Exhibit 10.1
EARLY RETIREMENT AGREEMENT AND GENERAL RELEASE
WHEREAS, George W. Houseweart (the "Employee") is an employee of SMSC North
America, Inc. ("SMSC" or the "Company"); and
WHEREAS, the Employee's normal retirement date is March 21, 2007; and
WHEREAS, the parties have mutually agreed that the Employee will voluntary
retire early, effective as of September 30, 2006; and
WHEREAS, the parties have agreed to different job titles and
responsibilities during the period from October 24, 2005 through September 30,
2006; and
WHEREAS, the parties have also agreed to a reduction in compensation and
hours effective as of February 1, 2006, in order to allow the Employee to work
on a part-time basis for SMSC, while retaining all employee benefits otherwise
available to the Employee; and
WHEREAS, the Employee is an employee-at-will with SMSC, and no Employment
Agreement or Offer Letter exists between the Employee and SMSC providing for the
payment of any early retirement benefits; and
WHEREAS, the Employee is not being terminated by SMSC and is therefore not
entitled to any benefits under the Standard Microsystems Corporation Severance
Plan as a result of this Early Retirement Agreement; and
WHEREAS, SMSC is willing to make all payments as identified in this
Agreement in order to ensure a smooth transition of responsibilities prior to
the Employee's early retirement date; and
WHEREAS, this Agreement will serve as an individually negotiated Early
Retirement Agreement and General Release between the Employee and SMSC; and
WHEREAS, the terms and condition of this Agreement are contingent upon
execution of this Agreement.
NOW, THEREFORE, in consideration of the foregoing statements and the mutual
promises set forth below, the Employee and SMSC agree, effective as of the last
day of the period during which the Employee may revoke this Agreement, as
follows:
1. Early Retirement Date. The Employee's early retirement date will be
September 30, 2006 (the "Early Retirement Date").
2. Job Titles. The Employee will hold the following positions during the
period prior to his Early Retirement Date.
a. On October 24, 2005, the Employee will relinquish the positions of
General Counsel and Secretary of SMSC and will hold the position of
Senior Vice President.
b. On February 1, 2006, the Employee will relinquish the title of Senior
Vice President and will become an Intellectual Property Attorney until
the Early Retirement Date.
3. Compensation and Benefits Prior to Early Retirement. During the period from
execution of this Agreement until the Employee's Early Retirement Date, the
Employee will be entitled to the following general benefits:
a. All current salary, wages, bonuses and car allowances will be paid
through January 31, 2006, in accordance with SMSC's normal payroll
procedures.
b. During the period from February 1, 2006 until September 30, 2006, the
Employee will receive 75% of the Employee's annual base salary as of
January 30, 2006 (i.e., 275,000 x 75% = $206,250), in accordance with
normal payroll procedures. The period from February 1, 2006 through
September 30, 2006 shall be known as the "Part-Time Employment
Period".
During the Part-Time Employment Period, the Employee will be expected
to work the minimum number of hours necessary to retain all employee
benefits for medical, dental, LTD and other insurances for active
employees, that will be maintained in accordance with all normal
policies and procedures. The Employee acknowledges that these benefits
are governed by the term of all benefit programs. To the extent that
any benefits cannot be maintained as a result of the transition to
part-time status, SMSC will only be responsible for the premium cost
of such benefits, which will be paid to the Employee, with a gross up
for any tax liabilities.
c. The Employee will be eligible to the Employee's full bonus for the
2006 fiscal year end bonus under the SMSC 2006 Management Incentive
Plan ("MIP"); and the fourth quarter bonus for the period ending
February 28, 2006 under the MIP (each adjusted for corporate but not
individual performance). All of these benefits will be paid in
accordance with all applicable plans.
d. SMSC will continue to pay the full cost of all individual life and
disability policies during the Part-Time Employment Period.
e. The Employee will not be entitled to any bonus for the 2007 fiscal
year ending February 28, 2007, including any quarterly bonuses.
f. Upon the Early Retirement Date, SMSC will vest the Employee in all
unvested Restricted Stock Awards, but not any unvested Stock Options
or Stock Appreciation Rights.
g. In accordance with the January 1, 2005 Amendment to the Standard
Microsystems Corporation Executive Retirement Plan (the "SERP"), the
Board will approve the determination of the Employee's Base Annual
Salary, as defined in the SERP as of the period prior to the Part-Time
Employment Period. Accordingly, the Employee will not incur a
reduction in the Employee's SERP benefit as a result of the reduction
in hours and compensation during the Part-Time Employee Period.
h. SMSC will maintain all business telephone and internet services during
the Part-Time Employment Period.
i. At the commencement of the Part-Time Employment Period, the Employee
will relinquish his car allowance and will no longer be eligible for
any vacation accruals. All accrued vacation as of the commencement of
the Part-Time Employment Period will be paid in the Employee's first
payroll in February, 2006 at the rate of compensation prior to the
Part-Time Employment Period.
4. Early Retirement Benefits. Following the Employee's Early Retirement Date,
the Employee will be entitled to the following general benefits consistent
with a normal retirement from SMSC, and the additional COBRA and other
benefits:
a. The Employee will be entitled to elect to receive continuation health
coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") after the Employee's Early Retirement Date, which is
the date of a "qualifying event" under COBRA, if the Employee was
receiving medical, dental and vision coverage from SMSC. SMSC agrees
to reimburse the Employee and/or directly pay the cost of COBRA
benefits for the Employee and the Employee's spouse from October, 2006
through March, 2007, when the Employee would otherwise have attained
his normal retirement age.
b. All group-term life insurance, long-term disability and short-term
disability will terminate in accordance with the provisions of all
plans, usually as of the Early Retirement Date. The Employee may be
entitled to individual conversion privileges under the various
policies. SMSC will provide information to the Employee regarding all
individual conversion rights.
c. The Employee will be entitled to a distribution of all vested benefits
under the Standard Microsystems Corporation Investment Savings and
Retirement Plan (the "Section 401(k) Plan").
d. The Employee will be entitled to retain the corporate cell phone,
laptop, monitor, fax, file cabinet, and related equipment used by the
Employee. The value of such property will be included in the
Employee's W-2 Form for the 2006 calendar year.
The early retirement benefits whereby SMSC agrees to reimburse or pay
for the cost of COBRA coverage for the period between the Employee's
Early Retirement Date and the date the Employee would otherwise have
attained age 65 will be paid in accordance with the Company's normal
payroll procedures. However, no COBRA benefits will be paid, until
after the return of all property to SMSC, as provided in Section 6.
Notwithstanding any provision to the contrary, the payment of any
COBRA benefits will not be treated as extending the Employee's
employment for any employee benefit or employment purposes.
5. Adequate Consideration. The Employee acknowledges and agrees that the
vesting of all unvested Restricted Stock Awards, the exercise of discretion
to determine the Employee's Base Annual Salary under the SERP, and the
payment for the cost of COBRA coverage during the period between the
Employee's Early Retirement Date and the attainment of age 65 (the
"Enhanced Benefits"), are adequate and sufficient consideration for the
Employee's execution of the General Release set forth below.
6. Return of Property. To the extent the Employee is in the possession of any
SMSC property, excluding the property addressed in Section 4(d), including
building access passes and keys, SMSC credit cards, and any SMSC documents,
correspondence and related corporate materials, the Employee will return
all property to SMSC on or before the Early Retirement Date.
7. Expense Accounts and Reports. The Employee will be allowed to submit a
final expense report and accounting to SMSC within 2 weeks after the Early
Retirement Date, and will receive all necessary reimbursements from SMSC,
if any, in accordance with all corporate policies and procedures.
8. General Release. In exchange for the Enhanced Benefits made available under
this Agreement, the Employee agrees to forever release and discharge SMSC,
and all subsidiaries and affiliates, as provided under Section 414 of the
Internal Revenue Code (the "Code") in determining a single employer for
purposes of employee benefits (collectively, "Related Entities"), and all
officers, directors, agents, and employees of SMSC or Related Entities,
from all claims, grievances, liabilities, and lawsuits whether or not
arising out of the Employee's employment or the Employee's early retirement
from SMSC, and agrees not to assert any such claim, grievance, liability,
or lawsuit. This release includes, but is not limited to, any claim under
the following laws:
(a) The Constitution of the United States;
(b) The Age Discrimination in Employment Act of 1967, as amended, 29
U.S.C. ss.621 et seq., which prohibits age discrimination in
employment;
(c) Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
ss.2000(e) et seq., which prohibits discrimination in employment based
on race, color, national origin, religion or sex;
(d) The Civil Rights Act of 1866, 42 U.S.C. ss.1981 et seq.;
(e) The Equal Pay Act, which prohibits paying men and women unequal pay
for equal work;
(f) Any other federal, state, or local law or regulation prohibiting
employment discrimination;
(g) The Employee Retirement Income Security Act, 29 U.S.C. ss.1001 et seq.
("ERISA");
(h) Section 806 of 18 U.S.C. ss.1514A.
(i) Executive Orders 11246 and 11141;
(j) The Americans with Disabilities Act of 1990, 42 U.S.C. ss.12101 et
seq.;
(k) The Federal Family and Medical Leave Act, 29 U.S.C. ss.2601 et seq.
and any comparable state statutes;
(l) The Constitution of the State of New York or any other applicable
states;
(m) Any claim arising from any express or implied contracts;
(n) Any claim under any other statute, regulation, ordinance, or common
law rule relating to the Employee's employment or separation from
employment, including any claim for wrongful discharge or defamation
arising out of employment or otherwise.
The Employee waives any claims or rights to payment of any attorney's
or professional advisor fees or expenses for review of this document
or any issues arising out of the Employee's early retirement.
Notwithstanding any provisions to the contrary, this release does not
include, a release of: (a) the Employee's rights under this Agreement;
(b) the Employee's right, if any, to individual conversion privileges
under any medical, dental, long term disability, life insurance, and
other welfare programs; (c) any obligations under the SERP; and (d)
any obligation of the Company to the Employee under any indemnity
agreement or any obligation of the Company to indemnify the Employee
pursuant to contract, law, charter, by-law or otherwise.
9. No Future Lawsuits. The Employee agrees that the Employee will not file, or
permit to be filed in the Employee's name or on the Employee's behalf, any
lawsuit or administrative claim against any of the persons or entities
released in this Agreement based upon any act or event which occurred
before the effective date of this Agreement. The Employee will also not
cooperate in the initiation of any lawsuits, except as otherwise required
by law.
In the event any charge or complaint is filed or any action is pursued by
others in the Employee's name or on the Employee's behalf by or before any
federal, state, or local agency or court, the Employee hereby waives the
right to any damages or other relief from any such action. This paragraph
does not apply to a challenge made by the Employee to the knowing and
voluntary nature of the Employee's waiver of claims under the Age
Discrimination in Employment Act of 1967, as amended ("ADEA").
10. Non-Admission of Liability. The use of this Agreement by SMSC does not
signify any liability by SMSC or any Related Entities to provide any
benefits.
11. Period for Review and Consideration of Agreement. The Employee understands
that the Employee will be given a period of 21 days to review and consider
this Agreement before signing it. The Employee further understands that the
Employee may wait up to 21 days prior to signing the Agreement, or may also
execute the Agreement prior to the expiration of the 21 day review period.
12. Older Workers Benefit Protection Act. SMSC is not required to provide the
Employee with certain demographic information required by the Older Workers
Benefit Protection Act of 1990, due to the voluntary early retirement by
the Employee.
13. Encouragement to Consult Attorney. The Employee is encouraged to consult
with an attorney before signing this Agreement.
14. Right to Revoke Agreement. The Employee may revoke this Agreement within 7
calendar days of the Employee's signing of this Agreement. If this
Agreement has not been revoked within such 7 day period, it becomes
effective on the 8th day. Revocation can be made by delivering a written
notice of revocation to Andy Solowey, Senior Vice President of Human
Resources. For this revocation to be effective, written notice must be
received by SMSC no later than close of business on the 7th calendar day
after the Employee signs this Agreement. If the Employee fails to sign this
Agreement or revokes this Agreement, it will not be effective or
enforceable and the Employee will not receive the Enhanced Benefits
described in Sections 3 and 4 of this Agreement.
15. Intellectual Property and Confidential Information. All of the Employee's
obligations under the Patent and Trade Secrets Agreement dated December 12,
1988, will end on the Early Retirement Date, except to the extent provided
in Section 16 below.
16. Trade Secrets, Confidential and/or Proprietary Information. The Employee
will regard and preserve as confidential: (i) all trade secrets and/or
other proprietary and/or confidential information belonging to the Company
or any Related Entities; and (ii) all trade secrets and/or other
proprietary and/or confidential information belonging to a third party
which have been confidentially disclosed to the Company or any Related
Entities, which trade secrets and/or other proprietary and/or confidential
information described in (i) and (ii) above (collectively, "Confidential
Information") have been disclosed to the Employee by reason of the
Employee's relationship with the Company or any Related Entities. The
Employee will not, without written authority from the Company to do so, use
for the Employee's own benefit or purposes, or the benefit or purpose of
any person or entity other than the Company, nor disclose to others, any
Confidential Information. This provision will not apply to the Employee's
general expertise and know-how, nor to Confidential Information that has
been voluntarily disclosed to the public by the Company, or otherwise
entered the public domain through lawful means. Confidential Information
shall include, but not be limited to, all nonpublic information relating to
the Company's: (i) business, research, development and marketing plans,
strategies and forecasts; (ii) business; (iii) products (whether existing,
in development, or being contemplated); (iv) reports; (v) formulas; (vi)
specifications; (vii) designs, software and other technology; (viii)
research and development programs; (ix) terms of contracts; and (x) any
employee information.
17. Return of Documents. Upon the Early Retirement Date, the Employee will
return all media on which any Confidential Information may be recorded or
located, including, without limitation, documents, program source codes,
samples, models, blueprints, photocopies, photographs, drawings,
descriptions, reproductions, cards, tapes, discs and other storage
facilities (collectively "Documentation") made by the Employee or that came
into the Employee's possession by reason of the Employee's employment with
the Company that are the property of the Company and shall be returned to
the Company. The Employee will not deliver, reproduce, or in any way allow
any Documentation to be delivered or used by any third party without the
written direction or consent of a duly authorized representative of the
Company.
18. Covenant Not to Compete. The Employee agrees that for a period of 1 year
after the Early Retirement Date, the Employee will not, directly or
indirectly, through any other person, firm, corporation or other entity,
compete with the Company or any Related Entities, anywhere in the United
States in the performance of services similar to the services being
provided prior to the Employee's Early Retirement Date or any prior
services provided to SMSC or any Related Entities. The Company and the
Employee agree that the Company's and all Related Entities business is
national in scope and is highly competitive.
19. No Solicitation of Employees. During the course of employment with the
Company, the Employee came into contact and became familiar with the
Company's employees, their knowledge, skills, abilities, salaries,
commissions, draws, benefits, and other matters with respect to such
employees, all of which information is not generally known to the public,
but has been developed, acquired or compiled by the Company at its great
effort and expense. Any solicitation, luring away or hiring of such
employees of the Company will be highly detrimental to the business of the
Company and may cause serious loss of business and great and irreparable
harm. Consequently, the Employee covenants and agrees that for a period of
1 year after the Employee's Early Retirement Date, the Employee will not,
directly or indirectly, whether on behalf of the Employee or others,
solicit, lure or hire away any employees of the Company or any Related
Entities, or assist or aid in any such activity.
20. No Solicitation of Clients. The Employee agrees that for a period of 1 year
after the Employee's Early Retirement Date, the Employee will not, directly
or indirectly, through any other person, firm, corporation or other entity,
solicit any customers or clients of the Company or any Related Entities.
21. Reasonableness of Covenants. The Employee acknowledges that the scope of
the Covenant Not to Compete and the Nonsolicitation of Employees and Client
provisions contained in this Agreement are reasonable. In the event that
any aspect of these provisions is deemed to be unreasonable by a court, the
Employee will submit to any reductions as the court will deem reasonable.
In the event the Employee violates these provisions, then the time
limitations will be extended for a period of time equal to the pendency of
such proceedings, including appeals.
22. Confidentiality of Terms. The Employee and SMSC agree that the terms of
this Agreement are confidential and will not be disclosed to any person
without the written consent of SMSC, except to the Employee's legal and tax
advisors and members of the Employee's immediate family, or to the extent
required by law. However, the Employee agrees and acknowledges that this
Agreement may be introduced as evidence by SMSC in the event the Employee
commences any legal, administrative, judicial or arbitration proceedings
against SMSC.
23. Non-Defamation. The Employee agrees that the Employee will not, directly or
indirectly, in public or private, deprecate, impugn or otherwise make any
remarks that would tend to or be construed to tend to defame SMSC or its
reputation, nor will the Employee assist any other person, firm or company
in engaging in such activities. SMSC also agrees not to engage in any
activities, directly or indirectly, that would defame the Employee, or the
Employee's reputation.
24. Consequences of Violation of Promises. If the Employee breaks any of the
Employee's promises contained within this Agreement and/or files any
lawsuit based on legal claims that the Employee has released, the Employee
will pay for all costs incurred by SMSC, any Related Entities, or the
officers, directors, agents or employees of SMSC or any Related Entities,
including reasonable attorney's fees to enforce any provisions or to defend
against any claim by the Employee. The Employee also agrees that if the
Employee acts in violation of this Agreement, the Employee will remit to
SMSC any and all monies paid to the Employee or any other parties under
this Agreement, including the cost of any COBRA coverage, and all severance
benefits will cease to be paid. The terms of this paragraph will not apply
to a challenge to the knowing and voluntary nature of a waiver of claims
under the Age Discrimination in Employment Act of 1967 and SMSC will not be
penalized for exercising that right.
25. Section 409A. As part of the American Jobs Creation Act of 2004, new
Section 409A of the Code was enacted to regulate nonqualified deferred
compensation plans. In general, any benefits paid following the termination
of an individual's employment, on a voluntary or involuntary basis, may be
treated as a form of deferred compensation under Section 409A of the Code,
unless a specific regulatory exemption exists. The Proposed Regulations
under Section 409A of the Code currently exempt certain arrangements from
the definition of deferred compensation. Under these exemptions benefits
that are paid within 2 1/2 months after the end of the later of the fiscal
year for an employer or the tax year for an employee in which a separation
from service occurs, are not considered deferred compensation. Given the
fact that the Employee's Early Retirement Date will be September 30, 2006;
and the payment of COBRA benefits will be completed in March, 2007, the
payment of COBRA benefits following the early retirement of the Employee
will not result in any deferred compensation under the "2 1/2 month rule".
This result easily occurs, since SMSC has a fiscal year ending February 28,
2007. Accordingly, all COBRA payments will clearly be made within 2 1/2
months of the SMSC tax year in which the early retirement occurs.
Furthermore, the Proposed Regulations also provide that any arrangement
that entitles an employee to certain reimbursements that are otherwise
excludable from gross income, such as the reimbursement for COBRA benefits,
that are incurred and paid by the December 31 of the second calendar year
following the calendar year in which a separation from service occurs, are
not considered to be deferred compensation.
Based upon the Proposed Regulations, this Agreement is not subject to
Section 409A, which could otherwise impose a 20% excise tax, and
underpayment of tax interest penalties, on any form of nonqualified
deferred compensation.
26. Entire Agreement. This document, constitutes the entire Agreement between
the Employee and SMSC concerning the subject matter hereof, except to the
extent the Patent and Trade Secrets Agreement has been incorporated into
this Agreement. SMSC has made no promises to the Employee other than those
in this Agreement concerning the subject matter hereof. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matters.
27. Waivers. A waiver by either party of any term or condition of this
Agreement in any instance will not be deemed or construed to be a waiver of
such term or condition for the future, or of any subsequent breach thereof.
All rights, remedies, undertakings or obligations contained in this
Agreement will be cumulative and none of them will be in limitation of any
other right, remedy, undertaking or obligation of either party.
28. Injunctive Relief. The Employee acknowledges that damages may be an
inadequate remedy in the event of an intended, threatened or actual breach
by the Employee of any of the covenants made in this Agreement. Any breach
by the Employee may cause SMSC great and irreparable injury and damage. To
the extent that such injury and damage can be demonstrated to a court of
competent jurisdiction, SMSC will be entitled, without waiving any
additional rights or remedies otherwise available to SMSC at law, or in
equity or by statute, to injunctive and other equitable relief in the event
of an intended, threatened, or actual breach by the Employee of any said
covenants.
29. Sarbanes-Oxley Act of 2002. SMSC and the Employee agree that this early
retirement is occurring for the reasons cited above and is not related to
any lawful actions taken by the Employee under the provisions of Section
806 of 18 U.S.C. ss.1514A.
30. No Application for Employment. The Employee agrees not to apply for any new
positions with SMSC or any Related Entities after the Early Retirement
Date.
31. Employment-At-Will. The Employee acknowledges that the Employee remains an
employee of SMSC, and is subject to the SMSC employment-at-will policy. The
Employee will be responsible for performing all responsibilities in a
satisfactory manner. In the event the Employee does not satisfy the
responsibilities of the Employee's position and/or violates any policies or
procedures of SMSC, the Employee may be immediately terminated. Upon such
action, unless such termination is for "Cause", the parties agree that all
payments contemplated under this Agreement will immediately be due and
payable and the Agreement will be honored. To the extent necessary to avoid
any adverse tax consequences under Section 409A, the parties agree to
execute a new Agreement maintaining as much of the intent of this Agreement
as possible.
For purposes of this provision, "Cause" shall include, but not be limited
to: any material violation of the terms of this Early Retirement Agreement
by the Employee; any material and intentional misstatement contained in the
Employee's representations under this Early Retirement Agreement, or in any
other corporate records; the commission by the Employee of any crime or
fraud against the Employer or any Related Entities or their property or any
crime involving moral turpitude or reasonably likely to bring discredit
upon the Employer or any Related Entities; the failure to adequately
perform the responsibilities of the Employee's position following written
notice of such failure and not cured within 30 days; and any material
violation of the Employer's published operating policies and procedures.
32. Execution of Agreement. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
33. Severability Clause. If any one or more provisions contained in this
Agreement will, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement, but
this Agreement will be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
34. No Release of Future Claims. This Agreement does not waive or release any
rights or claims that the Employee may have under the Age Discrimination in
Employment Act which arise after the effective date of the Agreement, if
applicable.
35. Reference. Reference inquiries from prospective employers will be handled
by only verifying the Employee's dates of employment and last position held
with SMSC consistent with SMSC's usual human resource policies and
procedures.
36. Binding Agreement. The provisions of this Agreement will be binding upon
the Employee, and SMSC and their successors, assigns, heirs, executors and
beneficiaries. Execution of this Agreement binds the Employee to the Early
Retirement Date designated above, which date may not be extended without
the mutual agreement of SMSC and the Employee.
37. Captions. The captions used in this Agreement are designed for convenience
of reference only and are not to be resorted to for the purpose of
interpreting any provision of this Agreement.
38. New York Law. The Employee and SMSC agree that this Agreement and any
interpretation thereof will be governed by the laws of the State of New
York.
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ THIS AGREEMENT,
UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT.
EMPLOYEE
Dated: October 14, 2005 By: /s/ George W. Houseweart
___________________________________
George W. Houseweart
SMSC NORTH AMERICA, INC.
Dated: October 14, 2005 By: /s/ Steven J. Bilodeau
___________________________________
Steven J. Bilodeau
Chairman and Chief Executive Officer
For internal use:
Date Delivered to Employee: October 14, 2005.
21-day Period for Consideration Ends November 4, 2005.
Date signed: 10/14/05
7-day Period for Revocation Ends: 10/21/05
October 14, 2005