AMI Semiconductor, Inc. Key Manager Incentive Plan (KMIP) 2008

Exhibit 10.26

AMI Semiconductor, Inc.

Key Manager Incentive Plan (KMIP)

2008

Key Manager Incentive Plan (KMIP) — KMIP is designed to reward executives, senior managers and senior technical leaders for achievement of specific company performance objectives. KMIP participants directly influence the achievement of these critical company objectives.

KMIP incentive is computed as a pre-determined percentage of base salary, and is determined by the performance of the company. The Company’s performance metrics for 2008 KMIP are Operating Margin % and Revenue.

In light of the pending merger with ON Semiconductor Corporation (“ON”), the AMIS Board of Directors has made the 2008 KMIP a First Quarter plan only, meaning that the performance period for the plan commences on January 1, 2008 and ends on earlier of (a) the date the merger with ON is completed, or (b) the last day of the first fiscal quarter, which is March 29, 2008. For a payout to be earned, the merger with ON must close after February 29, 2008 and the company must achieve at least the threshold level of Revenue and Operating Income described in Exhibit A. Should the merger close after February 29, 2008 but before March 29, 2008, the AMIS Board of Directors will determine the company’s level of achievement of the Revenue and Operating Income targets based on quarter-to-date actual performance and the forecast for balance of the quarter.

Table of Contents

The purpose of the AMI Semiconductor, Inc. Key Manager Incentive Plan (“Plan”) is to reward executives, senior managers and senior technical leaders (AMI Semiconductor and its subsidiaries) for the achievement of company objectives.

The term of the Plan is expected to be 3 months, commencing on January 1, 2008 and ending March 29 2008. In the event the Plan runs for a period ending prior to March 29, 2008, the AMIS Board of Directors will determine the payout percentage based on the performance data available at that time. At the end of the First Quarter, the Board of Directors may extend the Plan for Second Quarter.

The Board of Directors of the Company approves the Company’s quarterly Operating Plans, including targets for Operating Margin % and Revenue. The Company’s Board reviews and approves the specific Operating Margin % and Revenue targets for KMIP Payouts.

Additionally the Compensation Committee of the Board of Directors reviews and recommends KMIP Incentive Targets, reviews plan results and recommends payouts for the CEO and CFO for approval by the Company’s board of directors. The Compensation Committee also reviews and approves KMIP Incentive Targets and payouts for other Executive Managers.

For non-executive management participants, the Plan will be administered by a Plan Committee consisting of the Senior Vice President of Human Resources, Chief Financial Officer and Chief Executive Officer (“Plan Committee”). The Plan Committee will have responsibility to review and approve the eligibility and target incentive amounts for non-Executive Managers.

To be eligible for the KMIP, the following requirements must be met:

Generally, to be eligible to receive payment pursuant to the Plan, the employee must be employed by AMIS throughout the period of time during which the performance criteria set forth in the Plan are measured, and also must be employed by AMIS up to and including the date on which any such payment pursuant to the Plan is made.

Mathematical Representation of Formula for Calculating KMIP Payments

First Quarter of the Year = S x (25% x IIP) x CPF