EXHIBIT 10.1
STANDARD MICROSYSTEMS CORPORATION
2006 DIRECTORS STOCK APPRECIATION RIGHTS PLAN
1. Purpose. The purpose of this 2006 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. The Board may delegate all or a portion of the
administrative responsibilities for the SAR Plan to the Compensation
Committee of the Board. 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 200,000 "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 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. Initial SARs. Any Eligible Director first elected after the adoption
of this Plan, upon such election, shall automatically be granted
42,000 Initial SARs. All Initial SARs shall be subject to the Vesting
Schedule contained in Section 5(f) below.
c. Current Service SARs. In addition to Initial SARs, each Eligible
Director incumbent for at least three (3) years shall automatically be
granted SARs equal to 3,500 shares (the "Current SAR Grant"), which
shall be fully vested upon the first anniversary of each Grant Date.
Current Service SARs 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).
d. SAR Grant Value. All SARs granted hereunder shall have a "Grant Value"
equal to the "Fair Market Value" of a share of Common Stock on the
Grant Date, 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. Vesting of SARs. Each Initial SAR granted pursuant to this Sections
5(b) 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 Initial SARs shall be fully
vested.
In the event of death, Disability or any termination from the Board,
the Board shall have the discretion to accelerate the vesting of any
Initial or Current Service SARs.
g. Exercise of SARs. Any SAR, once vested, can be exercised within the
complete discretion of the Grantee at any point in time prior to the
expiration of any SAR.
All SAR Grants shall be exercised only in accordance with the
Company's current Trading Policy.
h. 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 Grant Value 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.
i. 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 (j) and (k) below)
prior to exercise, any vested SARs shall remain exercisable for a
period equal to the lesser of three (3) years from the date of the
termination of a Grantee's Directorship or the outstanding exercise
period for any SAR.
j. Death of Grantee. If a Grantee's directorship is terminated by reason
of his death prior to the exercise of his SAR Grant, or if a Grantee
whose directorship is terminated as a result of a Disability (as
described in Subsection (k) below) shall die following the Grantee's
termination of being a director, but prior to exercise of any vested
SAR Grant, such SAR Grant shall be exercisable by the Grantee's
Beneficiary to the extent of the number of SARs in which the Grantee
was vested for a period equal to the lesser of three (3) years from
the date of the termination of a Grantee's Directorship or the
outstanding exercise period for any SAR.
k. 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 exercise of any vested SAR Grant, any SAR Grant shall be
exercisable by the Grantee or the Grantee's personal representative
for a period equal to the lesser of three (3) years from the date of
the termination of a Grantee's Directorship or the outstanding
exercise period for any SAR.
l. 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.
m. Tax Withholding. The obligation of the Company to make payment upon
the exercise 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.
n. Next Business Day Rule. To the extent that any SAR is granted on a day
that is not a business day in which the NASDAQ is open, the Grant Date
of any SAR shall be the next business day upon which the NASDAQ is
open.
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.
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 exercise 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 over the Grant Value, as determined under Section
5(d), 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 or Discontinuance 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. 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" shall mean: (i) the acquisition of ownership of
stock of the Company, by any person (including, without limitation, a
corporation, trust, partnership, joint venture, limited liability
company (a "Person") or by any group of Persons), whether directly,
indirectly, beneficially or of record, in which acquisition, together
with stock held by such person or group, represents more than 20% of
the total voting power of all outstanding stock of the Company; (ii)
any merger or consolidation of the Company which the stockholders of
the Company before such merger or consolidation do not, as a result of
the merger or consolidation, own at least 50% of the merger or
consolidation; or (iii) any nomination and election of 50% or more of
all members of the Board of Directors of the Company within a 36-month
period whose election is without the recommendation of the Board.
"Change in Control" shall not include acquisition of the Company's
stock by any Company employee benefit plans.
d. "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
e. "Disability" means a Grantee 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 twelve (12)
months.
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.
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 Value,
as provided in Section 5, on the applicable exercise date.
i. "Subsidiary" means any entity as defined in Section 424(f) of the
Code.
14. Section 409A. Section 409A of the Code was enacted as part of the American
Jobs Creation Act of 2004 ("AJCA"). As originally enacted, Section 409A
would have precluded the issuance of SARs. However, the Proposed
Regulations issues under Section 409A confirmed that SARs may continue to
be granted, and are not treated as a form of nonqualified deferred
compensation, as long as the value of all SARs are based upon fair market
value at the time of grant. Consistent with the Proposed Regulations, the
SAR Plan is not subject to the provisions of Section 409A, and shall be
amended, if necessary, to comply with Final Regulations under Section 409A.
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. Expenses. The administrative or other expenses of the Plan shall be paid by
the Company.
17. 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.
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. 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.
20. 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.