EMPLOYMENT AGREEMENT
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Agreement made as of September 16, 2005 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:
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WHEREAS, Company desires to employ Executive as Company's Chief Financial
Officer ("CFO"), upon the terms and conditions
hereinafter in this
Employment
Agreement (the "Agreement") set forth, and
Executive desires to be so employed;
Now, therefore, in consideration of the promises and
the mutual covenants and
conditions contained herein, the parties
hereto agree as follows:
1. Employment.
Subject to the next sentence, Company hereby agrees to employ
Executive,
and
Executive hereby accepts such employment, upon the terms and conditions
hereinafter set forth. The Agreement shall not be
effective unless
approved by
Company's Board of Directors.
2. Title and Duties.
Company shall employ Executive as Senior
Vice President upon the commencement of
such employment, and Chief Financial Officer ("CFO"), effective as of the
retirement of the current CFO, Andrew
Caggia on approximately October 12, 2005.
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 September
16, 2005 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 six months 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);
(ii)
Notice
by Company of termination for cause, which shall mean
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).
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, any vested or
unvested
stock grants, any deferred compensation (e.g. stock
appreciation rights (SARs),
etc., excluding the SERP addressed in
Section 5.), 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
paid coverage for any Company-paid individual life insurance, and all 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 or SAR 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 or SAR 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
or SAR, such option or SAR shall
become exercisable to the extent permitted
under the provisions of the plan from which any such
stock option or SAR 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.
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
stock grants (RSAs), and deferred
compensation (e.g.
stock appreciation rights,
etc., excluding the SERP addressed in Section 5.) 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), 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. Notwithstanding any provisions to the contrary, to the extent the
provisions of this Section or any other provisions of this Agreement would
result in any adverse tax consequences under Section 409A of the Code of
1986,
the Executive agrees to delay and/or
accelerate the payment
of any benefits to
the extent necessary to satisfy Section
409A. For example, Section 409A provides
that any form of nonqualified deferred compensation may not be paid to key
employees of a publicly traded company for
a period of at least six months after
the date of a separation from service.
Accordingly, any
required payments under
the deferred compensation provision above shall not be paid until after
the
expiration of the applicable six-month
period. Similarly, severance benefits may
be subject to Section 409A. To the extent
that any severance benefits are deemed
to result in a deferral of compensation, acceleration of payments may be
required, such as the commitment to provide
certain benefits for a period of 18
months.
4. Annual compensation.
a. In consideration
of the services to be rendered by
Executive
hereunder,
Company shall pay to Executive:
(i) 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
(ii)
A management incentive bonus ("Bonus") target, with respect to
fiscal year 2006 ending February 28, 2006 and thereafter, equal to
60 percent of Base Salary, i.e., $195,000 (the "At Plan
Bonus"). An
additional bonus payment for performance against strategic goals as
defined by the Board of Directors (the "Strategic Plan Bonus")
equal
to 50% of the At Plan Bonus amount. Therefore, the maximum total
bonus is 90% of Base Salary. Any Bonus plan approved by the Board
of
Directors for
Executive will be consistent with the management
incentive bonus plan for other Company executives. For fiscal year
2006 only,
both the At Plan and
Strategic Plan bonuses will be
prorated based on the
number of days
employed during
fiscal year
2006. Executive
shall be paid a
minimum Bonus equal to
50% of the
prorated At Plan Bonus for fiscal year 2006.
(iii)
Any Bonus payable
shall be paid 50% in
cash, and the balance
shall
be paid in
shares of Company
restricted stock having a total Market
Value equal to 50% of the amount of such Bonus. 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.
b. For purposes hereof, Market Value of a share of
Company restricted stock
(RSA) shall mean the closing sale price of
Company stock on the
date the RSA is
actually granted following approval by the Compensation
Committee of
Company's
Board of Directors.
5. Benefits; Expenses.
Executive shall be entitled to such benefits as are provided generally to
Company's senior executive officers. In addition, the Company shall lease for
Executive's use an automobile at a monthly lease expense not to
exceed $1,100
plus insurance, and will also reimburse for fuel and normal
travel expenses
(i.e. tolls, parking, etc.). The preceding expenses
(excluding the
automobile
lease) are fully tax protected.
Company shall furnish Executive with individual supplemental life insurance
coverage in the amount of $250,000 and
individual disability
income coverage if
insurance underwriting can be obtained based
on Executive's health
examination
results.
Company shall furnish and maintain
continuously directors and officers liability
insurance coverage during employment, and
will continue to indemnify and advance
legal expenses on behalf of Executive, during Employment Term and after
termination f
