ex10-1.htm


     

    EXHIBIT
10.1


    


    MICROCHIP
TECHNOLOGY INCORPORATED

    


    MANAGEMENT
INCENTIVE COMPENSATION PLAN

    (as
amended by the Board of Directors on August 14, 2008)

    


    1.           Purposes of the
Plan.  The Plan is intended to increase shareholder value and
the success of the Company by motivating our key management and senior technical
employees to: (1) perform to the best of their abilities, and
(2) achieve the Company’s objectives.  The Plan’s goals are to be
achieved by providing such personnel with incentive awards based on the
achievement of goals relating to the performance of the Company, on the
achievement of individual performance goals, retention-based bonuses, or
nonrecurring awards for performance beyond that expected.

     

    2.           Definitions.

     

    (a)           “Award” means, with
respect to each Participant, the award determined pursuant to Section 7(a)
below for a Performance Period.  Each Award is determined by a Payout
Basis for a Performance Period, subject to the Committee’s authority under
Section 7(a) to increase, eliminate or reduce the Award otherwise
payable.

     

    (b)           “Base Salary” means as
to any Performance Period, the Participant’s annualized salary rate on the last
day of the Performance Period.  Such Base Salary shall be before both
(a) deductions for taxes or benefits, and (b) deferrals of
compensation pursuant to Company-sponsored plans.

     

    (c)           “Board” means the
Board of Directors of the Company.

     

    (d)           “Cash Position” means
the Company’s level of cash and cash equivalents.

     

    (e)           “Code” means the
Internal Revenue Code of 1986, as amended.

     

    (f)           “Committee” means the
Compensation Committee of the Board, or a sub-committee of the Compensation
Committee, which shall consist solely of two or more members of the Board who
are not employees of the Company and who otherwise qualify as “outside
directors” within the meaning of Section 162(m).

     

    (g)           “Company” means
Microchip Technology Incorporated or any of its subsidiaries (as such term is
defined in Code Section 424(f)).

     

    (h)           “Earnings Per Share”
means as to any Fiscal Quarter or Fiscal Year, the Company’s or a business
unit’s Net Income, divided by a weighted average number of common shares
outstanding and dilutive common equivalent shares deemed outstanding, determined
in accordance with generally accepted accounting principles.

     

    (i)           “Fiscal Quarter” means
a fiscal quarter of the Company.

     

    (j)           “Fiscal Year” means a
fiscal year of the Company.

     

    (k)           “Gross Margin” means
the Company’s or a business unit’s net sales for the Fiscal Quarter or Fiscal
Year less the Company’s or a business unit’s, as applicable, cost of goods sold
for the Fiscal Quarter or Fiscal Year, determined in accordance with generally
accepted accounting principles.

     

    (l)           “Net Income” means as
to any Fiscal Quarter or Fiscal Year, the income after taxes of the Company for
the Fiscal Quarter or Fiscal Year determined in accordance with generally
accepted accounting principles.

     

    (m)           “Operating Cash Flow”
means the Company’s or a business unit’s sum of Net Income plus depreciation and
amortization less capital expenditures plus changes in working capital comprised
of accounts receivable,


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    inventories,
other current assets, trade accounts payable, accrued expenses, product
warranty, advance payments from customers and long-term accrued expenses,
determined in accordance with generally accepted accounting
principles.

     

    (n)           “Operating Expenses”
means the sum of the Company’s or a business unit’s research and development
expenses and selling and general and administrative expenses during a Fiscal
Quarter or Fiscal Year.

     

    (o)           “Operating Income”
means the Company’s or a business unit’s income from operations determined in
accordance with generally accepted accounting principles.

     

    (p)           “Participant” means an
employee of the Company participating in the Plan for a Performance
Period.

     

    (q)           “Payout Basis” means
as to any Performance Period, the criteria established by the Committee pursuant
to Section 5 in order to determine the Awards (if any) to be paid to
Participants. The Payout Basis may contain discretionary elements to reward
additional performance as recommended by the CEO and approved by the
Committee.  The criteria may differ from Participant to Participant,
or between groups of Participants.

     

    (r)           “Performance Goals”
means the goal(s) (or combined goal(s)) determined by the Committee (in its
discretion) to be applicable to a Participant with respect to an
Award.  As determined by the Committee, the Performance Goals
applicable to an Award may provide for a targeted level or levels of achievement
based upon one or more of the following measures, but not limited hereto: Cash
Position, Earnings Per Share, Gross Margin, Net Income, Operating Cash Flow,
Operating Expenses, Operating Profit, Return on Assets, Return on Equity, Return
on Sales, Revenue Growth, and Total Stockholder Return.  The
Performance Goals may differ from Participant to Participant and from Award to
Award.  The Committee may appropriately adjust any evaluation of the
performance under a Performance Goal to exclude (i) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30
and/or in management’s discussion and analysis of financial conditions and
results of operations appearing in the Company’s quarterly and annual reporting
with Securities and Exchange Commission for the applicable year, or (ii) the
effect of any changes in accounting principles affecting the Company’s or a
business unit’s reported results.

     

    (s)           “Performance Period”
means any Fiscal Quarter or Fiscal Year, or such other longer period but not in
excess of five Fiscal Years, as determined by the Committee in its sole
discretion.

     

    (t)           “Plan” means this
Performance Bonus Plan.

     

    (u)           “Plan Year” means the
Company’s fiscal year.

     

    (v)           “Return on Assets”
means the percentage equal to the Company’s or a business unit’s Operating
Income before incentive compensation, divided by average net Company or business
unit, as applicable, assets, determined in accordance with generally accepted
accounting principles.

     

    (w)           “Return on Equity”
means the percentage equal to the Company’s Net Income divided by average
shareholder’s equity, determined in accordance with generally accepted
accounting principles.

     

    (x)           “Return on Sales”
means the percentage equal to the Company’s or a business unit’s Operating
Income before incentive compensation, divided by the Company’s or the business
unit’s, as applicable, revenue, determined in accordance with generally accepted
accounting principles.

     

    (y)           “Revenue Growth” means
the Company’s or a business unit’s net sales for the Fiscal Quarter or Fiscal
Year, determined in accordance with generally accepted accounting principles,
compared to the net sales of the immediately preceding quarter.


    
      
         


      

      
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    (z)           “Section 162(m)” means
Section 162(m) of the Code, or any successor to Section 162(m), as that Section
may be interpreted from time to time by the Internal Revenue Service, whether by
regulation, notice or otherwise.

     

    (aa)           “Total Stockholder
Return” means the total return (change in share price plus reinvestment
of any dividends) of a share of the Company’s common stock.

    


    3.           Plan
Administration.

     

    (a)           The
Plan may be administered by different administrators with respect to different
groups of Participants.  The Committee shall be responsible for the general
administration and interpretation of the Plan and for carrying out its
provisions.  The Committee may delegate its general administration and
interpretation authority to a committee of employees as the Plan relates to
Participants other than executive officers.  The Committee may
delegate specific administrative tasks to Company employees or others as
appropriate for proper administration of the Plan.  The Committee and
its delegates shall have such powers as may be necessary to discharge their
duties hereunder, including, but not by way of limitation, the following powers
and duties, but subject to the terms of the Plan:

    


    (i)           discretionary
authority to construe and interpret the terms of the Plan, and to determine
eligibility, Awards and the amount, manner and time of payment of any Awards
hereunder;

    


    (ii)          to
prescribe forms and procedures for purposes of Plan participation and
distribution of Awards; and

    


    (iii)         to
adopt rules, regulations and bylaws and to take such actions as it deems
necessary or desirable for the proper administration of the Plan.

    


    (b)           Any
rule or decision by the Committee or its delegates that is not inconsistent with
the provisions of the Plan shall be conclusive and binding on all persons, and
shall be given the maximum deference permitted by law.

    


    4.           Eligibility.  The
employees eligible to participate in the Plan for a given Performance Period
shall be those employees of the Company who based on their individual position
and Company criteria have a significant impact on the Company’s performance as
determined by the Committee.  No person shall be automatically
entitled to participate in the Plan.

    


    5.           Performance Goal
Determination.  The Company’s Chief Executive Officer shall
provide the Committee with recommendations as to the criteria underlying the
Performance Goals.  The CEO may make recommendations as to
discretionary elements to reward additional performance.  The
Committee shall have complete authority to accept, modify or reject such
recommendations, or to eliminate the Awards entirely.

     

    6.           Determination of Payout
Basis.  The Committee, in its sole discretion, shall establish
a Payout Basis for purposes of determining the Award (if any) payable to each
Participant.  Each Payout Basis shall (a) be based on a
comparison performance to the Performance Goals, (b) provide for the
payment of Awards if the Performance Goals for the Performance Period are
achieved.  Discretionary elements may be identified at the same time
as the criteria underlying the Performance Goals are set, or they may be later
determined at the Committee’s discretion.  Awards may be a specific
dollar amount, or a percentage of base salary.

    


    7.           Determination of Awards;
Award Payment.

     

    (a)           Determination and
Certification.  After the end of each Performance Period, the
Committee shall determine the extent to which the Performance Goals applicable
to each Participant for the Performance Period were


    
      
         


      

      
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    achieved
or exceeded.  The Award for each Participant shall be determined by
applying the Payout Basis to the level of actual performance that has been
determined by the Committee, and adding any discretionary element that has been
determined by the Committee.  Notwithstanding any contrary provision
of the Plan, the Committee, in its sole discretion, may increase, eliminate or
reduce the Award payable to any Participant below that which otherwise would be
payable under the Payout Basis.

     

    (b)           Right to Receive
Payment.  Each Award under the Plan shall be paid solely from
the general assets of the Company.  Nothing in this Plan shall be
construed to create a trust or to establish or evidence any Participant’s claim
of any right to payment of an Award other than as an unsecured general creditor
with respect to any payment to which he or she may be
entitled.  Unless otherwise approved by the Committee, a Participant
needs to be employed by the Company from the beginning of the applicable
Performance Period through the Award payment date to receive an Award payout
hereunder.

     

    (c)           Form of
Distributions.  The Company shall distribute all Awards to the
Participant in cash, restricted stock units or awards, or a combination thereof
at the discretion of the Committee.

     

    (d)           Deferral.  The
Committee may defer payment of Awards, or any portion thereof, to Participants
as the Committee, in its discretion, determines to be necessary or desirable to
preserve the deductibility of such amounts under
Section 162(m).  In addition, the Committee, in its sole
discretion, may permit a Participant to defer receipt of the payment of cash
that would otherwise be delivered to a Participant under the
Plan.  Any such deferral elections shall be subject to such rules and
procedures as shall be determined by the Committee in its sole
discretion.

    


    8.           Term of
Plan.  The Plan shall become effective October 1,
2006.  The Plan shall continue until terminated under Section 9
of the Plan.

    


    9.           Amendment and Termination of
the Plan.  The Committee may amend, modify, suspend or
terminate the Plan, in whole or in part, at any time, including the adoption of
amendments deemed necessary or desirable to correct any defect or to supply
omitted data or to reconcile any inconsistency in the Plan or in any Award
granted hereunder; provided, however, that no amendment, alteration, suspension
or discontinuation shall be made which would impair any payments to Participants
made prior to such amendment, modification, suspension or termination, unless
the Committee has made a determination that such amendment or modification is in
the best interests of all persons to whom Awards have theretofore been
granted.  To the extent necessary or advisable under applicable law,
Plan amendments shall be subject to shareholder approval.  At no time
before the actual distribution of funds to Participants under the Plan shall any
Participant accrue any vested interest or right whatsoever under the Plan except
as otherwise stated in this Plan.

    


    10.           Withholding.  Distributions
pursuant to this Plan shall be subject to all applicable federal and state tax
and withholding requirements.

    


    11.           At-Will
Employment.  No statement in this Plan should be construed to
grant any employee an employment contract of fixed duration or any other
contractual rights, nor should this Plan be interpreted as creating an implied
or an expressed contract of employment or any other contractual rights between
the Company and its employees.  The employment relationship between
the Company and its employees is terminable at-will.  This means that
an employee or the Company may terminate the employment relationship at any time
and for any reason or no reason.

    


    12.           Successors.  All
obligations of the Company under the Plan, with respect to awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
or assets of the Company.

    


    13.           Indemnification.  Each
person who is or shall have been a member of the Committee, of the Board, or
their delegates shall be indemnified and held harmless by the Company against
and from (a) any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action
taken or failure to act under the Plan or any award, and (b) from any and
all amounts paid by him or her in settlement thereof, with the Company’s
approval, or paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he or she shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he or she undertakes to handle and defend it on his or her own
behalf.  The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company’s Certificate of Incorporation or Bylaws, by contract, as a
matter of law, or otherwise, or under any power that the Company may have to
indemnify them or hold them harmless.

    


    14.           Nonassignment.  The
rights of a Participant under this Plan shall not be assignable or transferable
by the Participant except by will or the laws of intestacy.

    


    15.           Governing
Law.  The Plan shall be governed by the laws of the State of
Arizona, without regard to conflicts of law provisions thereunder.

    


    



    
      
         


      

      
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