Re: Letter Agreement

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Annual Base Salary of not less than $315,000.

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Annual Incentive Bonus Target of 75% of base salary; initially $236,250. Your incentive bonus target for the Company’s fiscal year ending February 28, 2007 will be prorated based on the number of days you are employed by the Company during its fiscal year 2007. Generally, one-half of any bonus is paid in cash and one half is paid as a restricted stock award (“RSA”) vesting as follows: 25% per year for each of the first two years after the date of the grant, and the remaining 50% after the third year after the date of the grant. Your incentive bonus plan will be modified to provide for an additional annual over-plan bonus amount consistent with the current Management Incentive Plan currently in place and which is paid in cash after year-end. For a full year, this amount is currently 8% of base salary, or approximately $25,200, and which would be paid in cash. Your Annual Incentive Bonus Target will be reviewed upon your first employment anniversary date for a possible adjustment. Notwithstanding anything herein to the contrary, any annual bonus for a particular fiscal year shall be paid to you as soon as reasonably practicable following the end of such fiscal year and in any event no later than 2 1/2 months following the end of such fiscal year; provided that in the event payment of such bonus to you within such 2 1/2 month period is impracticable, either administratively or economically, as determined by the Company, payment of such bonus will be made as soon as practicable thereafter.

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Monthly Car Allowance: $1,000

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Your annual salary, annual incentive bonus target, and monthly car allowance may be reviewed and increased from time to time.

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A hire-on bonus of $150,000 was paid in cash less applicable withholdings upon closing on a home on Long Island, NY. If you voluntarily resign your employment within three years of receipt of this bonus, you will be required to repay to SMSC this hire-on bonus on a prorata basis on or before your last date of employment without regard to any income taxes you may have paid or be responsible to pay relating to this bonus. This bonus shall be fully earned by you three years after receipt.

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Eligibility for Company paid Individual Executive Life Insurance ($250,000 death benefit), subject to obtaining underwriting.

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Eligibility for Company paid Individual Executive Disability Income Insurance (up to 1/3 ^rd of salary), subject to obtaining underwriting.

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Eligibility to participate in the Company’s Supplemental Executive Retirement Plan, which, if fully vested, provides for a retirement benefit of 35% of base salary for 10 years.

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Eligibility for severance benefits as set forth below: If your employment is terminated for any reason other than “Cause”, or if your compensation or duties are reduced following a “Change of Control”, or upon a “Required Relocation” (hereinafter referred to as “Good Reason Terminations”), (each of which shall be deemed a “Severance Eligible Event”), then you shall receive severance in a single lump sum cash payment equal to 12 months base salary and the Company shall pay for the cost of continuing your health insurance benefits under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), to the extent you are eligible and elect such benefits, for a period of 12 months. In addition, any granted stock option, RSA or stock appreciation rights (“SARs”) that, but for such termination, would have become exercisable in accordance with its terms within 24 months of the date of such termination, shall become exercisable (or become unrestricted in the case of RSAs) upon any Change of Control or “Severance Eligible Event.” Such option or SAR shall remain exercisable for a period of 12 months following your employment termination date. With respect to the vesting of any stock option or SAR that occurs within 12 months from the date of grant, immediate vesting will only occur to the extent permitted under the provisions of the plan from which such stock option or SAR was granted. In addition, in the event your employment is terminated for any Severance Eligible Event upon a Change of Control, you will be paid a prorata portion of any earned incentive bonus for which you would have otherwise been eligible, based on the number of days employed by the Company during the Company’s then current fiscal year and restriction on all RSAs previously granted shall be removed. For purposes of this paragraph:

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The merger or consolidation of SMSC with or into any other corporation or entities whereby the shareholders of SMSC immediately before the transaction do not own at least 50% of the new entity;

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SMSC is merged or consolidated with or into any other corporation or other entity, and at any time after such merger or consolidation is effected, the Continuing Directors do not or cease for any reason to constitute a majority of the board of directors either of the surviving entity, or of any entity in control of the surviving entity; or

iii.

All or substantially all of the assets of SMSC are sold or otherwise transferred to any other corporation or other entity, or more than 50% of the stock of SMSC is purchased by one entity, and at any time after such sale or other transfer is effected, the Continuing Directors do not or cease for any reason to constitute, a majority of the board of directors either of the entity which has acquired and owns such assets, or of any entity in control of the entity which has acquired and owns such assets.