MCRL-EX10.18_2013.12.31-10K






Exhibit 10.18
MICREL, INCORPORATED
CHANGE IN CONTROL AND SEVERANCE AGREEMENT
This Change in Control and Severance Agreement (the “Agreement”) is made and entered into by and between Raymond D. Zinn (the “Executive”) and Micrel, Incorporated (the “Company”), effective as of the latest date set forth by the signatures of the parties hereto below (the “Effective Date”).
R E C I T A L S


A.It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change in control.  The Board of Directors of the Company (the “Board”) recognizes that such consideration as well as the possibility of an involuntary termination or reduction in responsibility can be a distraction to Executive and can cause Executive to consider alternative employment opportunities.  The Board has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of such an event.


B.The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue Executive’s employment and to motivate Executive to maximize the value of the Company upon a Change in Control (as defined below) for the benefit of its shareholders.


C.The Board believes that it is important to provide Executive with severance benefits upon certain terminations of Executive’s service to the Company that enhance Executive’s financial security and provide incentive and encouragement to Executive to remain with the Company notwithstanding the possibility of such an event.


D.Certain capitalized terms used in this Agreement are defined in Section 6 below.
The parties hereto agree as follows:


1.Term of Agreement.  This Agreement shall become effective as of the Effective Date and terminate upon the date that all obligations of the parties hereto with respect to this Agreement have been satisfied.


2.At-Will Employment.  The Company and Executive acknowledge that Executive’s employment is and shall continue to be “at-will,” as defined under applicable law.  If Executive’s employment terminates for any reason, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement.


3.Covered Termination During a Change in Control Period.  If Executive experiences a Covered Termination during a Change in Control Period and if Executive executes and fails to revoke during any applicable revocation period a general release of all claims against the Company and its affiliates within sixty (60) days, or such shorter period of time specified by the Company, following such Covered Termination (a “Release of Claims”), then in addition to any accrued but unpaid salary, bonus, 

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vacation and expense reimbursement payable in accordance with applicable law, the Company shall provide Executive with the following:
(a)    Severance.  Executive shall be entitled to receive an amount equal to the sum of (i) twenty-four (24) months of Executive’s base salary at the rate in effect immediately prior to a Covered Termination or the Change in Control, whichever is higher,  payable in a cash lump sum, less applicable withholdings, plus (ii) the Executive’s targeted annual bonus in effect immediately prior to a Covered Termination or the Change in Control, whichever is higher, payable in a cash lump sum, as soon as administratively practicable following the date the Release of Claims is not subject to revocation and, in any event, within sixty (60) days following the date of the Covered Termination.
(b)    Acceleration and Extension.  Each outstanding equity award, including, without limitation, each stock option, restricted stock unit and restricted stock award, held by Executive shall automatically become vested and, if applicable, exercisable and any forfeiture restrictions or rights of repurchase thereon shall immediately lapse. In addition, the post-termination exercise period of each outstanding stock option shall be extended to provide that such stock option shall remain exercisable and outstanding until the earlier of (i) the first anniversary of Executive’s termination of employment or (ii) the original expiration date of such stock option.    In all other respects the equity awards shall continue to be bound by and subject to the terms of their respective agreements.
(c)    Continued Healthcare.  If Executive elects to receive continued healthcare coverage pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall directly pay, or, at Executive’s request, reimburse Executive for, the premium for Executive and Executive’ s covered dependents through the twelve (12) month anniversary of the date of Executive’s termination of employment.  After the Company ceases to pay premiums pursuant to the preceding sentence, Executive may, if eligible, elect to continue healthcare coverage at Executive’s expense in accordance the provisions of COBRA.


4.Other Terminations.  If Executive’s service with the Company is terminated by the Company or by Executive for any or no reason other than as a Covered Termination during a Change in Control Period, then Executive shall not be entitled to any benefits hereunder other than accrued but unpaid salary, bonus, vacation and expense reimbursement in accordance with applicable law and to elect any continued healthcare coverage as may be required under COBRA or similar state law.


5.Limitation on Payments. Notwithstanding anything in this Agreement to the contrary, if any payment or distribution Executive would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall either be (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the largest payment, notwithstanding that all or some portion the Payment may be taxable under Section 4999 of the Code. The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations.  The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.  The accounting firm shall provide its calculations to the Company and Executive within fifteen (15) calendar days after the date on which Executive’s right to a Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by the 

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Company or Executive.  Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.  Any reduction in payments and/or benefits pursuant to this Section 5 will occur in the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits payable to Executive.


6.Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:


(a)Cause.  “Cause” means (i) theft, dishonesty or falsification of any employment or Company records; (ii) malicious or reckless disclosure of the Company’s confidential or proprietary information; (iii) commission of any immoral or illegal act or any gross or willful misconduct, where the Board reasonably determines that such act or misconduct has (A) seriously undermined the ability of the Company’s Board or management to entrust Executive with important matters or otherwise work effectively with Executive, (B) contributed to the Company’s loss of significant revenues or business opportunities, or (C) significantly and detrimentally effected the business or reputation of the Company or any of its subsidiaries; and/or (iv) the failure or refusal by Executive to follow the reasonable and lawful directives of the Board or the Company’s Chief Executive Officer, provided such failure or refusal continues after Executive’s receipt of reasonable notice in writing of such failure or refusal and an opportunity to correct the problem.  Notwithstanding the foregoing, “Cause” shall not exist where any of the foregoing are due to Executive’s physical or mental disability.  The Company must either (a) provide fourteen (14) day notice of such violation, breach, or failure in order to allow the Executive a cure period to remedy the situation; or (b) the Company may terminate the Executive offering fourteen (14) days pay in lieu in such notice and cure period, in which case the Executive may nonetheless attempt to remedy the situation during the following fourteen (14) days.  If the terminated Executive notifies the Company during such fourteen (14) day period that such Executive believes that the Executive has remedied the situation and if the Company agrees in reasonable good faith, then the Company may elect either to reinstate the Executive’s employment or to leave the employment termination in effect, in which case the Executive’s employment will be deemed to have terminated without Cause.


(b)Change in Control.  “Change in Control” means the consummation of any of the following transactions: (i) a sale, transfer or disposition of all or substantially all of the Company’s assets (or consummation of any transaction or series of transactions having a similar effect) other than to (A) a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company, (B) a corporation or other entity owned directly or indirectly by the holders of capital stock of the Company in substantially the same proportions as their ownership of Common Stock, or (C) an Excluded Entity (as defined in subsection (ii) below); or (ii) any merger, consolidation or other business combination transaction of the Company with or into another corporation, entity or person, other than a transaction with or into another corporation, entity or person in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding in the continuing entity or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or the surviving entity) outstanding immediately after such transaction (an “Excluded Entity”); (iii) an acquisition of any voting securities of the Company by any “person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after which such person has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding voting securities; or (iv) a change in the composition of the board of directors of the 

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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 of this Agreement or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority 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 to the Company).  Notwithstanding the foregoing, a transaction shall not constitute a “Change in Control” if its sole purpose is to change the state of the Company’s incorporation, or to create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction.  Further notwithstanding the foregoing, a “Change in Control” must also constitute a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5).


(c)Change in Control Period.  “Change in Control Period” means the period of time commencing on the earliest of (i) the date the Company’s board of directors approves either a letter of intent or a term sheet that contemplates one or more transactions that, if completed, would constitute a Change of Control, (ii) the date that a proposed transaction with the Company which, if completed, would constitute a Change of Control is publicly announced, or (iii) the date that is six months prior to a Change in Control; and ending on the 12-month anniversary of the date of a Change in Control.


(d)Constructive Termination.  “Constructive Termination” means Executive’s resignation from employment with the Company after the occurrence, without Executive’s written consent, of any of the following: (i) a material adverse change in either (A) reporting structure applicable to Executive or (B) Executive’s title, function, job responsibilities or duties, taking into account the Company’s size, status as a public company and capitalization as of the date of this Agreement; (ii) a reduction by the Company in Executive’s base salary or target bonus of more than fifteen percent (15%) from Executive’s base salary in effect immediately prior to such reduction, except in connection with a reduction in salary affecting all senior management employees of the Company in substantially the same proportions; (iii) a material relocation of Executive’s office to a place more than twenty (20) miles from its then present location (which relocation shall be deemed to be material), except that required travel on the Company’s business to an extent substantially consistent with Executive’s business travel obligations as of immediately prior to the date of the Change in Control shall not be considered a relocation; (iv) the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law.  Notwithstanding the foregoing, the events or conditions set forth in the previous sentence shall not constitute a “Constructive Termination” unless the event or condition continues more than thirty (30) days following Executive’s written notice of such condition provided to the Company within ninety (90) days of the first occurrence of such event or condition and Executive’s resignation is effective within sixty (60) days following the delivery of such written notice to the Company.


(e)Covered Termination.  “Covered Termination” shall mean a Constructive Termination or the termination of Executive’s employment by the Company other than for Cause.


7.Successors.


(a)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, and the Company shall require such successor to, assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in 

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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 7(a) or which becomes bound by the terms of this Agreement by operation of law.


(b)Executive’s Successors.  The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.


8.Notices.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or one day following mailing via Federal Express or similar overnight courier service.  In the case of Executive, mailed notices shall be addressed to Executive at Executive’s home address that the Company has on file for Executive.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its General Counsel.


9.Confidentiality; Non-Solicitation.


(a)Confidentiality.  While Executive is employed by the Company, and thereafter, Executive shall not directly or indirectly disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below).  Upon termination of Executive’s employment with the Company, all Confidential Information in Executive’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Company and shall not be retained by Executive or furnished to any third party, in any form except as provided herein; provided, however, that Executive shall not be obligated to treat as confidential, or return to the Company copies of any Confidential Information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available there-after other than by any means in violation of this Agreement or any other duty owed to the Company by any person or entity, or (iii) is lawfully disclosed to Executive by a third party.  For purposes of this Agreement, the term “Confidential Information” shall mean information disclosed to Executive or known by Executive as a consequence of or through his or her relation-ship with the Company, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Company and its affiliates.  In addition, Executive shall continue to be subject to the Confidential Information and Invention Assignment Agreement entered into between Executive and the Company (the “Confidential Information Agreement”).


(b)Non-Solicitation of Employees or Customers.  Executive acknowledges that as a member of senior management of the Company he has had access to information concerning the Company’s organizational structure and performance evaluations of Company key employees.  During his employment with the Company and at all times thereafter, Executive shall not utilize any Trade Secrets of the Company to solicit any of its employees or contractors to discontinue working for the Company or to provide service to any other person or entity in competition with the Company without the Company’s written consent. Furthermore, beginning on the last day of his employment with the Company and at all times thereafter, Executive shall not utilize any Trade Secrets of the Company to solicit, contact, attempt to contact or meet with the Company’s current customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company. As used in this Agreement, the term “Trade Secrets” shall mean information that (a) derives economic value from not being known to the 

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general public or others who can obtain economic value from its disclosure or use and (b) is the subject of reasonable efforts on the part of the Company to maintain its secrecy.  Executive acknowledges and agrees that Trade Secrets are also Confidential Information and that he is under at least the same confidentiality obligations in relation to Trade Secrets as he is in relation to Confidential Information.


(c)Survival of Provisions.  The provisions of this Section 9 shall survive the termination or expiration of the applicable Executive’s employment with the Company and shall be fully enforceable thereafter.  If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 9 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.


10.Dispute Resolution.  To ensure the timely and economical resolution of disputes that arise in connection with this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Santa Clara County, California, conducted by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the applicable JAMS employment rules.  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The arbitrator shall:  (i) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (ii) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.


11.Miscellaneous Provisions.


(a)Section 409A.  
(i)    Separation from Service.  Notwithstanding any provision to the contrary in this Agreement, no amount deemed deferred compensation subject to Section 409A of the Code shall be payable pursuant to Section 3 unless Executive’s termination of employment constitutes a “separation from service” with the Company within the meaning of Section 409A of the Code and the Department of Treasury regulations and other guidance promulgated thereunder (“Separation from Service”) and, except as provided under Section 13(a)(ii) of this Agreement, any such amount shall not be paid, or in the case of installments, commence payment, until the sixtieth (60th) day following Executive’s Separation from Service.  Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the sixtieth (60th) day following Executive’s Separation from Service and the remaining payments shall be made as provided in this Agreement.
(ii)    Specified Employee.  Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed at the time of his separation from service to be a “specified employee” 

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for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (a) the expiration of the six (6)-month period measured from the date of the Executive’s Separation from Service or (b) the date of Executive’s death.  Upon the first business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 11(a)(ii) shall be paid in a lump sum to Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein.
(iii)    Expense Reimbursements.  To the extent that any reimbursements payable pursuant to this Agreement are subject to the provisions of Section 409A of the Code, any such reimbursements payable to Executive pursuant to this Agreement shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
(iv)    Installments.  For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment.


(b)Waiver.  No provision of this Agreement shall be modified, waived or dis-charged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive).  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)Whole Agreement.  This Agreement and the Confidential Information Agreement represent the entire understanding of the parties hereto with respect to the subject matter hereof and supersede all prior arrangements and understandings regarding same, including, without limitation, any accelerated vesting provisions of Executive’s offer letter agreement and/or stock option agreement.


(d)Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California.


(e)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.


(f)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.
(Signature page follows)

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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.


MICREL, INCORPORATED
    


By: /s/ Robert E. DeBarr        
Robert E. DeBarr
    
Title: Chief Financial Officer, Vice
President of Finance and
Human Resources
Date: February 28, 2014        




EXECUTIVE


/s/ Raymond D. Zinn            
      Raymond D. Zinn
    
Date: February 28, 2014        



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