MICROCHIP TECHNOLOGY INCORPORATED CHANGE OF CONTROL SEVERANCE AGREEMENTTermination Severance Agreement |
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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 ____________________ (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.
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 hundred/two
hundred percent (100/200%)] 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 hundred/two hundred
percent (100/200%)] 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.) 100%/200% (one
hundred/two hundred percent)
(ii) Continued
Employee Benefits. Reimbursement of Employee’s health, dental,
vision, and life insurance coverage at the same level of coverage premiums
as
was provided to such Employee immediately prior to termination and at the same
ratio of Company premium payment to Employee premium subsidy 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) [12 (twelve)/ 24 (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; provided, however that if such reimbursement
results in the imposition of additional taxes to Employee under Section 409A
of
the Internal Revenue Code of 1986, as amended (the “Code”), Employee shall be
paid an additional full gross-up for such additional taxes, so that Employee
is
in the same position, on an after-tax basis, as if such taxes did not
apply. 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.
2
(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.
(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
Payment Full Gross-Up. 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) are subject to the
excise tax imposed by Section 4999 of the Code, 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 plus an additional payment from the company
sufficient to pay the excise tax and federal and state income taxes arising
from
the payments made by the Company to Employee pursuant to this
sentence.
