AMENDED AND
RESTATED EMPLOYMENT AGREEMENT
Amended and Restated Agreement made as of March 19, 2007
between Standard Microsystems Corporation, a Delaware corporation
having an office at 80 Arkay Drive, Hauppauge, New York 11788
(“Company”), and David S. Smith, residing at 26 Birch
Road, Darien, Connecticut 06820 (“Executive”).
W I T N E S
S E T H:
WHEREAS, Company desires to employ Executive as Company’s
Chief Financial Officer (“CFO”), upon the terms and
conditions hereinafter in this Amended and Restated Employment
Agreement (the “Agreement”) set forth, and Executive
desires to be so employed; and
WHEREAS, the Company and the Executive acknowledge that the
Executive is currently a “Specified Employee” as
defined under Section 409A of the Internal Revenue Code (the
“Code”), thereby necessitating certain changes to the
Executive’s original Employment Agreement dated
September 16, 2005; and
WHEREAS, the primary change from the original Employment
Agreement dated September 16, 2005 shall be to ensure that
certain payments are not made until 6 months after the
Executive separates from service with the Company, except to the
extent that any exceptions may exist under Section 409A of the
Code and the regulations promulgated thereunder or any successor
thereto (collectively referred to herein as
“409A’).
Now, therefore, in consideration of the promises and the mutual
covenants and conditions contained herein, the parties hereto agree
as follows:
The Company hereby agrees to employ Executive, and Executive
hereby accepts such employment, upon the terms and conditions
hereinafter set forth.
2. Title and Duties .
Company shall employ Executive as Senior Vice President and
Chief Financial Officer (“CFO”), effective as of the
date of execution hereof. Executive will render his services
faithfully and to the best of his ability and devote his full
business time and attention to the services to be rendered by him
hereunder.
3. Term; Severance; Change in Control.
a. The term of employment under the Agreement shall
commence as of the date hereof and shall continue through
September 15, 2008 (the “Employment Term”).
Thereafter, the Employment Term shall be automatically extended for
one-year periods, unless either party shall give notice
(“Contrary Notice”) as per section 12 (e) herein,
at least ninety (90) days prior to the end of the initial
Employment Term, or any extended Employment Term, that the
Employment Term shall not be so extended.
b. Notwithstanding Section 3.a, the Employment
Term shall terminate prior to any date otherwise specified in
Section 3.a, upon:
(i) Executive’s death
or Disability. “Disability” shall mean the physical or
mental incapacity of Executive, which cannot be overcome by making
any reasonable accommodations and which prevents Executive from
performing Executive’s duties as herein provided for a
continuous period of 60 days or an aggregate period of
90 days during any consecutive six-month period, and
disability shall be deemed to have occurred as of the end of the
applicable period. Termination as a result of death is effective on
the date of death;
(ii) Notice by Company of
termination for “Cause”, which shall mean the
Executive’s (x) material dishonesty in the course of
employment, (y) willful and material failure to perform his
duties hereunder, following delivery of written notice thereof and
a reasonable period, not to exceed 30 days from delivery of
notice, to cure such failure, or (z) conduct, regardless
whether in the course of employment, constituting a felony or any
crime involving moral turpitude or being charged or sanctioned by a
federal or state government or governmental authority or agency
with violations of federal or state securities laws in any judicial
or administrative process or proceeding, or having been found by
any court or governmental authority or agency to have committed any
such violation;
(iii) Notice by Company of
termination other than for cause. Reduction of compensation or
duties, OR relocation of Executive’s location of employment
outside of Long Island OR other breach hereof and failure to cure
within 30 days following delivery of written notice thereof by
the Executive to the Company shall be considered notice of
termination under this subsection; or,
(iv) Notice of voluntary
termination by Executive within six months after a Change in
Control of Company. For purposes hereof, a “Change in Control
of Company” shall mean an event that Company would be
required to report as such pursuant to Securities and Exchange
Commission (“SEC”) Form 8-K, or as defined under
409A.
c. Should Company terminate the Employment Term
pursuant to clauses (i) or (iii) of Section 3.b:
(i) Company shall pay Executive, in lump sum on the day of
termination, an amount equal to one year’s Base Salary, the
value of any vested or unvested stock grants, the value of any
deferred compensation (excluding the SERP addressed in
Section 5, and stock options but including stock appreciation
rights), any accrued, unused vacation and unreimbursed business
expenses (including automobile expenses, and tax gross up on such
automobile expenses); (ii) Company shall pay any accrued,
unpaid Bonus, as hereinafter defined, (i.e., a pro-rated amount of
the Bonus that Executive would have earned if Executive remained
employed through the then current fiscal year of Company, to be
based on the number of weeks employed during the then current
fiscal year), payable at the same time such Bonus would have been
paid for such fiscal year; (iii) Company shall continue to
provide Company-paid individual life insurance, and shall pay the
cost of all family group health insurance plans under COBRA,
provided by Company to Executive as of the date of such
termination, excluding group life and group disability plans, for a
period of 18 months from the date of termination of the
Employment Term, or until Executive shall have sooner obtained
full-time employment; (iv) insofar as any stock option granted
by Company to Executive would have, but for such termination,
become exercisable in accordance with its terms within
24 months of the date of such termination, such option shall
become exercisable as of such termination date, remain exercisable
during the 24-month period immediately following such termination
date, and expire at the end of such 24-month period, except that if
the termination of the Employment Term pursuant to clause
(iii) of Section 3.b occurs within twelve months from the
date of grant of such option, such option shall become exercisable
to the extent permitted under the provisions of the plan from which
any such stock option was granted. This Section 3.c sets forth
Company’s entire obligation to Executive in case of
termination of the Employment Term on any basis referred to in this
Section 3.c.
For purposes of this Agreement the value of any SAR shall be the
spread between the grant price and the closing price of the common
stock of the Company measured on the exchange on which the
Company’s stock is traded on the date of the termination, or
the next day on which the exchange is open if the exchange is
closed on the date of the termination; the value of any common
stock shall be the closing price of the common stock of the Company
measured on the exchange on which it is traded on the date of the
termination, or the next day on which the exchange is open if the
exchange is closed on the date of the termination. Once the Company
makes such payment all such SARS and stock grants shall be
automatically deemed cancelled.
d. Should Company terminate the Employment Term
pursuant to clause 3.b (ii), Company’s obligations hereunder
shall then be fully satisfied upon payment by Company to Executive
of any unpaid Base Salary, accrued, unused vacation time and
unreimbursed business expenses through the date of termination,
provided, however, that such payment shall not prevent the Company
from seeking relief respecting any claim it might have against the
Executive hereunder or otherwise.
e. In the event of a Change in Control of Company
all stock options, all restricted stock awards (RSAs), and deferred
compensation (excluding the SERP addressed in Section 5, and
stock options but including stock appreciation rights) shall
immediately vest and become exercisable, and should
Executive’s employment be terminated pursuant to clause 3.b
(iv) or, within six months after the Change in Control, by
Company pursuant to clause 3.b (iii), Executive shall be entitled
to the payments referred to in clause 3.c (i) (except for any
payments related to stock appreciation rights or restricted stock),
the insurance coverage referred to in clause 3.c (iii), a payment
in an amount equal to 50% of Base Salary on the day of termination,
and any unexercised stock option or SAR shall remain exercisable
for the 24-month period immediately following such termination.
With respect to the immediate vesting of any stock option or SAR in
this section 3.e. by reason of a Change in Control of Company that
occurs within twelve months from the date of grant, immediate
vesting will only occur to the extent permitted under the
provisions of the plan from which any such stock option or SAR was
granted.
f . The parties acknowledge that the payment of some
or all of the above severance benefits may be considered to be a
form of nonqualified deferred compensation benefits subject to
409A. In recognition of this fact, the parties hereby agree and
confirm as follows:
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i.
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Notwithstanding anything to the contrary in
this Agreement, in no event shall any benefits be paid to you prior
to the 6 th month anniversary of the Executive’s
Separation from Service as defined below, unless otherwise
permissible under 409A. Any and all payments that may not be paid
within such 6 month period shall be delayed until the first
day of the month after such 6th month anniversary occurs and shall
retroactively apply to make the Executive whole for any lost
benefits, with interest at the rate of prime plus 2% determined as
of the first day of the month in which the Separation from Service
occurred. To the extent that the Executive is required to pay for
the cost of any benefits to keep them in full force and effect
during the 6 month delay period for Specified Employees, the
Executive shall also be reimbursed for such out-of-pocket expenses
as of the same date provided above with the same rate of
interest.
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ii.
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The parties acknowledge that the continuation
of benefits under COBRA and other benefits may be continued during
the 6 month delay for Specified Employees, but must also be
incurred and paid by the December 31 of the second calendar
year following the calendar year in which a separation from service
occurs. To the extent that any benefits would extend beyond this
period, a single lump cash payment will be made as of the
applicable December 31, in order to avoid any further
deferrals of compensation.
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iii.
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In the event that any payment or benefit
required to be paid to Executive pursuant to this Agreement would
violate the parties agree to amend this Agreement, to the extent
necessary and reasonable to maintain the spirit of the Agreement
without resulting in a violation of 409A.
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iv.
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In the event of a violation of 409A, it is not
the intent of the Company for the Executive to incur the excise tax
and other penalties under 409A. Accordingly, to the extent any
excise taxes, underpayment of interest or penalties under 409A
apply, the Company shall make a “gross up” payment to
the Executive, to offset the effect of any excise tax, interest or
penalties incurred in accordance with 409A of the Code, and any tax
on such gross up payments, to the extent such action is legally
permitted.
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v.
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All gross up payments set forth in this
Agreement (including any gross up contemplated in Section 5
hereof) shall be made as soon as legally permitted under 409A, but
in no event later than 2 1/2
months following the end of the fiscal year in which the event
giving rise to such gross up payment occurs and, if permissible,
before the excise tax becomes due.
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4. Annual
compensation .
In consideration of the services to
be rendered by Executive hereunder, Company shall pay to
Executive:
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(i)
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An annual base salary of $325,000, which may
be increased, but not decreased without Executive’s consent,
from time to time, by Company’s Board of Directors, based
upon Compensation Committee review and recommendation (“Base
Salary”) and
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(ii)
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A management incentive bonus opportunity
(“Bonus”) with respect to an applicable fiscal year
equal to 102% of Base Salary, in accordance with the
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Management Incentive Plan (the
“MIP”) for other Company executives, as approved by the
Board of Directors. Notwithstanding anything herein to the
contrary, the Bonus for a particular fiscal year shall be paid to
the Executive 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 the Bonus
to the Executive within such 2 1/2 month period is impracticable, either
administratively or economically, as determined by the Company,
payment of the Bonus will be made as soon as practicable
thereafter.
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(iii)
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Any Bonus payable shall be paid in cash, or
shares of Company restricted stock in accordance with the MIP, as
approved by the Board of Directors. At least half of the Bonus will
be paid in cash. All restricted stock so issued shall be subject to
the same transfer restrictions and forfeiture under the same
conditions as shall apply generally to Company bonus awards of
Company restricted stock, except as otherwise provided herein in
paragraphs 3 and 6. Executive shall have the right to demand
registration for all vested stock and Company shall use best effort
to cause such registration at Company expense to be effective.
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5. Benefits; Expenses.
Executive shall be entitled to such benefits as are provided
generally to Company’s senior execu
