Exhibit 10.1
STANDARD MICROSYSTEMS CORPORATION
2004 EMPLOYEE STOCK APPRECIATION RIGHTS PLAN
As Adopted by the Board of Directors on September 28, 2004
1. Purpose.
The Standard Microsystems Corporation 2004 Employee Stock Appreciation
Rights Plan (the "Plan" or the "SAR Plan") is intended to enable Standard
Microsystems Corporation ("SMSC" or the "Company"), or any Subsidiary, to
attract and retain capable employees and consultants, and to provide them with
incentives to promote the best interests of the Company by the granting of Stock
Appreciation Rights ("SARs").
2. Definitions.
For purposes of the Plan the words and phrases used herein shall have the
following meanings:
(a) "Board" means the Board of Directors of SMSC.
(b) "Cause" means a termination by the Company of the employment of a
Grantee by reason of the Grantee's: (i) willful refusal to perform his
or her obligations to the Company, (ii) willful misconduct, contrary
to the interests of the Company; or (iii) commission of a serious
criminal act, whether denominated a felony, misdemeanor or otherwise.
In the event of any dispute whether a termination for Cause has
occurred, the Board may by resolution resolve such dispute and such
resolution shall be final and conclusive on all parties.
(c) "Change in Control" means an event or series of events that would be
required to be described as a change in control of the Company on Form
8-K promulgated under the Exchange Act. Change in Control shall not
include acquisition of the Company's stock by any Company employee
benefit plans or action by the members of the Board of Directors when
acting as the Board of Directors. The determination whether and when a
change in control has occurred or is about to occur shall be made by
vote of a majority of the Non-Employee Directors who shall constitute
the Board immediately prior to the occurrence of the event or series
of events constituting such change in control.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Disability" means an individual is permanently and totally disabled,
as defined under Section 22(e)(3) of the Code and 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 which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
(f) "Exchange Act" means the Securities and Exchange Act of 1934.
(g) "Subsidiary" means a subsidiary corporation as set forth in Section
424(f) of the Code.
(h) "Securities Act" means the Securities Act of 1933, as amended.
(i) "Stock Appreciation Right" means a contractual right that allows a
Grantee to exercise a SAR Grant and receive the value of any
appreciation in the value of SMSC stock over the Exercise Price, as
provided in Section 6.
(j) "SAR Grant" means an award of SARs granted under the Plan.
3. Administration.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board. All members of the Committee shall be both
"Non-Employee Directors" within the meaning of paragraph (b)(3)(i) of Rule 16b-3
promulgated under the Exchange Act. No member of the Committee shall be eligible
to participate in the Plan nor shall any members of the Committee have been
eligible to participate in the Plan for a period of at least one (1) year prior
to their election to serve on the Committee. The Committee shall have and may
exercise all of the powers of the Board under the Plan, other than the power to
appoint a director to Committee membership. A majority of the Committee shall
constitute a quorum, and acts of the majority of members present at any meeting
at which a quorum is present shall be deemed the acts of the Committee. The
Committee may also act by instrument signed by all members of the Committee.
(b) The Committee shall have plenary authority in its discretion, subject
to and consistent with the express provisions of the Plan, to direct the grants
of SARs; the exercise price of the SAR covered by each SAR Grant, the
individuals to whom and the time or times at which SAR Grants shall be granted
and may be exercised; to prescribe, amend and rescind rules and regulations
relating to the Plan, including, without limitation, such rules and regulations
as it shall deem advisable so that transactions involving SARs may qualify for
exemption under such rules and regulations as the Securities and Exchange
Commission may promulgate from time to time exempting transactions from Section
16(b) of the Exchange Act; to determine the terms and provisions of, and to
cause the Company to enter into, agreements with Grantees, in accordance with
Section 6(k), in connection with SARs that may be granted under the Plan ("SAR
Grant Agreements" or "Agreements"), which Agreements may vary from one another,
as the Committee shall deem appropriate; to amend any such Agreement from time
to time, with the consent of the Grantee; and to make all other determinations
the Committee may deem necessary or advisable for the administration of the
Plan.
(c) Each SAR Grant under this Plan shall be deemed to have been granted
when the determination of the Committee with respect to such SAR Grant is made
or, if so determined by the Committee, at a specific future date. Once a SAR
Grant has been made, all conditions and requirements of this Plan with respect
to such SAR Grant shall be deemed to be conditions upon the exercise of the SAR,
but not upon the grant thereof.
(d) The Committee shall have the complete and absolute discretion to
determine all entitlements to benefits and to interpret the provisions of the
Plan. Every action, decision, interpretation or determination by the Committee
or the Board with respect to the application or administration of this Plan
shall be final and binding upon the Company and each person holding or claiming
any right or interest pursuant to any SAR granted under this Plan.
(e) No member of the Committee or the Board shall be liable for any action
or determination made in good faith with respect to this Plan or any SAR Grant.
To the full extent permitted by law, the Company shall indemnify and hold
harmless each person made or threatened to be made a party to any civil or
criminal action or proceeding by reason of the fact that such person, or such
person's testator or intestate, is or was a member of the Committee.
(f) Notwithstanding anything to the contrary herein, the Compensation
Committee may, in its sole discretion, delegate its authority to grant SARs to
employees other than executive officers within parameters determined by the
Compensation Committee, including the maximum number of shares underlying each
grant.
(g) In the event of a conflict between the terms of this Plan and the terms
of any Agreement, the terms of this Plan shall govern.
4. Eligibility.
The persons eligible to participate in the Plan shall be any officer,
employee or consultant of the Company, or any Subsidiary thereof, who may be
designated by the Committee. The persons eligible to receive SAR Grants under
the Plan are hereinafter referred to as "Eligible Individuals".
5. SAR Shares Subject to the Plan.
Subject to the provisions of Section 8 hereof, two million (2,000,000)
"hypothetical" shares (the "Shares") of $.10 par value common stock of SMSC (the
"Common Stock"), shall be available for the grant of SARs under the Plan. The
Plan does not permit any payments upon the exercise of a SAR Grant to be made in
the Common Stock of SMSC.
If any SAR granted under the Plan expires or otherwise terminates, in whole
or in part, without having been exercised, the "hypothetical" Shares subject to
the unexercised portion of such SAR Grant shall be available for the granting of
new SARs under the Plan as fully as if such "hypothetical" Shares had never been
subject to a SAR.
6. Grants, Terms and Conditions of SAR Grants.
From time to time until the expiration or earlier termination of the Plan,
the Committee may grant SARs under the Plan to Eligible Individuals (hereinafter
referred to as "Grantees") as it determines are warranted. SAR Grants shall be
subject to the following terms and conditions:
A SAR may be exercised by a Grantee in accordance with Section 6 by
surrendering the SAR Grant in accordance with procedures established by the
Committee. Upon such exercise and surrender, the Grantee shall be entitled to
receive an amount determined in the manner prescribed in Section 6(d).
(a) Price. The term "fair market value" of a share of Common Stock shall
mean, as of the date on which such fair market value is to be
determined, the closing price (or the average of the latest bid and
asked prices) of a share of Common Stock as reported in The Wall
Street Journal (or a publication or reporting service deemed
equivalent to The Wall Street Journal for such purpose by the Board or
the Committee) for the over-the-counter market or any national
securities exchanges and other securities markets which at the time
are included in the stock price quotations of such publication.
(b) Term. Subject to earlier termination as provided in Subsections (e)
through (h) below and in Section 10 hereof, the duration of each SAR
Grant shall not be more than ten (10) years from the date of grant.
(c) Vesting Period. SAR Grants shall become exercisable ("vested") with
respect to either twenty percent (20%) or twenty-five percent (25%) of
the number of shares subject to each such SAR Grant upon the first
anniversary of the date on which such SAR Grant is made and with
respect to an additional twenty percent (20%) or twenty-five percent
(25%) of the number of shares subject thereto on each subsequent
anniversary of such date. Each SAR Grant shall be exercisable until
the expiration of ten (10) years after the date on which it is
granted; provided, that each SAR Grant shall be subject to earlier
termination, expiration or cancellation as provided herein.
Notwithstanding the above general vesting guidelines, individual SAR
Grants may be granted with any vesting schedule, as determined within
the discretion of the Committee.
(d) Exercise. A SAR, once vested, shall be exercisable in accordance with
the terms of the Plan. The Committee may determine that SAR Grants
shall become immediately exercisable in whole or in part in the event
of termination of employment by reason of death, Disability or
retirement after age sixty-five (65) in accordance with the retirement
policy of the Company.
Any vested SAR Grants may be exercised by delivering notice to the
Company's principal office, in accordance with reasonable procedures
established by the Committee. Such notice shall specify the number of
shares with respect to which the SAR Grant is being exercised, the
effective date of the proposed exercise and shall be signed by the
Grantee. All payments shall be determined based upon the closing price
of the market on the business day coinciding with the exercise date.
An election not received by the Company before the close of the market
on any business day, for any reasons, including the failure of any
electronic or other transmission, shall result in an election being
effective as of the next business day, unless revoked.
Except as otherwise provided in Subsections (f) through (i) below, SAR
Grants shall only be exercisable by a Grantee while a Grantee remains
in the employ of the Company. Any SAR Grants, the right to exercise of
which has accrued, may be exercised at any time up to the expiration
or termination of the SAR Grants in accordance with Section 6(b). SAR
Grants may be exercised, in whole or in part, from time to time, by
giving written notice of exercise to the Company at its principal
office, specifying the number of SAR Grants to be exercised.
Designated SMSC Associates require approval, in advance, prior to
exercising any SAR Grants, in accordance with the SMSC Trading Policy.
(e) Payments Upon Exercise. Upon the exercise of a SAR, a Grantee shall be
entitled to receive an amount in cash equal to the excess of the fair
market value of one share over the Exercise Price per share specified
in the related SAR Grant, multiplied by the number of shares in
respect of which the SAR Grant is exercised. Full or fractional shares
may be exercised. Payment will be made within ten (10) business days
of any exercise.
(f) Termination of Grantee's Employment or Consulting. If a Grantee's
employment or consultancy with the Company is terminated for any
reason, without "Cause", other than by reason of death, Disability, or
retirement (as described in Subsections (g), (h) and (i) below) prior
to the expiration of the original term of his SAR Grant ("Expiration
Date") such SAR Grant shall terminate three (3) months after such
termination of employment or consultancy. For purposes of this
Subsection, a Grantee's employment relationship shall be considered as
continuing intact while the Grantee is on military leave, sick leave,
bona fide leave of absence in accordance with general corporate
policies, federal or state family leave, or other leave if the period
of such leave does not exceed three (3) months, unless the Grantee's
right to reemployment with the Company is guaranteed either by statute
or contract. In the event of any termination for "Cause", any and all
SAR Grants that have not yet become exercisable shall immediately
terminate, except as required otherwise under any state statutes.
Notwithstanding any provisions to the contrary, to the extent that any
Grantee is a member of the Board at the time of retirement or
termination of employment, any SAR Grants, whether vested or unvested,
shall continue to be governed by the terms of this Plan and the
exercise period shall be extended until three (3) months after the
individual is no longer a member of the Board.
(g) Death of Grantee. If a Grantee's employment is terminated by reason of
his death prior to the Expiration Date of his SAR Grant, or if a
Grantee whose employment is terminated as a result of retirement or
Disability (as described in Subsection (h) and (i) below) shall die
following the Grantee's termination of employment but prior to the
Expiration Date of any SAR Grant or expiration of the period
determined under Subsections (h) or (i) below, if earlier, such SAR
Grant may be exercised by the Grantee's estate, personal
representative or beneficiary who acquired the right to exercise such
SAR Grant by bequest or inheritance or by reason of the death of the
Grantee, to the extent of the number of SARs with respect to which the
Grantee could have exercised it on the date of the Grantee's death, or
to any greater extent permitted by the Committee, at any time prior to
the earlier of: (i) one (1) year following the date of the Grantee's
death; or (ii) the Expiration Date of such SAR Grant (which, in the
case of death following a termination of employment pursuant to
Subsections (h) or (i) below, shall be deemed to mean the expiration
of the exercise period determined thereunder).
(h) Disability of Grantee. If a Grantee shall become Disabled during the
Grantee's employment with the Company and the Grantee's employment
with the Company is terminated as a consequence of such Disability
prior to the Expiration Date of an SAR Grant, any SAR Grant may be
exercised by the Grantee, to the extent of the number of SARs with
respect to which the Grantee could have exercised under the SAR Grant
on the date of such termination of employment, or to any greater
extent permitted by the Committee, at any time prior to the earlier
of: (i) one (1) year following the date of the Grantee's termination
of employment; or (ii) the Expiration Date of such SAR Grants. In the
event of the Grantee's legal disability such SAR Grant may be so
exercised by the Grantee's legal representative.
(i) Retirement of Grantee. If a Grantee retirees in accordance with the
retirement policy of the Company or otherwise retires with the express
consent of the Committee after age sixty-five (65), and the Grantee's
employment with the Company is terminated as a consequence of such
retirement prior to the Expiration Date of the Grantee's SAR Grants,
such SAR Grants may be exercised by the Grantee, to the extent of the
number of Shares with respect to which the Grantee could have
exercised it on the date of the Grantee's retirement, or to any
greater extent permitted by the Committee, at any time prior to the
earlier of: (i) three (3) months after the date of retirement; or (ii)
the Expiration Date of such SAR Grant.
(j) Other Terminations of Employment. If a Grantee's employment is
terminated for any reason other than his death, Disability, or
retirement, the unvested portion of the Shares subject to any SAR
Grant shall immediately be forfeited, except that the Committee, if it
determines that the circumstances warrant, may direct that all or a
portion of the Grantee's unvested SARs be vested in the Grantee,
subject to such further terms and conditions, if any, as the Committee
may determine.
(k) Delivery of Notice and Execution of SAR Grant Agreement. Upon the
determination to issue a SAR award, the Company shall promptly issue a
notice representing the Shares subject to the SAR Grant to the
Grantee. Each Grantee shall enter into, and be bound by the terms of,
a SAR Grant Agreement which shall include or incorporate by reference
the terms of the Plan and which shall contain such other terms,
conditions and restrictions not inconsistent with the Plan as the
Committee shall determine.
(l) Transferability. No SARs subject to a SAR Grant shall be assignable or
transferable by a Grantee at any time and no Shares shall be issued
upon the exercise of any SAR. Any purported transfer made by a Grantee
in violation of the terms of this Plan and the SAR Grant Agreement
shall be null and void. Nothing in this Plan shall preclude the
transfer of SARs covered by a SAR Grant, on the death of the Grantee,
to his legal representatives or his estate or preclude such
representatives from transferring such Shares, or any of them, to the
person or persons entitled thereto by will or the laws of descent and
distribution, provided, however, that any unvested SAR shares so
transferred shall continue to be subject to the terms of the Plan and
the SAR Grant Agreement.
(m) No Rights as a Stockholder. A Grantee shall have no rights as a
stockholder with respect to any Shares covered by SAR Grant. In the
event that, as the result of a stock dividend, stock split, share
combination, or similar change in the capitalization of the Company,
the Grantee shall, as the Grantee of a SAR Grant hereunder, be
entitled to new or additional or different shares of stock or
securities, in accordance with any adjustments made under Section 8.
(n) SAR Shares Available for Grant. Upon the exercise of a SAR Grant, a
SAR Grant shall be deemed to have been exercised for the purpose of
the limitation set forth in Section 5 on the number of SAR shares to
be available for the granting of SARs under the Plan.
(o) Withholding. The obligation of the Company to pay compensation upon
the exercise of an SAR Grant shall be subject to all applicable
Federal, state and local tax withholding requirements. A Grantee shall
be responsible for any portion of the Grantee's tax liabilities
associated with the exercise of any SAR Grants.
7. Listing and Registration of Shares.
Each SAR Grant under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Shares covered thereby upon any securities
exchange or under the laws of any jurisdiction, or the consent or approval of
any regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such SAR Grant, or that action by the Company
or the Grantee should be taken in order to obtain an exemption from any such
requirement, then no such SAR Grant may be exercised in whole or in part and no
certificate representing SAR Grants shall be issued unless and until such
listing, registration, qualification, consent, approval, or action shall have
been effected, obtained, or taken on conditions acceptable to the Committee.
8. Adjustments.
The number of Shares representing the number of SARs which may be issued
under the Plan, as stated in Section 5 hereof, as well as the exercise price per
share under such outstanding SAR Awards, and the amount to be paid upon the
exercise of any SAR, shall be suitably adjusted by the Committee to reflect any
stock dividend, stock split, shares combination, or similar change in the
capitalization of the Company. The Committee shall use its reasonable judgment
in determining a suitable adjustment.
In the event the Company is liquidated or a corporate transaction described
in Section 424(a) of the Code and the Treasury Regulations issued thereunder
occurs (as, for example, a merger, consolidation, acquisition of property or
stock, separation, Change in Control or reorganization), each outstanding SAR
Grant shall be assumed by the surviving or successor corporation, if any,
provided, however, that the Committee may terminate each outstanding SAR if it
determines that such assumption would not be in the best interests of the
Company or a related corporation. The Committee shall give each Grantee of a SAR
Grant, fourteen (14) days written notice prior to such termination (by reason of
such liquidation or corporate transaction), so that any outstanding SAR or any
portion thereof may be exercised up to, and including the earlier of: (i) the
date immediately preceding such termination, or (ii) the Expiration Date of such
SAR Grant. In such event, the Committee may, in its sole discretion, allow each
such Grantee to exercise his SARs in full or in part (if it has not otherwise
terminated) regardless of the provisions of Section 6 hereof or of the terms of
any SAR Grant Agreement, even if under the Plan or the SAR Grant Agreements the
vesting period has not expired with respect to any SAR Grant.
9. Change in Control.
In the event of any transaction that constitutes a Change in Control, the
Committee, in its sole discretion, may determine that each SAR Grant outstanding
hereunder shall terminate within a specified number of days after notice to the
holder, and such holder shall receive, with respect to each SAR Grant, an amount
equal to the excess of the fair market value of such SAR Grant immediately prior
to the occurrence of such transaction over the exercise price per Share of such
SAR Grant. Such amount shall be payable in cash, in one or more of the kinds of
property payable in such transaction, or in a combination thereof, as the
Committee in its discretion shall determine.
10. Amendment or Discontinuance of the Plan.
The Board at any time, and from time to time, may suspend or discontinue
the Plan or amend it in any respect whatsoever, provided, however, that the Plan
may not be amended so as to materially: (a) increase the benefits accruing to
Grantees under the Plan; (b) increase the number of Shares which may be issued
under the Plan (except for adjustments permitted or required under Section 8
hereof); (c) modify the requirements as to eligibility for participation in the
Plan; or (d) increase the cost of the Plan to the Company; and provided further,
that no such suspension, discontinuance or amendment shall materially impair the
rights of any holder of an outstanding SAR Grant without the consent of such
holder.
11. Absence of Rights.
The recommendation or selection of an Eligible Individual as a recipient of
a SAR Grant under the Plan shall not entitle such person to any SAR unless and
until the grant actually has been made by appropriate action of the Committee;
and any such grant is subject to the provisions of the Plan. Furthermore, the
granting of a SAR to a person shall not entitle that person to continued
employment by the Company or any Subsidiary, or to continue as a consultant, or
affect the terms and conditions of such employment or any consultancy
relationship, and the Company shall have the absolute right, in its discretion,
to terminate a Grantee's employment or consultancy relationship at any time for
any reason, or for no reason, whether or not such termination may result in a
partial or total termination of any SAR Grant.
12. Plan Adoption.
This Plan shall become effective upon its adoption by the Board, and SAR
Grants may be issued upon such adoption and from time to time thereafter. The
Plan is not intended to be submitted to the Company's shareholders for their
approval at the next annual meeting of shareholders.
13. Consultants.
In the case of an SAR Grant granted to an individual who is a consultant
to, and not an employee of the Company, unless the SAR Grant Agreement shall
specify otherwise, a termination of the Grantee's consultancy relationship with
the Company shall have the same impact on the exercisability of the SAR Grant as
a termination of an employee's employment relationship with the Company.
14. Plan Unfunded.
The Plan is unfunded and all Grantees are general creditors of the Company
for the payment of any and all benefits.
15. Severability.
In the event that any one or more provisions of the Plan or any Agreement,
or any action taken pursuant to the Plan or such Agreement, should, for any
reason, be unenforceable or invalid in any respect under the laws of the United
States, any state of the United States or any other government, such
unenforceability or invalidity shall not affect any other provision of the Plan
or of such or any other Agreement, but in such particular jurisdiction and
instance the Plan and the affected Agreement shall be construed as if such
unenforceable or invalid provision had not been contained therein or as if the
action in question had not been taken thereunder.
16. Notices.
All notices and other communications hereunder shall be in writing and
shall be given and shall be deemed to have been duly given if delivered in
person, by cable, telegram, telex or facsimile transmission, to the parties as
follows:
If to the Grantee, to the Grantee's last known address.
If to the Company:
Standard Microsystems Corporation
Attention: Finance Department
80 Arkay Drive
Hauppauge, New York 11788
Such other addresses as any party may furnish to the other in writing shall be
used as applicable, except that notices of change of address shall only be
effective upon receipt.
17. Expenses.
The administrative or other expenses of the Plan shall be paid by the
Company.
18. Gender and Number.
The masculine gender, where appearing herein, shall be deemed to include
the feminine gender, and the singular shall be deemed to include the plural,
unless the context clearly indicates to the contrary.
19. Termination of Plan.
No SAR Grant may be granted after September 24, 2014, provided, however,
that the Plan and all outstanding SAR Grants shall remain in effect until such
SAR Grants have expired or vested, as the case may be, or are terminated in
accordance with the Plan.
20. Governing Law.
This Plan shall, to the maximum extent possible, be construed in the manner
consistent with the Code provisions concerning SARs, and its interpretation
shall otherwise be governed by the laws of the State of New York.