EXHIBIT 10.3
Published on August 24, 2006
EXHIBIT
10.3
MICROCHIP
TECHNOLOGY INCORPORATED
DISCRETIONARY
EXECUTIVE MANAGEMENT INCENTIVE
COMPENSATION
PLAN
1. Purposes
of the Plan.
The
Plan is intended to increase shareholder value and the success of the Company
by
motivating key executives 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 executives with incentive awards based on the achievement
of
Company performance goals, 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 by the Committee pursuant
to Section 5(a) below for a Performance Period.
(b)“Board”
means
the Board of Directors of the Company.
(c) “Code”
means
the Internal Revenue Code of 1986, as amended.
(d) “Committee”
means
the Compensation Committee of the Company’s 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) of the Code.
(e) “Company”
means
Microchip Technology Incorporated or any of its subsidiaries (as such term
is
defined in Code Section 424(f)).
(f)“Participant”
means
an executive officer of the Company participating in the Plan for a Performance
Period.
(g)“Performance
Period”
means
any Company fiscal quarter or fiscal year, or such other longer period but
not
in excess of five fiscal years, as determined in the Committee’s
discretion.
(h)“Plan”
means
this Discretionary Executive Management Incentive Compensation
Plan.
3. Plan
Administration.
(a) The
Committee shall be responsible for the general administration and interpretation
of the Plan and for carrying out its provisions. The Committee may delegate
specific administrative tasks to Company employees or others as appropriate
for
proper administration of the Plan. The Committee shall have such powers as
may
be necessary to discharge its 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 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 executive officers of the Company who are designated by the Committee
in its sole discretion. No person shall be automatically entitled to participate
in the Plan.
5. Determination
of Awards; Award Payment.
(a) Determination
of Awards.
The
Company’s Chief Executive Officer shall provide the Committee with
recommendations as to the executive officers that should participate in the
Plan
for that Performance Period, and the Award to be allocated to each such officer
other than the Chief Executive Officer. The Committee shall have complete
authority to accept, modify or reject such recommendations, or to eliminate
the
Awards entirely. The Committee may in its sole discretion determine an Awards
under the Plan for the Company’s Chief Executive Officer. Awards may be a
specific dollar amount, or a percentage of base salary.
(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.
All
Awards shall be distributed to the Participants in cash.
(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 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.
6. Term
of Plan.
The
Plan shall become effective October 1, 2006. The Plan shall continue until
terminated under Section 7 of the Plan.
7. 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.
8. Withholding.
Distributions pursuant to this Plan shall be subject to all applicable federal
and state tax and withholding requirements.
9. 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 of or the Company may terminate the
employment relationship at any time and for any reason or no
reason.
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10. 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.
11. Indemnification.
Each
person who is or shall have been a member of the Committee, or of the Board,
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.
12. 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.
13. 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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