Edgar Filing: MICROCHIP TECHNOLOGY INC

def_14a.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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Microchip Technology Incorporated

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MICROCHIP TECHNOLOGY INCORPORATED

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

August 14, 2009

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 approve the amendment and restatement of our 2004 Equity Incentive Plan to (i) modify the automatic grant provisions with respect to equity compensation for non-employee directors to provide for annual awards of options and restricted stock units (“RSUs”), rather than just options, and to provide for a one-time award of RSUs to serve as a retention mechanism and (ii) revise the definition of “performance goals” for purposes of Section 162(m) of the Internal Revenue Code.

(3) To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2010.

(4) 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 18, 2009 are

DATE:

entitled to vote at the annual meeting.

ANNUAL

Microchip’s fiscal 2009 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 may 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.

Kim van Herk

Secretary

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting

of Stockholders to be Held on August 14, 2009

The Microchip Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended March 31, 2009 are available at www.microchip.com/annual_reports.

Chandler, Arizona

July 10, 2009

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 14, 2009, 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 2009 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 2009 refer to the 12-month period from April 1, 2008 through March 31, 2009, and references to fiscal 2008 refer to the 12-month period from April 1, 2007 through March 31, 2008.

We anticipate first mailing this proxy statement and accompanying form of proxy on July 10, 2009 to holders of Microchip’s common stock on June 18, 2009, 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 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.

Stockholders Entitled to Vote

Stockholders of record at the close of business on the Record Date, June 18, 2009, are entitled to notice of and to vote at the annual meeting. Each share is entitled to one vote on each of the five director nominees and one vote on each other matter properly brought before the annual meeting. On the Record Date, there were 182,929,088 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 14, 2009, 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. Proposal One and Proposal Three 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.

Amendment and Restatement of 2004 Equity Incentive Plan (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 to adopt the amendment and restatement of our 2004 Equity Incentive Plan described in Proposal Two. An abstention will have the same effect as voting against this proposal. Broker “non-votes” are not counted for purposes of approving the amendment and restatement of our 2004 Equity Incentive Plan, and thus will not affect the outcome of the voting on such proposal.

Ratification of Accounting Firm (Proposal Three)

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, 2010. 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 fiscal 2009 Annual Report are available at www.microchip.com/annual_reports.

We will post our future proxy statements and annual reports on Form 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.

THE BOARD OF DIRECTORS

Meetings of the Board of Directors

Our Board of Directors met seven times in fiscal 2009. During fiscal 2009, 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 6 of the 7 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 2009. 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 2009:

Membership on Board Committees in Fiscal 2009

Name	Audit	Compensation (1)	Nominating and Governance
Mr. Chapman	C		·
Mr. Day		C	·
Mr. Hugo-Martinez	·	·	·
Mr. Meyercord	·	·	C
Meetings held in fiscal 2009	8	7	1

C = Chair

· = Member

(1)

From April 1, 2008 through August 14, 2008, the Compensation Committee was comprised of Mr. Day (Chair) and

Mr. Meyercord.

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 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.

In fiscal 2005, our 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 section under Mission Statement/Corporate Governance on www.microchip.com.

Compensation Committee

Our 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 section under Mission Statement/Corporate Governance on www.microchip.com.

The Board of Directors has determined that the members of our 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 18.

Nominating and Governance Committee

Our Nominating and Governance Committee has the responsibility of ensuring that our Board is properly constituted to be able 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 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 2010 Annual Meeting of Stockholders; Discretionary Authority to Vote on Stockholder Proposals” at page 40. 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 2008 annual meeting of stockholders.

REPORT OF THE AUDIT COMMITTEE (1)

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 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 Rule 3526 of the Public Company Accounting Oversight Board (Communication with Audit Committees Concerning Independence) 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 2009 was compatible with maintaining the independence of Ernst & Young LLP.

We have reviewed and discussed with management the audited annual financial statements included in Microchip’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 and filed with the SEC, as well as the unaudited financial statements filed with Microchip’s 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 Microchip’s audited financial statements be included in Microchip’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 for filing with the SEC.

By the Audit Committee of the Board of Directors:

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

(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.

Director Fees

Effective November 3, 2008, non-employee directors receive an annual retainer of $28,500, paid in quarterly installments, $3,000 for each meeting attended in person and do not receive any additional amounts for serving as a committee chair. Also, directors do not receive any compensation for telephonic meetings of the Board of Directors or for meetings of committees of the Board. From April 1, 2008 to November 3, 2008, non-employee directors received an annual retainer of $26,000, paid in quarterly installments, $2,800 for each meeting attended in person, the Chairman of the Audit Committee received an annual retainer of $3,250 paid in quarterly installments, and 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 our 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.

In accordance with the foregoing, on August 15, 2008, 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 $33.90 per share. Each such option vests in 12 equal and successive monthly installments following the grant date.

On June 1, 2009, our Board of Directors approved our amended and restated 2004 Equity Incentive Plan which, among other things, would change the equity compensation for our non-employee directors to provide (a) on first appointment as a director, an initial grant of an option to purchase 6,000 shares of common stock and $60,000 in RSUs (based on the market price of our stock on the grant date), each subject to four-year vesting, (b) an annual grant of an option to purchase 3,000 shares of common stock subject to vesting over 12 months and $30,000 in RSUs (based on the market price of our stock on the grant date) subject to two-year vesting; and (c) for non-employee directors who as of the 2009 annual meeting have served as our director for at least five years, a one-time grant of $100,000 in RSUs (based on the market price of our stock on the grant date) subject to four-year vesting. These changes are subject to approval by our stockholders at the annual meeting as described in Proposal Two.

The following table details the total compensation for Microchip’s non-employee directors for fiscal 2009.

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)		40,542		---		66,688		---		---		107,230
L.B. Day (4)		39,569		---		66,688		---		---		106,257
Albert J. Hugo-Martinez (5)		38,626		---		66,688		---		---		105,314
Wade F. Meyercord (6)		39,569		---		66,688		---		---		106,257

(1)

The amounts shown in the column labeled Option Awards represent the amount of compensation cost we recognized in fiscal 2009, 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 2009. This includes amounts related to the annual stock option grants of 6,000 shares of common stock on August 15, 2008 at an exercise price per share of $33.90. The grant date fair value of such equity award made to each of the non-employee directors on August 15, 2008 is $62,355. 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, 2009, 2008, and 2007 stated in Note 15, “Equity Incentive Plans” to Microchip’s audited financial statements for the fiscal year ended March 31, 2009, included in Microchip’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 29, 2009.

(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, 2009, Matthew W. Chapman had 58,750 options outstanding, of which 52,750 were exercisable.

(4)	As of March 31, 2009, L.B. Day had 55,500 options outstanding, of which 49,500 were exercisable.

(5)	As of March 31, 2009, Albert J. Hugo-Martinez had 63,750 options outstanding, of which 57,750 were exercisable.

(6)	As of March 31, 2009, Wade F. Meyercord had 50,500 options outstanding, of which 44,500 were exercisable.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is currently comprised of Mr. Day (Chair), Mr. Hugo-Martinez and Mr. Meyercord, three of our independent directors. From April 1, 2008 through August 14, 2008, the Compensation Committee was comprised of Mr. Day and Mr. Meyercord. None of Mr. Day, Mr. Hugo-Martinez nor Mr. Meyercord had any related-party transaction with Microchip during fiscal 2009 other than service as a director. In addition, none of such directors has a relationship which would constitute a compensation committee interlock under applicable SEC rules.

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 2009, 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 2009, 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 2009, except for the following: Mr. Moorthy filed one Form 4 in May 2008 that omitted two grants of RSUs and, later in May 2008, filed an amended Form 4 to include such grants; Mr. Sanghi filed a Form 4 one day late in June 2008 with respect to two transactions; and Mr. Meyercord filed one late Form 4 in December 2008 with respect to one transaction.

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.

Our Board of Directors has determined that each of the following nominees for director is an independent director as defined by applicable SEC rules and NASDAQ listing standards: Mr. Chapman, Mr. Day, Mr. Hugo-Martinez and Mr. Meyercord.

The term of office of each person who is elected as a director at the annual meeting will continue until the 2010 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, 2009)

Name	Age	Position(s) Held
Steve Sanghi	53	Chairman, President and CEO
Albert J. Hugo-Martinez	63	Director
L.B. Day	64	Director
Matthew W. Chapman	58	Director
Wade F. Meyercord	68	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.

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 COO of Burr-Brown Corp., Sr. VP and GM at TRW, and CEO 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. In his career, Mr. Chapman has served as CEO and Chairman of Concentrex Incorporated, a supplier of software solutions and service to U.S. financial institutions.

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 executive compensation matters and stock plan consulting for technology companies, a position he previously held part time beginning in 1987. 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. Mr. Meyercord served as a member of the Board of Directors of Magma Design Automation, Inc. from January 2004 to June 2005. From June 1999 to October 2002, Mr. Meyercord served as Sr. VP and CFO of Rioport.com, an Internet applications service provider for the music industry.

PROPOSAL TWO

APPROVAL OF AMENDMENT AND RESTATEMENT OF OUR 2004 EQUITY INCENTIVE PLAN

Our 2004 Equity Incentive Plan was approved by our stockholders in August 2004 and provides for the grant of stock options, stock appreciation rights, restricted stock (which may be granted in the form of restricted stock shares or RSUs), performance shares, performance units, and deferred stock units to our employees and consultants as well as for automatic grants of awards to the non-employee members of our Board of Directors. As of March 31, 2009, there were approximately 4,895 employees (including executive officers) who were eligible to participate in the 2004 Equity Incentive Plan.

On June 1, 2009, our Board of Directors approved our amended and restated 2004 Equity Incentive Plan to:

change the equity compensation for our non-employee directors to provide (a) on first appointment as a director, an initial grant of an option to purchase 6,000 shares of common stock and $60,000 in RSUs (based on the market price of our stock on the grant date), each subject to four-year vesting, (b) an annual grant of an option to purchase 3,000 shares of common stock subject to vesting over 12 months and $30,000 in RSUs (based on the market price of our stock on the grant date) subject to two-year vesting; and (c) for non-employee directors who as of the 2009 annual meeting have served as our director for at least five years, a one-time grant of $100,000 in RSUs (based on the market price of our stock on the grant date) subject to four-year vesting, and

·	revise the definition of “performance goals” in the 2004 Equity Incentive Plan related to the treatment of awards under Section 162(m) of the Internal Revenue Code.

The purpose of the change in equity compensation for our non-employee directors is to enable us to continue to attract and retain qualified persons to serve as directors. Our Board also believes that the equity compensation for our non-employee directors should include RSUs together with a reduced number of options to be more in line with the equity awards provided to our officers and key employees. In this regard, since fiscal 2006, we have used RSUs, as opposed to stock options, as our preferred method of providing equity incentives to our employees, and, since fiscal 2007, we have not granted stock options to any of our executive officers or key employees. However, under our 2004 Equity Incentive Plan, our non-employee directors have continued to receive stock options under the automatic grant provisions of such plan. Any change to such automatic grant provisions requires stockholder approval.

The purpose of the amendment to the definition of “performance goals” under our 2004 Equity Incentive Plan is to give the Compensation Committee of our Board more flexibility in structuring equity compensation arrangements that will qualify as “performance based compensation” for purposes of Section 162(m) of the Internal Revenue Code and to help us achieve our goal of attracting, retaining and motivating our personnel. In particular, as amended and restated, our 2004 Equity Incentive Plan will allow us to set goals based on a variety of GAAP and non-GAAP financial metrics, operating milestones or other object performance criteria as described in more detail in the summary below. We believe that, as revised, the 2004 Equity Incentive Plan will continue to be an essential element of our competitive compensation package.

Please see the summary of our 2004 Equity Incentive Plan below.

Vote Required and Recommendation

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 to approve the amendment and restatement of our 2004 Equity Incentive Plan.

Our executive officers have an interest in this proposal as they may receive awards of RSUs under the 2004 Equity Incentive Plan. The non-employee members of our Board of Directors have an interest in this proposal as they may receive awards of options and RSUs under the 2004 Equity Incentive Plan.

Our Board of Directors recommends a vote FOR Proposal Two to amend and restate our 2004 Equity Incentive Plan. Proxies solicited by the Board of Directors will be so voted unless stockholders specify otherwise in their proxies.

Summary of the Amended 2004 Equity Incentive Plan

The essential features of the 2004 Equity Incentive Plan are summarized below. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the amended and restated 2004 Equity Incentive Plan, which is attached as Appendix A. Capitalized terms used herein and not defined shall have the meanings set forth in the 2004 Equity Incentive Plan.

General. The purposes of the 2004 Equity Incentive Plan are to attract and retain the best available personnel, provide additional incentive to our employees, consultants and non-employee directors and promote the success of our business.

Administration. The 2004 Equity Incentive Plan may be administered by our Board of Directors or a committee, which our Board of Directors may appoint from among its members (the “Administrator”). Subject to the provisions of the 2004 Equity Incentive Plan, the Administrator has the authority to: (i) interpret the plan and apply its provisions; (ii) prescribe, amend or rescind rules and regulations relating to the 2004 Equity Incentive Plan; (iii) select the persons to whom awards are to be granted (apart from the non-employee director automatic grant provisions); (iv) subject to individual fiscal year limits applicable to each type of award, determine the number of shares or equivalent units to be made subject to each award; (v) determine whether and to what extent awards are to be granted; (vi) determine the terms and conditions applicable to awards generally and of each individual award (including the provisions of the award agreement to be entered into between Microchip and the participant); (vii) amend any outstanding award subject to applicable legal restrictions (except repricing an option or SAR); (viii) authorize any person to execute, on our behalf, any instrument required to effect the grant of an award; (ix) approve forms of agreement for use under the 2004 Equity Incentive Plan; (x) allow participants to satisfy withholding tax obligations by electing to have Microchip withhold from the shares or cash to be issued upon exercise, vesting of an award (or distribution of a deferred stock unit) that number of shares or cash having a fair market value equal to the minimum amount required to be withheld; and (xi) subject to certain limitations, take any other actions deemed necessary or advisable for the administration of the 2004 Equity Incentive Plan. All decisions, interpretations and other actions of the Administrator shall be final and binding on all holders of options or rights and on all persons deriving their rights therefrom.

Discount Award Limitations. No more than 30% of the shares initially available for issuance under the 2004 Equity Incentive Plan and 30% of the shares subsequently added to the 2004 Equity Incentive Plan by virtue of options expiring or being cancelled under the 1993 Stock Option Plan and the 1997 Nonstatutory Stock Option Plan may be granted pursuant to restricted share or share unit awards with a purchase price that is less than 100% of fair market value on the date of grant; provided, however, that such 30% limitation does not apply to RSUs issued on or after August 18, 2006. No stock options or stock appreciation rights may be granted with an exercise price that is less than 100% of fair market value on the date of grant.

No Repricing. The 2004 Equity Incentive Plan prohibits option or stock appreciation right repricing, including by way of an exchange for another award.

Eligibility. The 2004 Equity Incentive Plan provides that awards may be granted to our employees, consultants and non-employee directors.

Code Section 162(m) Performance Goals. We have designed the 2004 Equity Incentive Plan so that it permits us to also issue other awards that qualify as performance-based under Section 162(m) of the Code. Thus, the Administrator may make performance goals applicable to a participant with respect to an award. Prior to the amendment and restatement of our 2004 Equity Incentive Plan, at the Administrator’s discretion, one or more of the following performance goals may apply: revenue, cash position, earnings per share, net income, operating cash flow, operating expense, operating income, return on assets, return on equity, return on sales, total stockholder return, and gross margin. The Administrator shall appropriately adjust any evaluation of performance under a performance goal to exclude (i) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial conditions and results of operations appearing in our quarterly or annual reporting with the Securities and Exchange Commission for the applicable year, or (ii) the effect of any changes in accounting principles affecting our business unit’s reported results. Moreover, the Administrator, in its sole discretion, may adjust any performance goal (in both setting and determining the performance) to exclude other items, such as compensation expenses under FAS 123R. If Proposal Two is approved at the annual meeting, under our 2004 Equity Incentive Plan, as amended and restated, at the Administrator’s discretion, the performance measures for any performance period may be one or more of the following objective performance criteria: cash flow, cash position, revenue (on an absolute basis or adjusted for currency effects), revenue growth, contribution margin, gross margin or gross margin as a percentage of revenue, operating margin or operating margin as a percentage of revenue, operating expenses or operating expenses as a percentage of revenue, earnings (which may

include earnings before interest and taxes, earnings before taxes and net earnings), earnings per share, net income, stock price, return on equity, total stockholder return, growth in stockholder value relative to a specified publicly reported index, return on capital, return on assets or net assets, return on investment, operating profit or net operating profit, market share (which include ranking for a specific product line or market share percentage for a given product line), contract awards or backlog, overhead or other expense reduction, credit rating, objective customer indicators, new product invention or innovation, attainment of research and development milestones, improvements in productivity, attainment of objective operating goals and objective employee metrics. At the Administrator’s discretion, the objective performance criteria may be applied to Microchip as a whole or (except with respect to stockholder return metrics) to a region, business unit, affiliate or business segment or specific product or products, and measured either on an absolute basis or relative to a pre-established target, to a previous period’s results or to a designated comparison group. At the Administrator’s sole discretion, with respect to financial metrics, which may be determined in accordance with GAAP or accounting principals established by the International Accounting Standards Board, or IASB Principles, such objective performance criteria may be adjusted when established to exclude any items otherwise includable under GAAP or under IASB Principles or any other objectively determinable items including, without limitation, any extraordinary non-recurring items, the effect of any merger, acquisition, or other business combination or divestiture, or the effect of any changes in accounting principles affecting

Microchip’s or a business unit’s, region’s, affiliate’s or business segment’s reported results. The Administrator may use other performance goals for awards that are not intended to qualify as performance-based under Section 162(m) of the Code.

Terms and Conditions of Options. Each option granted under the 2004 Equity Incentive Plan is evidenced by a written stock option agreement between the optionee and Microchip and is subject to the following terms and conditions:

(a) Exercise Price. The Administrator determines the exercise price of options at the time the options are granted. However, the exercise price of a stock option may not be less than 100% of the fair market value of the common stock on the date the option is granted. As our common stock is listed on the Nasdaq National Market, the fair market value is the closing sale price for the common stock (or the closing bid if no sales were reported) on the date the option is granted.

(b) Form of Consideration. The means of payment for shares issued upon exercise of an option is specified in each option agreement and generally may be made by cash, check, other shares of our common stock owned by the optionee, delivery of an exercise notice together with irrevocable instructions to a broker to deliver to us the exercise price from sale proceeds, or by a combination thereof or other consideration permitted by applicable laws.

(c) Exercise of the Option. Each stock option agreement will specify the term of the option and the date when the option is to become exercisable. However, in no event shall an option granted under the 2004 Equity Incentive Plan be exercised more than ten (10) years after the date of grant.

(d) Termination of Employment. If an optionee’s employment terminates for any reason (other than misconduct, death or permanent disability), all vested options held by such optionee under the 2004 Equity Incentive Plan expire upon the earlier of (i) such period of time as is set forth in his or her option agreement, or three (3) months if no period is stated, or (ii) the expiration date of the option. The optionee may exercise all or part of his or her option at any time before such expiration to the extent that such option was exercisable at the time of termination of employment. Unvested options shall revert to the 2004 Equity Incentive Plan upon termination.

(e) Permanent Disability. If an optionee is unable to continue employment with us as a result of permanent and total disability (as defined in the Code), all options held by such optionee under the 2004 Equity Incentive Plan shall expire upon the earlier of (i) six (6) months after the date of termination of the optionee’s employment or (ii) the expiration date of the option. The optionee may exercise all or part of his or her option at any time before such expiration to the extent that such option was exercisable at the time of termination of employment.

(f) Death. If an optionee dies while employed by us, 100% of the optionee’s awards shall immediately vest, and shall expire upon the earlier of (i) 12 months after the optionee’s death or (ii) the expiration date of the option. The executors or other legal representatives or the optionee may exercise all or part of the optionee’s option at any time before such expiration with respect to all shares subject to such option.

(g) Other Provisions. The stock option agreement may contain terms, provisions and conditions that are consistent with the 2004 Equity Incentive Plan as determined by the Administrator.

162(m) Share Limit. No participant may be granted stock options and stock appreciation rights to purchase more than 1,500,000 shares of common stock in any fiscal year, except that up to 4,000,000 shares may be granted in the participant’s first fiscal year of service.

Exercise Price and Other Terms of Stock Appreciation Rights. The Administrator, subject to the provisions of the 2004 Equity Incentive Plan (including the 162(m) share limit referred to above), shall have complete discretion to determine the terms and conditions of SARs granted under the 2004 Equity Incentive Plan.

Payment of Stock Appreciation Right Amount. Upon exercise of an SAR, the holder of the SAR shall be entitled to receive payment in an amount equal to the product of (i) the difference between the fair market value of a share on the date of exercise and the exercise price and (ii) the number of shares for which the SAR is exercised.

Payment upon Exercise of Stock Appreciation Right. At the discretion of the Administrator, payment to the holder of an SAR may be in cash, shares of our common stock or a combination thereof. To the extent that an SAR is settled in cash, the shares available for issuance under the 2004 Equity Incentive Plan shall not be diminished as a result of the settlement.

Stock Appreciation Right Agreement. Each SAR grant shall be evidenced by an agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the committee, in its sole discretion, shall determine.

Expiration of Stock Appreciation Rights. SARs granted under the 2004 Equity Incentive Plan expire as determined by the Administrator, but in no event later than ten (10) years from date of grant. No SAR may be exercised by any person after its expiration.

Termination of Employment. If a SAR holder terminates employment, other than for death or disability, the participant may exercise vested SARs within such period as specified by the SAR agreement, or three (3) months if no period is specified, but in no event later than the term of the SAR. In the event of termination for disability, the participant may exercise vested SARs for a period specified in the SAR agreement, or six (6) months following termination if no period is specified. In the event of termination for death, all SARs become vested, and the participant may exercise the SARs for a period specified in the SAR agreement, or twelve (12) months if no period is specified.

Grant of Restricted Stock. Subject to the terms and conditions of the 2004 Equity Incentive Plan, restricted stock may be granted to our employees and consultants at any time and from time to time at the discretion of the Administrator. The Administrator shall have complete discretion to determine (i) the number of shares subject to a restricted stock award granted to any participant and (ii) the conditions for grant or for vesting that must be satisfied, which typically will be based principally or solely on continued provision of services but may include a performance-based component. However, no participant shall be granted a restricted stock award covering more than 300,000 shares in any of our fiscal years, except that up to 750,000 shares may be granted on the participant’s first fiscal year of service. Until the shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the underlying shares. Restricted stock may also be granted in the form of RSUs, which are generally not issued until the vesting date.

Restricted Stock Award Agreement. Each restricted stock grant shall be evidenced by an agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator shall determine; provided, however, that if the restricted stock grant has a purchase price, the purchase price must be paid no more than ten (10) years following the date of grant.

Grant of Performance Shares. Subject to the terms and conditions of the 2004 Equity Incentive Plan, performance shares may be granted to our employees and consultants at any time and from time to time as shall be determined at the discretion of the Administrator. The Administrator shall have complete discretion to determine (i) the number of shares of our common stock subject to a performance share award granted to any service provider and (ii) the conditions that must be satisfied for grant or for vesting, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component. However, no participant shall be granted a restricted stock award covering more than 300,000 shares in any of our fiscal years, except that up to 750,000 shares may be granted on the participant’s first fiscal year of service.

Performance Share Award Agreement. Each performance share grant shall be evidenced by an agreement that shall specify such other terms and conditions as the Administrator, in its sole discretion, shall determine.

Grant of Performance Units. Performance units are similar to performance shares, except that they shall be settled in cash equivalent to the fair market value of the underlying shares of our common stock, determined as of the vesting date. The shares available for issuance under the 2004 Equity Incentive Plan shall not be diminished as a result of the settlement of a performance unit.

Performance Unit Award Agreement. Each performance unit grant shall be evidenced by an agreement that shall specify such terms and conditions as shall be determined at the discretion of the Administrator. However, no participant shall be granted a performance unit award covering more than $1,500,000 in any of Microchip’s fiscal years, except that a newly hired participant may receive a performance unit award covering up to $4,000,000.

Deferred Stock Units. Deferred stock units shall consist of a restricted stock, performance share or performance unit award that the Administrator, in its sole discretion, permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Administrator. Deferred stock units are subject to the individual annual limits that apply to each type of award.

Awards to Non-Employee Directors. Prior to the amendment and restatement of our 2004 Equity Incentive Plan by our Board on June 1, 2009, our 2004 Equity Incentive Plan provided for initial and annual awards to non-employee directors within prescribed parameters. Specifically, each non-employee director is entitled to receive the following automatic option grants of Common Stock: (i) an initial option grant of 12,000 shares on the date first appointed or elected to the Board of Directors (except for non-employee directors who previously served as directors); and (ii) an annual option grant of 6,000 shares on the first business day of the month in which our annual stockholders’ meeting is scheduled. Only non-employee directors who have served as such for at least three months as of the grant date are eligible to receive the annual grant. If Proposal Two is approved by our stockholders at the annual meeting, our 2004 Equity Incentive Plan, as amended and restated, would result in each non-employee director being entitled to receive the following automatic equity award grants: (i) an initial option grant of 6,000 shares, and $60,000 of RSUs (based on the market price of our stock on the grant date) on the date first appointed or elected to the Board of Directors (except for non-employee directors who previously served as directors); (ii) an annual option grant of 3,000 shares and $30,000 of RSUs (based on the market price of our stock on the grant date) on the date of our annual meeting of stockholders’, provided that such non-employee director has served as such for at least three months as of the grant date; and (iii) for each non-employee director who has served as a non-employee director for at least five years as of the date of our 2009 annual stockholders’ meeting and provided that such director is elected by the stockholders to continue to serve as a director at that meeting, a one-time grant of $100,000 of RSUs (based on the market price of our stock on the grant date).

Non-Transferability of Awards. Unless determined otherwise by the Administrator, an award granted under the 2004 Equity Incentive Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. If the Administrator makes an award granted under the 2004 Equity Incentive Plan transferable, such award shall contain such additional terms and conditions as the Administrator deems appropriate.

Acceleration upon Death. In the event that a participant dies while a service provider, 100% of his or her awards shall immediately vest.

Leave of Absence. In the event that a participant goes on a leave of absence, award vesting will cease until he or she returns to work, except as required by law or as determined by the Administrator.

Misconduct. In the event a participant’s service is terminated for misconduct, including but not limited to dishonesty, willful misconduct, fraud, embezzlement or unauthorized use of confidential information, then all awards held by the participant shall terminate immediately.

Adjustment Upon Changes in Capitalization. In the event that our capital stock is changed by reason of any stock split, reverse stock split, stock dividend, combination or reclassification of our common stock or any other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by us, appropriate proportional adjustments shall be made in the number and class of shares of stock subject to the 2004 Equity Incentive Plan, the individual fiscal year limits applicable to restricted stock, performance share awards, SARs and options, the number and class of shares of stock subject to any award outstanding under the 2004 Equity Incentive Plan, and the exercise price of any such outstanding option or SAR or other award, provided that such automatic adjustments will not be made to the number of shares to be granted

to our non-employee Directors under the 2004 Equity Incentive Plan. Any such adjustment shall be made by the Compensation Committee of our Board of Directors, whose determination shall be conclusive.

Change of Control. In the event of a change of control, the successor corporation (or its parent or subsidiary) will assume or substitute for each outstanding award. If the successor corporation refuses to assume the awards or to substitute equivalent awards, such awards shall become 100% vested. In such event, the Administrator shall notify the participant that each award subject to exercise is fully exercisable for 30 days from the date of such notice and that the award terminates upon expiration of such period.

Amendment, Suspensions and Termination of the 2004 Equity Incentive Plan. Our Board of Directors may amend, suspend or terminate the 2004 Equity Incentive Plan at any time; provided, however, that stockholder approval is required for any amendment to the extent necessary to comply with Rule 16b-3 promulgated under the Securities Exchange Act of 1934, or “Rule 16b-3,” or Section 422 of the Code, or any similar rule or statute. The 2004 Equity Incentive Plan will naturally expire in September 2014, unless earlier terminated.

Federal Tax Information

Options. Options granted under the 2004 Equity Incentive Plan are nonstatutory options that do not qualify as incentive stock options under Section 422 of the Code.

An optionee will not recognize any taxable income at the time the optionee is granted a nonstatutory option. However, upon its exercise, the optionee will recognize taxable income generally measured as the excess of the then fair market value of the shares purchased over the purchase price. Any taxable income recognized in connection with an option exercise by an optionee who is also our employee will be subject to tax withholding by us. Upon resale of such shares by the optionee, any difference between the sale price and the optionee’s purchase price, to the extent not recognized as taxable income as described above, will be treated as short-term or long-term capital gain or loss, depending on the holding period.

Stock Appreciation Rights. No taxable income is reportable when an SAR is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the fair market value of any shares of our common stock received and/or the amount of cash received. Any additional gain or loss recognized upon any later disposition of the shares of our common stock would be a capital gain or loss.

Restricted Stock, Performance Units and Performance Shares. A participant will not have taxable income upon grant (unless, with respect to restricted stock that is not in the form of RSUs, he or she elects to be taxed at that time). Instead, he or she will recognize ordinary income at the time of vesting/delivery equal to the fair market value (on the vesting date) of the vested shares or cash received minus any amount paid for the shares of our vested common stock.

Code Section 409A. Section 409A of the Code, which was added by the American Jobs Creation Act of 2004, provides certain new requirements on non-qualified deferred compensation arrangements. These include new requirements with respect to an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Code Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date, or the individual’s death). Code Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, Code Section 409A requires that such individual’s distribution commence no earlier than six months after such officer’s separation from service.

Awards granted under the 2004 Equity Incentive Plan with a deferral feature will be subject to the requirements of Code Section 409A. If an Award is subject to and fails to satisfy the requirements of Code Section 409A, the recipient of that Award will recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Code Section 409A fails to comply with Code Section 409A’s provisions, Code Section 409A imposes an additional twenty percent (20%) federal income tax on compensation recognized as ordinary income, as well as possible interest charges and penalties. Certain states have enacted laws similar to Section 409A which impose additional taxes, interest and penalties on non-qualified deferred compensation arrangements. The Company will also have reporting requirements with respect to such amounts, and will have certain withholding requirements.

Tax Effect for Microchip. We generally will be entitled to a tax deduction in connection with an award under the 2004 Equity Incentive Plan in an amount equal to the ordinary income realized by a participant at the time the participant recognizes

such income (for example, the exercise of a nonqualified stock option). Special rules limit the deductibility of compensation paid to our CEO, CFO and to each of our three most highly compensated executive officers. Under Section 162(m) of the Code, the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met with respect to awards. The 2004 Equity Incentive Plan has been designed to permit the committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting us to continue to receive a federal income tax deduction in connection with such awards.

The foregoing is only a summary of the effect of federal income taxation upon us and upon participants, does not purport to be complete, and does not discuss the tax consequences of any participant’s death or the income tax laws of any municipality, state or foreign country in which a participant may reside.

New Plan Benefits

The amount, timing, and value of discretionary awards under the 2004 Equity Incentive Plan, including grants to our CEO, our current and former CFOs and our three other most highly compensated executive officers, is not determinable. The future award of options or RSUs to non-employee directors is subject to the election of such individuals as directors and the fair market value of the common stock on the date the awards are made. The following table sets forth information with respect to the grant of options during the fiscal year ended March 31, 2009 to: (a) non-employee directors; (b) our CEO, our current and former CFOs and our three other most highly compensated executive officers named in this proxy statement; (c) all current executive officers as a group; and (d) all other employees as a group:

EQUITY GRANTS IN FISCAL 2009

Name of Individual or Identity of Group and Position	Number of Shares Subject to RSUs Granted			Weighted Average Fair Value (1)		Number of Shares Subject to Options Granted		Weighted Average Grant Price (2)
Steve Sanghi President and CEO		191,438	(3)	$	19.11		---	$	---
Mitchell R. Little VP, Worldwide Sales and Applications		44,566	(3)		19.00		---		---
Gordon W. Parnell (4) VP, Business Development and Investor Relations, former CFO		1,289	(3)		18.41		---		---
David S. Lambert VP, Fab Operations		32,039	(3)		19.07		---		---
Ganesh Moorthy Executive VP		80,666	(3)		19.51		---		---
J. Eric Bjornholt (4) VP, CFO		24,298			17.62		---		---
All executive officers as a group (8 people)		449,218			19.06		---		---
All current directors who are not executive officers as a group (4 people)		---			---		24,000		33.90
All other employees as a group		1,427,520			23.07		---		---

_________________________

(1)	Represents the weighted average fair value per share as of the grant date.

(2)	Represents the weighted average per share grant price.

(3)	The vesting of a portion of these grants was subject to achievement of performance goals which were not fully met, therefore a portion of these grants were cancelled as they did not meet their vesting requirements.

(4)	Gordon W. Parnell stepped down from his position as our VP and CFO effective December 31, 2008 and assumed a new role of VP, Business Development and Investor Relations. J. Eric Bjornholt was elected as our VP and CFO effective as of January 1, 2009.

PROPOSAL THREE

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, 2010. 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.

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 $967,000 for fiscal 2009 and $1,188,000 for fiscal 2008.

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 $0 for fiscal 2009 and $85,000 for fiscal 2008.

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 $258,000 for fiscal 2009 and $262,000 for fiscal 2008.

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 2009 or fiscal 2008.

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 2009, 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 2009 and fiscal 2008 were compatible with maintaining the independence of Ernst & Young LLP.

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 22, 2009 for: (a) each director, (b) our CEO, our current and former CFOs 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 5% 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)		18,946,000		10.4	%
Waddell & Reed Financial, Inc.(3)		18,906,967		10.3	%
Capital Research Global Investors (4)		11,923,890		6.5	%
Steve Sanghi (5)		5,836,588		3.2	%
Matthew W. Chapman (6)		65,647		*
L.B. Day (7)		60,000		*
Albert J. Hugo-Martinez (8)		93,250		*
Wade F. Meyercord (9)		56,000		*
J. Eric Bjornholt (10)		20,267		*
David S. Lambert (11)		421,791		*
Mitchell R. Little (12)		52,163		*
Ganesh Moorthy (13)		332,440		*
Gordon W. Parnell (14)		115,186		*
All directors and executive officers as a group (11 people) (15)		7,424,143		4.0	%

_________________________

* 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 individual pursuant to stock options that are exercisable within 60 days of May 22, 2009. There are no stock purchase rights or RSUs that will vest within 60 days of May 22, 2009. In calculating the percentage of ownership of each individual or group, share amounts that are attributable to options that are exercisable or stock purchase rights or RSUs that will vest within 60 days of May 22, 2009 are deemed to be outstanding for the purpose of calculating the percentage of shares of common stock owned by such individual or group but are not deemed to be outstanding for the purpose of computing the percentage of shares of common stock owned by any other individual or group.

(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 12, 2009, with the exception of the percentage of common stock held which is based on shares outstanding at May 22, 2009. 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 deemed to be the beneficial owner of 18,946,000 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 6300 Lamar Avenue, Overland Park, KS 66202. All information is based solely on the Schedule 13G filed by Waddell & Reed Financial, Inc. dated May 7, 2009, with the exception of the percentage of common stock held which is based on shares outstanding at May 22, 2009. Such Schedule 13G indicates that (i) Waddell & Reed Financial, Inc. 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; (ii) Waddell & Reed Investment Management Company has sole power to vote or direct the vote and to dispose of and direct the disposition of 13,323,470 shares of the common stock; (iii) Ivy Investment Management Company has sole power to vote or direct the vote and to dispose of and direct the disposition of 5,223,436 shares of the common stock; and (iv) Austin, Calvert & Flavin, Inc. has sole power to vote or direct the vote and to dispose of and direct the disposition of 360,061 shares of the common stock.

(4)

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 17, 2009, with the exception of the percentage of common stock held which is based on shares outstanding at May 22, 2009. 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 deemed to be the beneficial owner of 11,923,890 shares as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.

(5)	Includes 1,508,507 shares issuable upon exercise of options and 4,289,884 shares held of record by Steve Sanghi and Maria T. Sanghi as trustees.

(6)	Includes 58,250 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 55,000 shares issuable upon exercise of options.

(8)	Includes 63,250 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 50,000 shares issuable upon exercise of options and 6,000 shares held of record by Wade F. Meyercord and Phyllis Meyercord as trustees.

(10)	Includes 14,481 shares issuable upon exercise of options.

(11)	Includes 257,050 shares issuable upon exercise of options, 2,789 shares held by Mr. Lambert’s children, and 159,103 shares held by David S. Lambert and Carol Lambert as trustees.

(12)	Includes 44,980 shares issuable upon exercise of options.

(13)	Includes 303,160 shares issuable upon exercise of options and 26,577 shares held of record by Ganesh Moorthy and Hema Moorthy as trustees.

(14)	Includes 106,308 shares issuable upon exercise of options and 8,878 shares held of record by Gordon W. Parnell and Jeanette Parnell as trustees.

(15)	Includes an aggregate of 2,746,205 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, Mr. Hugo-Martinez 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, our current and former CFOs, and our 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, 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.

In response to the adverse global economic conditions which impacted our business in fiscal 2009, we took a number of actions to significantly reduce our operating expenses, including significant reductions in compensation for our executive officers and other employees. These actions included:

·	a reduction in salary equal to one week without pay in the third quarter of fiscal 2009 which ended December 31, 2008,

·	a 10% salary reduction for all executive officers effective December 29, 2008,

·	a week off without pay in the fourth quarter of fiscal 2009 which ended March 31, 2009,

·	no payments under our Executive Management Incentive Compensation Plan, or EMICP, or under our Discretionary Management Incentive Compensation Plan, or DMICP, for the third and fourth quarters of fiscal 2009,

·	no payments to officers or employees under our Employee Cash Bonus Program, or ECBP, for the second, third and fourth quarters of fiscal 2009, and

·	no matching contributions under our 401(k) for the third and fourth quarters of fiscal 2009.

We believe that the overall compensation levels for our executive officers, including our named executive officers, in fiscal 2009 were consistent with our “pay-for-performance” philosophy and are commensurate with our fiscal 2009 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 himself. 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 EMICP and DMICP 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 since taking Microchip public in 1993, and to leading Microchip’s strong performance relative to others in the industry in the current adverse conditions facing the semiconductor industry and the global economy.

For fiscal 2009, 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. In addition, in light of the global economic downturn, the Compensation Committee took actions to reduce executive compensation as part of Microchip’s overall efforts to significantly reduce its operating expenses.

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.

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 ensures 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 and in light of the adverse global economic conditions that impacted our business in fiscal 2009, the base salaries for our CEO and other named executive officers were not increased from the fiscal 2008 levels. In addition, during the third quarter of fiscal 2009, our CEO and other named executive officers (and many other employees) had their salaries reduced by one week’s pay. Also, effective December 29, 2008, our CEO and other named executive officers (and many other employees), underwent a 10% reduction in base salary. In the fourth quarter of

fiscal 2009 our CEO and other named executive officers received a week off without pay. The only salary increase among our named executive officers during fiscal 2009 was in connection with the promotion of our VP of Finance, J. Eric Bjornholt, to the position of CFO effective January 1, 2009.

Incentive Cash Bonuses. The Compensation Committee sets performance goals which, if met, result in quarterly payments to our executive officers under the EMICP. Executive officers may also receive quarterly payments under the DMICP. 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 business conditions anticipated at the time the goals are set. When setting the performance goals, the Committee places more emphasis on the overall expected financial performance of Microchip 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 uses the DMICP to help achieve the overall objectives of the performance bonus program.

In fiscal 2009, the quarterly payments under the EMICP for our named executive officers were targeted at an aggregate of approximately $295,000 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 DMICP, a subjective element. Bonuses under the DMICP 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.

In fiscal 2009, 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	4.00%	10.00%
16-bit sequential revenue growth	30.00%	5.00%
Analog sequential revenue growth	6.00%	5.00%
Gross margin percentage (non-GAAP)	59.00%	15.00%
Operating expenses as a percentage of sales (non-GAAP)	25.5%	15.00%
Operating income as a percentage of sales (non-GAAP)	33.00%	15.00%
Earnings per share (quarterly)	(1)	15.00%
DMICP	Discretionary	20.00%

(1)

The EMICP quarterly non–GAAP earnings per share (EPS) targets for fiscal 2009 were $0.42, $0.43, and $0.37 for the first through third quarters, respectively. There was no EPS target set for the fourth quarter of fiscal 2009 due to the uncertain economic conditions existing at the time. The EPS targets (as well as the other targets under the EMICP) 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 typically uses 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 other executive officers received bonuses under the EMICP and DMICP for the first two quarters of fiscal 2009 as we achieved or exceeded 100% of the Target Quarterly Measurements stated above. However, to conserve cash, the Compensation Committee determined that only a portion of the awards should be paid. In particular, the EMICP bonuses for the first quarter of fiscal 2009 were paid at 80% and the bonuses for the second quarter of fiscal 2009 were paid at 60%. For the third and fourth quarters of fiscal 2009, no bonuses were paid under the EMICP as the performance criteria for such periods were not met and no amounts were paid under the DMICP for such periods due to adverse global economic conditions. For fiscal 2009, the total cash bonus payments under the EMICP and the DMICP for our named executive officers, other than our CEO, ranged from $9,240 to $47,450. In fiscal 2009, Mr. Sanghi

earned an aggregate EMICP bonus of $374,413, and no DMICP bonus. 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 2009, 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 in connection with the overall financial results and performance of the corporation.

The evergreen grants of RSUs for fiscal 2009 were awarded with vesting subject to meeting specified performance goals over identified periods. In fiscal 2009, these performance goals were related to achieving certain levels of operating profit over a specified time frame. Specifically, with respect to the awards made in April 2008, the performance goal was related to achieving non-GAAP operating profit for the six months ended September 30, 2008 from $160 million to $190 million with an achievement of $190 million of non-GAAP operating profit necessary for full vesting of the award. Based on the actual operating profit for such period, these awards vested at 100%. With respect to the awards made in July 2008, the performance goal was related to achieving non-GAAP operating profit for the six months ended December 31, 2008 from $157 million to $187 million with an achievement of $187 million of non-GAAP operating profit necessary for full vesting of the award. Based on the actual operating profit for such period, the performance goal was not achieved, these awards did not vest and were subsequently cancelled. With respect to the awards made in October 2008, the performance goal was related to achieving non-GAAP operating profit for the six months ended March 31, 2008 from $112 million to $142 million with an achievement of $142 million of non-GAAP operating profit necessary for full vesting of the award. Based on the actual operating profit for such period, the performance goal was not achieved, these awards did not vest and were subsequently cancelled. With respect to the awards made in February 2009, the performance goal was related to achieving non-GAAP operating profit of $21 million or more for the three months ended June 30, 2009 in order for the awards to vest in full. As of the date of this proxy statement, it was not known what portion of these awards, if any, will vest.

In addition to the evergreen RSU grants, in October 2008, we made additional RSU grants under the 2004 Equity Incentive Plan in order to recognize achievement of the Target Quarterly Measurements under the EMICP for the first and second quarters of fiscal 2009. These grants were made with vesting subject to a performance goal related to achieving non-GAAP operating profit for the six months ended March 31, 2009 from $112 million to $142 million with an achievement of $142 million of non-GAAP operating profit necessary for full vesting of the award. These awards were made in RSUs in order to incentivize employees on a continuing basis and to conserve cash. Based on the actual operating profit for such period, the performance goal was not achieved, these awards did not vest and were subsequently cancelled.

Grants of RSUs may also be made in connection with promotions, other changes in responsibilities or in recognition of other individual or Microchip developments or achievements. Grants of RSUs in fiscal 2009 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, 2009, approximately 58% 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. Grants of RSUs 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 grants of RSUs 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 Equity 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, 2009” at page 29 for information regarding RSUs granted during fiscal 2009 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 2009, 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.

Since these programs are generally available to all employees, 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. A significant portion of our international employees have the ability to participate in the 1994 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, Alternative Health Care, Long-Term Care, Legal Assistance, and Disability Coverage. We make medical, dental, vision, employee assistance program, flexible spending, alternative health care, long term care, legal assistance, 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 27 pursuant to SEC rules and regulations.

Life Insurance. In fiscal 2009, 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. In light of the adverse global economic conditions which impacted our business in fiscal 2009 and our resulting actions to significantly reduce our operating expenses, no discretionary matching contributions were made for the third or fourth quarters of fiscal 2009, and we eliminated any required matching contribution effective January 1, 2009.

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 2009, bonus awards were paid out at 75% for the first quarter of fiscal 2009. There were no bonus awards for the second, third and fourth quarters of 2009 due to the adverse economic conditions, the impact of such conditions on our performance and our efforts to substantially reduce our operating expenses. Under such program, for fiscal 2009, our named executive officers received payments ranging from $998 to $3,857.

Vacation and Paid Time-Off Benefits. We 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 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. 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. 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 VP 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 VP 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 VP 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, two years; (2) in the case of the CFO and VP 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 VP 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 VP 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.

With respect to our executive officers other than the CEO, the CFO and the VP 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, 2009, the last business day of our last completed fiscal year.

Name (1)	Salary		Bonus		Equity Compensation Due to Accelerated Vesting		Tax Gross-up on Change of Control (2)		Continuation of Certain Benefits (3)
Steve Sanghi (4)	$	962,769	$	1,962,568	$	6,284,128	$	---	2 years
Ganesh Moorthy (5)		221,738		130,484		2,175,620		1,057,929	1 year
Mitchell R. Little (5)		228,708		114,002		1,437,593		---	1 year
David S. Lambert (5)		199,387		97,393		1,085,648		---	1 year
J. Eric Bjornholt (5)		157,500		53,308		604,720		301,231	1 year

(1)	Mr. Parnell was a party to a change of control agreement which terminated effective December 31, 2008 in connection with his stepping down from his position as VP and CFO in order to assume the role of VP, Business Development and Investor Relations.

(2)

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.

(3)

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.

(4)	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.

(5)	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.

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 EMICP at our 2006 annual meeting. This allows us to seek to have such compensation under our EMICP 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.

Conclusion

We believe that our executive team provided outstanding service to Microchip in fiscal 2009. 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 (2)

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section 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 Directors:

L.B. Day (Chair) Albert J. Hugo-Martinez Wade F. Meyercord

(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.

SUMMARY COMPENSATION TABLE

The following table lists the annual compensation for our CEO, our current and former CFOs and our three other most highly compensated executive officers (referred to as the “named executive officers”) in the fiscal year ended March 31, 2009:

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,	2009	$	502,985	$	3,857	$	1,682,278	$	739,416	$	374,413	$	---	$	2,496	$	3,305,445
President	2008		532,675		7,714		1,183,405		1,293,246		751,495		---		4,231		3,772,766
and CEO	2007		515,010		28,467		904,135		1,787,773		1,167,276		---		5,005		4,407,666
Ganesh Moorthy,	2009		231,687		1,777		542,172		203,977		47,450		---		2,623		1,029,686
Executive Vice	2008		243,455		3,554		330,637		338,018		95,193		---		3,827		1,014,684
President	2007		215,632		11,741		243,322		422,967		134,866		---		4,152		1,032,680
Mitchell R. Little, VP	2009		238,971		1,833		385,440		142,784		40,919		---		3,123		813,070
Worldwide	2008		252,625		3,666		271,018		222,517		82,119		---		3,123		835,068
Sales and Applications	2007		241,808		13,420		207,179		256,258		125,844		---		3,896		848,405
David S. Lambert,	2009		208,334		1,598		299,490		142,784		34,896		---		2,749		689,851
VP, Fab	2008		220,321		3,196		213,738		222,517		70,035		---		2,822		732,629
Operations	2007		211,414		11,733		165,743		256,258		107,635		---		3,487		756,270
Gordon W. Parnell, VP, Business	2009		207,816		1,678		160,881		132,585		36,662		---		3,020		542,642
Development and Investor Relations	2008		231,384		3,356		132,585		204,359		73,552		---		3,088		726,775
and Former CFO (8)	2007		222,030		12,322		36,662		238,150		113,039		---		3,791		743,236
J. Eric Bjornholt, Current VP and CFO (8)	2009		137,765		998		102,154		15,879		9,240		---		1,383		267,419

(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 ECBP.

(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 grants of RSUs in fiscal 2009, please refer to the assumptions for fiscal years ended March 31, 2009, 2008, and 2007 stated in Note 15, “Equity Incentive Plans” to Microchip’s audited financial statements for the fiscal year ended March 31, 2009.

(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 and 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 foregoing option and RSU 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 statements 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, EMICP and DMICP. Each executive officer received the following payments under each of such plans in the specified fiscal year:

Named Executive Officer	Year	MICP		EMICP		DMICP
	2009	$	---	$	374,413	$	---
Steve Sanghi	2008		---		697,312		54,183
	2007		640,705		419,804		106,767
	2009		---		47,450		---
Ganesh Moorthy	2008		---		88,330		6,863
	2007		72,063		50,069		12,734
	2009		---		40,919		---
Mitchell R. Little	2008		---		76,198		5,921
	2007		69,074		45,259		11,511
	2009		---		34,896		---
David S. Lambert	2008		---		64,985		5,050
	2007		59,080		38,710		9,845
	2009		---		36,662		---
Gordon W. Parnell (8)	2008		---		68,249		5,303
	2007		62,046		40,654		10,339
J. Eric Bjornholt (8)	2009		9,240		---		---

(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
	2009	$	1,599	$	897
Steve Sanghi	2008		3,696		535
	2007		4,525		480
	2009		2,012		611
Ganesh Moorthy	2008		3,306		521
	2007		3,738		414
	2009		1,515		1,608
Mitchell R. Little	2008		2,590		533
	2007		3,431		465
	2009		1,361		1,388
David S. Lambert	2008		2,350		472
	2007		3,081		406
	2009		1,526		1,494
Gordon W. Parnell (8)	2008		2,593		495
	2007		3,365		426
J. Eric Bjornholt (8)	2009		1,208		175

(8)

Gordon W. Parnell stepped down from his position as our VP and CFO effective December 31, 2008 and assumed a new role of VP, Business Development and Investor Relations. J. Eric Bjornholt was elected as our VP and CFO effective as of January 1, 2009.

Grants of Plan-Based Awards During Fiscal 2009

The following table sets forth information with respect to our EMICP, our DMICP, and our ECBP, 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 2009. Actual payments for our bonus plans in fiscal 2009 are reflected in the Summary Compensation Table above. Equity awards in the table below were granted in fiscal 2009.

GRANTS OF PLAN-BASED AWARDS

For Fiscal Year Ended March 31, 2009

			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	04/01/2008			---		---			---		20,029			---		---		559,811
	04/01/2008			---		---			---		214			---		---		5,981
	07/01/2008			---		---			---		21,757	(4)		---		---		565,247
	10/31/2008			---		---			---		6,536	(4)		---		---		150,916
	10/31/2008			---		---			---		26,703	(4)		---		---		508,158
	10/31/2008			---		---			---		22,125	(4)		---		---		449,137
	02/27/2009			---		---			---		38,624			---		---		560,048
	02/27/2009			---		---			---		26,700			---		---		399,966
	02/27/2009			---		---			---		22,200			---		---		343,434
	02/27/2009			---		---			---		6,550			---		---		115,280
		---		---		770,215	(5)		---		---			---		---		---
		---		---		192,554	(6)		---		---			---		---		---
		---		---		18,515	(7)		---		---			---		---		---
Ganesh Moorthy	04/01/2008			---		---			---		7,439			---		---		207,920
	04/01/2008			---		---			---		3,000			---		---		83,850
	04/01/2008			---		---			---		2,000			---		---		55,900
	04/01/2008			---		---			---		303			---		---		8,469
	07/01/2008			---		---			---		8,081	(4)		---		---		209,944
	10/31/2008			---		---			---		827	(4)		---		---		19,095
	10/31/2008			---		---			---		9,918	(4)		---		---		188,740
	10/31/2008			---		---			---		11,902	(4)		---		---		241,611
	02/27/2009			---		---			---		14,346			---		---		208,017
	02/27/2009			---		---			---		10,000			---		---		149,800
	02/27/2009			---		---			---		12,000			---		---		185,640
	02/27/2009			---		---			---		850			---		---		14,960
		---		---		97,565	(5)		---		---			---		---		---
		---		---		24,391	(6)		---		---			---		---		---
		---		---		8,528	(7)		---		---			---		---		---
Mitchell R. Little	04/01/2008			---		---			---		4,578			---		---		127,955
	04/01/2008			---		---			---		117			---		---		3,270
	07/01/2008			---		---			---		4,973	(4)		---		---		129,199
	10/31/2008			---		---			---		714	(4)		---		---		16,486

			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)
	10/31/2008			---		---			---		6,103	(4)		---		---		116,140
	10/31/2008			---		---			---		6,103	(4)		---		---		123,891
	02/27/2009			---		---			---		8,828			---		---		128,006
	02/27/2009			---		---			---		6,200			---		---		92,876
	02/27/2009			---		---			---		6,200			---		---		95,914
	02/27/2009			---		---			---		750			---		---		13,200
		---		---		84,165	(5)		---		---			---		---		---
		---		---		21,041	(6)		---		---			---		---		---
		---		---		8,796	(7)		---		---			---		---		---
David S. Lambert	04/01/2008			---		---			---		3,434			---		---		95,980
	04/01/2008			---		---			---		102			---		---		2,851
	07/01/2008			---		---			---		3,730	(4)		---		---		96,905
	10/31/2008			---		---			---		609	(4)		---		---		14,062
	10/31/2008			---		---			---		4,578	(4)		---		---		87,119
	10/31/2008			---		---			---		3,815	(4)		---		---		77,445
	02/27/2009			---		---			---		6,621			---		---		96,005
	02/27/2009			---		---			---		4,600			---		---		68,908
	02/27/2009			---		---			---		3,900			---		---		60,333
	02/27/2009			---		---			---		650			---		---		11,440
		---		---		71,779	(5)		---		---			---		---		---
		---		---		17,945	(6)		---		---			---		---		---
		---		---		7,669	(7)		---		---			---		---		---
Gordon W. Parnell	10/31/2008			---		---			---		639	(4)		---		---		14,755
	03/02/2009			---		---			---		650			---		---		8,970
		---		---		37,800	(5)		---		---			---		---		---
		---		---		9,450	(5)		---		---			---		---		---
		---		---		6,058	(6)		---		---			---		---		---
J. Eric Bjornholt	04/01/2008			---		---			---		311			---		---		8,692
	04/01/2008			---		---			---		190			---		---		5,310
	04/01/2008			---		---			---		679			---		---		18,978
	04/01/2008			---		---			---		152			---		---		4,248
	07/01/2008			---		---			---		349			---		---		9,067
	07/01/2008			---		---			---		213			---		---		5,534
	07/01/2008			---		---			---		760			---		---		19,745
	08/14/2008			---		---			---		38			---		---		1,241
	09/05/2008			---		---			---		615			---		---		16,869
	10/02/2008			---		---			---		388			---		---		8,210
	10/02/2008			---		---			---		237			---		---		5,015
	10/02/2008			---		---			---		846			---		---		17,901
	10/31/2008			---		---			---		106			---		---		2,448
	12/16/2008			---		---			---		3,000			---		---		48,150

			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)
	12/16/2008			---		---			---		3,500		---		---		56,175
	12/16/2008			---		---			---		4,000		---		---		64,200
	12/16/2008			---		---			---		4,500		---		---		72,225
	02/27/2009			---		---			---		4,414		---		---		64,003
		---		---		37,800	(5)		---		---		---		---		---
		---		---		9,450	(6)		---		---		---		---		---
		---		---		6,058	(7)		---		---		---		---		---

(1)	Individual awards under our EMICP are made quarterly and are not stated in terms of a threshold or maximum amount for an award period. The EMICP 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 2009. 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 met, therefore these grants were cancelled and 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 EMICP.

(6)	This annual target represents the percentage of the executive officer’s base salary reflected in dollar terms targeted under Microchip’s DMICP.

(7)	Microchip’s EMICP annual target is based on 2.5 days of base salary per quarter, or on an annual basis, two weeks of the executive officer’s annual base salary.

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 27% to 55% for the named executive officers in fiscal 2009. 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 2009 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 ($)		Option Expiration Date		Number of Shares or Units of Stock that Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested (27) ($)		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		247,500	(1)		---			---		23.39	04/14/2010			---			---		---		---
		4,756	(1)		---			---		15.86	06/01/2011			---			---		---		---
		26,457	(1)		---			---		24.27	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	(1)		---			---		27.05	04/01/2014			---			---		---		---
		10,000	(1)		---			---		27.05	04/01/2014			---			---		---		---
		145,000	(1)		---			---		26.25	07/21/2014			---			---		---		---
		49,939	(1)		---			---		27.15	04/03/2012			---			---		---		---
		202,500	(1)		---			---		27.15	04/03/2012			---			---		---		---
		47,562	(1)		---			---		21.00	08/01/2012			---			---		---		---
		---			145,000	(2)		---		25.29	04/01/2015			---			---		---		---
		---			---			---		---		---		29,000	(3)		614,510		---		---
		---			---			---		---		---		65,000	(4)		1,377,350		---		---
		---			---			---		---		---		17,500	(5)		370,825		---		---
		---			---			---		---		---		32,778	(6)		694,556		---		---
		---			---			---		---		---		37,966	(7)		804,500		---		---
		---			---			---		---		---		20,029	(8)		424,415		---		---
		---			---			---		---		---		214	(9)		4,535		---		---
		---			---			---		---		---		21,757	(10)		461,031		---		---
		---			---			---		---		---		38,624	(11)		818,443		---		---
		---			---			---		---		---		26,700	(12)		565,773		---		---
		---			---			---		---		---		22,200	(13)		470,418		---		---
		---			---			---		---		---		6,550	(14)		138,795		---		---
		---			---			---		---		---		6,536	(10)		138,498		---		---
		---			---			---		---		---		26,703	(10)		565,837		---		---
		---			---			---		---		---		22,125	(10)		468,829		---		---
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	(1)		---			---		27.05	04/01/2014			---			---		---		---
		5,000	(1)		---			---		27.05	04/01/2014			---			---		---		---
		25,000	(1)		---			---		26.25	07/21/2014			---			---		---		---
		3,600	(1)		---			---		27.15	04/03/2012			---			---		---		---
		39,000	(1)		---			---		27.15	04/03/2012			---			---		---		---

	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 ($)		Option Expiration Date		Number of Shares or Units of Stock that Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested (27) ($)		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 ($)
		24,000	(1)		---			---		27.15	04/03/2012			---			---		---		---
		16,500	(1)		---			---		27.15	04/03/2012			---			---		---		---
		---			40,000	(2)		---		25.29	04/01/2015			---			---		---		---
		---			---			---		---		---		8,000	(3)		169,520		---		---
		---			---			---		---		---		17,000	(4)		360,230		---		---
		---			---			---		---		---		5,500	(5)		116,545		---		---
		---			---			---		---		---		10,302	(6)		218,299		---		---
		---			---			---		---		---		11,932	(7)		252,839		---		---
		---			---			---		---		---		7,439	(8)		157,632		---		---
		---			---			---		---		---		3,000	(7)		63,570		---		---
		---			---			---		---		---		2,000	(15)		42,380		---		---
		---			---			---		---		---		303	(16)		6,421		---		---
		---			---			---		---		---		8,081	(10)		171,236		---		---
		---			---			---		---		---		14,346	(11)		303,992		---		---
		---			---			---		---		---		10,000	(12)		211,900		---		---
		---			---			---		---		---		12,000	(13)		254,280		---		---
		---			---			---		---		---		850	(14)		18,012		---		---
		---			---			---		---		---		827	(10)		17,524		---		---
		---			---			---		---		---		9,918	(10)		210,162		---		---
		---			---			---		---		---		11,902	(10)		252,203		---		---
Mitchell R. Little		1	(1)		---			---		29.11	08/01/2010			---			---		---		---
		10,000	(1)		---			---		18.48	04/09/2013			---			---		---		---
		27,978	(1)		---			---		27.05	04/01/2014			---			---		---		---
		---			28,000	(2)		---		25.29	04/01/2015			---			---		---		---
		---			---			---		---		---		7,000	(3)		148,330		---		---
		---			---			---		---		---		14,000	(4)		296,660		---		---
		---			---			---		---		---		4,000	(5)		84,760		---		---
		---			---			---		---		---		7,492	(6)		158,755		---		---
		---			---			---		---		---		8,678	(7)		183,887		---		---
		---			---			---		---		---		4,578	(8)		97,008		---		---
		---			---			---		---		---		117	(17)		2,479		---		---
		---			---			---		---		---		4,973	(10)		105,378		---		---
		---			---			---		---		---		8,828	(11)		187,065		---		---
		---			---			---		---		---		6,200	(12)		131,378		---		---
		---			---			---		---		---		6,200	(13)		131,378		---		---
		---			---			---		---		---		750	(14)		15,893		---		---
		---			---			---		---		---		714	(10)		15,130		---		---
		---			---			---		---		---		6,103	(10)		129,323		---		---
		---			---			---		---		---		6,103	(10)		129,323		---		---
David S. Lambert		48,600	(1)		---			---		23.39	04/14/2010			---			---		---		---
		7,740	(1)		---			---		15.92	04/02/2011			---			---		---		---
		32,400	(1)		---			---		15.92	04/02/2011			---			---		---		---

	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 ($)		Option Expiration Date		Number of Shares or Units of Stock that Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested (27) ($)		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 ($)
		1,935	(1)		---			---		15.86	06/01/2011			---			---		---		---
		2,871	(1)		---			---		24.27	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	(1)		---			---		27.05	04/01/2014			---			---		---		---
		2,000	(1)		---			---		27.05	04/01/2014			---			---		---		---
		10,000	(1)		---			---		26.25	07/21/2014			---			---		---		---
		5,418	(1)		---			---		27.15	04/03/2012			---			---		---		---
		39,000	(1)		---			---		27.15	04/03/2012			---			---		---		---
		5,160	(1)		---			---		21.00	08/01/2012			---			---		---		---
		---			28,000	(2)		---		25.29	04/01/2015			---			---		---		---
		---			---			---		---		---		5,600	(3)		118,664		---		---
		---			---			---		---		---		11,200	(4)		237,328		---		---
		---			---			---		---		---		3,000	(5)		63,570		---		---
		---			---			---		---		---		5,619	(6)		119,067		---		---
		---			---			---		---		---		6,508	(7)		137,905		---		---
		---			---			---		---		---		3,434	(8)		72,766		---		---
		---			---			---		---		---		102	(9)		2,161		---		---
		---			---			---		---		---		3,730	(10)		79,039		---		---
		---			---			---		---		---		6,621	(11)		140,299		---		---
		---			---			---		---		---		4,600	(12)		97,474		---		---
		---			---			---		---		---		3,900	(13)		82,641		---		---
		---			---			---		---		---		650	(14)		13,744		---		---
		---			---			---		---		---		609	(10)		12,905		---		---
		---			---			---		---		---		4,578	(10)		97,008		---		---
		---			---			---		---		---		3,815	(10)		80,840		---		---
Gordon W. Parnell		8,550	(1)		---			---		24.86	06/01/2010			---			---		---		---
		3,022	(1)		---			---		24.27	01/22/2012			---			---		---		---
		7,948	(1)		---			---		26.14	10/09/2013			---			---		---		---
		26,000	(1)		---			---		27.05	04/01/2014			---			---		---		---
		10,000	(1)		---			---		26.25	07/21/2014			---			---		---		---
		5,704	(1)		---			---		27.15	04/03/2012			---			---		---		---
		38,582	(1)		---			---		27.15	04/03/2012			---			---		---		---
		---			26,000	(2)		---		25.29	04/01/2015			---			---		---		---
		---			---			---		---		---		5,200	(3)	$	110,188		---		---
		---			---			---		---		---		10,400	(4)	$	220,376		---		---
		---			---			---		---		---		650	(14)	$	13,774		---		---
		---			---			---		---		---		639	(10)	$	13,540		---		---

	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 ($)		Option Expiration Date		Number of Shares or Units of Stock that Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested (27) ($)		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 ($)
J. Eric Bjornholt		2,375	(1)		---			---		23.39	04/14/2010			---			---		---		---
		457	(1)		---			---		24.27	01/22/2012			---			---		---		---
		356	(1)		---			---		24.04	10/25/2012			---			---		---		---
		1,172	(1)		---			---		26.14	10/09/2013			---			---		---		---
		326	(1)		---			---		28.31	02/02/2014			---			---		---		---
		3,000	(1)		---			---		27.05	04/01/2014			---			---		---		---
		1,500	(1)		---			---		27.05	04/01/2014			---			---		---		---
		1,000	(1)		---			---		26.25	07/21/2014			---			---		---		---
		864	(1)		---			---		27.15	04/03/2012			---			---		---		---
		1,782	(1)		---			---		27.15	04/03/2012			---			---		---		---
		823	(1)		---			---		21.00	08/01/2012			---			---		---		---
		---			3,300	(2)		---		25.29	04/01/2015			---			---		---		---
		---			---			---		---		---		660	(3)		13,985		---		---
		---			---			---		---		---		125	(3)		2,6278		---		---
		---			---			---		---		---		1,354	(4)		28,691		---		---
		---			---			---		---		---		425	(5)		9,006		---		---
		---			---			---		---		---		300	(18)		6,357		---		---
		---			---			---		---		---		425	(19)		9,006		---		---
		---			---			---		---		---		430	(6)		9,112		---		---
		---			---			---		---		---		521	(7)		11,040		---		---
		---			---			---		---		---		311	(20)		6,590		---		---
		---			---			---		---		---		190	(5)		4,026		---		---
		---			---			---		---		---		679	(8)		14,388		---		---
		---			---			---		---		---		152	(9)		3,221		---		---
		---			---			---		---		---		349	(21)		13,752		---		---
		---			---			---		---		---		213	(19)		4,513		---		---
		---			---			---		---		---		760	(22)		16,104		---		---
		---			---			---		---		---		38	(23)		805		---		---
		---			---			---		---		---		615	(24)		13,032		---		---
		---			---			---		---		---		388	(25)		8,222		---		---
		---			---			---		---		---		237	(6)		5,022		---		---
		---			---			---		---		---		846	(12)		17,927		---		---
		---			---			---		---		---		106	(26)		2,246		---		---
		---			---			---		---		---		3,000	(14)		63,570		---		---
		---			---			---		---		---		3,500	(15)		74,165		---		---
		---			---			---		---		---		4,000	(7)		84,760		---		---
		---			---			---		---		---		4,500	(11)		95,355		---		---
		---			---			---		---		---		4,414	(11)		93,533		---		---

1	The option is fully vested.

2	The option vests in 12 equal monthly installments, commencing on March 31, 2009.

3	The award vests quarterly over a two-year period, commencing on May 1, 2008.

4	The award vests quarterly over a one-year period, commencing on May 1, 2010.

5	The award vests in full on May 1, 2011.

6	The award vests in full on November 1, 2011.

7	The award vests in full on February 1, 2012.

8	The award vests in full on May 1, 2012.

9	The award vests in two equal installments on November 1, 2009 and February 1, 2010.

10	The vesting of this grant was subject to achievement of performance goals which were not met, therefore these grants were cancelled and will not vest.

11	The award vests in full on February 1, 2013.

12	The award vests in full on November 1, 2012.

13	The award vests quarterly over a two-year period commencing on February 1, 2010.

14	The award vests in full on February 1, 2010.

15	The award vests in full on February 1, 2011.

16	The award vests in one installment of 151 shares on November 1, 2009 and one installment of 152 shares on February 1, 2010.

17	The award vests in one installment of 58 shares on November 1, 2009 and one installment of 59 shares on February 1, 2010.

18	The award vests in full on May 1, 2009.

19	The award vests in full on August 1, 2011.

20	The award vests in full on May 1, 2010.

21	The award vests in full on August 1, 2010.

22	The award vests in full on August 1, 2012.

23	The award vests in full on August 14, 2009.

24	The award vests quarterly over a two-year period, commencing on August 1, 2009.

25	The award vests in full on November 1, 2010.

26	The award vests in full on November 2, 2009.

27	Represents number of RSUs multiplied by $21.19, the closing price of our common stock on March 31, 2009.

OPTION EXERCISES AND STOCK VESTED

For Fiscal Year Ended March 31, 2009

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Steve Sanghi, President and CEO		71,343		1,130,287		7,250		138,765
		103,750		2,086,724		7,250		275,500
		81,000		1,232,253		7,250		228,883
		84,000		1,534,092		7,250		178,713
Ganesh Moorthy, Executive Vice President		---		---		2,000		38,280
		---		---		2,000		76,000
		---		---		2,000		63,140
		---		---		2,000		49,300
Mitchell R. Little, VP, Worldwide Sales and Applications		22		79		1,750		33,495
		16,000		294,240		1,750		66,500
		9,375		125,259		1,750		55,247

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
		2,084		21,882		1,750		43,137
		6,500		82,615		---		---
		1,457		14,133		---		---
David S. Lambert, VP, Fab Operations		20,283		181,132		1,400		26,796
		60,750		542,512		1,400		53,200
		3,837		91,414		1,400		44,198
		---		---		1,400		34,510
Gordon W. Parnell, VP Business Development and Investor Relations, and former CFO		400		5,376		1,875		71,250
		100		1,343		1,300		49,400
		400		5,368		1,300		41,041
		100		1,341		1,300		32,045
		400		5,360		1,300		24,882
		300		4,017		---		---
		1,100		14,718		---		---
		1,300		17,381		---		---
		1,700		22,712		---		---
		1,500		20,025		---		---
		100		1,334		---		---
		400		5,332		---		---
		1,100		14,652		---		---
		1,100		14,641		---		---
		101		1,343		---		---
		2,000		26,580		---		---
		3,472		46,108		---		---
		327		4,339		---		---
		400		5,304		---		---
		2,825		37,431		---		---
		1,007		13,333		---		---

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
		2,168		28,683		---		---
		200		2,642		---		---
		500		6,600		---		---
		1,600		21,104		---		---
		700		9,226		---		---
		500		6,585		---		---
		200		2,632		---		---
		93		1,815		---		---
		300		5,826		---		---
		2,000		38,240		---		---
		1,000		19,070		---		---
		2,000		38,340		---		---
		11,000		209,220		---		---
		940		17,926		---		---
		1,060		17,543		---		---
		4,373		72,592		---		---
J. Eric Bjornholt, VP and CFO		304		5,949		31		593
		700		13,699		165		3,158
		1,000		19,094		31		1,178
		---		---		165		6,270
		---		---		31		979
		---		---		165		5,209
		---		---		31		764
		---		---		165		4,067

Non-Qualified Deferred Compensation for Fiscal Year 2009

All of our U.S. employees in director-level and above positions, including our executive officers, are eligible to defer a portion of their salary and cash bonuses into our Non-Qualified Deferred Compensation Plan, or the Deferred Compensation Plan. Pursuant to the Deferred Compensation Plan, eligible employees can defer up to 50% of their base salary and/or cash bonuses. In general, deferral elections are made prior to January of each year for amounts to be earned in the upcoming year. Participants may invest amounts in various funds available under the Deferred Compensation Plan (in general, any of those funds traded on a nationally recognized exchange). Plan earnings are calculated by reference to actual earnings of mutual funds or other securities chosen by individual participants.

Except for a change in control or certain unforeseeable emergencies (as defined under the Deferred Compensation Plan), benefits under the plan will not be distributed until a “distribution event” has occurred. The distribution event occurs upon termination of employment.

We incur incidental expenses for administration of the Deferred Compensation Plan, and the receipt of any tax benefit we might obtain based on payment of a participant’s compensation is delayed until funds (including earnings or losses on the amounts invested pursuant to the plan) are eventually distributed. We do not pay any additional compensation or guarantee minimum returns to any participant in the Deferred Compensation Plan.

The following table shows the non-qualified deferred compensation activity for each named executive officer for the fiscal year ended March 31, 2009.

NON-QUALIFIED DEFERRED COMPENSATION

Name	Executive Contributions in Last FY (1)		Registrant Contributions in Last FY		Aggregate Earnings in Last FY (1)			Aggregate Withdrawals/ Distributions		Aggregate Balance at Last FYE (1)
Steve Sanghi	$	0.00	$	0.00	$	(872,654.94	)	$	1,601,746.50	$	0.00
Ganesh Moorthy	$	79,226.61	$	0.00	$	(162,907.30	)	$	328,811.13	$	11,893.48
Mitchell R. Little	$	10,587.52	$	0.00	$	(79,679.28	)	$	128,945.17	$	0.00
David S. Lambert	$	16,615.56	$	0.00	$	(120,662.77	)	$	0.00	$	197,956.55
Gordon W. Parnell	$	36,476.23	$	0.00	$	(223,282.47	)	$	0.00	$	387,551.99
J. Eric Bjornholt	$	6,558.62	$	0.00	$	(11,227.96	)	$	0.00	$	21,479.13

(1)

The executive contribution amounts shown in the table were previously reported in the “Summary Compensation Table” as salary and/or bonus for fiscal 2009 or prior fiscal years. The earnings amounts shown in the table were not previously reported for fiscal 2009 or prior years under applicable SEC rules as such earnings were not under a defined benefit or actuarial pension plan and there were no above-market or preferential earnings on such amounts made or provided by Microchip.

Equity Compensation Plan Information

The table below provides information about our common stock that, as of March 31, 2009, may be issued upon the exercise of options and rights under the following existing equity compensation plans (which are all of our equity compensation plans):

·	Microchip 1993 Stock Option Plan,

·	Microchip 1994 International Employee Stock Purchase Plan,

·	Microchip 1997 Nonstatutory Stock Option Plan,

·	Microchip 2001 Employee Stock Purchase Plan,

·	Microchip 2004 Equity Incentive Plan,

·	PowerSmart, Inc. 1998 Stock Incentive Plan,

·	TelCom Semiconductor, Inc. 1994 Stock Option Plan, and

·	TelCom Semiconductor, Inc. 2000 Nonstatutory Stock Option Plan.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options and vesting of RSUs			(b) Weighted-average exercise price of outstanding options			(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation Plans Approved by Stockholders (1)		8,438,391	(2)	$	25.10	(3)		14,684,465
Equity Compensation Plans Not Approved by Stockholders (4)		5,247,469		$	23.42			---
Total		13,685,860		$	24.24			14,684,465

(1)

Beginning January 1, 2005, the shares authorized for issuance under our 2001 Employee Stock Purchase Plan are subject to an annual automatic increase of the lesser of (i) 1,500,000 shares, (ii) one-half of one percent (0.5%) of the then outstanding shares of our common stock, or (iii) such lesser amount as is approved by our Board of Directors. Beginning January 1, 2007, the shares authorized for issuance under our 1994 International Employee Stock Purchase Plan, or the IESPP, are subject to an annual automatic increase of one-tenth of one percent (0.10%) of the then outstanding shares of our common stock.

(2)

Includes 3,603,210 shares issuable upon the vesting of RSUs granted under the 2004 Equity Incentive Plan. The remaining balance consists of outstanding stock option grants under various plans.

(3)

The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price.

(4)

Includes outstanding options to purchase an aggregate of 111,211 shares of our common stock assumed through our acquisitions of TelCom Semiconductor, Inc. in January 2001, and PowerSmart, Inc. in June 2002. At March 31, 2009, these assumed options had a weighted average exercise price of $20.60 per share. No additional options may be granted under these plans.

Equity Compensation Plans Not Approved by Stockholders

Microchip Technology Incorporated 1997 Nonstatutory Stock Option Plan

In November 1997, our Board of Directors approved the Microchip 1997 Nonstatutory Stock Option Plan, or our 1997 Plan. Under our 1997 Plan, nonqualified stock options were granted to employees who were not officers or directors of Microchip and to our consultants. The 1997 Plan was not submitted to our stockholders for approval because doing so was not required under applicable rules and regulations in effect at the time the plan was initially adopted or when it was amended. As of March 31, 2009, options to acquire 5,220,219 shares were outstanding under the 1997 Plan and no shares were available for future grant because this plan was replaced with our 2004 Equity Incentive Plan for future grants.

The expiration date, maximum number of shares purchasable, and other provisions of options granted under the 1997 Plan, including vesting provisions, were established at the time of grant by either the Compensation Committee or the Employee Committee appointed by the Board of Directors, provided that the exercise price of an option could not be less than the fair market value of our common stock on the date of grant and no option could have a term of more than 10 years. If Microchip is acquired by merger, consolidation or asset sale, each outstanding option that is not assumed by the successor corporation or otherwise replaced with a comparable option will automatically accelerate and vest in full. In connection with a change of control of Microchip by tender offer or proxy contest for board membership, our Board of Directors can accelerate the vesting of outstanding options. Our Board of Directors or Compensation Committee may amend or terminate the 1997 Plan without stockholder approval, but no amendment or termination of the 1997 Plan may adversely affect any award previously granted under the 1997 Plan without the written consent of the stock option holder.

CODE OF ETHICS

On May 3, 2004, our Board of Directors adopted a code of ethics for our directors, officers (including our chief executive officer and chief financial officer), and employees. A copy of the code of ethics is available on our website at the Corporate/Investors section under Mission Statement/Corporate Governance on www.microchip.com.

We intend to post on our website any amendment to, or waiver from, a provision of our codes of ethics within four business days following the date of such amendment or waiver or such other time period required by SEC rules.

OTHER MATTERS

Other Matters to be Presented at the Annual Meeting

At the date this proxy statement went to press, we did not anticipate that any other matters would be raised at the annual meeting.

Requirements, Including Deadlines, for Receipt of Stockholder Proposals for the 2010 Annual Meeting of Stockholders; Discretionary Authority to Vote on Stockholder Proposals

Under SEC rules, if a stockholder wants us to include a proposal in our proxy statement and form of proxy for the 2010 annual meeting, our Secretary must receive the proposal at our principal executive offices by March 12, 2010. Stockholders interested in submitting such a proposal are advised to contact knowledgeable counsel with regard to the detailed requirements of applicable securities laws. The submission of a stockholder proposal does not guarantee that it will be included in our proxy statement.

Under our Bylaws, stockholders must follow certain procedures to nominate a person for election as a director or to introduce an item of business at our annual meeting. Under these procedures, stockholders must submit the proposed nominee or item of business by delivering a notice addressed to our Secretary at our principal executive offices. We must receive notice as follows:

Normally we must receive notice of a stockholder’s intention to introduce a nomination or proposed item of business for an annual meeting not less than 90 days before the first anniversary of the date on which we first mailed our proxy statement to stockholders in connection with the previous year’s annual meeting of stockholders. Accordingly, a stockholder who intends to submit a nomination or proposal for our 2010 annual meeting must do so no later than April 11, 2010.

However, if we hold our 2010 annual meeting on a date that is not within 30 days before or after the anniversary date of our 2009 annual meeting, we must receive the notice no later than the close of business on the later of the 90th day prior to our 2010 annual meeting or the 10th day following the day on which public announcement of the date of such annual meeting is first made.

A stockholder’s submission must include certain specified information concerning the proposal or nominee, as the case may be, and information as to the stockholder’s ownership of our common stock. Proposals or nominations not meeting these requirements will not be considered at our 2010 annual meeting.

·	If a stockholder does not comply with the requirements of this advance notice provision, the proxies may exercise discretionary voting authority under proxies it solicits to vote in accordance with its best judgment on any such proposal or nomination submitted by a stockholder.

To make any submission or to obtain additional information as to the proper form and content of submissions, stockholders should contact our Secretary in writing at 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199.

Householding of Annual Meeting Materials

Some brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report may have been sent to multiple stockholders in a stockholder’s household. Additionally, you may have notified us that multiple stockholders share an address and thus you requested to receive only one copy of our proxy statement and annual report. While our proxy statement and 2009 Annual Report are available online (see “Electronic Access to Proxy Statement and Annual Report” on page 2), we will promptly deliver a separate copy of either document to any stockholder who contacts our investor relations department at 480-792-7761 or by mail addressed to Investor Relations, Microchip Technology Incorporated, 2355 West Chandler Boulevard, Chandler, Arizona 85224-6199, requesting such copies. If a stockholder is receiving multiple copies of our proxy statement and annual report at the stockholder’s household and would like to receive a single copy of the proxy statement and annual report for a stockholder’s household in the future, stockholders should contact their broker, or other nominee record holder to request mailing of a single copy of the proxy statement and annual report. Stockholders receiving multiple copies of these documents directly from us, and who would like to receive single copies in the future, should contact our investor relations department to make such a request.

Date of Proxy Statement

The date of this proxy statement is July 10, 2009.

APPENDIX A

MICROCHIP TECHNOLOGY INCORPORATED

2004 EQUITY INCENTIVE PLAN

As amended and restated by the Board on June 1, 2009

Subject to Stockholder Approval at our 2009 Annual Meeting

1. Purposes of the Plan. The purposes of this 2004 Equity Incentive Plan are:

§	to attract and retain the best available personnel,

§	to provide additional incentive to Service Providers, and

§	to promote the success of the Company’s business.

Awards granted under the Plan may be Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units, as determined by the Administrator at the time of grant.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) “Applicable Laws” means the legal requirements relating to the administration of equity compensation plans under state and federal corporate and securities laws and the Code.

(c) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Stock Appreciation Rights, Performance Shares, Performance Units or Deferred Stock Units.

(d) “Award Agreement” means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

(e) “Awarded Stock” means the Common Stock subject to an Award.

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

(g) “Change of Control” means the occurrence of any of the following events, in one or a series of related transactions:

(1) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company, a subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing

(2) fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; or

(3) a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

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(4) the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(5) a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are Directors as of the date this Plan is approved by the Board, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors and whose election or nomination was not in connection with any transaction described in (1) or (2) above or in connection with an actual or threatened proxy contest relating to the election of directors of the Company.

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

(i) “Committee” means a committee appointed by the Board in accordance with Section 4 of the Plan.

(j) “Common Stock” means the common stock of the Company.

(k) “Company” means Microchip Technology Incorporated.

(l) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services and who is compensated for such services. The term Consultant shall not include Directors who are compensated by the Company only for their service as Directors.

(m) “Deferred Stock Unit” means a deferred stock unit Award granted to a Participant pursuant to Section 13.

(n) “Director” means a member of the Board.

(o) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(p) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(r) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(1) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation (“Nasdaq”) System, the Fair Market Value of a Share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(2) If the Common Stock is quoted on the Nasdaq System (but not on the Nasdaq National Market thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(3) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

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

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

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(u) “Non-Employee Director” means a member of the Board who is not an Employee.

(v) “Nonstatutory Stock Option” means an Option not intended to qualify as an incentive stock option under Section 422 of the Code and regulations promulgated thereunder.

(w) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Award. The Notice of Grant is part of the Option Agreement.

(x) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(y) “Option” means a stock option granted pursuant to the Plan.

(z) “Option Agreement” means a written or electronic agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(aa) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(bb) “Participant” means the holder of an outstanding Award granted under the Plan.

(cc) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Administrator, the performance measures for any performance period will be any one or more of the following objective performance criteria, applied to either the Company as a whole or, except with respect to stockholder return metrics, to a region, business unit, affiliate or business segment or specific product or products, and measured either on an absolute basis or relative to a pre-established target, to a previous period's results or to a designated comparison group, and, with respect to financial metrics, which may be determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), in accordance with accounting principles established by the International Accounting Standards Board ("IASB Principles") or which may be adjusted when established to exclude any items otherwise includable under GAAP or under IASB Principles or any other objectively determinable items including, without limitation, (a) any extraordinary non-recurring items, (b) the effect of any merger, acquisition, or other business combination or divestiture, or (c) the effect of any changes in accounting principles affecting the Company's or a business units', region's, affiliate's or business segment's reported results: (i) cash flow (including operating cash flow or free cash flow), (ii) cash position, (iii) revenue (on an absolute basis or adjusted for currency effects), (iv) revenue growth, (v) contribution margin, (vi) gross margin or gross margin as a percentage of revenue, (vii) operating margin or operating margin as a percentage of revenue (viii) operating expenses or operating expenses as a percentage of revenue, (ix) earnings (which may include earnings before interest and taxes, earnings before taxes and net earnings), (x) earnings per share, (xi) net income, (xii) stock price, (xiii) return on equity, (xiv) total stockholder return, (xv) growth in stockholder value relative to a specified publicly reported index (such as the S&P 500 Index), (xvi) return on capital, (xvii) return on assets or net assets, (xviii) return on investment, (xix) operating profit or net operating profit, (xx) market share (which may include ranking for a specific product line or market share percentage for a given product line), (xxi) contract awards or backlog, (xxii) overhead or other expense reduction, (xxiii) credit rating, (xxiv) objective customer indicators, (xxv) new product invention or innovation, (xxvi) attainment of research and development milestones, (xxvii) improvements in productivity, (xxviii) attainment of objective operating goals, and (xxix) objective employee metrics. The Performance Goals may differ from Participant to Participant and from Award to Award.

(dd) “Performance Share” means a performance share Award granted to a Participant pursuant to Section 11.

(ee) “Performance Unit” means a performance unit Award granted to a Participant pursuant to Section 12.

(ff) “Plan” means this 2004 Equity Incentive Plan.

(gg) “Restricted Stock” means Shares granted pursuant to Section 10 of the Plan.

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(hh) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(ii) “Section 16(b)” means Section 16(b) of the Exchange Act, as amended.

(jj) “Service Provider” means an Employee, Consultant or Non-Employee Director.

(kk) “Share” means a share of the Common Stock, as adjusted in accordance with Section 19 of the Plan.

(ll) “Stock Appreciation Right” or “SAR” means an Award granted pursuant to Section 9 of the Plan.

(mm) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 19 of the Plan, the maximum aggregate number of Shares which may be issued under the Plan is 20,400,000 Shares comprised of (i) any Shares remaining available for issuance pursuant to the Company’s 1993 Stock Option Plan as of the date upon which this Plan is effective, up to a maximum of 7,500,000 Shares, (ii) any Shares remaining available for issuance pursuant to the Company’s 1997 Nonstatutory Stock Option Plan as of the date upon which this Plan is effective, up to a maximum of 7,900,000 Shares, and (iii) any Shares subject to any outstanding options under the Company’s 1993 or 1997 Nonstatutory Stock Option Plans that subsequently expire unexercised, up to a maximum of an additional 5,000,000 Shares. In no event shall more than 30% of the Shares remaining issuable under the Plan as of the effective date and 30% of the Shares subsequently added to the Plan by virtue of outstanding 1993 Stock Option Plan and 1997 Nonstatutory Stock Option Plan options expiring unexercised be issued pursuant to Restricted Stock, Performance Share, Performance Unit or Deferred Stock Unit Awards with a purchase price lower than 100% of the Fair Market Value of the underlying Shares or units on the date of grant; provided, however, that such 30% limitation shall not apply to RSUs issued on or after the date of the Company’s 2006 annual stockholders’ meeting.

The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Award expires or becomes unexercisable without having been exercised in full, or with respect to Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and SARs, the forfeited or repurchased Shares) which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to SARs, only Shares actually issued pursuant to an SAR shall cease to be available under the Plan; all remaining Shares under SARs shall remain available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan under any Award shall not be returned to the Plan and shall not become available for future distribution under the Plan; provided, however, that if Shares of Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units are repurchased by the Company at their original purchase price or are forfeited to the Company, such Shares shall become available for future grant under the Plan. Shares used to pay the exercise price or purchase price, if applicable, of an Award shall become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than stock, such cash payment shall not result in reducing the number of Shares available for issuance under the Plan.

4. Administration of the Plan.

(a) Procedure.

(1) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers.

(2) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code.

(3) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

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(4) Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

(1) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(u) of the Plan;

(2) to select the Service Providers to whom Awards may be granted hereunder (other than the automatic grants to Non-Employee Directors provided for in Section 17 of the Plan);

(3) to determine whether and to what extent Awards or any combination thereof, are granted under the Plan;

(4) to determine the number of shares of Common Stock or equivalent units to be covered by each Award granted under the Plan;

(5) to approve forms of agreement for use under the Plan;

(6) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted under the Plan. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or SARs may be exercised or other Awards vest (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(7) to construe and interpret the terms of the Plan and Awards;

(8) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

(9) to modify or amend each Award (subject to Section 21(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options and SARs longer than is otherwise provided for in the Plan;

(10) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(11) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award (or distribution of a Deferred Stock Unit) that number of Shares or cash having a Fair Market Value equal to the minimum amount required to be withheld (but no more). The Fair Market Value of any Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

(12) to determine the terms and restrictions applicable to Awards; and

(13) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards.

5. Eligibility. Restricted Stock, Performance Shares, Performance Units, Stock Appreciation Rights, Deferred Stock Units and Nonstatutory Stock Options may be granted to Service Providers. Non-Employee Directors shall only receive Awards pursuant to Section 17 of the Plan.

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6. Limitations.

(a) Nonstatutory Stock Option. Each Option shall be designated in the Notice of Grant as a Nonstatutory Stock Option.

(b) No Employment Rights. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s employment with the Company or its Subsidiaries, nor shall they interfere in any way with the Participant’s right or the Company’s or Subsidiary’s right, as the case may be, to terminate such employment at any time, with or without cause or notice.

(c) 162(m) Limitations. The following limitations shall apply to grants of Options and Stock Appreciation Rights to Participants:

(1) No Participant shall be granted, in any Fiscal Year, Options and Stock Appreciation Rights to purchase more than 1,500,000 Shares; provided, however, that such limit shall be 4,000,000 Shares in the Participant’s first Fiscal Year of Company service.

(2) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 19(a).

7. Term of Plan. The Plan is effective as of October 1, 2004 (the “Effective Date”). It shall continue in effect until September 30, 2014, unless sooner terminated under Section 21 of the Plan.

8. Stock Options.

(a) Term. The term of each Option shall be stated in the Notice of Grant; provided, however, that the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Notice of Grant.

(b) Option Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant.

(c) No Repricing. The exercise price for an Option may not be reduced. This shall include, without limitation, a repricing of the Option as well as an Option exchange program whereby the Participant agrees to cancel an existing Option in exchange for an Option, SAR or other Award.

(d) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. In so doing, the Administrator may specify that an Option may not be exercised until the completion of a service period.

(e) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. Subject to Applicable Laws, such consideration may consist entirely of:

(1) cash;

(2) check;

(3) other Shares which (A) in the case of Shares acquired upon exercise of an option have been owned by the Participant for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

(4) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale proceeds required to pay the exercise price;

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(5) any combination of the foregoing methods of payment; or

(6) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

(f) Exercise of Option.

Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the optioned stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 19 of the Plan.

Exercising an Option in any manner shall decrease the number of Shares thereafter available for sale under the Option, by the number of Shares as to which the Option is exercised.

(g) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s misconduct, death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(h) Disability. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for six (6) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(i) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Option Agreement (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement), by the personal representative of the Participant’s estate, provided such representative has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such representative has been designated by the Participant, then such Option may be exercised by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following Participant’s death. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

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9. Stock Appreciation Rights.

(a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the number of SARs granted to any Participant.

(b) Exercise Price and Other Terms. Subject to Section 4(c) of the Plan, the Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that no SAR may have a term of more than ten (10) years from the date of grant. The per share exercise price for the Shares or cash to be issued pursuant to exercise of an SAR shall be determined by the Administrator and shall be no less than 100% of the Fair Market Value per share on the date of grant. The exercise price may not be reduced. This shall include, without limitation, a repricing of the SAR as well as an SAR exchange program whereby the Participant agrees to cancel an existing SAR in exchange for an Option, SAR or other Award

(c) Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(1) the difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(2) the number of Shares with respect to which the SAR is exercised.

(d) Payment Upon Exercise of SAR. At the discretion of the Administrator, payment for an SAR may be in cash, Shares or a combination thereof.

(e) SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.

(f) Expiration of SARs. An SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement.

(g) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability termination, the Participant may exercise his or her SAR within such period of time as is specified in the SAR Agreement to the extent that the SAR is vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for three (3) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified by the Administrator, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

(h) Disability. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her SAR within such period of time as is specified in the SAR Agreement to the extent the SAR is vested on the date of termination (but in no event later than the expiration of the term of such SAR as set forth in the SAR Agreement). In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for six (6) months following the Participant’s termination. If, on the date of termination, the Participant is not vested as to his or her entire SAR, the Shares covered by the unvested portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

(i) Death of Participant. If a Participant dies while a Service Provider, the SAR may be exercised following the Participant’s death within such period of time as is specified in the SAR Agreement (but in no event may the SAR be exercised later than the expiration of the term of such SAR as set forth in the SAR Agreement), by the personal representative of the Participant’s estate, provided such representative has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such representative has been designated by the Participant, then such SAR may be exercised by the person(s) to whom the SAR is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the SAR Agreement, the SAR shall remain exercisable for

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twelve (12) months following Participant’s death. If the SAR is not so exercised within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.

10. Restricted Stock.

(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock award granted to any Participant (provided that during any Fiscal Year, no Participant shall be granted more than 300,000 Shares of Restricted Stock); provided, however, that such limit shall be 750,000 Shares in the Participant’s first Fiscal Year of Company service, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on continued provision of services but may include a performance-based component, upon which is conditioned the grant or vesting of Restricted Stock.

(b) Restricted Stock Units. Restricted Stock may be granted in the form of Restricted Stock or units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. With respect to the units to acquire Shares, until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist.

(c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Restricted Stock granted under the Plan. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded. The

Administrator may require the recipient to sign a Restricted Stock Award agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator.

(d) Restricted Stock Award Agreement. Each Restricted Stock grant shall be evidenced by an agreement that shall specify the purchase price (if any) and such other terms and conditions as the Administrator, in its sole discretion, shall determine; provided, however, that if the Restricted Stock grant has a purchase price, such purchase price must be paid no more than ten (10) years following the date of grant.

(e) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Restricted Stock to qualify as “performance-based compensation” under Section 162(m) of the Code. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Restricted Stock under Section 162(m) of the Code (e.g., in determining the Performance Goals).

11. Performance Shares.

(a) Grant of Performance Shares. Subject to the terms and conditions of the Plan, Performance Shares may be granted to Participants at any time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Performance Share award granted to any Participant (provided that during any Fiscal Year, no Participant shall be granted more than 300,000 units of Performance Shares); provided, however, that such limit shall be 750,000 Shares in the Participant’s first Fiscal Year of Company service, and (ii) the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Shares. Performance Shares shall be granted in the form of units to acquire Shares. Each such unit shall be the equivalent of one Share for purposes of determining the number of Shares subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the units to acquire Shares.

(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Shares granted under the Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator

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may require the recipient to sign a Performance Shares agreement as a condition of the award. Any certificates representing the Shares of stock awarded shall bear such legends as shall be determined by the Administrator.

(c) Performance Share Award Agreement. Each Performance Share grant shall be evidenced by an agreement that shall specify such other terms and conditions as the Administrator, in its sole discretion, shall determine.

(d) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Performance Shares to qualify as “performance-based compensation” under Section 162(m) of the Code. In granting Performance Shares which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Performance Shares under Section 162(m) of the Code (e.g., in determining the Performance Goals).

12. Performance Units.

(a) Grant of Performance Units. Performance Units are similar to Performance Shares, except that they shall be settled in a cash equivalent to the Fair Market Value of the underlying Shares, determined as of the vesting date. Subject to the terms and conditions of the Plan, Performance Units may be granted to Participants at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the conditions that must be satisfied, which typically will be based principally or solely on achievement of performance milestones but may include a service-based component, upon which is conditioned the grant or vesting of Performance Units. Performance Units shall be granted in the form of units to acquire Shares. Each such unit shall be the cash equivalent of one Share of Common Stock. No right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Performance Units or the cash payable thereunder.

(b) Number of Performance Units. The Administrator will have complete discretion in determining the number of Performance Units granted to any Participant, provided that during any Fiscal Year, no Participant shall receive Performance Units having an initial value greater than $1,500,000, provided, however, that such limit shall be $4,000,000 in the Participant’s first Fiscal Year of Company service.

(c) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of Performance Units granted under the Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the stock is awarded, which may include such performance-based milestones as are determined appropriate by the Administrator. The Administrator may require the recipient to sign a Performance Unit agreement as a condition of the award. Any certificates representing the Shares awarded shall bear such legends as shall be determined by the Administrator.

(d) Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced by an agreement that shall specify such terms and conditions as the Administrator, in its sole discretion, shall determine.

(e) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Performance Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Performance Units to qualify as “performance-based compensation” under Section 162(m) of the Code. In granting Performance Units which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Performance Units under Section 162(m) of the Code (e.g., in determining the Performance Goals).

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13. Deferred Stock Units.

(a) Description. Deferred Stock Units shall consist of a Restricted Stock, Performance Share or Performance Unit Award that the Administrator, in its sole discretion permits to be paid out in installments or on a deferred basis, in accordance with rules and procedures established by the Administrator. Deferred Stock Units shall remain subject to the claims of the Company’s general creditors until distributed to the Participant.

(b) 162(m) Limits. Deferred Stock Units shall be subject to the annual 162(m) limits applicable to the underlying Restricted Stock, Performance Share or Performance Unit Award.

14. Death of Participant. In the event that a Participant dies while a Service Provider, then 100% of his or her Awards shall immediately vest.

15. Leaves of Absence. Unless the Administrator provides otherwise or as otherwise required by Applicable Laws, vesting of Awards granted hereunder shall cease commencing on the first day of any unpaid leave of absence and shall only recommence upon return to active service.

16. Misconduct. Should (i) the Participant’s service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement), or (ii) the Participant makes any unauthorized use or disclosure of confidential information or trade secrets of the Company or any Parent or Subsidiary, then in any such event all outstanding Awards held by the Participant under the Plan shall terminate immediately and cease to be outstanding, including as to both vested and unvested Awards.

17. Non-Employee Director Options.

(a) Initial Grants. Each Non-Employee Director who first becomes a Non-Employee Director on or after the date upon which the Plan is approved by the Company’s stockholders (excluding any Non-Employee Director who previously served on the Board), shall be automatically granted (i) an Option grant covering 6,000 shares of Common Stock (the “Initial Option Grant”), and (ii) that number of Restricted Stock Units equal to $60,000 divided by the Fair Market Value, rounded down to the nearest whole Share (the “Initial RSU Grant”), as of the date that the individual first is appointed or elected as a Non-Employee Director. The Initial Option Grant shall vest as to 1/48th of the Shares subject to the Initial Option each month following the grant date, so as to be 100% vested on the four-year anniversary of the grant date. The Initial RSU Grant will vest in equal 25% annual installments on each of the four anniversaries of the first business day of the second month of the Company’s fiscal quarter in which the grant is made. All vesting of the Initial Option Grant and the Initial RSU Grant is contingent upon the Non-Employee Director maintaining continued status as a Non-Employee Director through the applicable vesting date.

(b) Annual Grants. On the date of the Company’s annual stockholders’ meeting, each Non-Employee Director who has served as a Non-Employee Director for at least three months on that date shall be automatically granted (i) an Option grant covering 3,000 shares of Common Stock (the “Annual Option Grant”), and (ii) that number of Restricted Stock Units equal to $30,000 divided by the Fair Market Value, rounded down to the nearest whole Share (the “Annual RSU Grant”), provided that such Non-Employee Director has been elected by the stockholders to serve as a member of the Board at that annual meeting. The Annual Option Grant shall vest as to 1/12th of the Shares subject to the Annual Option each month following the grant date, so as to be 100% vested on the anniversary of the grant date. The Annual RSU Grant will vest in equal 50% annual installments on each of the two anniversaries of the first business day of the second month of the Company’s fiscal quarter in which the grant is made. All vesting of the Annual Option Grant and the Annual RSU Grant is contingent upon the Non-Employee Director maintaining continued status as a Non-Employee Director through the applicable vesting date.

(c) One-Time Grant. On the date of the Company’s 2009 stockholders’ meeting, each Non-Employee Director who has served as a Non-Employee Director for at least five years on that date shall be automatically granted a one-time grant of that number of Restricted Stock Units equal to $100,000 divided by the Fair Market Value, rounded down to the nearest whole Share, provided that such Non-Employee Director has been elected by the stockholders to serve as a member of the Board at that annual meeting. The Restricted Stock Units subject to this grant will vest in equal 25% annual installments on each of the four anniversaries of the first business day of the second month of the Company’s fiscal quarter in which the grant is made. Vesting of the one-time grant is contingent upon the Non-Employee Director maintaining continued status as a Non-Employee Director through the applicable vesting date.

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18. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. If the Administrator makes an Award transferable, such Award shall contain such additional terms and conditions as the Administrator deems appropriate.

19. Adjustments Upon Changes in Capitalization, Dissolution or Liquidation or Change of Control.

(a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Award, the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the price per share of Common Stock covered by each such outstanding Award and the 162(m) fiscal year share issuance limits under Sections 6(c), 10(a) and 11(a) shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that any such change in capitalization shall not affect the number of shares awarded under the automatic grants to Non-Employee Directors described in Sections 17(a) and (b), and provided that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the right to exercise his or her Option or SAR until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised (with respect to Options and SARs) or vested (with respect to other Awards), an Award will terminate immediately prior to the consummation of such proposed action.

(1) Stock Options and SARs. In the event of a Change of Control, each outstanding Option and SAR shall be assumed or an equivalent option or SAR substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or SAR, the Participant shall fully vest in and have the right to exercise the Option or SAR as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or SAR becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change of Control, the Administrator shall notify the Participant in writing or electronically that the Option or SAR shall be fully vested and exercisable for a period of thirty (30) days from the date of such notice, and the Option or SAR shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the Change of Control, the option or stock appreciation right confers the right to purchase or receive, for each Share of Awarded Stock subject to the Option or SAR immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share of Awarded Stock subject to the Option or SAR, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.

(2) Restricted Stock, Performance Shares, Performance Units and Deferred Stock Units. In the event of a Change of Control, each outstanding Restricted Stock, Performance Share, Performance Unit and Deferred Stock Unit award shall be assumed or an equivalent Restricted Stock, Performance Share, Performance Unit and Deferred Stock Unit

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award substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Restricted Stock, Performance Share, Performance Unit or Deferred Stock Unit award, the Participant shall fully vest in the Restricted Stock, Performance Share, Performance Unit or Deferred Stock Unit including as to Shares (or with respect to Performance Units, the cash equivalent thereof) which would not otherwise be vested. For the purposes of this paragraph, a Restricted Stock, Performance Share, Performance Unit and Deferred Stock Unit award shall be considered assumed if, following the Change of Control, the award confers the right to purchase or receive, for each Share (or with respect to Performance Units, the cash equivalent thereof) subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received, for each Share and each unit/right to acquire a Share subject to the Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control.

20. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant.

21. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Section 422 of the Code (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such stockholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company.

22. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the issuance and delivery of such Shares (or with respect to Performance Units, the cash equivalent thereof) shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

23. Liability of Company.

(a) Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

(b) Grants Exceeding Allotted Shares. If the Awarded Stock covered by an Award exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional stockholder approval, such Award

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shall be void with respect to such excess Awarded Stock, unless stockholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 21(b) of the Plan.

24. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

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Microchip Technology Incorporated

2355 West Chandler Boulevard

Chandler, Arizona 85224-6199

This Proxy is solicited on behalf of the Board of Directors

2009 ANNUAL MEETING OF STOCKHOLDERS

I (whether one or more of us) appoint Steve Sanghi and J. Eric Bjornholt, and each of them, each with full power of substitution, to be my Proxies. The Proxies may vote on my behalf, in accordance with my instructions, all of my shares entitled to vote at the 2009 Annual Meeting of Stockholders of Microchip Technology Incorporated and any adjournment(s) of that meeting. The meeting is scheduled for August 14, 2009, at 9:00 a.m., Mountain Standard Time, at the company’s Chandler, Arizona facility at 2355 West Chandler Boulevard, Chandler, Arizona. The Proxies may vote on my behalf as if I were personally present at the meeting.

This Proxy will be voted as directed or, if no contrary direction is indicated, will be voted for the Election of Directors; for approval of the amendment and restatement of our 2004 Equity Incentive Plan to (i) modify the automatic grant provisions with respect to equity compensation for non-employee directors to provide for annual awards of options and restricted stock units (“RSUs”), rather than just options, and to provide for a one-time award of RSUs to serve as a retention mechanism and (ii) revise the definition of “performance goals” for purposes of Section 162(m) of the Internal Revenue Code; for the ratification of Ernst & Young LLP as Microchip’s independent registered public accounting firm for the fiscal year ending March 31, 2010; and as my Proxies deem advisable on such other matters as may properly come before the meeting or any adjournment(s) thereof. The proposals described in the accompanying proxy statement have been proposed by the Board of Directors.

IF VOTING BY MAIL, PLEASE COMPLETE, DATE AND SIGN ON REVERSE SIDE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

Dear Stockholder,

Microchip requests that you notify us if you are receiving multiple copies of our proxy statement and annual report. If you do so, we can reduce the number of these materials we must print and mail. To choose this option, please check the appropriate box on your proxy card and return it by mail.

YOUR VOTE IS IMPORTANT!

Thank you in advance for participating in our 2009 Annual Meeting.

The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.

1. Election of directors:	01 Steve Sanghi	04 Matthew W. Chapman	o Vote FOR	o Vote WITHHELD
	02 Albert J. Hugo-Martinez	05 Wade F. Meyercord	all nominees	from all nominees
	03 L.B. Day		(except as marked)

(Instructions: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the box provided to the right.)

2.	Proposal to approve the amendment and restatement of our 2004 Equity Incentive Plan to (i) modify the automatic grant provisions with respect to equity compensation for non-employee directors to provide for annual awards of options and restricted stock units (“RSUs”), rather than just options, and to provide for a one-time award of RSUs to serve as a retention mechanism and (ii) revise the definition of “performance goals” for purposes of Section 162(m) of the Internal Revenue Code.	o		For	o	Against	o	Abstain

3.	Proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2010.	o		For	o	Against	o	Abstain

o Multiple stockholder publications. Please check here to stop mailing of stockholder publications for this account, since multiple copies come to this address

			Date

Address Change? Mark Box o Indicate changes below:

Signature(s) in Box

(Please sign exactly as your name(s) appears on the proxy card. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., must include title and authority. Corporations must provide full name of corporation and title of authorized officer signing the proxy.)