Exhibit 10.1
STANDARD MICROSYSTEMS CORPORATION
2005 DIRECTORS STOCK APPRECIATION RIGHTS PLAN
1. Purpose. The purpose of this 2005 Directors Stock Appreciation Rights
Plan (the "Plan" or the "SAR Plan") of Standard Microsystems
Corporation (the "Company" or "SMSC"), is to link the compensation of
outside directors of the Company, whose services are considered
essential to the Company's continued progress, to the performance of
SMSC stock, and to also provide them with a further incentive to
continue to serve as directors of the Company. The Plan is also
intended to assist the Company through utilization of the incentives
provided by the Plan to attract and retain experienced and qualified
candidates to fill vacancies in the Board that may occur in the
future.
2. Administration
a. The Plan will be administered by the Board of Directors (the
"Board") of the Company. Subject to the express provisions of the
Plan, the Board will have complete authority to interpret the
Plan; to prescribe, amend, and rescind rules and regulations
relating to it; to determine the terms and provisions of the
respective Stock Appreciation Rights ("SAR") Agreements (which
need not be identical); and to make all other determinations
necessary or advisable for the administration of the Plan. The
Board's determinations on the matters referred to in this Section
2 will be conclusive and binding on all parties.
b. No member of the Board, or any employee of the Company authorized
to administer the Plan, 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 Board, or an authorized
employee.
3. Participation in the Plan. Each person who is now or shall become a
director of the Company and who is not, while serving as director, an
employee of the Company or any Subsidiary of the Company, shall be
eligible to participate in the Plan (an "Eligible Director",
hereinafter also referred to as a "Grantee"). A director of the
Company shall not be deemed to be an employee of the Company solely by
reason of the existence of a consulting contract between such director
and the Company or any Subsidiary thereof pursuant to which the
director agrees to provide consulting services as an independent
consultant to the Company or its Subsidiaries on a regular or
occasional basis for a stated consideration.
4. SAR Shares Subject to the Plan. Subject to the provisions of Section
10 hereof, this Plan has 49,000 "hypothetical" shares (the "Shares")
of $.10 par value common stock of SMSC (the "Common Stock") available
for the granting of SARs under the Plan. The Plan does not permit any
payments for a SAR Grant to be made in the Common Stock of SMSC.
If any SARs are not granted under the Plan in whole or in part, such
as if an Eligible Director should cease to be a Board member before
any Current Service SAR is granted, or before a Vesting SAR becomes
vested, "hypothetical" Shares that could have been granted or do not
vest shall remain available for the granting of new SARs under the
Plan.
5. General Terms and Conditions of SAR Grants
a. Form of SARs. Each SAR granted under this Plan shall be evidenced
by a written SAR Agreement in such form as the Board shall from
time to time approve, which SAR Agreement shall set forth the
applicable date of grant (the "Grant Date") and shall comply with
and be subject to the terms and conditions set forth in the Plan.
b. Vesting SARs. Any Eligible Director first elected after the
adoption of this Plan, upon such election, may be granted SARs in
the event this Plan is amended to allocate any new SARs under the
Plan, as provided by any Amendment to Section 4 above. Each SAR
granted pursuant to this Section 5(b) (i.e., "Vesting SARs")
shall become vested, to the extent of one-third (1/3) of the
number of SARs granted on the first anniversary of the date of
grant, and cumulatively to the extent of an additional one-third
(1/3) on each of the next two (2) succeeding anniversaries, so
that on the third anniversary of the Grant Date, all SARs shall
be fully vested.
c. Current Service SARs. In addition to Vesting SARs, that are
currently not available under the Plan, each Eligible Director
incumbent for at least three (3) years shall be granted SARs
equal to 3,500 shares of Common Stock (the "Current SAR Grant"),
which shall be fully vested upon the granting thereof and,
subject to any other provisions of the Plan, shall be granted on
each January 15, April 15, July 15, and October 15 (or, if any
such day shall not be a business day, then on the next succeeding
business day). Current Service SARs shall only be forfeited to
the extent an Eligible Director is no longer a member of the
Board on the applicable Grant Date.
d. SAR Value Per Share. All SARs granted hereunder shall have a
"Grant Value" equal to the "Fair Market Value" of a share of
Common Stock on the date of the grant, as defined in Section
13(f).
e. SARs Nontransferable. Each SAR granted under the Plan by its
terms shall not be transferable by the Grantee otherwise than by
will, or by the laws of descent and distribution. No SAR or
interest therein may be transferred, assigned, pledged, or
hypothecated by the Grantee during his or her lifetime, whether
by operation of law or otherwise, or be made subject to
execution, attachment, or similar process.
f. No Exercise of SARs. A SAR, once vested, cannot be exercised by a
Grantee at any point in time. SAR Grants are only paid in
accordance with the provisions of Section 5(g) below.
g. Payment Dates. All SARs (i.e., Vesting or Current Service SARs)
shall automatically be paid on the applicable Payment Date, which
is the end of the fifth fiscal year following the Grant Date,
which is intended to be a fixed date to avoid any adverse tax
consequences under Section 409A of the Code. Accordingly, for
purposes of the SAR Plan, Current Service SARs shall be paid as
follows:
Grant Date Payment Date
October 15, 2005 February 28, 2011
January 15, 2006 February 28, 2011
April 15, 2006 February 29, 2012
Notwithstanding the proceeding provisions of this Section 5(g),
the fixed Payment Date in the event of death, Disability or a
Change in Control shall be the date sixty (60) days after the
occurrence of such an event, or sixty (60) days after the
determination that such an event has occurred, or the next
business day, consistent with the provisions of Section 409A of
the Code (regardless of the thirty (30) day notice period for a
Change in Control under Section 11).
Upon the Payment Date 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 of Common Stock determined on such Payment
Date over the Grant Value per share specified in the related SAR
Grant Agreement, multiplied by the number of shares in respect of
which the SAR Grant is payable. Full or fractional shares may be
paid. Payment will be made on each applicable Payment Date.
Fair Market Value shall be determined as of the date of death,
Disability, or the date a Change in Control is determined to have
occurred, regardless of when the actual Payment Date is (i.e.,
the Fair Market Value is determined as of the date of the event
and not the date of payment sixty (60) days after such an event
occurs).
h. Termination of Grantee's Directorship. If a Grantee's
directorship with the Company is terminated for any reason, other
than by reason of death or Disability (as described in
Subsections (i) and (j) below) prior to the Payment Date, any
vested SARs shall nevertheless be valued and paid on the
applicable Payment Date under Section 5(g).
i. Death of Grantee. If a Grantee's directorship is terminated by
reason of his death prior to the Payment Date of his SAR Grant,
or if a Grantee whose directorship is terminated as a result of a
Disability (as described in Subsection (j) below) shall die
following the Grantee's termination of being a director, but
prior to the Payment Date of any SAR Grant, such SAR Grant shall
be paid to the Grantee's Beneficiary to the extent of the number
of SARs in which the Grantee was vested on the date of the
Grantee's death, as of the applicable Payment Date (i.e., under
the sixty (60) day provision).
j. Disability of Grantee. If a Grantee shall become Disabled during
the Grantee's directorship with the Company and the Grantee's
directorship with the Company is terminated as a consequence of
such Disability, or if a Grantee whose directorship is terminated
shall become Disabled following the Grantee's termination of
being a Director, but prior to the Payment Date of any SAR Grant,
any SAR Grant shall be paid to the Grantee or the Grantee's
personal representative on the applicable Payment Date (i.e.,
under the sixty (60) day provision).
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 Board shall determine.
l. Tax Withholding. The obligation of the Company to make payment
upon any Payment Date of any 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.
6. No Right to Continue as a Director. Neither the Plan, the execution of
any SAR Grant Agreement, nor any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain a
director for any period of time, or at any particular rate of
compensation.
7. No Stockholder's Rights for Grantees. A Grantee shall have no rights
as a stockholder with respect to any Shares covered by SAR Grant, and
no adjustments shall be made for any dividends paid prior to any
Payment Date.
8. No Right to Vote. A Grantee shall have no right to vote any Shares as
a result of the granting of any SAR.
9. No Right to Dividends. A Grantee shall have no right to dividends as a
result of the granting of any SARs.
10. Adjustments. The number of Shares representing the number of SARs
which may be issued under the Plan, as stated in Section 4 hereof, as
well as the Grant Value per share under such outstanding SAR Awards,
and the amount to be paid upon the Payment Date of any SAR, shall be
suitably adjusted by the Board to reflect any stock dividend, stock
split, shares combination, or similar change in the capitalization of
the Company. The Board 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 or reorganization), each
outstanding SAR Grant shall be assumed by the surviving or successor
corporation if any.
11. Change in Control. Notwithstanding any provisions to the contrary, in
the event of a Change in Control, the Board may, within its
discretion, within a period of twelve (12) months after such Change in
Control, determine that each SAR Grant outstanding hereunder shall
terminate within thirty (30) days after notice to the Grantees, and
such Grantees shall receive, with respect to each SAR Grant, an amount
equal to the excess of the Fair Market Value of such SAR Grant as
determined under Section 5(g), to the extent such action is consistent
with Section 409A of the Code, and any guidance issued thereunder.
Such amount shall be payable in cash.
12. Amendment of the Plan. The Board may suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however,
that, without approval of the Grantees, no revision or amendment shall
change the rights under any granted or vested SARs.
13. Definition. For purposes of the Plan the words and phrases used herein
shall have the following meanings:
a. "Beneficiary" shall mean a Grantee's spouse, if married, or the
Grantee's estate, if no spouse exists as of any applicable
Payment Date. A Grantee may, however, designate other individuals
or entities as a Beneficiary for any payment, in accordance with
procedures established by the Board.
b. "Board" means the Board of Directors of SMSC.
c. "Change in Control" means a Change in Control as defined under
IRS Notice 2005-1 Q&A-11, 12, 13 and 14. In accordance with these
provisions, the Plan may permit a payment upon the occurrence of
a change in "ownership" of the Company as defined in Q&A-12; a
change in "effective control" of the Company is defined in
Q&A-13; or "change in the ownership" of a substantial portion of
the assets of the Company as defined as Q&A-14. To qualify as a
Change in Control, the occurrence of the event must be
objectively determinable and the requirement that the Board
certify the occurrence of a Change in Control event, must be
strictly ministerial and not involve any discretionary authority.
For purposes of this provision, a payment shall be treated as
occurring upon a Change in Control if the right to the payment
arises due to the Board's exercise of discretion under the terms
of this Plan to terminate the Plan upon a Change in Control and
paid benefits in accordance with Section 11.
d. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
e. "Disability" means a Grantee is:
(i) 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
twelve (12) months; or
(ii) 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
twelve (12) months, receiving income replacement benefits
for a period of not less than three (3) months under an
accident and health plan covering employees or directors of
SMSC.
f. "Fair Market Value" means, as of the date on which such Fair
Market Value is to be determined, the closing price 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) for the
over-the-counter market or any national securities exchange and
other securities market which at the time are included in the
stock price quotations of such publication. If no closing price
is so reported for such date, Fair Market Value shall mean the
average of the latest bid and asked prices so reported for such
date, or if there was no bid and asked prices so reported for
such date, Fair Market Value shall mean the closing price on the
last previous day on which a closing price was reported.
g. "SAR Grant" means an award of SARs granted under the Plan.
h. "Stock Appreciation Right" means a contractual right that allows
a Grantee to receive payment for a SAR Grant equal to the value
of any appreciation in the value of SMSC Common Stock over the
Grant Price, as provided in Section 5, on the applicable Payment
Date.
i. "Subsidiary" means any entity as defined in Section 424(f) of the
Code.
14. Section 409A. The Company acknowledges that a SAR Plan may be
classified as a form of deferred compensation if the Grantee can
control the payment of benefits. It is intended that by use of fixed
payment dates, no Grantee has the ability to control the recognition
of income attributable to any SAR Grant. To the extent necessary, the
Plan shall be amended to avoid any adverse tax consequences under
Section 409A, or any guidance issued thereunder.
15. Notice. Any notice to the Company required by this Plan shall be in
writing addressed to the General Counsel of the Company at its
principal office, and shall be deemed delivered only when it is
received by the General Counsel.
16. 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.
17. 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.
18. Conflict. 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.
19. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of the State of New York,
without regard to the provisions governing conflict of laws, and
construed accordingly.