Exhibit 10.18
STANDARD MICROSYSTEMS
CORPORATION
SEVERANCE
PLAN
WHEREAS,
Standard Microsystems Corporation ("SMSC" or the
“Company”) maintains the Standard Microsystems
Corporation Severance Plan (the "Severance Plan" or "Plan");
and
WHEREAS, SMSC
acknowledges that the Severance Plan is a "welfare plan" as defined
under Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"); and
WHEREAS, the
American Jobs Creation Act of 2004 (“AJCA”) enacted new
Section 409A of the Internal Revenue Code (the “Code”),
imposing new rules for all forms of deferred compensation,
including benefits under the SMSC Severance Plan; and
WHEREAS, SMSC
amended and restated the Severance Plan effective as of December
31, 2008 to comply with Section 409A of the Code, including all IRS
announcements and notices, and the Final Regulations issued under
Section 409A; and
WHEREAS, SMSC
wishes to amend the Severance Plan effective as of January 14, 2009
for business reasons; and
WHEREAS, due to
the brevity of the Plan, this document shall serve as both the Plan
document and the Summary Plan Description for the Severance Plan;
and
WHEREAS,
Section 22 of the Severance Plan retained the right for SMSC to
amend, modify or terminate the Plan.
NOW, THEREFORE,
the Plan is amended and restated as follows:
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1.
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Effective
Date. The
Plan became effective as of January 1, 1986. The Plan
was amended and restated effective as of December 31, 2008 to
comply with Section 409A of the Code. SMSC can
demonstrate its good faith compliance with Section 409A from
January 1, 2005 to December 31, 2008, as permitted under the Final
Treasury Regulations issued under Section 409A of the
Code. The Plan is being amended as of January 14, 2009
for business reasons.
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2.
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Plan
Year. The
Plan Year shall be the calendar year.
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"Base
Salary" shall mean an
eligible employee's regular salary as determined in accordance with
SMSC's payroll records, excluding any bonuses, commissions, taxable
or non-taxable fringe benefits, car or other allowances, and any
other forms of compensation.
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“Committee” means the Section 401(k) Committee established
for purposes of the SMSC Section 401(k) Savings Plan.
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“
Disability ” means a Participant is unable to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment, which can be expected
to result in death or can be expected to last for a continuous
period of not less than 12 months, as determined by an independent
third party physician, selected within the discretion of the
Committee. The determination of whether a Participant is
Disabled shall be determined by the Committee, in its sole
discretion, but subject to the provisions of Section
409A.
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"Employee" shall mean any individual employed directly by
SMSC or any Related Company regularly scheduled to work at least 30
hours per week, excluding any part time, temporary,
seasonal, and leased employees, and excluding any independent
contractors and consultants.
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“Key
Employee” means an
individual as described in Section 416(i) of the Code, determined
without regard to Section 416(i)(5) thereof. For
purposes of this provision, a Key Employee is an officer earning
over $140,000 in 2006, $145,000 in 2007, $150,000 in 2008 and
$165,000 in 2009 (with a limit of no more than 50 employees, or if
less, the greater of 3 or 10% of all employees); a 5% owner; or a
1% owner having annual compensation of more than
$150,000. All amounts shall automatically be increased
as provided under the Code for cost of living or other
charges.
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“Participating Company”
shall mean any Related Company
located in the United States.
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"Related
Company" means any entity
that is within SMSC's "controlled group", as defined under Section
1563 of the Code.
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“
Separation from Service ” shall have the meaning set
forth in Section 409A of the Code and the regulations
thereunder. Consistent with Final Treasury Regulation
Section 1.409A-1(h), or any subsequent guidance under Section 409A
of the Code, no Separation from Service shall occur if an Eligible
Employee continues to perform services as a consultant or an
Employee in accordance with the following rules:
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Leave of
Absence . For
purposes of Section 409A, the employment relationship is treated as
continuing in effect while a Eligible Employee is on military
leave, sick leave, or other bona fide leave of absence, as long as
the period of leave does not exceed 6 months, or if longer, as long
as the Eligible Employee’s right to reemployment with the
Employer provided either by statute or
contract. Otherwise, after a 6 month leave of absence,
the employment relationship is deemed terminated.
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Part-Time
Status . Whether or not a termination of
employment occurs is determined based upon all facts and
circumstances. However, in the event that services
provided by an Eligible Employee are insignificant, a Separation
from Service shall be deemed to have occurred. For
purposes of Section 409A, if an Eligible Employee is providing
services to SMSC or any Related Entities at a rate that is at least
equal to 20% of the services rendered, on average, during the
immediately preceding 3 full calendar years of employment (or such
lesser period), and the annual compensation for such services is at
least 20% of the average annual compensation earned during the
final 3 full calendar years of employment (or such lesser period),
no termination shall be deemed to have occurred since such services
are not insignificant.
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Consulting
Services . Where an Eligible Employee
continues to provide services to SMSC or any Related Entities in a
capacity other than as an employee, a Separation from Service shall
not be deemed to have occurred if the Eligible Employee is
providing services at an annual rate that is 50% or more of the
services rendered, on average, during the immediately preceding 3
full calendar years of employment (or such lesser period) and the
annual remuneration for such services is 50% or more of the annual
remuneration earned during the final 3 full calendar years of
employment (or such lesser period).
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“Service Date”
means an Eligible Employee’s
initial date of hire or any re-hire date, if later. In
certain instances (which must be approved in writing by the CEO or
the Vice President of Human Resources of SMSC), Eligible Employees
may be granted past service credit with former
employers. In this event, the Service Date may be
determined prior to an Eligible Employee’s date of hire or
re-hire with SMSC, within SMSC’s discretion or the provisions
of any acquisition or other agreement.
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“Specified Employee”
means a Key Employee who is employed
by SMSC or any Related Entities which has its stock publicly traded
on an established securities market. For purposes of the
Plan, the Specified Employee Identification Date shall be each
December 31, and the Specified Employee Effective Date shall be the
first day of the fourth month following the Specified Employee
Identification Date (i.e., each April 1). Specified
Employees shall be determined by an officer of SMSC on an annual
basis for purposes of all nonqualified deferred compensation plans
and any other programs in accordance with the provisions of Section
409A of the Code.
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Eligibility
for the Basic Severance Benefit . All Employees (other than excluded
employees) of SMSC and any Participating Companies are eligible for
the Basic Severance Benefit described in Section 5 (the "Basic
Severance Benefit"), unless benefits are otherwise precluded under
the terms of this Plan. Employees satisfying these
requirements shall be referred to as "Eligible
Employees." Notwithstanding any provision to the
contrary, however, in no event shall any Basic Severance Benefits
under the Plan be provided to individuals who are hired as
temporary employees for a specified period of time; are offered but
refuse to accept another suitable position within the organization;
or who are provided the opportunity to be retained for any length
of time by any successor employer or entities. Nor shall any Basic
Severance Benefits be payable to any Eligible Employees who are
eligible for any Executive Severance Benefits or who have a
separately negotiated employment or severance agreement with SMSC,
to the extent that such Executive Severance Benefits or benefits
under a separately negotiated employment or severance agreement
equal or exceed the Basic Severance Benefit.
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5.
Basic Severance Benefits .
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Cash
Benefits . Eligible Employees shall be
entitled to a severance benefit equal to ½ of a week's base
pay for each 6 months of Continuous Service measured from an
Eligible Employee's Service Date (the “Basic
Benefit”). The Basic Benefit shall be increased by
a multiplier of one and one half (1.5) only for Continuous Service
by an Eligible Employee between five (5) and ten (10)
years of service. The Basic Benefit shall be
further increased by a multiplier of two (2) only for Continuous
Service by an Employee after their tenth year. To illustrate the
above formula, an Eligible Employee with thirteen (13) years of
Continuous Service would receive a severance benefit equal to 18.5
weeks of base pay calculated as follows:
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½ week of base pay x 2 x 5 years
(Years 1 to 5) = 5 weeks.
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½ week of base pay x 2 x 5 years
(Years 5 to 10) x 1.5 = 7.5 weeks.
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½ week of base pay x 2 x 3 years
(Years 10 to 13) x 2 = 6 weeks.
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Total Cash
Benefit is 18.5 weeks of base salary.
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Notwithstanding
anything to the contrary in this Plan, the maximum benefit that any
Eligible Employee shall receive under the Severance Plan, exclusive
of employees receiving benefits under Section 8, shall be a maximum
benefit of 26 weeks for any Eligible Employees. In
determining Continuous Service for purposes of computing severance
benefits, all periods of time from an individual's Service Date
during which an eligible employee is “actively at work”
shall be taken into consideration, regardless of the actual hours
worked in any period of time, plus any leave time taken under the
Family Medical Leave Act. Thus, any periods during which
an Eligible Employee is absent from work, other than Family Medical
Leaves, shall not be considered in determining Continuous
Service. No severance benefits shall be paid under the
Plan for any partial periods.
Notwithstanding
any provision to the contrary, all Eligible Employees shall be paid
a "Minimum Benefit" equal to 2 weeks of base
pay. This Minimum Benefit is inclusive of the
severance benefit determined above, based upon an Eligible
Employee’s Continuous Service, and shall not be paid in
addition to any benefits based upon Continuous Service.
b.
COBRA Benefits . As an additional severance
benefit, whether an Employee receives the Basic Severance Benefit
or the Executive Severance Benefit, SMSC shall also pay for 100% of
the cost of any continuation health coverage if elected under
COBRA, by the Employee or any qualified beneficiaries, for coverage
in existence at the time of any qualifying event, for a period
equal to the number of weeks of severance to which the Employee is
entitled following termination of their employment plus
an additional period of time until the end of the calendar month in
which the severance period ends. Using the above example
in Section 5.a., if the Employee is entitled to receive 18.5 weeks
of severance, then SMSC shall pay 100% of the cost of any
continuation health coverage if elected under COBRA for 18.5 weeks
following the termination of the Employee plus the
number of days left in the month that is 18.5 weeks after the
Employee’s last date of employment .
Notwithstanding the foregoing, each Employee shall receive a
minimum benefit of three months paid COBRA coverage. The
payment of any COBRA premiums shall not extend the period of any
COBRA entitlement, and shall only apply for coverage in effect at
the time of a termination, for which COBRA election rights
exist. The Employee and any qualified beneficiaries may
thereafter continue COBRA benefits at their own cost for any
remaining periods of coverage. However, COBRA coverage
shall be terminated when any subsequent coverage is obtained and
the Employee shall notify SMSC when such subsequent coverage
commences.
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No Deferred
Compensation . The continuation of benefits under
COBRA and other benefits must be incurred and paid by 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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Other
Benefits . Other than medical coverage
(including dental, vision, prescription drug and similar coverage,
all other benefits, such as group-term life insurance, long-term
disability, short-term disability and other welfare benefits, shall
be terminated in accordance with the provisions of all plans, with
any applicable individual conversion rights.
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Entitlement
to Basic Severance Benefits . An Eligible Employee shall be
entitled to the Basic Severance Benefits if an Eligible Employee's
employment is involuntarily terminated with SMSC, unless such
termination is for “Cause" as defined below in this Section
6. In the event of a termination for “Cause",
including unsatisfactory job performance, no Basic Severance
Benefits shall be paid.
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For purposes of
this Plan the term "Cause" shall include, but not be limited to the
following: any material violation of the terms of any of SMSC's
personnel policies or procedures; any material misstatement
contained in the Eligible Employee's employment application;
commission by the Eligible Employee of any crime or fraud against
SMSC or its property or any crime involving moral turpitude or
reasonably likely to bring discredit upon SMSC; unsatisfactory job
performance; material failure to perform or meet standards of
performance established by SMSC with respect to any services to be
provide by the Eligible Employee; and any violation of SMSC's
operating policies.
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7.
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Eligibility
for the Executive Severance Benefit . Employees who may be eligible for
the Executive Severance Benefit (the "Executive Benefit") shall
include Divisional Vice Presidents, Vice Presidents, Senior Vice
Presidents, Executive Vice Presidents, Presidents, Chief Operating
Officer, Chief Executive Officer, Chief Financial Officer, and any
other key employees specifically identified by SMSC to receive the
Executive Benefit, in writing. SMSC retains the
discretion to identify any employees for the Executive Benefit who
are employed by SMSC or any Related Entities as a result of any
acquisitions. However, to the extent any executives are
covered under any separately negotiated employment or severance
agreements, that provide for any severance benefits, such
individuals shall be excluded from participation in the Executive
Benefit, and the Severance Plan, until such individuals are
informed, in writing by the SMSC Chief Executive Officer, of their
eligibility for participating in the Severance Plan. Individuals
who are specifically excluded from the benefits as of the
effective date of this amended and restated Severance Plan are
identified in separate corporate records and agreements.
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Notwithstanding
any provisions to the contrary, in no event shall any benefits
under the Severance Plan or this Amendment be provided to any
individuals who are offered but refused to accept another suitable
position within SMSC, or who are provided the opportunity to be
retained for any length of time by any successor employer, joint
venturer, etc., except with regard to any relocations addressed
below.
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Executive
Severance Benefit . Eligible Employees for the
Executive Benefit shall receive an Executive Severance Benefit
equal to three (3) months of Base Salary upon the occurrence of
required “Relocation” as defined in Section 9(a) of
this Plan or the occurrence of “Other Events” as
defined in Section 9(c) of this Plan. Eligible Employees
for the Executive Benefit shall receive an Executive Severance
Benefit equal to six (6) months of Base Salary upon the occurrence
of “Change in Control” as defined in Section 9(b) of
this Plan.
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The above
Executive Benefit shall be provided in lieu of the Basic Severance
Benefit provided under the Severance Plan based upon an employee's
Years of Continuous Service with SMSC, and in no event shall be
paid in addition to any other severance benefits under the SMSC
Severance Plan or any individually negotiated employment or
severance agreements. Furthermore, under the Executive
Severance Benefit, no "Minimum Benefits" shall exist, such as the 2
week Minimum Benefit provided under the Basic Severance
Benefit. However, in the event the Basic Severance
Benefit for any Eligible Employee under this Severance Plan is
greater than the Executive Benefit, an executive employee shall be
entitled to the greater of such benefits.
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Entitlement
to Executive Severance Benefits . The provisions of the Severance
Plan shall be controlling with regard to the entitlement of any
Executive Severance Benefits. Therefore, no Eligible
Employee who is terminated “for Cause”, including
unsatisfactory job performance shall be entitled to receive any
benefits, consistent with the provisions of this Severance
Plan. However, Eligible Employees shall be entitled to
the Executive Benefit upon the occurrence of any of the following
events:
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