANTIES.

10. INTELLECTUAL PROPERTY INDEMNIFICATION  Supplier shall defend, at its expense, any action brought against Distributor, its affiliates and its customers to the extent it alleges that a Product of Supplier infringes a Unites States patent, United States mask work right, or United States copyright or trademark, provided that Supplier is promptly notified in writing of any claim, is given sole control of the defense and settlement thereof, and is provided with all reasonable assistance in connection therewith. If any Product is finally adjudged to so infringe, Supplier shall, at its option, (a) procure for Distributor, its affiliates and its customers the right to continue using the product; (b) modify or replace the product so there is no infringement; or (c) refund the net purchase price paid upon return of the Product.

    Supplier shall have no liability regarding any claim arising out of the use of the Product in combination with other goods if the infringement would not occur but for such combination. Distributor shall defend, indemnify, and hold Supplier harmless from any and all expense, damage, cost or losses resulting from any suit or proceeding brought for infringement of US patents, US maskworks, US copyrights, or US trademarks arising from compliance with the design, specifications or instructions of Distributor, its affiliates and customers.

    THE FOREGOING INDEMNITY CONSTITUTES SUPPLIER'S SOLE LIABILITY AND DISTRIBUTOR'S EXCLUSIVE REMEDY FOR U.S. PATENT INFRINGEMENT AND IS IN LIEU OF ALL EXPRESS, IMPLIED OR STATUTORY WARRANTIES RELATING THERETO.

11. TERM AND TERMINATION

a.  Term  This Agreement is effective once signed by both parties and until terminated in accordance with the provisions of this paragraph. Either party may at any time terminate this Agreement without cause and for its convenience by giving thirty (30) days prior written notice to the other. Supplier and Distributor represent that they have considered the making of expenditures in preparing to perform under this Agreement. In that regard, both parties acknowledge that neither party will in any way be liable to the other for any loss, expense or damage (including special, consequential, or incidental damages) by reason of any termination of this Agreement without cause.

b.  Events of Default  Any of the following is a default under this Agreement:

    i.   the assignment of this Agreement by either party without the prior written consent of the other party;

    ii.  either party's failure to cure any breach of this Agreement within thirty days following written notice thereof from the other (or, if not curable within sixty days, if the cure is not commenced within that period and thereafter diligently completed); and

    iii.  the assignment by either party of its business for the benefit of creditors, or the filing of a petition by either party under the Bankruptcy Code or any similar statute, or the filing of such a petition against either of them which is not discharged or stayed within sixty days, or the appointment

of a receiver or similar officer to take charge of either party's property, or any other act indicative of bankruptcy or insolvency.

c.  Remedies upon Default  In the event of either party's default, the other party may terminate this Agreement for cause by written notice and/or avail itself of any remedy available at law or equity, subject to the limitations contained in this Agreement.

d.  Return of Inventory  In the event of any termination of this Agreement, Supplier will repurchase from Distributor any or all unsold Products designated by Distributor from its inventory at the price paid therefor by Distributor, less any and all credits taken by Distributor on such Products. Supplier must receive a detailed return listing by part and quantity not later than thirty (30) days after the termination date. If Distributor terminates this Agreement without cause, or Supplier terminates it with cause, the price will be reduced by a ten percent handling charge and Distributor will pay all freight and shipping charges. In the event of any termination, Supplier will, at Distributor's request, honor any Distributor purchase order then outstanding for delivery within ninety (90) days of the date of termination. Supplier may require payment in advance for such Products.

    All Products must be in their original, unopened, packaging, in merchantable condition, and be received within thirty (30) days of the date of Supplier's RMA, or authorization shall lapse. Obsolete Products may only be returned under paragraph 8.

    In addition, all returned Products must meet the requirements for its Product classification:

    The following product classifications, as set forth in Supplier's price list, shall govern allowable and non-allowable returns from Distributor:

Product Class

"A"  Return to the factory in factory sealed boxes or bags and in factory order increments.

"B"  Return to the factory in factory order increments.

"C"  Non-Returnable to factory.

"D"  Non-Returnable to factory.

"R"  Return to the factory in factory order increments.

e.  Ship and Credit/Debit  All ship and credit/debit authorizations shall expire 90 days after termination of this Agreement and may only be extended in writing by Supplier, at its sole discretion.

    Supplier will be required to accept only those Products which are in their original unopened packaging or are undamaged and in merchantable condition. No termination of this Agreement will affect any obligation of either party to pay amounts due to the other hereunder.

12. DATA INTERCHANGE  The terms and conditions of the electronic data interchange or "EDI" between Supplier and Distributor shall be governed by Schedule C.

13. RIGHTS IN DATA  Technical information and software, if any, are subject to the U.S. Government's Restricted Rights Legend, and use, duplication, or disclosure by the Government is subject to restrictions set forth in Federal Acquisition Regulation 52-227-19.

    All software is copyrighted. All maskworks are registered. Distributor shall not copy, reverse engineer or decompile or disassemble any product or software without Supplier's express written consent.

14. EXPORT CONTROL  Distributor shall comply with all rules and regulations of the U.S. Government and the Bureau of Export Administration regarding the direct and indirect export of Products. Distributor will indemnify and hold Supplier harmless from and against any claim, loss or liability arising out of any breach of this paragraph, whether intentional or unintentional.

15. MARKETING COMMUNICATION  To assist Distributor in advertising and promoting the Products, Supplier will accrue into a cooperative marketing fund one-half percent (0.5%) of the net sales dollars invoiced to Distributor each month, to be used by Distributor for promotional efforts

approved by both Distributor and Supplier. All unused accrued funds shall expire 12 months from the accrual date.

16. NOTICES  Notices under this Agreement will be deemed given when delivered by hand, overnight carrier, or deposited in the United States mail as certified mail, postage prepaid, addressed to the president of Distributor at its then principal place of business and if to Supplier to the Vice President of Sales and the North America Distribution Sales Manager at its then principal place of business.

17. TRADEMARKS  This Agreement does not create, and neither party will have any right in, or to the use of, any mark, name, style or logo of the other party. Distributor is, however, hereby granted a nonexclusive right to use Supplier's marks, names or logos to identify itself as an authorized distributor of the Products and for advertising and promoting its services under this Agreement. Distributor shall comply with all Supplier guidelines regarding the use of Supplier's trademarks.

18. CONFIDENTIAL INFORMATION  Each party will receive and maintain in confidence all proprietary information, trade secrets or other know-how belonging to the other (including but not limited to knowledge of manufacturing or technical processes, financial and systems data, and customer information) provided that any such information, secrets or know-how is clearly marked as being confidential, except and to the extent that disclosure is required by law, regulation or court order, or enters into the public domain through no fault of the party obligated to maintain such confidentiality, or is received from a third party without obligation of confidentiality. Neither party shall disclose Confidential Information to any third party without the prior written consent of the disclosing party. A party receiving Confidential Information shall use such information solely for purposes consistent with the distribution of Products hereunder and for no other purpose. Without limiting the foregoing, all material and information made known to Supplier by Distributor pursuant to Paragraph 4 of this Agreement is hereby designated as confidential, provided such material and information is clearly marked as confidential information of Distributor.

19. CREDITS  In the event Distributor is entitled to a credit from Supplier which exceeds Distributor's obligation to Supplier at the time, Supplier will pay the amount of such excess to Distributor within thirty (30) days of demand.

20. AUTHORIZATION NOT UNREASONABLY WITHHELD  Except as provided herein, whenever any consent, action or authorization is required or requested of either party hereunder, it will not be unreasonably withheld or delayed. Any required return authorization will be granted (or deemed to have been granted) within sixty days from the day it is properly requested.

21. FORCE MAJEURE  Neither party will bear any liability to the other for any failure or delay to the extent that it results from acts of God, labor difficulties, inability to obtain materials or any other cause beyond such party's reasonable control.

22. RELATIONSHIP OF PARTIES  The parties are independent contractors, each in full control of its business. Under no circumstances will either party have the right or authority to act or make any commitment on behalf of or bind the other or represent the other as its agent in any way.

23. PUBLICITY  This Agreement is confidential within the meaning of paragraph 17. Except as required by law, no press release or other like publicity regarding the relationship between Distributor and Supplier, this Agreement or its termination will be made without the other party's prior approval.

24. GENERAL

a.  Entire Agreement  This Agreement supersedes all prior communications or understandings between Distributor and Supplier and constitutes the entire agreement between the parties with respect to the matters covered herein. In the event of a conflict or inconsistency between the terms of this Agreement and those of any order, quotation, acknowledgment or other communication from one party to the other, the terms of this Agreement will be controlling. Any purchase order or other document which purportedly modifies, supersedes or otherwise alters these terms and conditions shall be of no force or effect whatsoever.

    b.  Amendment  This Agreement cannot be changed in any way except by a writing signed by an authorized representative of both parties.

c.  Governing Law  This Agreement is made in, governed by, and will be construed solely in accordance with, the internal laws of the State of California. Any action brought under or in connection with this Agreement must be instituted in the state or federal forum covering the defending party's principal place of business.

d.  Reformation  In the event any provision of this Agreement is held to be invalid or unenforceable for any reason, such invalidity or unenforceability will attach only to such provision and will not affect or render invalid or unenforceable any other provision of this Agreement. Any such provision may be reformed by a court of competent jurisdiction so as to render the same valid or enforceable while most nearly effectuating the intent of the parties.

e.  Assignment  Neither party has the right to assign this Agreement in whole or in part without the prior written consent of the other except to another corporation wholly-owned by or under common control with it. For purposes hereof, an assignment includes, without limitation, a merger, sale of assets or business, or other transfer of control by operation of law or otherwise.

f.   LIMITATION OF LIABILITY

    a.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR ANY MATTER ARISING OUT OF OR UNDER THIS AGREEMENT.

    b.  EXCEPT AS STATED IN PARAGRAPH 11 (INTELLECTUAL PROPERTY INDEMNIFICATION), SUPPLIER'S MAXIMUM LIABILITY AND DISTRIBUTOR'S MAXIMUM RECOVERY FOR ANY CLAIM ARISING OUT OF OR UNDER THIS AGREEMENT INVOLVING PRODUCTS PURCHASED FOR RESALE SHALL NOT IN THE AGGREGATE EXCEED THE NET PURCHASE PRICE PAID OF THE AFFECTED PRODUCTS.

25. SCHEDULES  The indicated schedules are attached to, and are a part of, this Agreement.

Schedule A—Supplier's Standard Warranties

Schedule B—Special Cost Program (If Applicable)

Schedule C—EDI Trading Partner Agreement

    Each party has entered this Agreement by having an authorized representative sign below.

DISTRIBUTOR:
By:
	(Typed Name)	(Title)
SUPPLIER:
By:
	(Typed Name)	(Title)

SCHEDULE A—SUPPLIER'S STANDARD WARRANTIES

    Supplier warrants that all products, when delivered, shall conform to Supplier's specifications and be free of defects in manufacture and workmanship. Provided Distributor notifies Supplier in writing within 90 days of the date of delivery of printed circuit modules or boards, or within one year of the date of delivery of integrated circuits or ceramic modules, to a common carrier at the point of origin of such defective or nonconforming product, and promptly returns such product to Supplier in accordance with Supplier's instructions, freight prepaid, Supplier shall, at Supplier's option and expense, either repair, replace, or refund the purchase price of any nonconforming or defective product. Supplier shall have no obligation with respect to any damage arising from misuse, neglect, tampering, unauthorized or improper use or installation, disassembly, repair, alteration, or accident. Notwithstanding the foregoing, if any product is designated developmental or experimental, such product shall be purchased "as is, with all faults" and the remedy granted above shall be of no force or effect whatsoever.

    SUPPLIER DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, EXCEPT FOR THE STATUTORY WARRANTY OF TITLE, THERE ARE NO OTHER EXPRESS OR IMPLIED WARRANTIES.

SCHEDULE B—SPECIAL COST PROGRAM

1.PURPOSE  The purpose of this Schedule is to provide a means by which Distributor may provide specified Supplier products to designated key customers with an initial cost to Distributor below the current Supplier US Distributor Price Book ("Special Cost Program").

2.PROCEDURES  Distributor shall follow all procedures and policies of Supplier regarding the Special Cost Program. Supplier reserves the right to amend such policies and procedures at any time and from time to time, however, Supplier shall obtain Distributor's written agreement prior to making any changes to Sections 2.E, 2.F. and 4.C. The current procedures are outlined below:

A.  "Special Cost Products" are Supplier Products which are purchased by Distributor under the Special Cost Program.

B.  Distributor shall submit the required forms and information regarding the customer, products to be purchased, anticipated volume and requested pricing to Supplier.

C.  Supplier shall review the information and determine, in its sole discretion, if customer will be included in the Special Cost Program. If the customer will be included, part numbers and pricing will be assigned.

D.  Distributor may place orders for the Special Cost Products only for resale to the designated customer. If Distributor must transfer such Special Cost Products between the special inventory and standard inventory, Distributor must comply with Supplier's Stock Transfer Procedure which Distributor is familiar with. In the event of such an inventory transfer, Distributor shall notify Supplier, in writing, within five days of such transfer and pay Supplier the difference between the standard inventory cost and the special pricing.

E.Price Adjustment.  Special Cost Products shall be eligible for price protection only as specified in Supplier's then current Special Cost policy and procedures. Price adjustments may result in inventory and backlog write-down or write-up and credit or payment between Distributor and Supplier as set forth below:

     (i) Within ten days after the effective date of a price change, Supplier shall provide Distributor with an inventory report for the affected Special Cost Products.

    (ii) If Supplier decreases the price for any Special Cost Product, Supplier shall provide a price protection credit to Distributor in an amount equal to the difference between the prior Special Cost in effect at the date of the price change and the new Special Cost multiplied by the quantity of such Special Cost Product in Distributor's inventory on the effective date of such price change.

    (iii) If Supplier increases the price for any Special Cost Product, Supplier shall invoice Distributor in an amount equal to the difference between the prior Special Cost in effect at the date of the price change and the new Special Cost multiplied by the quantity of such Special Cost Product in Distributor's inventory on the effective date of such price change.

    (iv) "Net Inventory Effect" Supplier shall submit the price protection credit and the bill-up Invoice to Distributor at the same time. If the combination of the credit and invoice result in a payment due by Distributor, such payment shall be due and payable as set forth in the Agreement.

    (v) If the Net Inventory Effect results in a payment due from Distributor, Distributor may, at Distributor's option, return Products to Supplier with a value equal to the Net Inventory Effect. Special Cost Products which are returned to Supplier must be from the Supplier product line in which the price increase occurred. Distributor must request an RMA from Supplier within ten (10) working days of Supplier's determination of and invoicing for the Net Inventory Effect. Returns under this section in no way offset or relieve Distributor from its obligations to pay any amounts due under section (iv).

F.Stock Rotation  The exchange value for Special Cost Products under stock rotation privileges of the Agreement shall be the Special Cost Price at the time of the stock rotation.

3.RESTRICTIONS AND LIMITATIONS  Distributor shall comply with all Supplier requirements regarding the Special Cost Program. Ship and Credit claims are not permitted on Special Cost Product under any circumstances. The terms and conditions of the Agreement shall govern purchases made by Distributor under the Special Cost Program.

4.  TERM AND TERMINATION

A.  Either Supplier or Distributor may terminate this Special Cost Program, with cause or for convenience, upon 30 days written notice to the other party.

B.  Either Supplier or Distributor may remove a Special Cost Product or customer from the Special Cost Program upon notice to the other party. Such notice shall be effective at the end of Distributor's then current fiscal month.

C.  Upon termination of this Special Cost Program or removal of a Special Cost Product from the Special Cost Program, the price of the (former) Special Cost Product(s) will be adjusted to the cost shown in the then current Supplier US Distributor Price Book. Price adjustments may result in inventory and backlog write-down or write-up, credit or payment between Distributor and Supplier and return of Special Cost Products using the procedures set forth in the Special Cost policies and procedures. (The current procedure is outlined in Section 2.E. of this Special Cost Schedule.) In lieu of any inventory write-up, Distributor will be entitled to return any affected inventory to Supplier for credit.

SCHEDULE C—EDI TRADING PARTNER AGREEMENT

1.PURPOSE. IDT and EDI Participant agree to establish a system whereby communication and/or transactions between IDT and EDI Participant can be accomplished through electronic means, rather than writing on paper.

2.EDI OPERATIONS. Technical operational details necessary to implement the EDI relationship contemplated herein such as defining transaction standards and sets and selection of third party networks shall be mutually agreed upon and followed by the parties in good faith using reasonable efforts. Any transaction not agreed upon shall have no force or effect between parties.

3.GENERAL TERMS AND CONDITIONS FOR PURCHASES AND SALES. This Agreement does not express or imply any commitment to purchase or sell goods or services. The terms and conditions set forth in the Distribution Agreement entered into between IDT and EDI Participant shall govern all sales made under this Agreement.

4.EDI TRANSACTIONS ENFORCEABILITY. IDT and the EDI Participant agree that all rights, duties, and obligations which would accrue upon receipt of data in the form of paper documentation shall accrue upon receipt of the data in electronic form via EDI. Further, they agree: (1) that neither party shall contest the admissibility of paper documentation copies of electronically transmitted data under the business records exception to the hearsay rule, or the best evidence rule, or the Statute of Frauds, on the basis that the data were not originated or maintained in documentary form, or that the data do not constitute a signed writing by a party intending to be bound thereby; (2) that company identifiers such as DUNS numbers in data transmission fields or network access identification codes shall constitute prima facie evidence of which EDI participant sent a transmission; and (3) that copies of the transmitted and received data, mechanically or electronically stored by either party shall constitute evidence of the intended contents of the orders, acknowledgments, transactions, and other information covered by this Agreement, if they are machine readable and capable of reproduction into printed human readable form of paper. Each party is obligated to retain records as prescribed by law or common business practice.

5.THIRD PARTY PUBLIC DATA NETWORK (PDN) USE. Each party is responsible for establishing its own agreements with third party networks. Connect time and any other charges of the third party network shall be paid for by the party initiating each communication. Either party may change its third party network at any time upon thirty (30) days prior written notice to the other party at the address on the attached page hereof.

6.TRANSMISSION REQUIREMENT. Each party shall have in place reasonable controls to ensure timely handling of EDI transmissions and to promptly contact the sending party for corrective action in the event of a transmission error, such as an unintelligible or garbled transmission. Exhibit A contains specific Transaction Sets that will be used by both parties. Proper receipt of an EDI transmission shall not give rise to any obligation unless and until the party initially transmitting such document has properly received in return an acceptance document.

7.SECURITY DUTIES. Each party is solely responsible for the selection, implementation, and maintenance of appropriate security products, tools, tests and procedures sufficient to meet its requirements for protecting its programs and data from improper access, loss, alteration, or destruction.

    Each party shall treat as confidential and not provide or otherwise make available the whole or any portion of the other party's network procedures, passwords, or computer telephone numbers to any person other than to recipient's employees who need to know, without written consent from the other party. Each party agrees that its access to the other party's network, if any, will be limited and agrees not to exceed the scope of authorized access. If the scope is exceeded by a party, it will promptly notify the other party. Each party agrees that it will take appropriate actions by instructions, agreement, or otherwise with its employees who are permitted access to the aforementioned items to notify them of EDI Participant's and their individual obligations under this Agreement. Each party agrees that any other network procedure information shall not be considered as confidential information unless a separate nondisclosure agreement.

8.TERM AND TERMINATION. The term of this Agreement shall begin when this Agreement has been executed by both parties. Either party may terminate this Agreement at any time for convenience without liability therefore, upon ten (10) days prior written notice to the other party at the address on the attached page hereof. However, such termination shall not relieve either party of any contractual obligations incurred prior to termination.

9.DAMAGE LIMITATION. NEITHER PARTY SHALL BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF USE, LOSS OF INFORMATION, INTERRUPTION OF BUSINESS, OR INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT WHETHER ALLEGED AS A BREACH OF CONTRACT OR TORTUOUS CONDUCT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

10.FORCE MAJEURE. Neither party shall be liable for any failure to perform its obligations hereunder where such failure results from any act of God or other cause beyond such party's reasonable control, including without limitation, any mechanical, electronic or communications failure which prevents electronic transmission or receipt of data.

11.APPLICABLE LAW / LIMITATION OF ACTIONS. The validity, performance and construction of this Agreement will be governed by the laws of the State of California, U.S.A. All legal actions, however asserted, shall be commenced within one year from the date the cause of action arises.

12.ASSIGNMENT. This Agreement shall not be assigned or transferred by either party without the prior written consent of the other party.

13.TRANSACTION SETS. All Transaction Sets shall be transmitted and formatted in accordance with the American National Standards Institute (ANSI)ASC X12 standard or the Electronic Data Interchange for Administration of Commercial Trade Standard (EDIFACT). This also includes the data dictionary, segment dictionary, and transmission controls published as standards.

EDI TRADING PARTNER AGREEMENT

1.	EDI Participant:
	Company Name:
	Address:

2.

EDI Business Contact Name, Address and Phone Number

IDT
EDI Coordinator
Corporate Customer Service
Integrated Device Technology, Inc.
Santa Clara, CA 95052
(408) 330-1839

EDI Participant

3.

Address for Legal Notices

IDT
Integrated Device Technology, Inc.
2975 Stender Way, Mail Stop C4-25
Santa Clara, CA 95054
Attn.: General Counsel

EDI Participant

4.

Third Party Network Provider

IDT: GEIS
EDI Participant:

EXHIBIT A

1.

Transaction Sets.

    All Transaction Sets shall be transmitted and formatted in accordance with the American National Standards Institute ("ANSI")ASC X12 standard or the Electronic Data Interchange for Administration of Commercial Trade Standard ("EDIFACT"), as reflected below beside each Transaction Set. This also includes the data dictionary, segment dictionary, and transmission controls published as standards.

2.

Transaction Sets, and minimum field requirements where applicable, to be transmitted are as follows

810—Invoice
850—PO
855—PO Ack.
867—POS (Maximum of two digits after the decimal point and invoice and item number must be unique per line item)
	1.	Branch
	2.	End Customer Name
	3.	End Customer Number
	4.	Quantity Sold
	5.	Part Number
	6.	Resale Price
	7.	Invoice Number
	8.	Invoice Item Number
	9.	Invoice Date/Ship Date
	10.	Transaction Type
	11.	Authorization Number (If sending against it)
	12.	Inventory Location Code
846—Inventory-
	1.	Branch
	2.	Part Number
	3.	Inventory
	4.	Book Price
	5.	Inventory Location Code
844—Ship and debit claim (Maximum of two digits after the decimal point and invoice and item number must be unique per line item)
	1.	Branch
	2.	End Customer Name
	3.	End Customer Number
	4.	Quantity Sold
	5.	Part Number
	6.	Resale Price
	7.	Adjusted Cost
	8.	Book Cost
	9.	Invoice Number
	10.	Invoice Item Number
	11.	Invoice Date/Ship Date
	12.	Claim Date
	13.	Transaction Type
	14.	Authorization Number
849—Ship and debit response
856—Ship notice
870—Backlog
832—Cost book

EX-10.21

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EXHIBIT 10.21

INTEGRATED DEVICE TECHNOLOGY, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

Effective as of November 1, 2000

INTEGRATED DEVICE TECHNOLOGY, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

Effective as of November 1, 2000

TABLE OF CONTENTS

	ARTICLE 1: DEFINITIONS
1.1	ACCOUNT	1
1.2	BENEFICIARY	1
1.3	CODE	1
1.4	COMPENSATION	1
1.5	COMPENSATION DEFERRAL ACCOUNT	1
1.6	COMPENSATION DEFERRALS	1
1.7	DEFERRAL ELECTION FORM	1
1.8	DESIGNATION DATE	1
1.9	EFFECTIVE DATE	1
1.10	ELIGIBLE EMPLOYEE	1
1.11	EMPLOYER	2
1.12	ENTRY DATE	2
1.13	FORM AND TIMING OF PAYMENT ELECTION FORM	2
1.14	PARTICIPANT	2
1.15	PLAN	2
1.16	PLAN COMMITTEE	2
1.17	PLAN YEAR	2
1.18	RETIREMENT AGE	2
1.19	TOTAL AND PERMANENT DISABILITY	2
1.20	TRUST	2
1.21	TRUSTEE	2
1.22	VALUATION DATE	2
	ARTICLE 2: ELIGIBILITY AND PARTICIPATION
2.1	REQUIREMENTS	2
2.2	RE-EMPLOYMENT	3
2.3	CHANGE OF EMPLOYMENT CATEGORY	3
	ARTICLE 3: CONTRIBUTIONS AND CREDITS
3.1	PARTICIPANT CONTRIBUTIONS AND CREDITS	3
3.2	CONTRIBUTIONS TO THE TRUST	4
	ARTICLE 4: ALLOCATION OF FUNDS
4.1	ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS	4
4.2	ACCOUNTING FOR DISTRIBUTIONS	4
4.3	SEPARATE ACCOUNTS	4
4.4	INTERIM VALUATIONS	4
4.5	DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS	4
4.6	EXPENSES AND TAXES	5
	ARTICLE 5: ENTITLEMENT TO BENEFITS
5.1	FIXED PAYMENT DATES; TERMINATION OF EMPLOYMENT	6
5.2	IMMEDIATE DISTRIBUTION ELECTION; TEN PERCENT PENALTY	6
5.3	HARDSHIP DISTRIBUTIONS	6
5.4	RE-EMPLOYMENT OF RECIPIENT	7

i

	ARTICLE 6: DISTRIBUTION OF BENEFITS
6.1	AMOUNT	7
6.2	METHOD OF PAYMENT	7
6.3	DEATH OR DISABILITY BENEFITS	8
	ARTICLE 7: BENEFICIARIES; PARTICIPANT DATA
7.1	DESIGNATION OF BENEFICIARIES	8
7.2	INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES	8
	ARTICLE 8: ADMINISTRATION
8.1	PLAN COMMITTEE	9
8.2	ADMINISTRATIVE AUTHORITY	9
8.3	LITIGATION	9
8.4	CLAIMS PROCEDURE	10
	ARTICLE 9: AMENDMENT
9.1	RIGHT TO AMEND	11
9.2	AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN	11
	ARTICLE 10: TERMINATION
10.1	EMPLOYER'S RIGHT TO TERMINATE OR SUSPEND PLAN	11
10.2	AUTOMATIC TERMINATION OF PLAN	11
10.3	SUSPENSION OF DEFERRALS	11
10.4	ALLOCATION AND DISTRIBUTION	11
10.5	SUCCESSOR TO EMPLOYER	11
ARTICLE 11: THE TRUST		12
	ARTICLE 12: MISCELLANEOUS
12.1	STATUS OF PARTICIPANTS	12
12.2	LIMITATIONS ON LIABILITY OF EMPLOYER	12
12.3	CONSTRUCTION	12
12.4	SPENDTHRIFT PROVISION/QUALIFIED DOMESTIC RELATIONS ORDER	13

ii

INTEGRATED DEVICE TECHNOLOGY, INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN

Effective as of November 1, 2000

RECITALS

    This Integrated Device Technology, Inc. Nonqualified Deferred Compensation Plan (the "Plan") is adopted by Integrated Device Technology, Inc., a Delaware Corporation (the "Employer") for certain of its eligible employees. The purpose of the Plan is to offer those employees an opportunity to elect to defer the receipt of compensation in order to provide post-employment and related benefits. The Plan is intended to be a "top-hat" plan (i.e., an unfunded deferred compensation plan maintained for a select group of management or highly-compensated employees) under sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").

ARTICLE 1
DEFINITIONS

    1.1  ACCOUNT means the balance credited to a Participant's or Beneficiary's Plan account, including amounts credited under the Compensation Deferral Account and deemed income, gains and losses (as determined by the Employer, in its discretion) credited thereto. A Participant's or Beneficiary's Account shall be determined as of the date of reference.

    1.2  BENEFICIARY means any person or persons so designated in accordance with the provisions of Article 7.

    1.3  BOARD means the Board of Directors of Integrated Device Technology, Inc., a Delaware corporation, and its successors and assigns, or any other corporation or business organization which, with the consent of Integrated Device Technology, Inc., or its successors or assigns, assumes the obligations of Integrated Device Technology, Inc., hereunder.

    1.3  CODE means the Internal Revenue Code of 1986 and the regulations thereunder, as amended from time to time.

    1.4  COMPENSATION means the total current cash remuneration, including regular salary, bonus payments, sales bonus compensation, profit sharing distributions and other compensation as defined by the Plan Committee and paid by the Employer to an Eligible Employee with respect to his or her service for the Employer (as determined by the Employer, in its discretion).

    1.5  COMPENSATION DEFERRAL ACCOUNT is defined in Section 3.1(b).

    1.6  COMPENSATION DEFERRALS are defined in Section 3.1(a).

    1.7  DEFERRAL ELECTION FORM means the form or forms on which a Participant elects to defer Compensation hereunder and on which the Participant makes certain other designations as required thereon.

    1.8  DESIGNATION DATE means the date or dates as of which a designation of deemed investment directions by an individual pursuant to Section 4.5, or any change in a prior designation of deemed investment directions by an individual pursuant to Section 4.5, shall become effective. The Designation Dates in any Plan Year shall only be the first day of any calendar month as designated by the Plan Committee.

    1.9  EFFECTIVE DATE means the effective date of the Plan, which shall be November 1, 2000.

    1.10  ELIGIBLE EMPLOYEE means, for any Plan Year (or applicable portion thereof), a person employed by the Employer where compensation is paid on a United States payroll, who is determined

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by the Plan Committee in its sole discretion to be a member of a select group of management or highly compensated employees eligible to participate in the Plan. By each December 1 (or before the Effective Date for the Plan's first Plan Year), the Plan Committee shall notify those individuals, if any, who will be Eligible Employees for the next Plan Year. If the Plan Committee determines that an individual first becomes an Eligible Employee during a Plan Year, the Plan Committee shall notify such individual of its determination and of the date during the Plan Year on which the individual shall first become an Eligible Employee.

    1.11  EMPLOYER means Integrated Device Technology, Inc., a Delaware corporation, and its successors and assigns unless otherwise herein provided, or any other corporation or business organization which, with the consent of Integrated Device Technology, Inc., or its successors or assigns, assumes the Employer's obligations hereunder, and any other corporation or business organization which agrees, with the consent of Integrated Device Technology, Inc., to become a party to the Plan.

    1.12  ENTRY DATE with respect to an individual means 30 days following the date on which the individual first becomes an Eligible Employee.

    1.13  FORM AND TIMING OF PAYMENT ELECTION FORM means the form or forms on which a Participant elects the form and timing of the Participant's Plan benefit.

    1.14  PARTICIPANT means any person so designated in accordance with the provisions of Article 2, including, where appropriate according to the context of the Plan, any former employee who is or may become eligible to receive a benefit under the Plan.

    1.15  PLAN means this Integrated Device Technology, Inc. Nonqualified Deferred Compensation Plan set forth herein, as amended from time to time.

    1.16  PLAN COMMITTEE refers to the officers and employees of the Employer appointed by the Board to administer the Plan on behalf of the Employer.

    1.17  PLAN YEAR means the twelve (12) month period ending on December 31 of each year during which the Plan is in effect, provided that the initial Plan Year is the short year beginning November 1, 2000 and ending December 31, 2000.

    1.18  RETIREMENT AGE with respect to any Participant means the date on which the sum of (a) such Participant's age plus (b) his or her completed years of employment with the Employer equals or exceeds 55.

    1.19  TOTAL AND PERMANENT DISABILITY means the inability of a Participant to perform the material duties of his or her regular occupation by reason of any medically determinable physical or mental impairment that may be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment shall be supported by medical evidence. Disability will be determined to exist if the Participant is receiving disability benefits under the Social Security Act or Railroad Retirement Act.

    1.20  TRUST means the Trust described in Article 11.

    1.21  TRUSTEE means the trustee of the Trust described in Article 11.

    1.22  VALUATION DATE means the last day of each Plan Year and any other date that the Plan Committee, in its sole discretion, designates as a Valuation Date.

ARTICLE 2
ELIGIBILITY AND PARTICIPATION

    2.1  REQUIREMENTS.  Every Eligible Employee on the Effective Date shall be eligible to become a Participant on the Effective Date. Every other Eligible Employee shall be eligible to become

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a Participant on the first Entry Date occurring on or after the date on which he or she becomes an Eligible Employee. No individual shall become a Participant, however, if he or she is not an Eligible Employee on the date his or her participation is to begin.

    2.2  RE-EMPLOYMENT.  If a Participant whose employment with the Employer is terminated is subsequently re-employed, he or she shall become a Participant in accordance with the provisions of Section 2.1.

    2.3  CHANGE OF EMPLOYMENT CATEGORY.  During any period in which a Participant remains in the employ of the Employer but ceases to be an Eligible Employee, he or she shall not be eligible to make Compensation Deferrals hereunder.

ARTICLE 3
CONTRIBUTIONS AND CREDITS

    3.1  PARTICIPANT CONTRIBUTIONS AND CREDITS.

    (a)  Compensation Deferrals.  In accordance with rules established by the Plan Committee, a Participant may elect to defer Compensation which is due to be earned and which would otherwise be paid to the Participant, as a percentage of Compensation, in a lump sum or in any fixed periodic dollar amounts designated by the Participant. Amounts so deferred will be considered a Participant's "Compensation Deferrals." A Participant shall make such an election with respect to the coming six (6) month period during the periods beginning on December 1 and June 1 and ending on December 31 and July 1 of each Plan Year following the initial Plan Year (or during such other period as may be established by the Plan Committee) by completing and delivering to the Plan Committee a Deferral Election Form in a form prescribed by the Plan Committee. As it relates to the initial Plan Year, the election shall be made prior to November 1, 2000 and will apply to the period beginning November 1, 2000 and ending on December 31, 2000. Should a Participant become newly eligible during a Plan Year, their election will apply from the date of participation to the next December 31 or June 30, as applicable.

    Compensation Deferrals shall be made through regular payroll deductions or through an election by the Participant to defer the payment of a bonus, sales bonus compensation or profit sharing distribution not yet payable to him or her at the time of the election, which election shall be set forth on such Participant's Deferral Election Form. Compensation deferrals will be limited to the extent necessary to satisfy applicable tax withholding or benefit plan contribution requirements. The Participant may change his or her regular payroll deduction Compensation Deferral amount as of, and by written notice delivered to the Plan Committee during the periods described in the preceding paragraph, with such change being first effective for Compensation to be earned following the next December 31 or June 30, as applicable.

    Once delivered to the Plan Committee, a Deferral Election Form with respect to a payroll deduction election shall continue in force indefinitely, until changed as provided above. A Deferral Election Form with respect to deferrals of bonuses, sales bonus compensation, profit sharing distribution proceeds, or other compensation payments shall continue in force only for the Plan Year for which the Deferral Election Form is first effective. Compensation Deferrals shall be deducted by the relevant Employer from the pay of a Participant and shall be credited to the Compensation Deferral Account of the Participant.

    (b)  The Participant's Compensation Deferral Account.  There shall be established and maintained by the Employer a separate Compensation Deferral Account in the name of each Participant to which shall be credited or debited, as applicable: (a) amounts equal to the Participant's Compensation Deferrals; (b) amounts equal to any earnings or losses attributable or allocable thereto; and (c) any withdrawals or distributions therefrom.

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    (c)  Vesting.  A Participant shall at all times be 100% vested in amounts credited to his or her Compensation Deferral Account.

    3.2  CONTRIBUTIONS TO THE TRUST.  An amount shall be contributed by the Employer to the Trust maintained under Section 11.1 equal to the amount(s) required to be credited to the Participant's Account under Section 3.1. The Employer shall make a good faith effort to contribute these amounts to the Trust as soon as practicable.

ARTICLE 4
ALLOCATION OF FUNDS

    4.1  ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS.  Subject to Section 4.5 and such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Plan Committee prior to the date on which a direction will become effective, the Participant shall have the right to direct the Employer as to how amounts in his or her Account shall be deemed to be invested. The Employer shall direct the Trustee to invest the account maintained in the Trust on behalf of the Participant pursuant to the deemed investment directions the Employer has properly received from the Participant.

    The value of the Participant's Account shall be equal to the value of the Account maintained under the Trust on behalf of the Participant. As of each Valuation Date of the Trust, the Participant's Account will be credited or debited to reflect the Participant's deemed investments of the Trust. The Participant's Account will be credited or debited with the increase or decrease in the realizable net asset value or credited interest, as applicable, of the designated deemed investments, as follows: As of each Valuation Date, an amount equal to the net increase or decrease in realizable net asset value or credited interest, as applicable (as determined by the Trustee), of each deemed investment option within the Account since the preceding Valuation Date shall be allocated among all Participants' Accounts deemed to be invested in that investment option in accordance with the ratio which the portion of the Account of each Participant which is deemed to be invested within that investment option, determined as provided herein, bears to the aggregate of all amounts deemed to be invested within that investment option.

    4.2  ACCOUNTING FOR DISTRIBUTIONS.  As of the date of any distribution hereunder, the distribution made hereunder to the Participant or his or her Beneficiary or Beneficiaries shall be charged to such Participant's Account. Such amounts shall be charged on a pro rata basis against the investments of the Trust in which the Participant's Account is deemed to be invested.

    4.3  SEPARATE ACCOUNTS.  A separate bookkeeping account under the Plan shall be established and maintained by the Employer to reflect the Account for each Participant. Each such bookkeeping account will separately account for the credits and debits described in Article 3 and Section 4.2.

    4.4  INTERIM VALUATIONS.  If it is determined by the Employer that the value of a Participant's Account as of any date on which distributions are to be made differs materially from the value of the Participant's Account on the prior Valuation Date upon which the distribution is to be based, the Employer, in its discretion, shall have the right to designate any date in the interim as a Valuation Date for the purpose of revaluing the Participant's Account so that the Account will, prior to the distribution, reflect its share of such material difference in value.

    4.5  DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS.  Subject to such limitations as may from time to time be required by law, imposed by the Employer or the Trustee or contained elsewhere in the Plan, and subject to such operating rules and procedures as may be imposed from time to time by the Plan Committee prior to and effective for each Designation Date, each Participant

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may communicate to the Employer a direction as to how his or her Account should be deemed to be invested among such categories of deemed investments as may be made available by the Employer hereunder. Such direction shall designate the portion (in any whole percent multiples or whole dollar amounts eligible) of each portion of the Participant's Account which is requested to be deemed to be invested in such categories of deemed investments, and shall be subject to the following rules:

    (a) Any deemed investment direction shall be in writing, on a form supplied by and filed with the Plan Committee, in a manner specified by the Plan Committee. A designation shall be effective as of the Designation Date following the date the direction is received and accepted by the Plan Committee on which it would be reasonably practicable for the Plan Committee to effect the designation.

    (b) All amounts credited to the Participant's Account shall be deemed to be invested in accordance with the then effective deemed investment direction, and as of the Designation Date with respect to any new deemed investment direction, all or a portion of the Participant's Account at that date shall be reallocated among the designated deemed investment funds according to the new deemed investment direction unless and until a subsequent deemed investment direction shall be filed and become effective. An election concerning deemed investment choices shall continue indefinitely as provided in the Participant's most recent investment direction form provided by and filed with the Employer.

    (c) If the Employer receives a deemed investment direction which it deems to be incomplete, unclear or improper, the Participant's investment direction then in effect shall remain in effect (or, in the case of a deficiency in an initial deemed investment direction, the Participant shall be deemed to have filed no deemed investment direction) until the next Designation Date, unless the Employer provides for, and permits the application of, corrective action prior thereto.

    (d) If the Employer possesses (or is deemed to possess as provided in (c), above) at any time directions as to the deemed investment of less than all of a Participant's Account, the Participant shall be deemed to have directed that the undesignated portion of the Account be deemed to be invested in a money market, fixed income or similar fund made available under the Plan as determined by the Employer in its discretion.

    (e) Each Participant hereunder, as a condition to his or her participation hereunder, agrees to hold the Employer and its agents and representatives harmless, for any losses or damages of any kind relating to the investment of the Participant's Account hereunder, other than such losses or damages that result directly from gross negligence or intentional malfeasance on the part of the Employer or its agents or representatives.

    (f)  Each reference in this Section to a Participant shall be deemed to include, where applicable, a reference to a Beneficiary.

    4.6  EXPENSES AND TAXES.  Expenses associated with the administration or operation of the Plan including Trustee fees, shall be paid by the Employer from its general assets. Any taxes allocable to an Account (or portion thereof) maintained under the Plan which are payable prior to the distribution of the Account (or portion thereof), as determined by the Employer, shall be paid by the Employer.

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ARTICLE 5
ENTITLEMENT TO BENEFITS

    5.1  FIXED PAYMENT DATES; TERMINATION OF EMPLOYMENT.  Each Participant shall complete a Form and Timing of Payment Election Form which shall be effective, unless changed in accordance with this Section 5.1, with respect to any distributions occurring at least six (6) months after the date of such Form and Timing of Payment Election Form. On his or her Form and Timing of Payment Election Form, a Participant shall select the manner of payment (as described in Section 6.2(b)) and shall select a fixed payment date for the payment or commencement of payment of his or her Account (or the Participant may select fixed payment dates for the payment or commencement of payment of portions of his or her Account), which will be valued and payable according to the provisions of Article 6. Such payment dates may be extended to later dates so long as elections to so extend the payment dates are made by the Participant at least six (6) months prior to the date on which the distribution is scheduled to be made or commence. A Participant may exercise the payment date extension only 3 times during his or her participation in the Plan. Such payment dates may not be accelerated, except as provided in Section 5.2. A Participant may elect on his or her Form and Timing of Payment Election an election each year they are eligible to participate.

    A Participant who selects payment or commencement of payment of his or her Account (or portions thereof) on a fixed date or dates shall receive payment of his or her Account at the earlier of such fixed payment date or dates (as extended, if applicable) or his or her termination of employment with the Employer.

    If a Participant's employment with the Employer is terminated for any reason (other than by reason of Total and Permanent Disability) prior to attainment of Retirement Age or if a Participant does not make an election as provided above for any particular amounts hereunder, and the Participant terminates employment with the Employer for any reason, the Participant's Account at the date of such termination shall be valued and payable at or commencing at such termination according to the provisions of Article 6.

    5.2  IMMEDIATE DISTRIBUTION ELECTION; TEN PERCENT PENALTY.  In addition to a Participant's option to have payment or commencement of payment of his or her Account occur on the fixed payment date or on the Participant's termination of employment as described in Section 5.1, a Participant may elect to have his or her Account (or a portion thereof) paid or commence to be paid as soon as possible upon his or her election. For purposes of this Section, the value of the Participant's Account shall be determined as of the date of the distribution. Any amount paid pursuant to this Section shall be subject to a ten percent (10%) penalty, with the amount of the penalty permanently forfeited from the Participant's Account and returned to the Employer on or about the date of the distribution.

    Any Participant wishing to elect an immediate distribution pursuant to this Section must complete an Immediate Distribution Election Form and receive approval from the Plan Committee. The distribution shall occur or commence as soon as is administratively feasible following the Employer's receipt and approval of the Immediate Distribution Election Form.

    5.3  HARDSHIP DISTRIBUTIONS.  In the event of financial hardship of the Participant, as hereinafter defined, the Participant may apply to the Plan Committee for the distribution of all or any part of his or her Account. The Plan Committee shall consider the circumstances of each such case and the best interests of the Participant, and shall have the right, in its sole discretion, if applicable, to approve such distribution, or, if applicable, to direct a distribution of part of the amount requested, or to refuse to allow any distribution. Upon a finding of financial hardship, the Plan Committee shall direct the appropriate distribution to the Participant from amounts held by the Trust in respect of the Participant's Account. In no event shall the aggregate amount of the distribution exceed either the full

6

value of the Participant's Account or the amount determined by the Plan Committee to be necessary to alleviate the Participant's financial hardship (which financial hardship may be considered to include any taxes due as a result of the distribution), and which is not reasonably available from other resources of the Participant. For purposes of this Section, the value of the Participant's Account shall be determined as of the date of the distribution. "Financial hardship" means (a) a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Code section 152(a)) of the Participant, (b) loss of the Participant's property due to casualty, or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, each as determined to exist by the Plan Committee. A distribution may be made under this Section only with the consent of the Plan Committee.

    5.4  RE-EMPLOYMENT OF RECIPIENT.  If a Participant receiving installment distributions pursuant to Section 6.2 is re-employed by the Employer, the remaining distributions due to the Participant shall be suspended until such time as the Participant (or his or her Beneficiary) once again becomes eligible for benefits under Section 5.1 or 5.2, at which time such distribution shall commence, subject to the limitations and conditions contained in the Plan.

ARTICLE 6
DISTRIBUTION OF BENEFITS

    6.1  AMOUNT.  A Participant (or his or her Beneficiary) shall become entitled to receive, on or about the earlier of the Participant's termination of employment with the Employer or the date or dates selected by the Participant on his or her Form and Timing of Payment Election Form (or, if no such selection is made, on or about the date of the Participant's termination of employment with the Employer), a distribution in an aggregate amount equal to the Participant's Account. A Participant may alternatively elect to receive an immediate distribution, subject to a ten percent (10%) penalty, of all or a portion of his or her Account pursuant to Section 5.2. Any payment due hereunder from the Trust, which is not paid by the Trust for any reason, will be paid by the Employer from its general assets.

    6.2  METHOD OF PAYMENT.

    (a)  Payments.  Subject to Section 6.2(d), payments under the Plan shall be made as elected by the Participant and as permitted by the Employer in its sole and absolute discretion and subject to restrictions on transfer as may be applicable legally or contractually applicable.

    (b)  Timing and Manner of Payment.  Subject to Section 6.2(d), in the case of distributions to a Participant or his or her Beneficiary by virtue of an entitlement pursuant to Sections 5.1 or 5.2, an aggregate amount equal to the Participant's Account will be paid by the Trust or the Employer, as soon as is administratively feasible, in a lump sum or in bi-weekly, monthly, quarterly or annual substantially equal installments for a period not to exceed fifteen (15) years (adjusted for gains and losses), as selected by the Participant as provided in Article 5. If a Participant fails to designate properly the manner of payment of the Participant's benefit under the Plan, such payment will be in a lump sum.

    (c)  Installment Distributions.  If the whole or any part of a payment hereunder is to be in installments, the balance of the Participant's Account not yet distributed shall continue to be deemed to be invested pursuant to Sections 4.1 and 4.5 under such procedures as the Employer may establish, in which case any deemed income, gain, loss or expense or tax allocable thereto (as determined by the Trustee, in its discretion) shall be reflected in the installment payments in such equitable manner as the Trustee shall determine.

    (d)  Distributions before Retirement.  Notwithstanding anything herein to the contrary, a Participant who terminates employment with the Employer (other than by reason of Total and Permanent Disability) prior to attainment of Retirement Age shall receive his or her distribution in

7

a single lump sum, without regard to any contrary election made by the Participant pursuant to Article 5. The Plan Committee shall have sole discretion with regard to any determination whether a Participant's termination of employment precedes his or her attainment of Retirement Age.

    6.3  DEATH OR DISABILITY BENEFITS.

    (a)  Disability Benefits.  If a Participant experiences a Total and Permanent Disability before terminating his or her employment with the Employer, the entire value of the Participant's Account shall be paid, at the time(s) and in the manner selected by the Participant under Section 5.1 and Section 6.2, to the Participant.

    (b)  Death Benefits.  If a Participant dies before terminating his or her employment with the Employer the Beneficiary shall receive the Participant's Account Balance in a lump sum.

    Upon the death of a Participant after payments hereunder have begun but before he or she has received all payments to which he or she is entitled under the Plan, the remaining benefit payments shall be paid to the person or persons designated in accordance with Section 7.1, in the time and manner in which such benefits were otherwise to be payable to the Participant, or the Beneficiary may make an irrevocable election to receive the remaining balance in a lump sum.

ARTICLE 7
BENEFICIARIES; PARTICIPANT DATA

    7.1  DESIGNATION OF BENEFICIARIES.  Each Participant from time to time may designate any person or persons (who may be named contingently or successively) to receive such benefits as may be payable under the Plan upon or after the Participant's death, and such designation may be changed from time to time by the Participant by filing a new designation. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Employer, and will be effective only when filed in writing with the Employer during the Participant's lifetime.

    In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Participant, the Employer shall pay any such benefit payment to the Participant's spouse, if then living, but otherwise to the Participant's then living descendants, if any, per stirpes, but, if none, to the Participant's estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Participant's personal representative, executor or administrator. If a question arises as to the existence or identity of anyone entitled to receive a benefit payment as aforesaid, or if a dispute arises with respect to any such payment, then, notwithstanding the foregoing, the Employer, in its sole discretion, may distribute such payment to the Participant's estate without liability for any tax or other consequences which might flow therefrom, or may take such other action as the Employer deems to be appropriate.

    7.2  INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES.  Any communication, statement or notice addressed to a Participant or to a Beneficiary at his or her last post office address as shown on the Employer's records shall be binding on the Participant or Beneficiary for all purposes of the Plan. The Employer shall not be obliged to search for any Participant or Beneficiary beyond the sending of a registered letter to such last known address. If the Employer notifies any Participant or Beneficiary that he or she is entitled to an amount under the Plan and the Participant or Beneficiary fails to claim such amount or make his or her location known to the Employer within three (3) years thereafter, then, except as otherwise required by law, if the location of one or more of the next of kin of the Participant is known to the Employer, the Employer may direct distribution of such amount to any one or more or all of such next of kin, and in such proportions as the Employer determines. If the location of none of the foregoing persons can be determined, the Employer shall have the right to direct that the amount payable shall be deemed to be a forfeiture, except that the dollar amount of the

8

forfeiture, unadjusted for deemed gains or losses in the interim, shall be paid by the Employer if a claim for the benefit subsequently is made by the Participant or the Beneficiary to whom it was payable. If a benefit payable to an unlocated Participant or Beneficiary is subject to escheat pursuant to applicable state law, the Employer shall not be liable to any person for any payment made in accordance with such law.

ARTICLE 8
ADMINISTRATION

    8.1  PLAN COMMITTEE.  Notwithstanding any other provision of the Plan document, any member of the Plan Committee or any other officer or employee of the Employer who exercises discretion or authority on behalf of the Employer shall not be a fiduciary of the Plan merely by virtue of his or her exercise of such discretion or authority. The Board shall identify the Employer's officers and employees who shall serve as members of the Plan Committee. Because this Plan is a "top hat" arrangement, the Plan Committee shall not be subject to the duties imposed by the provisions of Part 4 of Title I of ERISA.

    8.2  ADMINISTRATIVE AUTHORITY.  Except as otherwise specifically provided herein, the Plan Committee shall have the sole responsibility for and the sole discretion over the operation and administration of the Plan, and shall have the power and authority to take all action and to make all decisions and interpretations which may be necessary or appropriate in order to administer and operate the Plan, including, without limiting the generality of the foregoing, the power, duty, discretion and responsibility to:

    (a) Resolve and determine all disputes or questions arising under the Plan, and to remedy any ambiguities, inconsistencies or omissions in the Plan.

    (b) Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Plan and as are consistent with the Plan.

    (c) Implement the Plan in accordance with its terms and the rules and regulations adopted as described above.

    (d) Make determinations with respect to the eligibility of any Eligible Employee to be or continue as a Participant and make determinations concerning the crediting of Accounts.

    (e) Appoint any persons or firms, or otherwise act to secure specialized advice or assistance, as it deems necessary or desirable in connection with the administration and operation of the Plan, and the Employer shall be entitled to rely conclusively upon, and shall be fully protected in any action or omission taken by it in good faith reliance upon, the advice or opinion of such firms or persons. The Employer shall have the power and authority to delegate from time to time by written instrument all or any part of its duties, powers or responsibilities under the Plan, both ministerial and discretionary, as it deems appropriate, to any person or committee, and in the same manner to revoke any such delegation of duties, powers or responsibilities. Any action of such person or committee in the exercise of such delegated duties, powers or responsibilities shall have the same force and effect for all purposes hereunder as if such action had been taken by the Employer. Further, the Employer may authorize one or more persons to execute any certificate or document on behalf of the Employer, in which event any person notified by the Employer of such authorization shall be entitled to accept and conclusively rely upon any such certificate or document executed by such person as representing action by the Employer until such notified person shall have been notified of the revocation of such authority.

    8.3  LITIGATION.  Except as may be otherwise required by law, in any action or judicial proceeding affecting the Plan, no Participant or Beneficiary shall be entitled to any notice or service of

9

process, and any final judgment entered in such action shall be binding on all persons interested in, or claiming under, the Plan.

    8.4  CLAIMS PROCEDURE.  Any person claiming a benefit under the Plan (a "Claimant") shall present the claim, in writing, to the Plan Committee, and the Plan Committee shall respond in writing. If the claim is denied, the written notice of denial shall state, in a manner calculated to be understood by the Claimant:

    (a) The specific reason or reasons for the denial, with specific references to the Plan provisions on which the denial is based;

    (b) A description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or information is necessary; and

    (c) An explanation of the Plan's claims review procedure.

    The written notice denying or granting the Claimant's claim shall be provided to the Claimant within ninety (90) days after the Plan Committee's receipt of the claim, unless special circumstances require an extension of time for processing the claim. If such an extension is required, written notice of the extension shall be furnished by the Plan Committee to the Claimant within the initial ninety (90) day period and in no event shall such an extension exceed a period of ninety (90) days from the end of the initial ninety (90) day period. Any extension notice shall indicate the special circumstances requiring the extension and the date on which the Employer expects to render a decision on the claim. Any claim not granted or denied within the period noted above shall be deemed to have been denied.

    Any Claimant whose claim is denied, or deemed to have been denied under the preceding sentence (or such Claimant's authorized representative), may, within sixty (60) days after the Claimant's receipt of notice of the denial, or after the date of the deemed denial, request a review of the denial by notice given, in writing, to the Plan Committee. Upon such a request for review, the claim shall be reviewed by the Plan Committee (or its designated representative) which may, but shall not be required to, grant the Claimant a hearing. In connection with the review, the Claimant may have representation, may examine pertinent documents, and may submit issues and comments in writing.

    The decision on review normally shall be made within sixty (60) days of the Plan Committee's receipt of the request for review. If an extension of time is required due to special circumstances, the Claimant shall be notified, in writing, by the Plan Committee, and the time limit for the decision on review shall be extended to one hundred twenty (120) days. The decision on review shall be in writing and shall state, in a manner calculated to be understood by the Claimant, the specific reasons for the decision and shall include references to the relevant Plan provisions on which the decision is based. The written decision on review shall be given to the Claimant within the sixty (60) day (or, if applicable, the one hundred twenty (120) day) time limit discussed above. If the decision on review is not communicated to the Claimant within the sixty (60) day (or, if applicable, the one hundred twenty (120) day) period discussed above, the claim shall be deemed to have been denied upon review. All decisions on review shall be final and binding with respect to all concerned parties.

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ARTICLE 9
AMENDMENT

    9.1  RIGHT TO AMEND.  The Employer, by action of the Plan Committee, shall have the right to amend the Plan, at any time and with respect to any provisions hereof, and all parties hereto or claiming any interest hereunder shall be bound by such amendment; provided, however, that no such amendment shall deprive a Participant or a Beneficiary of a right accrued hereunder prior to the date of the amendment.

    9.2  AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN.  Notwithstanding the provisions of Section 9.1, the Plan may be amended by the Employer, by action of the Plan Committee, at any time, retroactively if required, if found necessary, in the opinion of the Plan Committee, in order to ensure that the Plan is characterized as "top-hat" plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA sections 201(2), 301(a)(3), and 401(a)(1), and to conform the Plan to the provisions and requirements of any applicable law (including ERISA and the Code). No such amendment shall be considered prejudicial to any interest of a Participant or a Beneficiary hereunder.

ARTICLE 10
TERMINATION

    10.1  EMPLOYER'S RIGHT TO TERMINATE OR SUSPEND PLAN.  The Employer reserves the right to terminate the Plan and/or its obligation to make further credits to Plan Accounts, by action of the Plan Committee. The Employer also reserves the right to suspend the operation of the Plan for a fixed or indeterminate period of time, by action of the Plan Committee.

    10.2  AUTOMATIC TERMINATION OF PLAN.  The Plan automatically shall terminate upon the dissolution of the Employer, or upon its merger into or consolidation with any other corporation or business organization if there is a failure by the surviving corporation or business organization to specifically adopt and agree to continue the Plan.

    10.3  SUSPENSION OF DEFERRALS.  In the event of a suspension of the Plan, the Employer shall continue all aspects of the Plan, other than Compensation Deferrals, during the period of the suspension, in which event payments hereunder will continue to be made during the period of the suspension in accordance with Articles 5 and 6.

    10.4  ALLOCATION AND DISTRIBUTION.  This Section shall become operative on a complete termination of the Plan. The provisions of this Section also shall become operative in the event of a partial termination of the Plan, as determined by the Employer, but only with respect to that portion of the Plan attributable to the Participants to whom the partial termination is applicable. Upon the effective date of any such event, notwithstanding any other provisions of the Plan, no persons who were not theretofore Participants shall be eligible to become Participants, the value of the interest of all Participants and Beneficiaries shall be paid to them as soon as is practicable after such termination in a lump sum payment.

    10.5  SUCCESSOR TO EMPLOYER.  Any corporation or other business organization which is a successor to the Employer by reason of a consolidation, merger or purchase of substantially all of the assets of the Employer shall have the right to become a party to the Plan by adopting the same by resolution of the entity's board of directors or other appropriate governing body. If, within ninety (90) days from the effective date of such consolidation, merger or sale of assets, such new entity does not become a party hereto, as above provided, the Plan shall be automatically terminated, and the provisions of Section 10.4 shall become operative.

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ARTICLE 11
THE TRUST

    The Employer shall establish the Trust with the Trustee pursuant to such terms and conditions as are set forth in the Trust agreement to be entered into between the Employer and the Trustee, or the Employer shall cause to be maintained one or more separate subaccounts in an existing Trust maintained with the Trustee with respect to one or more other plans of the Employer, which subaccount or subaccounts represent Participants' interests in the Plan. Any such Trust shall be intended to be treated as a "grantor trust" under the Code and the establishment of the Trust or the utilization of any existing Trust for Plan benefits, as applicable, shall not be intended to cause any Participant to realize current income on amounts contributed thereto, and the Trust shall be so interpreted.

ARTICLE 12
MISCELLANEOUS

    12.1  STATUS OF PARTICIPANTS.

    (a) Employees, Participants and Inactive Participants under this Plan shall have the status of general unsecured creditors of the Employer;

    (b) This Plan constitutes a mere promise by the Employer to make benefit payments in the future;

    (c) Any trust to which this Plan refers (i.e. any trust created by the Employer and any assets held by the trust to assist the Employer in meeting its obligations under the Plan) shall be based on the terms of the model trust described in Revenue Procedure 92-64; and

    (d) It is the intention of the parties that the arrangements under this Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.

    12.2  LIMITATIONS ON LIABILITY OF EMPLOYER.  Neither the establishment of the Plan nor any modification thereof, nor the creation of any account under the Plan, nor the payment of any benefits under the Plan shall be construed as giving to any Participant or other person any legal or equitable right against the Employer, or any officer or employer thereof except as provided by law or by any Plan provision. The Employer does not in any way guarantee any Participant's Account from loss or depreciation, whether caused by poor investment performance of a deemed investment or the inability to realize upon an investment due to an insolvency affecting an investment vehicle or any other reason. In no event shall the Employer, or any successor, employee, officer, director or stockholder of the Employer, be liable to any person on account of any claim arising by reason of the provisions of the Plan or of any instrument or instruments implementing its provisions, or for the failure of any Participant, Beneficiary or other person to be entitled to any particular tax consequences with respect to the Plan, or any credit or distribution hereunder.

    12.3  CONSTRUCTION.  If any provision of the Plan is held to be illegal or void, such illegality or invalidity shall not affect the remaining provisions of the Plan, but shall be fully severable, and the Plan shall be construed and enforced as if said illegal or invalid provision had never been inserted herein. For all purposes of the Plan, where the context admits, the singular shall include the plural, and the plural shall include the singular. Headings of Articles and Sections herein are inserted only for convenience of reference and are not to be considered in the construction of the Plan. The laws of the State of California shall govern, control and determine all questions of law arising with respect to the Plan and the interpretation and validity of its respective provisions, except where those laws are preempted by the laws of the United States. Participation under the Plan will not alter the Participant's status as an (at will) employee nor give any Participant the right to be retained in the service of the

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Employer nor any right or claim to any benefit under the Plan unless such right or claim has specifically accrued hereunder.

    The Plan is intended to be and at all times shall be interpreted and administered so as to qualify as an unfunded deferred compensation plan, and no provision of the Plan shall be interpreted so as to give any individual any right in any assets of the Employer which right is greater than the rights of a general unsecured creditor of the Employer.

    12.4  SPENDTHRIFT PROVISION/QUALIFIED DOMESTIC RELATIONS ORDER.

    (a) Except as set forth in subsection (b), no amount payable to a Participant or a Beneficiary under the Plan will, except as otherwise specifically provided by law, be subject in any manner to anticipation, alienation, attachment, garnishment, sale, transfer, assignment (either at law or in equity), levy, execution, pledge, encumbrance, charge or any other legal or equitable process, and any attempt to do so will be void; nor will any benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled thereto. Further, (i) the withholding of taxes from Plan benefit payments, (ii) the recovery under the Plan of overpayments of benefits previously made to a Participant or Beneficiary, (iii) if applicable, the transfer of benefit rights from the Plan to another plan, or (iv) the direct deposit of benefit payments to an account in a banking institution (if not actually part of an arrangement constituting an assignment or alienation) shall not be construed as an assignment or alienation. In the event that any Participant's or Beneficiary's benefits hereunder are garnished or attached by order of any court, the Employer or Trustee may bring an action or a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan. During the pendency of said action, any benefits that become payable shall be held as credits to the Participant's or Beneficiary's Account or, if the Employer or Trustee prefers, paid into the court as they become payable, to be distributed by the court to the recipient as the court deems proper at the close of said action.

    (b) Subsection (a) shall not apply to the creation, assignment or recognition of a right of an "alternate payee," as defined in ERISA Section 206(d)(3)(K) (the "Alternate Payee"), to all or any portion of a Participant's Account pursuant to a "qualified domestic relations order," as defined in ERISA Section 206(d)(3)(B)(i) (a "QDRO"), and all or such portion of such Participant's Account shall be distributed to such Alternate Payee in accordance with this subsection (b), Article 5 and Article 6 and the terms of such QDRO. Such Alternate Payee shall be treated as a Participant for all purposes of Articles 5 and 6 with respect to the amounts that are to be distributed to such Alternate Payee under the terms of the QDRO. Except as provided in paragraph (b)(iii), below, or under the terms of the QDRO, all or such portion of a Participant's Accounts that is to be distributed to the Alternate Payee shall be distributed in accordance with the Participant's Form and Timing of Payment Election Form(s) in effect on the date of the creation, assignment or recognition of such Alternate Payee's right to all or such portion of such Accounts under the terms of the QDRO. Notwithstanding the foregoing, to the extent provided under the terms of the QDRO:

     (i) The Plan Committee shall establish an Account for the Alternate Payee, to which shall be credited the amounts allocated thereto under the terms of the QDRO. The amounts so credited shall be debited from the Participant's Account under the terms of the QDRO.

    (ii) The Alternate Payee may make elections regarding the deemed investment of the amounts credited to such Alternate Payee's Account in accordance with Section 4.3.

    (iii) The Alternate Payee may change the distribution election applicable to the amounts credited to such Alternate Payee's Account by filing a Form and Timing of Payment Election Form in accordance with Section 5.1. The Alternate Payee's Form and Timing of Payment

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Election Form, and the manner and timing of payments to the Alternate Payee shall be subject to the requirements and limitations of Section 5.1 and Article 6.

    (iv) The Alternate Payee may designate a Beneficiary or Beneficiaries to receive the amount credited to the Alternate Payee's Account in the event of the death of the Alternate Payee. Designation or redesignation of a Beneficiary or Beneficiaries must be made in accordance with the procedures set forth in Section 7.1 as if the Alternate Payee was the Participant for all purposes thereunder.

[Signature page follows]

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IN WITNESS WHEREOF, the Employer has caused the Plan to be executed and its seal to be affixed hereto, effective as of the 1st day of November, 2000.

INTEGRATED DEVICE TECHNOLOGY, INC.

By:

Its:

Date:

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ARTICLE 1 DEFINITIONS
ARTICLE 2 ELIGIBILITY AND PARTICIPATION
ARTICLE 3 CONTRIBUTIONS AND CREDITS
ARTICLE 4 ALLOCATION OF FUNDS
ARTICLE 5 ENTITLEMENT TO BENEFITS
ARTICLE 6 DISTRIBUTION OF BENEFITS
ARTICLE 7 BENEFICIARIES; PARTICIPANT DATA
ARTICLE 8 ADMINISTRATION
ARTICLE 9 AMENDMENT
ARTICLE 10 TERMINATION
ARTICLE 11 THE TRUST
ARTICLE 12 MISCELLANEOUS

EX-21.1

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EXHIBIT 21.1

LIST OF REGISTRANT'S SUBSIDIARIES

	State or other jurisdiction of incorporation	Percent owned by Registrant
Clear Logic, Inc.	California	31
Baccarat Coyote Inc.	California	100
Baccarat Silicon, Inc.	California	100
Bay Semiconductor, Inc.	California	100
Integrated Device Technology Asia Limited	Hong Kong	100
IDT Asia, Limited	Hong Kong	100
IDT Design Australia Pty Ltd.	Australia	100
IDT Europe Limited	United Kingdom	100
I.D.T. France S.A.R.L.	France	100
IDT Foreign Sales Corporation	Barbados	100
Integrated Device Technology International Holdings, Inc.	California	100
Integrated Device Technology, Inc. Cayman Islands Corporation	Cayman Islands	100
IDT Integrated Device Technology AB (Sweden)	Sweden	100
Integrated Device Technology Europe, Inc.	California	100
Integrated Device Technology GmbH	Germany	100
Integrated Device Technology (Israel) Ltd.	Israel	100
Integrated Device Technology S.r.l.	Italy	100
Integrated Device Technology Korea, Inc.	Korea	100
Integrated Device Technology (Malaysia) SDN. BHD	Malaysia	100
Integrated Device Technology Realty Holdings, Inc.	Philippines	40
Integrated Device Technology Holding Inc.	Philippines	40
Integrated Device Technology (Philippines), Inc.	Philippines	100
Integrated Device Technology Singapore (1997) Pte Ltd	Singapore	100
Nippon IDT K.K.	Japan	100
Quality Semiconductor, Inc.	California	100
Quality Semiconductor Australia Pty. Ltd.	Australia	100

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LIST OF REGISTRANT'S SUBSIDIARIES

EX-23.1

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-4681, 33-34458, 33-54937, 33-63133, 33-15871, 333-36601, 333-45245, 333-77559, 333-64279, 333-35124, 333-42446, 333-59162 and 333-61742) of Integrated Device Technology, Inc of our report dated April 20, 2001, except as described in Note 16, which is as of June 28, 2001, relating to the financial statements and financial statement schedules, which appears in this Form 10-K.

PricewaterhouseCoopers LLP
San Jose, California
June 28, 2001

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CONSENT OF INDEPENDENT ACCOUNTANTS