EXHIBIT 10.1

MICROCHIP TECHNOLOGY INCORPORATED
 
CHANGE OF CONTROL SEVERANCE AGREEMENT
 
This Change of Control Severance Agreement (the “Agreement”) is made and entered
into by and between ________________ (the “Employee”) and Microchip Technology
Incorporated (the “Company”), effective as of ________________, 2006 (the
“Effective Date”).
 
RECITALS
 
1.  It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the “Board”) recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined herein) of the Company.
 
2.  The Board believes that it is in the best interests of the Company and its
stockholders to provide the Employee with an incentive to continue his or her
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
 
3.  The Board believes that it is imperative to provide the Employee with
certain benefits upon a Change of Control and certain benefits upon the
Employee’s termination of employment following a Change of Control. These
benefits will provide the Employee with enhanced financial security and
incentive and encouragement to remain with the Company notwithstanding the
possibility of a Change of Control.
 
4.  Certain capitalized terms used in the Agreement are defined in Section 5
below.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
 
1.  Term of Agreement. This Agreement shall terminate upon the date that all of
the obligations of the parties hereto with respect to this Agreement have been
satisfied.
 
2.  At-Will Employment. The Company and the Employee acknowledge that the
Employee’s employment is and shall continue to be at-will, as defined under
applicable law, except as may otherwise be specifically provided under the terms
of any written formal employment agreement or offer letter between the Company
and the Employee (an “Employment Agreement”). If the Employee’s employment
terminates prior to the Change of Control Period, the Employee shall not be
entitled to any payments, benefits, damages, awards or compensation other than
as provided by this Agreement, or under his or her Employment Agreement if any
exists in writing, or as may otherwise be available in accordance with the
Company’s established employee plans.
 

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3.  Benefits.
 
(a)  Benefits Upon a Change of Control. Immediately prior to consummation of a
Change of Control the Employee shall receive the following benefit:
 
(i)  Equity Compensation Acceleration. One hundred percent (100%) of the
Employee’s outstanding stock options, stock appreciation rights, restricted
stock units and other Company equity compensation awards (the “Equity
Compensation Awards”) shall immediately vest and become exercisable. Any Company
stock options and stock appreciation rights shall remain exercisable following
the Employee’s employment termination for the period prescribed in the
respective option and stock appreciation right agreements.
 
(b)  Termination Other than for Cause During the Change of Control Period. If
within the three-month period preceding or any time following a Change of
Control (the “Change of Control Period”), the Employee ceases to be employed
with the Company (or any parent or subsidiary of the Company) for any reason
other than “Cause” (as defined herein), and the Employee signs, and does not
revoke, a standard release of claims with the Company in a form acceptable to
the Company (the “Release”), then the Employee shall receive the following
severance from the Company:
 
(i)   Severance Payment. The Employee shall be entitled to receive a lump-sum
severance payment (less applicable withholding taxes) equal to (one/two) hundred
percent of the Employee’s annual base salary (as in effect immediately prior to
(A) the Change of Control, or (B) the Employee’s termination of employment,
whichever is greater) plus (one/two) hundred percent of the Employee’s target
bonuses for which Employee was or would have been eligible (for the fiscal year
in which the Change of Control or the Employee’s termination occurs, whichever
is greater.)
 
(ii)  Continued Employee Benefits. Company-paid health, dental, vision, and life
insurance coverage at the same level of coverage as was provided to such
Employee immediately prior to termination and at the same ratio of Company
premium payment to Employee premium payment as was in effect immediately prior
to termination (the “Company-Paid Coverage”). If such coverage included the
Employee’s eligible dependents immediately prior to termination, such dependents
shall also be covered at Company expense. Company-Paid Coverage shall continue
until the earlier of (A) (twelve/twenty-four) months from the date of
termination, or (B) the date upon which the Employee and his dependents become
covered under another employer’s group health, dental, vision, long-term
disability or life insurance plans that provide Employee and his dependents with
comparable benefits and levels of coverage. For purposes of Title X of to the
Consolidated Budget Reconciliation Act of 1985 (“COBRA”), the date of the
“qualifying event” for Employee and his or her dependents shall be the date upon
which the Company-Paid Coverage terminates. Coverage in this Section is
dependent on the valid and timely election of continued COBRA coverage under
applicable law.
 
(c)  Timing of Severance Payments. Except as otherwise provided herein, the
severance payment to which Employee is entitled shall be paid by the Company to
Employee in cash and in full, not later than ten (10) calendar days after the
effective date of the Release. If the Employee should die before all amounts
have been paid, such unpaid amounts shall be paid in a lump-sum payment (less
any withholding taxes) to the Employee’s designated beneficiary, if living, or
otherwise to the personal representative of the Employee’s estate.
 
(d)  Termination for Cause; Termination Prior to Change of Control Period. In
the event the Employee’s employment is terminated for Cause, or for any reason
prior to the Change of Control Period, then the Employee shall not be entitled
to receive severance and any other benefits except as may then be established
under the Company’s existing written severance and benefits plans and practices
or pursuant to other written agreements with the Company.
 
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(e)  Internal Revenue Code Section 409A. Notwithstanding any other provision of
this Agreement, if the Employee is a “key employee” under Code Section 409A and
a delay in making any payment or providing any benefit under this Agreement is
required by Code Section 409A and any Treasury Regulations, and IRS guidance
thereunder, or necessary in the good faith judgment of the Company, to avoid the
Employee incurring additional tax under Section 409A, such payments shall not be
made until the end of six (6) months following the date of the Employee’s
separation from service in accordance with Code Section 409A.
 
4.  Golden Parachute Excise Tax.
 
(a)  Parachute Payments Equal to or Greater than 3.0 x Base Amount. In the event
that the benefits provided for in this agreement or otherwise payable to
Employee, including vesting acceleration upon a change of control pursuant to
Company equity plans or any Employment Agreement which may exist (i) constitute
“parachute payments” within the meaning of Section 280G of the Code, (ii) would
be subject to the excise tax imposed by Section 4999 of the Code, and (iii) the
aggregate value of such parachute payments, as determined in accordance with
Section 280G of the Code and the proposed Treasury Regulations thereunder (or
the final Treasury Regulations, if they have then been adopted) is equal to or
greater than the product obtained by multiplying three by Employee’s “base
amount” within the meaning of Code Section 280G(b)(3), then (A) the benefits
shall be delivered in full, and (B) the Employee shall receive a payment from
the Company sufficient to pay such excise tax.
 
(b)  280G Determinations. Unless the Company and the Employee otherwise agree in
writing, the determination of Employee’s excise tax liability and the amount
required to be paid under this Section 4 shall be made in writing by the
Company’s independent auditors who are primarily used by the Company immediately
prior to the Change of Control (the “Accountants”). For purposes of making the
calculations required by this Section 4, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. The Company and the Employee shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 4.
 
5.  Definition of Terms. The following terms referred to in this Agreement shall
have the following meanings:
 
(a)  Cause. “Cause” shall mean (i) a willful act of personal dishonesty taken by
the Employee in connection with his responsibilities as an employee and intended
to result in substantial personal enrichment of the Employee, (ii) Employee
being convicted of, or pleading nolo contendere to, a felony that is materially
and demonstrably injurious to the Company, and (iii) following delivery to the
Employee of a written demand for performance from the Company which describes
the basis for the Company’s reasonable belief that the Employee has not
substantially performed his duties, continued violations by the Employee of the
Employee’s obligations to the Company which are demonstrably willful and
deliberate on the Employee’s part.
 
For the purposes of this Section 5(a), no act or failure to act shall be
considered “willful” unless done or omitted to be done in bad faith and without
reasonable belief that the act or omission was in or not opposed to the best
interests of the Company. Any act or failure to act based upon authority given
pursuant to a resolution duly adopted by the Board of Directors of the Company
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done or omitted to be done in good faith and in the best
interests of the Company. Notwithstanding anything herein to the contrary, the
Employee shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board of Directors of the Company at a meeting of the Board
called and held for the purpose (after reasonable notice to the Employee and an
opportunity for the Employee with Employee’s counsel to be heard before the
Board) finding that in the good faith opinion of the Board the Employee was
properly terminated for Cause.
 
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(b)  Change of Control. “Change of Control” means the occurrence of any of the
following:
 
(i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the total voting power
represented by the Company’s then outstanding voting securities; or
 
(ii)  A change in the composition of the Board of Directors of the Company as a
result of which fewer than a majority of the directors are “Incumbent
Directors.” “Incumbent Directors” shall mean directors who either (A) are
directors of the Company as of the date hereof, or (B) are elected, or nominated
for election, to the Board of Directors with the affirmative votes (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for election as a director without objection to
such nomination) of at least three-quarters of the Incumbent Directors at the
time of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors of the Company); or
 
(iii)  The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
 
(iv)  The consummation of the sale, lease or other disposition by the Company of
all or substantially all the Company’s assets.
 
6.  Successors.
 
(a)  The Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term “Company” shall
include any successor to the Company’s business and/or assets which executes and
delivers the assumption agreement described in this Section 6(a) or which
becomes bound by the terms of this Agreement by operation of law.
 
(b)  The Employee’s Successors. The terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
 
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7.  Notice.
 
(a)  General. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (i) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (ii) upon delivery, if delivered
by hand, (iii) one (1) business day after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid or (iv) one (1)
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (A) if to Employee, at his or her last known residential address
and (B) if to the Company, at the address of its principal corporate offices
(attention: Secretary), or in any such case at such other address as a party may
designate by ten (10) days’ advance written notice to the other party pursuant
to the provisions above.
 
(b)  Notice of Termination. Any termination by the Company for Cause or as a
result of a voluntary resignation shall be communicated by a notice of
termination to the other party hereto given in accordance with Section 7(a) of
this Agreement. Such notice shall indicate the specific termination provision in
this Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the termination date (which shall be not more than
thirty (30) days after the giving of such notice).
 
8.  Miscellaneous Provisions.
 
(a)  No Duty to Mitigate. The Employee shall not be required to mitigate the
amount of any payment contemplated by this Agreement, nor shall any such payment
be reduced by any earnings that the Employee may receive from any other source,
except as set forth in Section 3(b)(ii)(B).
 
(b)  Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). Employee and the Company agree to work in good faith to
consider amendments to this Agreement which are necessary or appropriate to
avoid imposition of any additional tax or income recognition under Section 409A
prior to the actual payment of amounts to the Employee. The parties agree to
cooperate with each other and to take reasonably necessary steps in this
regard. No waiver by either party of any breach of, or of compliance with, any
condition or provision of this Agreement by the other party shall be considered
a waiver of any other condition or provision or of the same condition or
provision at another time.
 
(c)  Headings. All captions and section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.
 
(d)  Entire Agreement. This Agreement, along with other written agreements
relating to the subject matter hereof between Employee and a duly authorized
Company officer constitute the entire agreement of the parties hereto and
supersede in their entirety all prior representations, understandings,
undertakings or agreements (whether oral or written and whether expressed or
implied) of the parties with respect to the subject matter hereof.
 
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(e)  Choice of Law; Arbitration. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Arizona. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Phoenix, Arizona, by
three arbitrators in accordance with the then current rules of the American
Arbitration Association. The prevailing party in any arbitration shall be
entitled to injunctive relief to enforce the arbitration award. The parties
agree to waive their right to have any dispute regarding this Agreement resolved
in a court of law by judge or jury. The Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. This Section shall not
prevent either party from seeking injunctive relief (or any other provisional
remedy) relating to employee’s obligations under this Agreement. The Company
shall bear the costs and expenses arising out of or in connection with any
arbitration pursuant to this Section 8(e), including Employee’s costs and
reasonable attorney’s fees.
 
(f)  Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
 
(g)  Withholding. All payments made pursuant to this Agreement will be subject
to withholding of applicable income and employment taxes.
 
(h)  Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together will constitute one and
the same instrument.
 
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year set forth
below.
 

 
COMPANY
 
MICROCHIP TECHNOLOGY INC.
 
 
By:
   
 
Title:
   
 
Date:
       
 
EMPLOYEE
 
By:
   
 
Date:
 

    
 
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