def_14a.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
(RULE 14a-101)

SCHEDULE 14A INFORMATION

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Microchip Technology Incorporated
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MICROCHIP TECHNOLOGY INCORPORATED


NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 15, 2008
 
TIME:
9:00 a.m. Mountain Standard Time

PLACE:
Microchip Technology Incorporated
 
2355 West Chandler Boulevard, Chandler, Arizona 85224-6199

ITEMS OF
(1)
To elect five directors to serve until the next annual meeting of stockholders or until their
BUSINESS:
successors are elected and qualified.
 
 
(2)   To ratify the appointment of Ernst & Young LLP as the independent registered public accounting
firm of Microchip for the fiscal year ending March 31, 2009.
     
 
(3)
To transact such other business as may properly come before the annual meeting or any adjournment(s) thereof.

 
The Microchip Board of Directors recommends that you vote for each of the foregoing items.
 
RECORD
Holders of Microchip common stock of record at the close of business on June 19, 2008 are
DATE:
entitled to vote at the annual meeting.

ANNUAL
Microchip’s 2008 Annual Report, which is not a part of the proxy soliciting material, is
REPORT:
enclosed.

PROXY:
It is important that your shares be represented and voted at the annual meeting.  You can vote your shares by completing and returning the proxy card sent to you.  Stockholders who hold their shares in “street name” may also have a choice of voting their shares over the Internet or by telephone.  If Internet or telephone voting is available to you, voting instructions are printed on the proxy card sent to you.  You can revoke your proxy at any time prior to its exercise at the annual meeting by following the instructions in the accompanying proxy statement.
 
J. Eric Bjornholt
Secretary

 
Chandler, Arizona
 
July 11, 2008

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on August 15, 2008

The Microchip Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended March 31, 2008 are available at www.microchip.com/annual_reports.
 

 
 

 

 
 
MICROCHIP TECHNOLOGY INCORPORATED
2355 West Chandler Boulevard
Chandler, Arizona 85224-6199
 

 
PROXY STATEMENT
 


You are cordially invited to attend our annual meeting on Friday, August 15, 2008, beginning at 9:00 a.m., Mountain Standard Time.  The annual meeting will be held at our Chandler facility located at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199.

We are providing these proxy materials in connection with the solicitation by the Board of Directors (the “Board”) of Microchip Technology Incorporated (“Microchip”) of proxies to be voted at Microchip’s 2008 annual meeting of stockholders and at any adjournment(s) thereof.

Our fiscal year begins on April 1 and ends on March 31.  References in this proxy statement to fiscal 2008 refer to the 12-month period from April 1, 2007 through March 31, 2008, and references to fiscal 2007 refer to the 12-month period from April 1, 2006 through March 31, 2007.

We anticipate first mailing this proxy statement and accompanying form of proxy on July 11, 2008 to holders of Microchip’s common stock on June 19, 2008, the Record Date for the annual meeting.

PROXIES AND VOTING PROCEDURES

YOUR VOTE IS IMPORTANT.  Because many stockholders cannot attend the annual meeting in person, it is necessary that a large number of stockholders be represented by proxy.  Stockholders who hold their shares in “street name” may have a choice of voting over the Internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage-paid envelope provided.  Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.  Under Delaware law, stockholders may submit proxies electronically.  Please be aware that if you vote over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible.

You can revoke your proxy at any time before it is exercised by timely delivery of a properly executed, later-dated proxy (including an Internet or telephone vote if these options are available to you) or by voting by ballot at the annual meeting.

The method by which you vote will in no way limit your right to vote at the annual meeting if you later decide to attend in person.  If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote at the annual meeting.

All shares entitled to vote and represented by properly completed proxies received prior to the annual meeting and not revoked will be voted at the annual meeting in accordance with the instructions on such proxies.  IF YOU DO NOT INDICATE HOW YOUR SHARES SHOULD BE VOTED ON A MATTER, THE SHARES REPRESENTED BY YOUR PROPERLY COMPLETED PROXY WILL BE VOTED AS OUR BOARD OF DIRECTORS RECOMMENDS.

If any other matters are properly presented at the annual meeting for consideration, including, among other things, consideration of a motion to adjourn the annual meeting to another time or place, the persons named as proxies and acting thereunder will have discretion to vote on those matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote.  At the date this proxy statement went to press, we did not anticipate that any other matters would be raised at the annual meeting.
 
 
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Stockholders Entitled to Vote

Stockholders of record at the close of business on the Record Date, June 19, 2008, are entitled to notice of and to vote at the annual meeting.  Each share is entitled to one vote on each of the five (5) director nominees and one vote on each other matter properly brought before the annual meeting.  On the Record Date, there were 184,466,576 shares of our common stock issued and outstanding.

In accordance with Delaware law, a list of stockholders entitled to vote at the annual meeting will be available at the annual meeting on August 15, 2008, and for 10 days prior to the annual meeting at 2355 West Chandler Boulevard, Chandler, Arizona, between the hours of 9:00 a.m. and 4:30 p.m., Mountain Standard Time.

Required Vote

Quorum, Abstentions and Broker Non-Votes

The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting.  Abstentions and broker “non-votes” are counted as present and entitled to vote for purposes of determining a quorum.  A broker “non-vote” occurs when a nominee holding shares for a beneficial owner (i.e., in “street name”) does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.  Under the rules of the New York Stock Exchange (NYSE), which apply to NYSE member brokers trading in non-NYSE stock, brokers have discretionary authority to vote shares on certain routine matters if customer instructions are not provided.  Proposals One and Two to be considered at the annual meeting may be treated as routine matters.  Consequently, if you do not return a proxy card, your broker may have discretion to vote your shares on such matters.

Election of Directors (Proposal One)

A plurality of the votes duly cast is required for the election of directors (i.e., the five nominees receiving the greatest number of votes will be elected).  Abstentions and broker “non-votes” will not affect the election of directors.

Ratification of Accounting Firm (Proposal Two)

The affirmative vote of the holders of a majority of the shares of common stock present in person or represented by proxy and entitled to vote at the annual meeting is required for ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2009.   An abstention will have the same effect as voting against this proposal.  Broker “non-votes” are not counted for purposes of approving the ratification of our accounting firm, and thus will not affect the outcome of the voting on this proposal.

Electronic Access to Proxy Statement and Annual Report

This proxy statement and our 2008 Annual Report are available at www.microchip.com/annual_reports.

We will post our future proxy statements and annual reports on From 10-K on our website as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission.  All such filings on our website are available free of charge.  The information on our website is not incorporated into this proxy statement.  Our Internet address is www.microchip.com.  

Cost of Proxy Solicitation

Microchip will pay its costs of soliciting proxies.  Proxies may be solicited on behalf of Microchip by its directors, officers or employees in person or by telephone, facsimile or other electronic means.  We may also reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of Microchip common stock.

 
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THE BOARD OF DIRECTORS

Meetings of the Board of Directors

Our Board of Directors met nine times in fiscal 2008.  During fiscal 2008, each of Mr. Day, Mr. Hugo-Martinez,  Mr. Meyercord and Mr. Sanghi attended 100% of the meetings of the Board of Directors, and Mr. Chapman attended 8 of the 9 of the meetings of the Board of Directors.  Each director attended 100% of the meetings of the committees on which such director served.  During fiscal 2003, the Board of Directors implemented the practice of meeting in executive session on a periodic basis without management or management directors (i.e., Mr. Sanghi) present, and continued this practice through fiscal 2008.  The Board of Directors has determined that each of Mr. Chapman, Mr. Day, Mr. Hugo-Martinez and Mr. Meyercord is an independent director as defined by applicable SEC rules and NASDAQ listing standards.

Communications from Stockholders

Stockholders may communicate with the Board of Directors or individual members of the Board of Directors, provided that all such communication is submitted in writing to the attention of the Secretary at Microchip Technology Incorporated, 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199, who will then forward such communication to the appropriate director or directors.

Committees of the Board of Directors

The following table lists our three Board committees, the directors who served on them and the number of committee meetings held in fiscal 2008:

Membership on Board Committees in Fiscal 2008

 
Name
 
Audit
 
Compensation
Nominating and Governance
Mr. Chapman
C
 
·
Mr. Day
 
·
C
Mr. Hugo-Martinez
·
C
·
Mr. Meyercord
CC
 
·
Meetings held in fiscal 2008
8
6
2

C = Chair
CC = Co-Chair
· = Member

In April 2008, the Board of Directors modified the membership and leadership of its Committees.  The Audit Committee is comprised of Mr. Chapman (Chair), Mr. Hugo-Martinez and Mr. Meyercord.  The Compensation Committee is now comprised of Mr. Day (Chair) and Mr. Meyercord.  The Nominating and Governance Committee is now comprised of Mr. Meyercord (Chair), Mr. Chapman, Mr. Day and Mr. Hugo-Martinez.

Audit Committee

The responsibilities of our Audit Committee are to appoint, compensate, retain and oversee Microchip’s independent registered public accounting firm, oversee the accounting and financial reporting processes of Microchip and audits of its financial statements, and provide the Board of Directors with the results of such monitoring.  These responsibilities are further described in the committee charter.  A copy of the Audit Committee Charter, as last amended on May 13, 2007, is available at the Corporate/Investors Information section under Mission Statement/Corporate Governance on www.microchip.com.

Our Board of Directors has determined that all members of the Audit Committee are independent directors as defined by applicable SEC rules and NASDAQ listing standards.  The Board of Directors has also determined that each of Mr. Chapman, Mr. Hugo-Martinez and Mr. Meyercord meet the requirements for being an “audit committee financial expert” as defined by applicable SEC rules.

 
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In fiscal 2004, the Audit Committee adopted a policy with respect to (i) the receipt, retention and treatment of complaints received by us regarding questionable accounting, internal accounting controls or auditing matters; (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting, internal accounting controls or auditing matters; and (iii) the prohibition of harassment, discrimination or retaliation arising from submitting concerns regarding questionable accounting, internal accounting controls or auditing matters or participating in an investigation regarding questionable accounting, internal accounting controls or auditing matters.  This policy, called “Legal Compliance,” was created in accordance with applicable SEC rules and NASDAQ listing requirements.  A copy of this policy is available at the Corporate/Investors Information section under Mission Statement/Corporate Governance on www.microchip.com.

Compensation Committee

The Compensation Committee has oversight responsibility for the compensation and benefit programs for our executive officers and other employees, and for administering our equity incentive and employee stock purchase plans adopted by our Board of Directors.  The responsibilities of our Compensation Committee are further described in the committee charter as adopted on January 29, 2007.  A copy of the Compensation Committee Charter is available at the Corporate/Investors Information section under Mission Statement/Corporate Governance on www.microchip.com.

The Board of Directors has determined that the members of the Compensation Committee are independent directors as defined by applicable SEC rules and NASDAQ listing standards.  For more information on our Compensation Committee, please turn to the “Compensation Discussion and Analysis” at page 11.

Nominating and Governance Committee

The Nominating and Governance Committee has the responsibility of ensuring that the Board is properly constituted to meet its fiduciary obligations to our stockholders.  In so doing, the Nominating and Governance Committee identifies and recommends director candidates, develops and recommends governance principles, and recommends director nominees to serve on committees of the Board of Directors.  The responsibilities of our Nominating and Governance Committee are further described in the committee charter which is available at the Corporate/Investors Information section under Mission Statement/Corporate Governance on www.microchip.com.  The Board of Directors has determined that the members of the Nominating and Governance Committee are independent directors as defined by applicable SEC rules and NASDAQ listing standards.

When considering a candidate for a director position, the Nominating and Governance Committee looks for demonstrated character, judgment, relevant business, functional and industry experience, and a high degree of skill.  The Nominating and Governance Committee evaluates director nominees recommended by a stockholder in the same manner as it would any other nominee.  The Nominating and Governance Committee will consider nominees recommended by stockholders provided such recommendations are made in accordance with procedures described in this proxy statement under “Requirements, Including Deadlines, for Receipt of Stockholder Proposals for the 2009 Annual Meeting of Stockholders; Discretionary Authority to Vote on Stockholder Proposals” at page 27.  We do not pay any third party to identify or assist in identifying or evaluating potential nominees for director.

Attendance at the Annual Meeting of Stockholders

All directors are encouraged, but not required, to attend our annual meeting of stockholders.  All directors attended our 2007 annual meeting of stockholders.

 
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REPORT OF THE AUDIT COMMITTEE
 



The Board of Directors has adopted a written charter setting out the purposes and responsibilities of the Audit Committee.  The Board of Directors and the Audit Committee review and assess the adequacy of the charter on an annual basis.  A copy of the Audit Committee Charter, as last amended on May 13, 2007, is available at the Corporate/Investors Information section under Mission Statement/Corporate Governance on www.microchip.com.

Each of the directors who serves on the Audit Committee meets the independence and experience requirements of the SEC rules and NASDAQ listing standards.  What this means is the Microchip Board of Directors has determined that no member of the Audit Committee has a relationship with Microchip that may interfere with such member’s independence from Microchip and its management, and that all members have the required knowledge and experience to perform their duties as committee members.

We have received from Ernst & Young LLP the written disclosure and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and have discussed with Ernst & Young LLP their independence from Microchip.  We also discussed with Ernst & Young LLP all matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (Professional Standards).  We have considered whether and determined that the provision of the non-audit services rendered to us by Ernst & Young LLP during fiscal 2008 was compatible with maintaining the independence of Ernst & Young LLP.

We have reviewed and discussed with management the audited annual financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 and filed with the SEC, as well as the unaudited financial statements filed with our quarterly reports on Form 10-Q.  We also met with both management and Ernst & Young LLP to discuss those financial statements.

Based on these reviews and discussions, we recommended to the Board of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008 for filing with the SEC.

By the Audit Committee of the Board of Directors1:

Matthew W. Chapman (Chairman)                                                              Albert J. Hugo-Martinez                                                        Wade Meyercord

Director Compensation

Procedures Regarding Director Compensation

The Board of Directors, upon the recommendation of the Compensation Committee, sets non-employee director compensation.  Microchip does not pay employee directors for services provided as a member of the Board of Directors.  The current program of cash and equity compensation for non-employee directors has been in effect for several years, and is designed to achieve the following goals: compensation should fairly pay directors for work required for a company of Microchip’s size and scope; compensation should align directors’ interests with the long-term interests of stockholders; compensation should be competitive so as to attract and retain qualified non-employee directors; and the structure of the compensation should be simple, transparent and easy for stockholders to understand.  Non-employee director compensation is typically reviewed once per year to assess whether any adjustment is needed to further such goals.  The Board of Directors has not used outside consultants in setting non-employee director compensation.

Director Fees

In fiscal 2008, non-employee directors received a $26,000 annual retainer paid in quarterly installments, and $2,800  for each meeting attended in person.  Directors do not receive any compensation for telephonic meetings of the Board of
  1 The Report of the Audit Committee is not “soliciting” material and is not deemed “filed” with the Securities and Exchange Commission, and is not incorporated by reference into any filings of Microchip under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date of this proxy statement and irrespective of any general incorporation language contained in such filings.

 
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Directors or for meetings of committees of the Board.  In fiscal 2008, the Chairman of the Audit Committee received an annual retainer of $3,250 paid in quarterly installments.  In fiscal 2008, the Co-Chair of the Audit Committee, the Chair of the Compensation Committee, and the Chair of the Nomination and Governance Committee each received an annual retainer of $1,600 paid in quarterly installments.

Equity Compensation

Under the terms of our current 2004 Equity Incentive Plan, each non-employee director is automatically granted:

 
·
an option to purchase 12,000 shares of common stock upon his or her first election to the Board of Directors, and
 
 
·
an option to purchase 6,000 shares of common stock on the date of the Company’s annual stockholders meeting, provided that he or she has served as a non-employee director for at least three months on that date and has been elected by the stockholders to serve as a member of the Board at that annual meeting.

On August 17, 2007, each of Mr. Chapman, Mr. Day, Mr. Hugo-Martinez and Mr. Meyercord was granted an option to acquire 6,000 shares of common stock at an exercise price of $37.84 per share.  Each such option vests in 12 equal and successive monthly installments following the grant date.

The following table details the total compensation for Microchip’s non-employee directors for fiscal 2008.

DIRECTOR COMPENSATION

Name
 
Fees Earned or Paid
in Cash
   
Stock
Awards
   
Option
Awards (1)
   
Non-Equity Incentive Plan Compensation
   
All Other Compensation
   
Total
 
Steve Sanghi (2)
  $ ---     $ ---     $ ---     $ ---     $ ---     $ ---  
Matthew W. Chapman (3)
    40,450       ---       66,483       ---       ---       106,933  
L.B. Day (4)
    38,800       ---       66,483       ---       ---       105,283  
Albert J. Hugo-Martinez (5)
    38,800       ---       66,483       ---       ---       105,283  
Wade Meyercord (6)
    38,800       ---       66,483       ---       ---       105,283  
__________________
(1)
The amounts shown in the column labeled Option Awards represent the amount of compensation cost we recognized in fiscal 2008, in accordance with Statement of Financial Accounting Standards No. 123, as revised, “Share-Based Payment” (“SFAS No. 123R”) and thus may include amounts from awards granted in and prior to fiscal 2008.  This includes amounts related to the annual stock option grants of 6,000 shares of common stock on August 17, 2007 at an exercise price per share of $37.84.  The grant date fair value of such equity award made to each of the non-employee directors on August 17, 2007 is $73,033.  The annual stock option awards were made pursuant to our 2004 Equity Incentive Plan.  Each option vests in 12 equal and successive monthly installments following the grant date.  For information on the valuation assumptions made with respect to the foregoing option grants, please refer to the assumptions for fiscal years ended March 31, 2008, and 2007 stated in Note 14, “Equity Incentive Plans” to Microchip’s audited financial statement for the fiscal year ended March 31, 2008, included in Microchip’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 28, 2008.
(2)
Mr. Sanghi, our Chairman of the Board, President and Chief Executive Officer, does not receive any additional compensation for his services as a member of the Board of Directors.
(3)
As of March 31, 2008, Matt Chapman had 52,750 options outstanding, of which 50,250 were exercisable.
(4)
As of March 31, 2008, L.B. Day had 49,500 options outstanding, of which 47,000 were exercisable.
(5)
As of March 31, 2008, Albert Hugo-Martinez had 57,750 options outstanding, of which 55,250 were exercisable.
(6)
As of March 31, 2008, Wade Meyercord had 45,500 options outstanding, of which 43,000 were exercisable.

Compensation Committee Interlocks and Insider Participation

In fiscal 2008, Mr. Day and Mr. Hugo-Martinez, two of our independent directors, served on the Compensation Committee.  Neither Mr. Day nor Mr. Hugo-Martinez had any related-party transaction with Microchip during fiscal 2008 other than service as a director.  In addition, neither of such directors has a relationship which would constitute a compensation committee interlock under applicable SEC rules.

 
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Further, during the most recent fiscal year, no Microchip executive officer served on the compensation committee (or equivalent) or the board of directors, of another entity whose executive officer(s) served either on Microchip’s Compensation Committee or Board of Directors.

CERTAIN TRANSACTIONS

During fiscal 2008, Microchip had no related-party transactions within the meaning of the applicable SEC rules.

Pursuant to its charter, the Audit Committee reviews issues involving potential conflicts of interest and reviews and approves all related-party transactions as contemplated by NASDAQ and SEC rules and regulations.  The Audit Committee may consult with the Board of Directors regarding certain conflict of interest matters that do not involve a member of the Board.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) and related rules under the Securities Exchange Act of 1934 require our directors, executive officers and stockholders holding more than 10% of our common stock to file reports of holdings and transactions in Microchip stock with the SEC and to furnish us with copies of all Section 16(a) forms they file.  Based solely on our review of the copies of such forms received by us during fiscal 2008, and written representations from our directors and executive officers that no other reports were required, we believe that all Section 16(a) filing requirements applicable to our directors, executive officers and stockholders holding more than 10% of our common stock were met for fiscal 2008.
 


PROPOSAL ONE

ELECTION OF DIRECTORS
 


A board of five directors will be elected at the annual meeting.  Unless proxy cards are otherwise marked, the persons named in the proxy card will vote such proxy for the election of the nominees named below.  Each of the nominees is currently serving as a director and has agreed to continue serving if re-elected.  If any of the nominees becomes unable or declines to serve as a director at the time of the annual meeting, the persons named in the proxy card will vote such proxy for any nominee designated by the current Board of Directors to fill the vacancy.  We do not expect that any of the nominees will be unable or will decline to serve as a director.

The term of office of each person who is elected as a director at the annual meeting will continue until the 2009 annual meeting of stockholders or until a successor has been elected and qualified.

The Board of Directors recommends that stockholders vote FOR the nominees listed below.

Information on Nominees for Director
(as of June 30, 2008)

Name
Age
Position(s) Held
Steve Sanghi
52
Chairman, President and CEO
Albert J. Hugo-Martinez
62
Director
L.B. Day
63
Director
Matthew W. Chapman
57
Director
Wade F. Meyercord
67
Director

Steve Sanghi is currently, and has been since August 1990, a director and President of Microchip Technology Incorporated.  Since October 1991, he has served as CEO of Microchip, and since October 1993, as Chairman of the Board of Directors.  Since May 2004, he has been a member of the Board of Directors of Xyratex Ltd., a storage and network technology company.  In September 2004, Mr. Sanghi was appointed to the Board of Trustees of Kettering University in Flint, Michigan.  In May 2007, Mr. Sanghi was appointed to the Board of Directors of FIRST Organization, a not-for-profit public charity founded in 1989 to develop young people’s interest in science and technology.

 
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Albert J. Hugo-Martinez has served as a director of Microchip since October 1990.  Since February 2000, he has served as CEO of Hugo-Martinez Associates, a consulting and advisory firm.  During 2007, he became Chairman of two companies he co-founded, HVVi Semiconductors, Inc., which is developing a CMOS High Voltage/Frequency RF transistor and also PCN Technology, Inc., which has developed software and hardware which transceives data, audio and video over power lines.  In June 2007, Mr. Hugo-Martinez became a member of the Board of Directors of Lynguent, Inc., a supplier of integrated analog and mixed-signal design development products.  In his career, Mr. Hugo-Martinez has served as Chief Operating Officer of Burr-Brown Corp., Sr. Vice President and General Manager at TRW, and Chief Executive Officer of Applied Micro Circuits Corporation and GTI Corporation.  He has previously served on the public company boards of Amkor Technology, Inc., ON Semiconductor Corp. and as Chairman of Ramtron International Corporation.

L.B. Day has served as a director of Microchip since December 1994.  Mr. Day serves as President of L.B. Day & Company, Inc., a consulting firm whose parent company he co-founded in 1977, which provides strategic planning, strategic marketing and organization design services to the elite of the high-technology world.  He also serves on the Board of Advisors of Willamette University’s Atkinson Graduate School of Management.  In September 2006, he became a member of the Board of Directors of Lynguent, Inc., a supplier of integrated analog and mixed-signal design development products.

Matthew W. Chapman has served as a director of Microchip since May 1997.  Since December 2006, he has served as President and CEO of Northwest Evaluation Association, an education service organization providing computer adaptive testing for millions of students throughout the United States.  From January 2002 to February 2006, he served as President and CEO of Centrisoft Corporation, a software provider for application performance management.  From August 2000 to January 2002, Mr. Chapman served as an advisor to early-stage technology companies in connection with developing business plans and securing funding.  From 1988 until August 2000 he served as CEO, and from 1991 until August 2000 as Chairman of Concentrex Incorporated, a supplier of integrated software solutions and services to financial institutions throughout the United States.

Wade F. Meyercord has served as a director of Microchip since June 1999.  Since October 2002, he has served as President of Meyercord & Associates, Inc., a management consulting firm specializing in high technology company compensation matters (CEO, executive officer and board) and in stock plan consulting, a position he previously held part time beginning in 1987.  From June 1999 to October 2002, Mr. Meyercord served as Senior Vice President and CFO of Rioport.com, an Internet applications service provider for the music industry.  Mr. Meyercord served as a member of the Board of Directors of Magma Design Automation, Inc. from January 2004 to June 2005.  Mr. Meyercord has been a member of the Board of Directors of California Micro Devices Corporation since January 1993 and of Endwave Corporation since March 2004.
 



PROPOSAL TWO

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

 
The Audit Committee of our Board of Directors has appointed Ernst & Young LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending March 31, 2009.  Ernst & Young LLP has audited our financial statements since the fiscal year ended March 31, 2002 and has served as our independent registered public accounting firm since June 2001.  The partner in charge of our audit is rotated every five years.  Other partners and non-partner personnel are rotated on a periodic basis.

We anticipate that a representative of Ernst & Young LLP will be present at the annual meeting, will have the opportunity to make a statement if he or she desires and will be available to respond to appropriate questions.  Stockholder ratification of the appointment of Ernst & Young LLP is not required by our Bylaws or applicable law.  However, our Board of Directors chose to submit such appointment to our stockholders for ratification.  In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection.

Upon the recommendation of our Audit Committee, the Board of Directors recommends that stockholders vote FOR ratification of such appointment.


 
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Fees Paid to Independent Registered Public Accounting Firm

Audit Fees

This category includes fees associated with our annual audit, the reviews of our quarterly reports on Form 10-Q, and statutory audits required internationally.  This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of our interim financial statements, statutory audits and the assistance with review of our SEC registration statements.  This category also included fees associated with the audit of our internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002.  The aggregate fees billed or to be billed by Ernst & Young LLP in each of the last two fiscal years for such services were $1,188,000 for fiscal 2008 and $1,007,000 for fiscal 2007.  The majority of the increase in audit fees from fiscal 2007 to fiscal 2008 was related to fees associated with our $1.15 billion principal amount of 2.125% junior subordinated convertible debentures issued in December 2007.

Audit-Related Fees

This category includes fees associated with employee benefit plan audits, internal control reviews, accounting consultations and attestation services that are not required by statute or regulation.  The aggregate fees billed or to be billed by Ernst & Young LLP in each of the last two fiscal years for such services were $85,000 for fiscal 2008 and $54,000 for fiscal 2007.

Tax Fees

This category includes fees associated with tax return preparation, tax advice and tax planning.  The aggregate fees billed or to be billed by Ernst & Young LLP in each of the last two fiscal years for such services were $262,000 for fiscal 2008 and $306,000 for fiscal 2007.

All Other Fees

This category includes fees for support and advisory services not related to audit services or tax services.  There were no such fees in fiscal 2008 and $10,000 of such fees in fiscal 2007.

Our Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm.  These services may include audit services, audit-related services, tax services and other services.  The Audit Committee has adopted a policy for the pre-approval of services provided by our independent registered public accounting firm.  Under the policy, pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget or limit.  The Audit Committee may also pre-approve particular services on a case-by-case basis.  The Chairman of the Audit Committee has the delegated authority from the Audit Committee to pre-approve a specified level of services, and such pre-approvals are then communicated to the full Audit Committee at its next scheduled meeting.  During fiscal 2008, all audit and non-audit services rendered by Ernst & Young LLP were approved in accordance with our pre-approval policy.

Our Audit Committee has determined that the non-audit services rendered by Ernst & Young LLP during fiscal 2008 and fiscal 2007 were compatible with maintaining the independence of Ernst & Young LLP.



 
9

 

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning the beneficial ownership of our common stock as of May 23, 2008 for:  (a) each director, (b) our CEO, CFO and the three other most highly compensated executive officers named in the Summary Compensation Table, (c) all directors and executive officers as a group, and (d) each person who is known to us to own beneficially more than five percent of our common stock.  Except as otherwise indicated in the footnotes to this table, and subject to applicable community property laws and joint tenancies, the persons named in this table have sole voting and investment power with respect to all shares of common stock held by such person:

 
Name and Address of Beneficial Owner
 
Number of Shares Beneficially Owned (1)
   
Percent of
Common Stock (1)
 
Capital World Investors (2)
    18,746,000       10.1 %
Capital Research Global Investors (3)
    18,521,630       10.0 %
FMR Corp. (4)
    14,180,725       7.7 %
Steve Sanghi (5)
    5,661,792       3.0 %
Matthew W. Chapman (6)
    59,647       *  
L.B. Day (7)
    54,000       *  
Albert J. Hugo-Martinez (8)
    87,250       *  
David S. Lambert (9)
    471,104       *  
Mitchell R. Little (10)
    23,986       *  
Wade F. Meyercord (11)
    47,000       *  
Ganesh Moorthy (12)
    286,732       *  
Gordon W. Parnell (13)
    88,572       *  
All directors and executive officers as a group (11 people) (14)
    7,098,357       3.8 %
_________________________
 
 
*  Less than 1% of the outstanding shares of common stock.

(1)
For each individual and group included in the table, the number of shares beneficially owned includes shares of common stock issuable to the identified person pursuant to stock options and stock purchase rights that may be exercised within 60 days of May 23, 2008.  In calculating the percentage of ownership, share amounts which are subject to outstanding options are deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by such person but are not deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by any other stockholder.
(2)
Address is 333 South Hope Street, Los Angeles, CA 90071.  All information is based solely on the Schedule 13G filed by Capital World Investors dated February 11, 2008, with the exception of the percentage of common stock held which is based on shares outstanding at May 23, 2008.  Such Schedule 13G indicates that (i) Capital World Investors has sole power to dispose of and direct the disposition of the common stock, and (ii) Capital World Investors is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940 and is deemed to be the beneficial owner of 18,746,000 shares as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940, and (iii) The Income Fund of America, Inc., an investment company registered under the Investment Company Act of 1940, which is advised by Capital World Investors, is the beneficial owner of 14,128,000 of such shares.
(3)
Address is 333 South Hope Street, Los Angeles, CA 90071.  All information is based solely on the Schedule 13G filed by Capital Research Global Investors dated February 12, 2008, with the exception of the percentage of common stock held which is based on shares outstanding at May 23, 2008.  Such Schedule 13G indicates that (i) Capital Research Global Investors has sole power to dispose of and direct the disposition of the common stock, and (ii) Capital Research Global Investors is an investment adviser registered under Section 203 of the Investment Advisers Act of 1940 and is deemed to be the beneficial owner of 18,521,630 shares as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.
(4)
Address is 82 Devonshire Street, Boston, MA 02109.  All information is based solely on the Schedule 13G filed by FMR Corp. dated February 14, 2008, with the exception of the percentage of common stock held which is based on shares outstanding at May 23, 2008.  Such Schedule 13G indicates that (i) FMR Corp. has sole power to vote or direct the vote and to dispose of and direct the disposition of the common stock, (ii) FMR Corp. is the parent holding company of a group of investment management companies that hold investment power and, in some cases, voting power over the securities reported in the referenced Schedule 13G, and (iii) the number of shares owned by the investment management companies included 14,639 shares of Common Stock resulting from the assumed conversion of $500,000 principal amount of Microchip’s Convertible Subordinated Debentures (29.2793 shares of Common Stock for each $1,000 principal amount of debenture).

 
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(5)
Includes 1,703,601 shares issuable upon exercise of options and 3,927,244 shares held of record by Steve Sanghi and Maria T. Sanghi as trustees.
(6)
Includes 52,250 shares issuable upon exercise of options, 262 shares held in Testamentary Trust of Regan Chapman and 135 shares held by Mr. Chapman’s minor children.
(7)
Includes 49,000 shares issuable upon exercise of options.
(8)
Includes 57,250 shares issuable upon exercise of options and 30,000 shares held of record by Albert J. Hugo-Martinez and S. Gay Hugo-Martinez as trustees.
(9)
Includes 313,922 shares issuable upon exercise of options, 2,789 shares held by Mr. Lambert’s children, and 70,516 shares held by David S. Lambert and Carol Lambert as trustees.
(10)
Includes 17,003 shares issuable upon exercise of options.
(11)
Includes 45,000 shares issuable upon exercise of options and 2,000 shares held of record by Wade Meyercord and Phyllis Meyercord as trustees.
(12)
Includes 263,160 shares issuable upon exercise of options and 21,865 shares held of record by Ganesh Moorthy and Hema Moorthy as trustees.
(13)
Includes 80,308 shares issuable upon exercise of options and 5,534 shares held of record by Gordon W. Parnell and Jeanette Parnell as trustees.
(14)
Includes an aggregate of 2,815,884 shares issuable upon exercise of options.
 

 

EXECUTIVE COMPENSATION


COMPENSATION DISCUSSION AND ANALYSIS


Overview of the Compensation Program

The Compensation Committee of the Board of Directors, presently comprised of Mr. Day and Mr. Meyercord, reviews the performance of our executive officers and makes compensation decisions regarding our executive officers.  Our policies for setting compensation for each of our named executive officers (CEO, CFO, and three most highly paid executive officers) are the same as those for the rest of our executive officers.  Our compensation program is a comprehensive package designed to motivate the executive officers to achieve our corporate objectives and is intended to be competitive and allow us to attract and retain highly qualified executive officers.  In general, the types of compensation and benefits provided to our executive officers are similar to those provided to most other Microchip employees, and include salary, cash bonuses, restricted stock units (RSUs), and other benefits described below.

Our Executive Compensation Policy and Objectives

Our compensation policy for executive officers, including our named executive officers, and key employees is based on a “pay-for-performance” philosophy.  This “pay-for-performance” philosophy emphasizes variable compensation, primarily by placing a large portion of pay at risk.  We believe that this philosophy meets the following objectives:

 
·
rewards performance that may contribute to increased stockholder value,
 
·
attracts, retains, motivates and rewards individuals with competitive compensation opportunities,
 
·
aligns an executive officer’s total compensation with our business objectives,
 
·
fosters a team environment among our management that focuses their energy on achieving our financial and business objectives consistent with Microchip’s “guiding values,”
 
·
balances short-term and long-term strategic goals, and
 
·
builds and encourages ownership of our common stock.

Decisions regarding cash and equity compensation also include subjective determinations and consideration of various factors with the weight given to a particular factor varying from time to time and in various individual cases, such as an executive officer’s experience in the industry and the perceived value of the executive officer’s position to Microchip as a whole.

 
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We believe that the overall compensation levels for our executive officers, including our named executive officers,  in fiscal 2008 were consistent with our “pay-for-performance” philosophy and are commensurate with our fiscal 2008 performance.

Executive Compensation Process

On an annual basis, the Compensation Committee evaluates and establishes the compensation of the executive officers, including the named executive officers.  The Compensation Committee seeks input from Mr. Sanghi when discussing the performance of, and compensation levels for, the executive officers other than his own.  Mr. Sanghi does not participate in deliberations relating to his own compensation.

The Compensation Committee designs our executive compensation program to be competitive with those of other companies in the semiconductor or related industries that are similar to us in number of employees, revenue and capitalization.  The Compensation Committee determines appropriate levels of compensation for each executive officer based on their level of responsibility within the organization, performance, and overall contribution.  After such determination, the Compensation Committee makes allocations between long-term and short-term as well as cash and non-cash elements of compensation.  Microchip’s financial and business objectives, the salaries of executive officers in similar positions with comparable companies and individual performance are considered in making these determinations.  If compensation information is reviewed for other companies, it is obtained from published materials such as proxy statements, and information gathered from such companies directly.  We do not engage consultants to conduct such review process for us.

The executive officer compensation process begins with consideration of Microchip’s overall annual budget for employee compensation.  The Compensation Committee considers the budgeted salary data and individual executive officer salary increases are determined with the goal of keeping the average executive officer salary increase within the budgeted range for all other employees.  In setting annual salaries for executive officers, the Compensation Committee also considers relevant industry data but does not target any overall industry percentage level or peer group average.

Microchip’s annual budget is created as part of Microchip’s annual operating plan process under which business and financial objectives are initially developed by our executive officers, in conjunction with their respective operating units, and then discussed with and approved by our CEO.  These objectives are then reviewed by our Board of Directors and the Board sets the overall financial and business objectives for Microchip on which incentive compensation is based.

The Compensation Committee sets the compensation of our Chairman, CEO and President, Mr. Sanghi, in the same manner as each of our other executive officers.  In particular, the Compensation Committee considers Mr. Sanghi’s level of responsibility, performance, and overall contribution to the results of the organization.  The Compensation Committee also considers the compensation of CEOs of other companies in the semiconductor or related industries that are similar to us in number of employees, revenue and capitalization.  Mr. Sanghi participates in the same cash incentive, equity incentive and benefit programs as our other executive officers.  For example, his compensation is subject to the same performance metrics as our other executive officers under our Executive MICP and Discretionary MICP programs.  The Compensation Committee recognizes that Mr. Sanghi’s total compensation package is significantly higher than that of our other executive officers and the Committee believes this is appropriate in consideration of Mr. Sanghi's superior leadership of Microchip over a long period of time.  In particular, the Committee believes that Mr. Sanghi’s leadership has been key to the substantial revenue growth, strong market position and substantial increase in the market value of Microchip over the last 15 years.

For fiscal 2008, the Compensation Committee reviewed and approved the total compensation package of all of our executive officers, including the elements of compensation discussed below, and determined the amounts to be reasonable and competitive.

Elements of Compensation

Our executive compensation program is currently comprised of four major elements:

 
·
annual base salary,
 
·
incentive cash bonuses,
 
·
equity compensation, and
 
·
compensation and employee benefits generally available to all of our employees.
 
 
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The retirement benefits and other benefits offered to our executive officers are largely the same as those we provide to a broad base of employees.  While our executive officers’ level of participation in our management incentive compensation plans and equity incentive plans is typically higher than for our non-executive employees, based on the officers’ level of responsibility and industry experience, the plans in which our executive officers are eligible to participate are very similar to those for our other employees.  In accordance with Microchip’s compensation philosophy, we do not offer perquisites to our executive officers.  The Compensation Committee reviews each element of compensation separately and total compensation as a whole, other than those benefits which are available to all employees.  The Compensation Committee determines the appropriate mix of elements to meet our compensation objectives and ensure that we remain competitive with the compensation practices in our industry.

Although our executive officers are entitled to certain severance and change of control benefits (as described below), the Compensation Committee does not consider such benefits to be elements of compensation for purposes of annual compensation reviews because such benefits may never be paid.

Base Salaries.  We review the base salaries of our executive officers each year.  When setting base salaries, we review the business and financial objectives for Microchip as a whole, as well as the objectives for each of the individual officers relative to their respective areas of responsibility.  We may also consider the salaries of executive officers in similar positions with comparable companies in the semiconductor industry.  This review encompasses the objectives for both the immediately preceding fiscal year and the upcoming fiscal year.

After consideration of the factors described above, the base salaries for our named executive officers were increased by an average of approximately 4.7% in May 2007 compared to the prior fiscal year.  Our CEO’s base salary increased by approximately 3.4% in May 2007 compared to the prior fiscal year.  These increases were in line with the budget for salary increases for our U.S. employee base which was 5.0%.

Incentive Cash Bonuses.  Quarterly incentive cash bonuses are payable to executive officers and key employees under our management incentive compensation plans.  Prior to August 18, 2006, Microchip had a single management incentive compensation plan, referred to as the “MICP,” which both our executive officers and other management level employees participated.  In order to enable us to qualify the bonuses to executive officers for favorable tax treatment under Section 162(m) of the Code, in August 2006, we asked our stockholders to approve our Executive Management Incentive Compensation Plan, referred to as the “Executive MICP.”  The Executive MICP, along with the Discretionary Management Incentive Compensation Plan, referred to as the “Discretionary MICP,” became effective on August 18, 2006.  Our executive officers now participate in the Executive MICP and the Discretionary MICP, and do not receive bonuses under the original MICP which we continue to maintain for our other key employees.

The Compensation Committee sets performance goals which, if met, result in quarterly payments to key employees under the MICP, and quarterly payments to executive officers under the Executive MICP and Discretionary MICP.  The Committee establishes performance goals which it believes are challenging, require a high level of performance and motivate participants to drive shareholder value, but which goals are expected to be achievable in the context of anticipated business conditions.  When setting the performance goals, the Committee places more emphasis on the overall expected financial performance of the Company rather than on the achievement of any one individual goal.  The Committee believes that this focus on the overall payout incentivizes outstanding performance across the corporation and drives the overall financial success of the corporation.   The Committee also uses the Discretionary MICP to help achieve the overall objectives of the performance bonus program.

In fiscal 2008, the quarterly payments under the Executive MICP for our named executive officers were targeted at an aggregate of approximately $305,000 for all such officers as a group.  The aggregate budgeted bonus pool under the various management incentive compensation plans is calculated by multiplying the eligible executive officer’s bonus target percentage by his or her base salary.  Actual payments under the various management incentive plans are predicated on Microchip’s quarterly operating results and, with respect to the Discretionary MICP, a subjective element.  Cash bonuses under the Executive MICP are subject to a maximum award of $2,500,000 per individual on an annual basis; however, all awards to date have been substantially less than such maximum amount.


 
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In fiscal 2008, the following business and financial areas were selected as the basis for calculating bonuses under our management incentive compensation plans:
 
 
   
Target Quarterly Measurement
   
Target %
of Bonus
 
Total sequential revenue growth
    5.00 %     10.00 %
16-bit sequential revenue growth
    40.00 %     5.00 %
Analog sequential revenue growth
    8.00 %     5.00 %
Gross margin percentage (GAAP, non-GAAP)
    57.35%, 58.00 %     15.00 %
Operating expenses as a percentage of sales (GAAP, non-GAAP)
    26.40%, 24.00 %     15.00 %
Operating income as a percentage of sales (GAAP, non-GAAP)
    27.00%, 30.00 %     15.00 %
Earnings per share (quarterly)
    (1 )     15.00 %
Discretionary MICP
 
Discretionary
      20.00 %

(1)
The EMICP quarterly earnings per share (EPS) targets for fiscal 2008 were $0.39 (non-GAAP), $0.37 (GAAP), $0.35 (non-GAAP), and $0.42 (non-GAAP) for the first through fourth quarters, respectively.  EPS targets are set each quarter by the Compensation Committee and may be based on either GAAP or non-GAAP financial results at the discretion of the Compensation Committee.  The Compensation Committee often chooses to use non-GAAP information when setting the targets because it believes such targets are more useful in understanding our operating results due to the exclusion of non-cash and other special charges.

Consistent with our “pay-for-performance” philosophy, our CEO and executive officers received bonuses under the Executive MICP and Discretionary MICP for each quarter of fiscal 2008.  In fiscal 2008, the actual quarterly combined payout percentages for the Executive MICP and Discretionary MICP were 70%, 45%, 65%, and 101% for the first through fourth quarters, respectively.  For fiscal 2008, these bonus payments for named executive officers other than our CEO ranged, on an aggregate basis for each officer, from $70,034 to $95,193.  In fiscal 2008, Mr. Sanghi earned an Executive MICP bonus of $697,312, and a Discretionary MICP bonus of $54,183.  The differences in the levels of compensation under these programs for the various executive officers are based upon their relative contribution, performance, and responsibility level within the organization.

Equity Compensation.  Equity compensation, such as RSUs, constitutes a significant portion of our incentive compensation program because we believe that executive officers and key employees should hold a long-term equity stake in Microchip to align their collective interests with the interests of our stockholders.  In fiscal 2008, equity grants in the form of RSUs were a significant portion of our executive officers’ total compensation package.

We typically make equity compensation grants to executive officers and key employees in connection with their initial employment, and we also typically make quarterly evergreen grants of equity to incentivize employees on a continuing basis as their initial equity awards vest.  In setting the amount of the equity compensation grants, the estimated value of the grants is considered, as well as the intrinsic value of the outstanding equity compensation held by the executive officer, both the unvested retention value and the vested amount. In setting these amounts and any performance goals, the Committee uses its judgment after considering the effect of the overall RSU amounts and the percentage of RSUs granted to executive officers would have on the overall financial results and performance of the corporation.

The quarterly evergreen grants of RSUs for fiscal 2008 were granted with vesting contingent upon meeting specified performance goals over identified periods.  In the first two quarters of fiscal 2008, these performance goals were related to gross margin and operating income to be achieved by the end of the associated quarter.  Specifically, for the first quarter of fiscal 2008, the goals were tied to achieving GAAP gross margin of $147 million, and GAAP operating income of $81 million by the end of the first quarter, and these goals were achieved.  For the second quarter of fiscal 2008, the goals were tied to achieving GAAP gross margin of $151 million, and GAAP operating income of $83.5 million as measured at the end of the second fiscal quarter.  The GAAP gross margin actual results were $154.7 million, achieving the target level, however the GAAP operating income actual results were $82.4 million, which did not achieve the target level.  As both goals were not met, the performance measures for the second quarter of fiscal 2008 were not achieved and the related RSUs were not earned.  In the third and fourth quarters of fiscal 2008, performance goals were related to operating income to be achieved over six-month periods.  For the third and fourth quarters of fiscal 2008, the performance goals were based on non-GAAP operating profit of $177 million and $183 million, respectively.  In order for the RSU grants to meet the performance goals, the Company results need to be at or

 
14

 

above the target for the applicable period.  If the performance goals are not achieved, then each $3 million reduction in actual operating profit will result in a reduction of the RSUs earned by 10%.  The goal for the third quarter of fiscal 2008 was achieved.  With respect to RSUs granted in the fourth quarter of fiscal 2008, achievement of these performance goals will be measured at the close of the first quarter of fiscal 2009.

RSU grants may also be made in connection with promotions, other changes in responsibilities or in recognition of other individual or Microchip developments or achievements.  Our RSUs granted in fiscal 2008 typically were scheduled to vest approximately four years from the grant date.  The RSUs were awarded without a purchase price and therefore have immediate value to recipients upon vesting.  On March 31, 2008, approximately 57% of our employees worldwide held RSUs or options to purchase our common stock.  Since the middle of fiscal 2006, RSUs have been the principal equity compensation vehicle for Microchip executive officers and key employees.

In granting equity compensation awards to executive officers, we consider numerous factors, including:

 
·
the individual’s position and responsibilities,
 
·
the individual’s future potential to influence our mid- and long-term growth,
 
·
the vesting schedule of the awards, and
 
·
the number and value of awards previously granted.

We do not separately target the equity element of our executive officer compensation programs at a specific percentage of overall compensation.  However, overall total compensation is structured to be competitive so that we can attract and retain executive officers.  In setting equity award levels, we also take into consideration the impact of the equity-based awards on the dilution of our stockholders’ interests in our common stock.

Historically, the Compensation Committee had granted RSUs to executive officers and current employees once per year near the start of the fiscal year.  In fiscal 2008, the Compensation Committee moved from annual grants to a quarterly grant program in order to more evenly record its stock-based compensation expense.  RSU grants to new employees are made once per month by the Employee Committee at a meeting of such committee.  Microchip does not have any program, plan or practice to time RSU grants in coordination with the release of material non-public information.  Microchip does not time, nor do we plan to time, the release of material non-public information for the purposes of affecting the value of executive compensation.  Our 2004 Incentive Plan provides that the value of RSUs be the market closing price of our stock on the grant date.

See the table under “Grants of Plan-Based Awards for Fiscal Year Ended March 31, 2008” at page 21 for information regarding RSUs granted during fiscal 2008 to our named executive officers.

Stock Ownership Guidelines For Key Employees And Directors

To help ensure alignment of the interests of our management and Board of Directors with those of our stockholders, we have put in place a stock holding policy that applies to each member of our management and Board of Directors.  This policy was proposed by our Nominating and Governance Committee and ratified by our Board of Directors at its October 24, 2003 meeting.  Under this policy, effective April 1, 2004, each of our directors, executive officers, vice presidents and internal director-level employees must maintain a specified minimum level of ownership of our stock during their tenure in their respective office or position.  During fiscal 2008, all persons subject to this policy were in compliance with its terms.

Microchip does not permit executive officers to speculate in Microchip stock, which includes a prohibition on short selling, buying and selling options (including writing covered calls) or hedging or any type of arrangement that has a similar economic effect.

Other Compensation and Employee Benefits Generally Available to All Employees.  We maintain compensation and employee benefits that are generally available to all Microchip employees, including:
 

 
·
our employee stock purchase plan,
 
·
medical, dental, vision, employee assistance program, flexible spending, and short- and long-term disability insurance, accidental death and dismemberment insurance,
 
·
life insurance benefits,
 
·
a 401(k) retirement savings plan,
 
·
an employee cash bonus plan, and
 
·
vacation and paid time off.

 
15

 
These forms of compensation are not independently evaluated by the Compensation Committee in connection with the annual determination of executive officer compensation.

Employee Stock Purchase Plan.  Our 2001 Employee Stock Purchase Plan is a Section 423 qualified employee stock purchase plan that allows all U.S. employees the opportunity to purchase our common stock through payroll deduction at 85% of the fair market value at the lower of the price as of the opening of the two-year offering period or at the end of any six-month purchase period.  Our international employees have the ability to participate in the 1997 International Employee Stock Purchase Plan that allows them the opportunity to purchase our common stock through payroll deduction at 85% of the fair market value at the lower of the price as of the opening or the end of any six-month offering period.

Medical, Dental, Vision, Employee Assistance Program, Flexible Spending, and Disability Coverage.  We make medical, dental, vision, employee assistance program, flexible spending, and disability coverage available to all of our U.S. employees through our active benefit plans.  Under these generally available plans, our named executives officers are eligible to receive between $1,000 and $7,500 per month in long-term disability coverage depending on which plan they elect.  Short-term disability coverage is provided which allows for 100% of base salary to be paid for six months in the event of disability.  Accidental death and dismemberment insurance with a benefit of one times the executive’s annual salary is provided by Microchip. Since all of our U.S. employees participate in this plan on a non-discriminatory basis, the value of these benefits to our named executive officers is not required to be included in the Summary Compensation Table on page 19 pursuant to SEC rules and regulations.

Life Insurance.  In fiscal 2008, we provided life insurance coverage to our named executive officers in the amount up to one and a half times the executive’s annual salary (up to a maximum of $500,000).  The named executive officers may purchase supplemental life insurance at their own expense.

401(k).  We maintain a 401(k) plan for the benefit of all of our U.S. employees in order to allow our employees to save for retirement.  We contribute to our 401(k) plan each year based on our profitability during the year, subject to maximum contributions and other rules prescribed by Federal law governing such plans.  Our named executive officers are permitted to participate in the plans to the same extent as our other U.S. employees.

Employee Cash Bonus Plan.  All of our employees worldwide participate in our Employee Cash Bonus Plan.  The cash bonus plan can award each eligible employee with a target of two and one-half days of pay, calculated on base salary, every quarter, if certain operating profitability objectives are achieved.  The pay-out is adjusted based on actual quarterly operating results.  During fiscal 2008, bonus awards were paid out under such plan for each quarterly period at an average of 37.5% of the target.  Under such program, for fiscal 2008, our named executive officers received payments ranging from $3,195 to $7,714.

Vacation and Paid Time-Off Benefits.  We also provide vacation and other paid holidays to all of our employees, including our named executive officers.  We believe our vacation and holidays are comparable to others in the industry.

Non-Qualified Deferred Compensation Plan.  We also maintain a non-qualified deferred compensation plan for certain employees, including our named executive officers, who receive compensation in excess of the 401(k) contribution limits imposed under the Internal Revenue Code and desire to defer more compensation than they would otherwise be permitted under a tax-qualified retirement plan, such as our 401(k) plan.  Microchip does not make contributions to this non-qualified deferred compensation plan. This plan allows our executive officers to make pre-tax contributions to this plan which would be fully taxed to the executive officers after the executive officer’s termination of employment with Microchip.

We do not have pension plans or other retirement plans for our named executive officers or our other U.S. employees.

Employment Contracts, Termination of Employment and Change of Control Arrangements

We do not have employment contracts with our CEO, CFO or any of our executive officers, nor agreements to pay severance on involuntary termination (other than as stated in the change of control agreements below) or upon retirement.

 
16

 

Our CEO, CFO, and our executive officers have entered into change of control agreements with us.  These agreements were designed to help ensure the continued services of our key executive officers in the event that a change of control of the company is effected, and to assist our key executive officers in transitioning from the company if as a result of a change of control, they lose their positions.  We believe that the benefits provided by these agreements help to ensure that our management team will be incentivized to remain employed with Microchip during a change of control.  Capitalized terms used herein and not defined shall have the meanings set forth in the change of control agreements.  Additionally, our 2004 Equity Incentive Plan has a change of control provision which provides that any successor company shall assume each outstanding award or provide an equivalent substitute award; however, if the successor fails to do so, vesting of awards shall accelerate.  In putting the change of control agreements in place, the Compensation Committee considered prevalent market practices in determining the severance amounts and the basis for selecting the events triggering payment in the agreements.

With respect to our CEO, CFO and Vice President of Worldwide Sales, if the executive officer’s employment terminates for reasons other than Cause within the Change of Control Period, the executive officer will be entitled to receive severance benefits consisting of the following primary components:

 
·
a one-time payment of his base salary in effect immediately prior to the Change of Control or termination date, whichever is greater, for the following periods: (1) in the case of the CEO, two years; (2) in the case of the CFO and the Vice President of Worldwide Sales, one year; and
 
 
·
a one-time payment of his bonuses for which he was or would have been eligible in the year in which the Change of Control occurred or for the year in which termination occurred, whichever is greater, for the following periods: (1) in the case of the CEO, two years; (2) in the case of the CFO and the Vice President of Worldwide Sales, one year; and
 
 
·
a continuation of medical and dental benefits (subject to any required employee contributions) for the following periods: (1) in the case of the CEO and the CFO, two years; (2) in the case of the Vice President of Worldwide Sales, one year; provided in each case that such benefits would cease sooner if and when the executive officer becomes covered by the plans of another employer; and
 
 
·
a payment to cover any excise tax that may be due under Section 4999 of the Code, if the payments provided for in the change of control agreement constitute “parachute payments” under Section 280G of the Code and the value of such payments is more than three times the executive officer’s “base amount” as defined by Section 280G(b)(3) of the Code.
 
With respect to our CEO, the CFO and the Vice President of Worldwide Sales, immediately prior to a Change of Control (regardless of whether the executive officer’s employment terminates), all equity compensation held by the executive officer shall become fully vested.
 
With respect to our executive officers other than the CEO, the CFO and the Vice President of Worldwide Sales, if the executive officer terminates his employment for Good Reason, or the executive’s employment is terminated for reasons other than Cause within the Change of Control Period, the executive officer will be entitled to receive severance benefits consisting of the following primary components:
 
 
·
a one-time payment of his base salary in effect immediately prior to the Change of Control or termination date, whichever is greater, for one year; and
 
 
·
a one-time payment of his bonuses for which he was or would have been eligible in the year in which the Change of Control occurred or for the year in which termination occurred, whichever is greater, for one year; and
 
 
·
a continuation of medical and dental benefits (subject to any required employee contributions) for one year (provided in each case that such benefits would cease sooner if and when the executive officer becomes covered by the plans of another employer); and
 
 
·
a payment to cover any excise tax that may be due under Section 4999 of the Code, if the payments provided for in the change of control agreement constitute “parachute payments” under Section 280G of the Code and the value of such payments is more that three times the executive officer’s “base amount” as defined by Section 280G(b)(3) of the Code.

 
17

 
 
With respect to our executive officers other than the CEO, the CFO and the Vice President of Worldwide Sales, immediately upon termination during the Change of Control Period other than for Cause, all equity compensation held by the executive officer shall become fully vested.

The following table sets forth the aggregate dollar value of payments, to the extent calculable, in the event of a termination of a named executive officer on March 31, 2008, the last business day of our last completed fiscal year.

Name
 
Salary
   
Bonus
   
Equity
Compensation Due to
Accelerated Vesting
   
Tax Gross-up
on Change of
Control (3)
 
Continuation
of Certain
Benefits (4)
Steve Sanghi (1)
  $ 1,069,744     $ 2,180,632     $ 8,816,416     $ ---  
2 years
Ganesh Moorthy (2)
    246,735       145,194       2,512,624       1,281,038  
1 year
Mitchell R. Little (2)
    254,120       126,669       1,943,964       ---  
1 year
David S. Lambert (2)
    221,541       108,214       1,595,619       ---  
1 year
Gordon W. Parnell (2)
    232,665       113,648       1,083,273       ---  
2 years
__________________
(1)
The change of control payment includes an amount equal to twice the annual salary of the executive plus a bonus equal to two times the targeted annual amount payable to such executive under our management incentive compensation plans and employee cash bonus plan.
(2)
The change of control payment includes an amount equal to one times the annual salary of the executive plus a bonus equal to the targeted annual amounts payable to such executive under our management incentive compensation plans and employee cash bonus plan.
(3)
This payment covers any excise tax that may be payable under Section 4999 of the Code if the payments provided for under the change of control agreement constitute “parachute payments” under section 280G of the Code and the value of the payments is more than three times the executive officer’s “base amount” as defined by Section 280G(b)(3) of the Code.
(4)
Benefits continued under the change of control agreements are limited to company-paid medical, dental, vision and life insurance coverage at the same level of coverage the executive was provided immediately prior to termination of employment with Microchip.  Amounts are not determinable at this time and are dependent on each executive officer’s individual circumstances.

Performance-Based Compensation and Financial Restatement

To date, Microchip has not experienced a financial restatement and has not considered or implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to its executive officers and other employees where such payments were predicated upon the achievement of certain financial results that would subsequently be the subject of a restatement.

Tax Deductibility

Section 162(m) of the Code disallows a corporate income tax deduction for executive compensation paid to our named executive officers in excess of $1,000,000 per year, unless that income meets permitted exceptions.  In order to enhance our ability to obtain tax deductions for executive compensation, our stockholders approved the Executive MICP at our 2006 annual meeting.  This allows us to seek to have such compensation under our Executive MICP qualify as performance-based compensation under Section 162(m).  Additionally, our 2004 Equity Incentive Plan allows for the granting of performance-based awards such as RSUs.  To the extent that we grant awards with such performance-based limitations, we would expect them to qualify as performance-based awards for purposes of 162(m).

To maintain flexibility in compensating Microchip’s executive officers in a manner designed to promote varying corporate goals, it is not the policy of the Compensation Committee that executive compensation must be tax deductible.  We intend to review the deductibility of executive officer compensation from time to time to determine whether any additional actions are advisable to obtain deductibility.


 
18

 

Conclusion

We believe that our executive team provided outstanding service to Microchip in fiscal 2008.  We will work to assure that the executive compensation programs continue to meet Microchip’s strategic goals as well as the overall objectives of the compensation program.

Compensation Committee Report on Executive Compensation

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis of this proxy statement required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

By the Compensation Committee of the Board of Directors2:

L.B. Day (Chair)                                                                Wade Meyercord



Summary Compensation Table

The following table lists the annual compensation for our CEO, CFO and our three other most highly compensated executive officers (referred to as the “named executive officers”) in the fiscal year ended March 31, 2008:

Name and
Principal Position
 
Year
 
Salary(1)
 
Bonus(2)
 
Stock
Awards(3)
 
Option
Awards(4)
 
Non-Equity Incentive
Plan Compensation(5)
 
Change in Pension Value and Non-Qualified Deferred Compensation Earnings(6)
 
All
Other Compensation(7)
 
Total
 
Steve Sanghi,
President and CEO
 
2008
2007
  $
532,675 515,010
  $
7,714
28,467
  $
1,183,405 904,135
  $ 1,293,246 1,787,773   $ 751,495 1,167,276   $
---
---
  $
4,231
5,005
  $ 3,772,766 4,407,666  
Ganesh Moorthy,
Executive
Vice President
 
2008
2007
   
243,455 215,632
   
3,554
11,741
    330,637 243,322     338,018 422,967    
95,193 
134,866
   
---
---
   
3,827
4,152
    1,014,684 1,032,680  
Mitchell R. Little,
Vice President, Worldwide Sales
and Applications
 
2008
2007
    252,625 241,808    
3,666
13,420
    271,018 207,179     222,517 256,258    
82,119
  125,844
   
---
---
   
3,123
3,896
    835,068 848,405  
David S. Lambert,
Vice President,
Fab Operations
 
2008
2007
    220,321 211,414    
3,196
11,733
    213,738 165,743     222,517 256,258    
70,035
  107,635
   
---
---
   
2,822
3,487
    732,629 756,270  
Gordon W. Parnell,
Vice President
and CFO
 
2008
2007
    231,384 222,030    
3,356
12,322
    211,036 153,904     204,359 238,150    
73,552
  113,039
   
---
---
   
3,088
3,791
    726,775 743,236  
__________________
 
(1)
Represents the base salary earned by each executive officer in the specified fiscal year.
(2)
Represents bonuses earned by each executive officer in the specified fiscal year under our Employee Cash Bonus Plan.
(3)
Represents the compensation cost recognized in our financial statements in the specified fiscal year under SFAS No. 123R related to RSUs for each executive officer and thus may include amounts from awards granted prior to the specified fiscal year. For information on the valuation assumptions made with respect to the RSU grants in fiscal 2008, please refer to the assumptions for  fiscal years ended March 31, 2008, 2007, and 2006 stated in Note 14, “Equity Incentive Plans” to Microchip’s audited financial statement for the fiscal year ended March 31, 2008. 
 


  2 The Compensation Committee Report on executive compensation is not “soliciting” material and is not deemed “filed” with the Securities and Exchange Commission, and is not incorporated by reference into any filings of Microchip under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.

 
19

 

(4)
Represents the compensation cost recognized in our financial statements in the specified fiscal year under SFAS No. 123R related to non-qualified stock options for each executive officer and thus may include amounts from awards granted prior to the specified fiscal year.  For information on the valuation assumptions made with respect to the foregoing option grants, please refer to the assumptions for fiscal years ended March 31, 2006, 2005 and 2004 stated in Note 15, “Equity Incentive Plans” to Microchip’s audited financial statement for the fiscal year ended March 31, 2006, included in Microchip’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 31, 2006.
(5)
Represents the aggregate amount of bonuses earned by each executive officer in the specified fiscal year under our MICP, Executive MICP and Discretionary MICP.  Each executive officer received the following payments under each of such plans in the specified fiscal year:

Named Executive Officer
 
Year
   
MICP
   
Executive
MICP
   
Discretionary
MICP
 
Steve Sanghi
   
2008
2007
    $
---
640,705
    $
697,312
419,804
    $
54,183
106,767
 
Ganesh Moorthy
   
2008
2007
     
---
72,063
     
88,330
50,069
     
6,863
12,734
 
Mitchell R. Little
   
2008
2007
     
---
69,074
     
76,198
 45,259
     
5,921
11,511
 
David S. Lambert
   
2008
2007
     
---
59,080
     
64,985
38,710
     
5,050
9,845
 
Gordon W. Parnell
   
2008
2007
     
---
62,046
     
68,249
40,654
     
5,303
10,339
 

(6)
The contributions under our non-qualified deferred compensation plan are invested at the discretion of the executive officer and there are no above-market or preferential earnings on such amounts made or provided by Microchip.
(7)
Consists of company-matching contributions to our 401(k) retirement savings plan and the full dollar value of premiums paid by Microchip for life insurance for the benefit of a named executive officer in the amounts shown below:

 
Named Executive Officer
 
Year
      401(k)     
Life Insurance
 
Steve Sanghi
   
2008
2007
    $
3,696
4,525
    $
535
480
 
Ganesh Moorthy
   
2008
2007
      3,306 3,738      
521
414
 
Mitchell R. Little
   
2008
2007
      2,590 3,431      
533
465
 
David S. Lambert
   
2008
2007
      2,350 3,081      
472
406
 
Gordon W. Parnell
   
2008
2007
      2,593 3,365      
495
426
 


 
20

 

Grants of Plan-Based Awards During Fiscal 2008

The following table sets forth information with respect to our Executive MICP, our Discretionary MICP, and our Employee Cash Bonus Plan, as well as RSUs made to our named executive officers under the 2004 Equity Incentive Plan, including the grant date fair value of the RSUs.  Amounts listed in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column are annual targets based on the salaries of the named executive officers at the end of fiscal 2008.  Actual payments for our bonus plans in fiscal 2008 are reflected in the Summary Compensation Table above.  Option awards in the table below were granted in fiscal 2008.

GRANTS OF PLAN-BASED AWARDS
For Fiscal Year Ended March 31, 2008

 
         
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
                         
Name
 
Grant
Date
   
Threshold
($)(1)
   
Target
($)
   
Maximum
($) (1)
   
All Other Stock Awards: Number of Shares of Stock or Units(#) (2)
   
All Other Option Awards: Number of Securities Underlying Options (#)
   
Exercise or Base Price of Option Awards ($/Sh)
   
Grant Date Fair Value of Stock
and Option Awards ($) (3)
 
Steve Sanghi
 
4/16/07
      ---       ---       ---       17,500       ---       ---       562,975  
   
7/2/07(4)
      ---       ---       ---       17,500       ---       ---       564,550  
   
11/2/07
      ---       ---       ---       32,778       ---       ---       899,428  
   
1/20/08
      ---       ---       ---       37,966       ---       ---       897,516  
      ---       ---       1,069,744 (5)     ---       ---       ---       ---       ---  
      ---       ---       20,572 (6)     ---       ---       ---       ---       ---  
Ganesh Moorthy
 
4/16/07
      ---       ---       ---       5,500       ---       ---       176,935  
   
7/2/07(4)
      ---       ---       ---       5,500       ---       ---       177,430  
   
11/2/07
      ---       ---       ---       10,302       ---       ---       282,687  
   
1/20/08
      ---       ---       ---       11,932       ---       ---       282,072  
      ---       ---       135,506 (5)     ---       ---       ---       ---       ---  
      ---       ---       9,476 (6)     ---       ---       ---       ---       ---  
Mitchell R. Little
 
4/16/07
      ---       ---       ---       4,000       ---       ---       128,680  
   
7/2/07(4)
      ---       ---       ---       4,000       ---       ---       129,040  
   
11/2/07
      ---       ---       ---       7,492       ---       ---       205,580  
   
1/20/08
      ---       ---       ---       8,678       ---       ---       205,148  
      ---       ---       116,895 (5)     ---       ---       ---       ---       ---  
      ---       ---       9,774 (6)     ---       ---       ---       ---       ---  
David S. Lambert
 
4/16/07
      ---       ---       ---       3,000       ---       ---       96,510  
   
7/2/07(4)
      ---       ---       ---       3,000       ---       ---       96,780  
   
11/2/07
      ---       ---       ---       5,619       ---       ---       154,185  
   
1/20/08
      ---       ---       ---       6,508       ---       ---       153,849  
      ---       ---       99,694 (5)     ---       ---       ---       ---       ---  
      ---       ---       8,521 (6)     ---       ---       ---       ---       ---  
Gordon W. Parnell
 
4/16/07
      ---       ---       ---       1,875       ---       ---       60,319  
      ---       ---       104,700 (5)     ---       ---       ---       ---       ---  
      ---       ---       8,949 (6)     ---       ---       ---       ---       ---  

_______________
 
(1)
Individual awards under our Executive MICP are made quarterly and are not stated in terms of a threshold or maximum amount for an award period.  The Executive MICP does provide that the maximum amount payable to any participant is $2.5 million for any fiscal year.
(2)
Represents RSUs granted under Microchip’s 2004 Equity Incentive Plan.
(3)
This column shows the full grant date fair value of RSU awards under SFAS No. 123R granted to the named executives under SFAS No. 123R in fiscal 2008.  Generally, the full grant date fair value is the amount that Microchip would expense in its financial statements over the award’s vesting schedule.
(4)
The vesting of this grant was subject to achievement of performance goals which were not fully met, therefore these grants will not vest.
(5)
This annual target represents the percentage of the executive officer’s base salary reflected in dollar terms targeted under Microchip’s management incentive compensation plans.
(6)
Microchip’s Employee Cash Bonus Plan annual target is based on 2.5 days of base salary per quarter, or two weeks of the executive officer’s annual base salary.


 
21

 

Summary Compensation Table and Grants of Plan-Based Awards Table Discussion

Based on the data stated in the Summary Compensation Table, the level of salary, bonus and non-equity incentive plan compensation in proportion to total compensation ranged from approximately 34% to 42% for the named executive officers in fiscal 2008.  See the “Compensation Discussion and Analysis” section of this proxy statement for further discussion of overall compensation and how compensation is determined.

We do not have employment contracts with our named executive officers, nor agreements to pay severance on involuntary termination (other than as stated in the change of control agreements discussed above under the heading “Employment Contracts, Termination of Employment and Change of Control Arrangements”) or retirement.

For a discussion of the material terms of the awards listed in the Grants of Plan-Based Awards Table, see our discussion of the equity awards and incentive cash bonuses in the “Compensation Discussion and Analysis” section of this proxy statement under the headings “Incentive Cash Bonus,” “Equity Compensation,” and “Cash Bonus Plan.”

Microchip has not repriced any stock options or made any material modifications to any equity-based awards during the last fiscal year.

 
OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR END
 
 
   
Option Awards
 
Stock Awards
 
Name
 
Number of Securities Underlying Unexercised Options (#) Exercisable
   
Number of Securities Underlying Unexercised Options (#)Unexercisable
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
   
Option Exercise Price ($)
 
Option
Expiration
Date
 
Number of Shares or
Units of
Stock that
Have Not
Vested (#)
   
Market
Value of
Shares or
Units of
Stock That Have Not
Vested (10) ($)
   
Equity Incentive Plan Awards: Number of Unearned
Shares, Units
or Other Rights that Have Not Vested (#)
   
Equity Incentive Plan Awards: Market or
Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
 
Steve Sanghi
    103,750 1     ---       ---       10.037  
04/14/2009
    ---       ---       ---       ---  
      247,500 1     ---       ---       23.389  
04/14/2010
    ---       ---       ---       ---  
      71,343 1     ---       ---       15.917  
04/02/2011
    ----       ---       ---       ---  
      165,000 1     ---       ---       15.917  
04/02/2011
    ---       ---       ---       ---  
      4,757 1     ---       ---       15.86  
06/01/2011
    ---       ---       ---       ---  
      26,457 1     ---       ---       24.267  
01/22/2012
    ---       ---       ---       ---  
      303,750 1     ---       ---       24.04  
10/25/2012
    ---       ---       ---       ---  
      58,541 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      2,602 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      135,000 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      70,249 1     ---       ---       26.14  
10/09/2013
    ---       ---       ---       ---  
      23,400 1     ---       ---       27.39  
10/24/2013
    ---       ---       ---       ---  
      ---       145,000 2     ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      10,000 1     ---       ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      145,000 1     ---       ---       26.25  
07/21/2014
    ---       ---       ---       ---  
      49,940 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      202,500 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      47,562 1     ---       ---       21.00  
08/01/2012
    ---       ---       ---       ---  
      ---       145,000 3     ---       25.29  
04/01/2015
    ---       ---       ---       ---  
                                        58,000 4   $ 1,898,340       ---       ---  
                                        65,000 5   $ 2,127,450       ---       ---  
                                        17,500 6   $  572,775       ---       ---  
                                        32,778 7   $ 1,072,824       ---       ---  
                                        37,966 8   $ 1,242,627       ---       ---  
 
 

 
22

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR END (cont’d)
 
   
Option Awards
 
Stock Awards
 
Name
 
Number of Securities Underlying Unexercised Options (#)    Exercisable
   
Number of Securities Underlying Unexercised Options (#)  Unexercisable
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
   
Option Exercise Price ($)
 
Option
Expiration
Date
 
Number of Shares or
Units of
Stock that
Have Not
Vested (#)
   
Market
Value of
Shares or
Units of
Stock That Have Not
Vested (10) ($)
   
Equity Incentive Plan Awards: Number of Unearned
Shares, Units
or Other Rights that Have Not Vested (#)
   
Equity Incentive Plan Awards: Market or
Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
 
Ganesh
Moorthy
    72,000 1     ---       ---       23.70  
12/03/2011
    ---       ---       ---       ---  
      26,000 1     ---       ---       24.04  
10/25/2012
    ---       ---       ---       ---  
      35,000 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      7,060 1     ---       ---       26.14  
10/09/2013
    ---       ---       ---       ---  
      ---       40,000 2     ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      5,000 1     ---       ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      25,000 1     ---       ---       26.25  
07/21/2014
    ---       ---       ---       ---  
      3,600 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      39,000 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      24,000 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      16,500 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      ---       40,000 3     ---       25.29  
04/01/2015
    ---       ---       ---       ---  
                                        16,000 4   $ 523,680       ---       ---  
                                        17,000 5   $ 556,410       ---       ---  
                                        5,500 6   $ 180,015       ---       ---  
                                        10,302 7   $ 337,184       ---       ---  
                                        11,932 8   $ 390,534       ---       ---  
Mitchell R. Little
    9,375 1     ---       ---       23.389  
04/14/2010
    ---       ---       ---       ---  
      6,500 1     ---       ---       24.04  
10/25/2012
    ---       ---       ---       ---  
      26,000 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      ---       28,000 2     ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      1,457 1     ---       ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      2,084 1     ---       ---       26.25  
07/21/2014
    ---       ---       ---       ---  
      ---       28,000 3     ---       25.29  
04/01/2015
    ---       ---       ---       ---  
                                        14,000 4   $ 458,220       ---       ---  
                                        14,000 5   $ 458,220       ---       ---  
                                        4,000 6   $ 130,920       ---       ---  
                                        7,492 7   $ 245,213       ---       ---  
                                        8,678 8   $ 284,031       ---       ---  
David S. Lambert
    20,284 1     ---       ---       10.037  
04/14/2009
    ---       ---       ---       ---  
      60,750 1     ---       ---       10.037  
04/14/2009
    ---       ---       ---       ---  
      3,837 1     ---       ---       5.778  
10/09/2008
    ---       ---       ---       ---  
      48,600 1     ---       ---       23.389  
04/14/2010
    ---       ---       ---       ---  
      7,740 1     ---       ---       15.917  
04/02/2011
    ---       ---       ---       ---  
      32,400 1     ---       ---       15.917  
04/02/2011
    ---       ---       ---       ---  
      1,935 1     ---       ---       15.86  
06/01/2011
    ---       ---       ---       ---  
      2,871 1     ---       ---       24.267  
01/22/2012
    ---       ---       ---       ---  
      26,000 1     ---       ---       24.04  
10/25/2012
    ---       ---       ---       ---  
      6,307 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      1,051 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      26,000 1     ---       ---       18.48  
04/09/2013
    ---       ---       ---       ---  
      7,568 1     ---       ---       26.14  
10/09/2013
    ---       ---       ---       ---  
      ---       28,000 2     ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      2,000 1     ---       ---       27.05  
04/01/2014
    ---       ---       ---       ---  
      10,000 1     ---       ---       26.25  
07/21/2014
    ---       ---       ---       ---  
      5,418 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      39,000 1     ---       ---       27.153  
04/03/2012
    ---       ---       ---       ---  
      5,160 1     ---       ---       21.00  
08/01/2012
    ---       ---       ---       ---  
      ---       28,000 3     ---       25.29  
04/01/2015
    ---       ---       ---       ---  
                                        11,200 4   $ 366,576       ---       ---  
                                        11,200 5   $ 366,576       ---       ---  
                                        3,000 6   $ 98,190       ---       ---  
                                        5,619 7   $ 183,910       ---       ---  
                                        6,508 8   $ 213,007       ---       ---  

 
23

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR END (cont’d)
 
 
   
Option Awards
 
Stock Awards
 
Name
 
Number of Securities Underlying Unexercised Options (#)  Exercisable
   
Number of Securities Underlying Unexercised Options (#)  Unexercisable
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
   
Option Exercise Price ($)
 
Option
Expiration
Date
 
Number of Shares or
Units of
Stock that
Have Not
Vested (#)
   
Market
Value of
Shares or
Units of
Stock That Have Not
Vested (10) ($)
   
Equity Incentive Plan Awards: Number of Unearned
Shares, Units
or Other Rights that Have Not Vested (#)
   
Equity Incentive Plan Awards: Market or
Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
 
Gordon W. Parnell
    8,550 1     ---       ---       24.861  
06/01/2010
    ---       ---       ---       ---  
      3,023 1     ---       ---       24.267  
01/22/2012