EMPLOYMENT
AGREEMENT
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 Steven J. Bilodeau, residing at 9
Merriman Point Road, Center Sandwich, NH 03227
(“Executive”).
W I T N E S S E T
H:
WHEREAS, Company desires to retain the Executive as the
Company’s President and Chief Executive Officer, upon the
terms and conditions hereinafter in this Agreement set forth, and
the 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
March 18, 1999; and
WHEREAS, a primary change from the original Employment Agreement
dated March 18, 1999 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”); and
WHEREAS, the original Employment Agreement dated March 18,
1999 is more than seven years old, has been amended several times
during the intervening period, and is being updated,
Now, therefore, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties hereto agree
as follows:
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1.
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Employment . The Company hereby
agrees to employ the Executive, and the Executive hereby accepts
such employment, upon the terms and conditions hereinafter set
forth.
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2.
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Title and Duties . Company shall
employ the Executive as the Company’s President and Chief
Executive Officer, effective as of the date of execution hereof.
The Executive shall 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. Company shall use
best efforts to cause Executive’s election and re-election as
a director of Company during the Employment Term.
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3. Term; Severance; Change in Control .
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a.
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The term of employment under this Agreement
(the “Employment Term”) shall commence as of the date
hereof and shall continue through 18 November 2008.
Thereafter, the Employment Term shall be automatically extended for
one-year periods, unless either party shall give notice
(“Contrary Notice”), at least ninety (90) days
prior to the end of the Employment Term, that the Employment Term
shall not be so extended.
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b.
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Notwithstanding Section 3.a, the
Employment Term shall terminate prior to any date otherwise
specified in Section 3.a, upon:
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i.
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Executive’s death or Disability.
“Disability” shall mean
the physical or mental incapacity of the Executive which prevents
Executive from performing the 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. 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;
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ii.
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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 of whether in the course
of employment, constituting a felony or any crime involving moral
turpitude;
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iii.
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Notice by Company of termination other than
for Cause. Reduction of compensation or duties, contract
non-renewal, or requirement to relocate outside of Long Island or
“other breach” hereof shall be considered notice of
termination under this subsection. An “other breach” of
the contract is not effective until the Company fails to cure the
“other breach” within 30 days following delivery of
written notice thereof by the Executive to Company;
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iv.
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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 report, as such,
pursuant to Securities and Exchange Commission Form 8-K, or as
defined under 409A; or
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v.
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Notice of voluntary termination by Executive
within six months after Company’s shareholders fail to elect
Executive as a member of the Company’s Board of
Directors.
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c.
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(A) Should Company terminate the
Employment Term pursuant to paragraph (iii) of Section 3.b:
Company shall pay Executive, in lump sum on the day of termination;
(i) an amount equal to one year’s Base Salary, an amount
equal to the value of any deferred compensation (not including
stock appreciation rights, stock options, or stock grants), and any
accrued, unused vacation and unreimbursed business expenses
(including automobile and relocation expense, and tax gross up on
such automobile and relocation expenses); (ii) an amount equal
to the annual Bonus described in Section 4.a.(ii) herein;
(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, 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;
and (iv) any stock option, stock grants (including restricted
stock) or stock appreciation right (“SAR”) granted by
Company will immediately vest and any stock option or SAR granted
to Executive shall remain exercisable for 24 months after said
termination (the “Extension Period”), and expire at the
end of such 24 month period; provided, that the Extension
Period shall be limited to such shorter period of time as may be
required to comply with 409A and as may be set forth in the
applicable stock option plan,
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(B) Should Company terminate
the Employment Term pursuant to paragraph (i) of
Section 3.b: Company shall pay Executive, in lump sum on the
day of termination; (i) an amount equal to one year’s
Base Salary, an amount equal to the value of any deferred
compensation (not including stock appreciation rights, stock
options or stock grants), and any accrued, unused vacation and
unreimbursed business expenses (including automobile and relocation
expense, and tax gross up on such automobile and relocation
expenses); (ii) an amount equal to the annual Bonus described
in Section 4.a.(ii) herein; (iii) Company shall continue
to provide Company paid individual life insurance and shall
subsidize all family group health insurance plans under COBRA,
provided by Company to Executive as of the date of such
termination, for a period of 18 months from the date of
termination of the Employment Term; and (iv) the value as if
fully vested of any vested or unvested stock grants, (including
restricted stock awards (RSAs)), any stock options and any SARS.
For purposes of this Agreement the value of any stock option or 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
relevant event, or the next day on which the exchange is open if
the exchange is closed on the date of the relevant event; 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 relevant event or the next day on which the
exchange is open if the exchange is closed on the date of the
relevant event. Once the Company makes such payment all such SARS,
stock options and stock grants shall be automatically deemed
cancelled.
This Section 3.c sets forth
Company’s entire severance obligation to Executive in case of
termination of the Employment Term on any basis referred to in this
Section 3.c.
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d.
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Should Company terminate the Employment Term
pursuant to paragraph 3.b (ii) Company’s obligations
hereunder shall be fully satisfied upon payment by the Company to
the 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.
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e.
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In the event of either a Change in Control of
Company or the Company’s shareholders failing to elect
Executive as a member of the Board of Directors or removing
Executive as a Director once elected, the Company shall pay
executive, in lump sum on the day of the relevant event set forth
above in this paragraph (e); (i) an amount equal to one
year’s Base Salary, the value of any deferred compensation
(not including stock appreciation rights, stock options or stock
grants), and any accrued, unused vacation and unreimbursed business
expenses (including automobile and relocation expense, and tax
gross up on such automobile and relocation expenses); (ii) an
amount equal to the annual Bonus described in Section 4.a.(ii)
herein; (iii) Company shall continue to provide Company paid
individual life insurance and shall subsidize all family group
health insurance plans under COBRA, provided by Company to
Executive as of the date of the relevant event set forth above, for
a period of 18 months from the date of such event;
(iv) the value as if fully vested of any vested or unvested
stock grants (including RSAs), any stock options, and any SARS.
Once the Company makes such payment all such SARS, stock options
and stock grants shall be automatically deemed cancelled.
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f.
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The parties acknowledge that the payment of
some or all of the above 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 Executive
prior to the 6th 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
prior to such 6 th month anniversary shall be delayed
until the first day of the month after such 6 th
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 409A, 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 or 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, 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 under
Section 5.c 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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g.
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Except in the event of a Change in Control,
this Agreement shall not be assignable by the Company without the
written consent of Executive. The Company will require any
successor (whether by reason of a Change in Control, direct or
indirect, by purchase, merger, consolidation, or otherwise) to all
or substantially all of the business and/or assets of the Company
to expressly assume and agree to perform the obligations under this
Agreement in the same manner and the same extent that the Company
would be required to perform it as if no such succession had taken
place.
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h.
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This Agreement shall inure to the benefit of
and be enforceable by Executive’s personal or legal
representatives, executo
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