SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
STANDARD MICROSYSTEMS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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STANDARD MICROSYSTEMS CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 11, 2001
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To the Stockholders of
STANDARD MICROSYSTEMS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Standard
Microsystems Corporation ("SMSC") will be held on July 11, 2001, at 10:00 A.M.,
at Chase Conference Center, 270 Park Avenue, 11th Floor, New York, New York for
the following purposes:
(1) Elect directors.
(2) Adopt and approve amendments to the Plan for Deferred Compensation
in Common Stock for Outside Directors;
(3) Adopt and approve the 2001 Director Stock Option Plan.
(4) Adopt and approve the 2001 Stock Option and Restricted Stock Plan;
(5) Ratify the selection of Arthur Andersen LLP as independent public
accountants for SMSC for the fiscal year ending February 28, 2002.
(6) Transact such other business as may properly come before the meeting
or any adjournment thereof.
In accordance with the bylaws of SMSC, the board of directors has fixed the
close of business on May 17, 2001 as the record date for the determination of
the stockholders entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
/s/ David C. Fischer
DAVID C. FISCHER
SECRETARY
Dated: May 31, 2001
AFTER READING THE FOLLOWING PROXY STATEMENT, TO VOTE BY PHONE, PLEASE CALL
1-800-PROXIES, AND FOLLOW THE RECORDED INSTRUCTIONS. TO VOTE BY INTERNET,
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER, SET FORTH ON THE ENCLOSED PROXY,
AVAILABLE WHEN YOU VOTE BY PHONE OR ACCESS THE WEB PAGE. TO VOTE BY MAIL,
PLEASE SIGN AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
STANDARD MICROSYSTEMS CORPORATION
80 ARKAY DRIVE
HAUPPAUGE, NEW YORK 11788
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS, JULY 11, 2001
This statement is furnished in connection with the solicitation of proxies
by the board of directors of Standard Microsystems Corporation, a Delaware
corporation ("SMSC"), for use at the annual meeting of stockholders of SMSC to
be held on July 11, 2001 and at any adjournment thereof. The approximate date on
which this statement and the accompanying proxy are first being mailed to
stockholders is May 31, 2001.
ELECTION OF DIRECTORS
At the annual meeting, three directors are to be elected for terms expiring
in 2004.
NOMINEES OF THE BOARD OF DIRECTORS
The persons named in the proxy hereby solicited intend to vote for the
election as directors the three nominees of the board who are named below,
unless otherwise specified in the proxy. Should any nominee become unable to
accept nomination or election (which is not anticipated), the persons designated
as proxies intend to vote for the election of any remaining nominee and for any
substitute nominee as the board may designate.
Set forth below is certain information with respect to each nominee and each
other person whose term as a director will continue after the annual meeting:
OTHER POSITIONS WITH SMSC, PRINCIPAL OCCUPATION, CERTAIN OTHER DIRECTOR
NAME DIRECTORSHIPS AND AGE AS OF MAY 17, 2001 SINCE
- ---- -------------------------------------------------------------- ----------
NOMINEES TO SERVE UNTIL THE 2004 ANNUAL MEETING:
James R. Berrett............ Retired corporate executive; until January 1996, Office of the 1996
Chairman and Chief Operating Executive of NEC Corporation,
manufacturer of computers, telecommunications products, and
semiconductors; 61
Andrew M. Caggia............ Senior Vice President and Chief Financial Officer; 52 2001
Ivan T. Frisch.............. Executive Vice President and Provost, Polytechnic University; 1992
63
DIRECTORS TO SERVE UNTIL THE 2003 ANNUAL MEETING:
Robert M. Brill............. General Partner, Newlight Associates, L.P., General Partner, 1994
Poly Ventures II, L.P., venture capital investment in high
technology; Director, Level 8 Systems, Inc.; 54
James J. Boyle.............. Chairman and President, Cardinal Resources, Inc., independent 2000
oil and gas producer; Trustee, Alvernia College; Councilor,
American Geographical Society, The New Ireland Fund, Inc,
(NYSE); 61
DIRECTORS CONTINUING TO SERVE UNTIL THE 2002 ANNUAL MEETING:
Steven J. Bilodeau.......... Chairman, President and Chief Executive Officer; 42 1999
Peter F. Dicks.............. Corporate Director; Directorships include, among others, 1992; also
Enterprise Capital Trust, Polar Capital Technology Trust, 1976-1991
Foreign & Colonial Ventures Trust, Sportingbet.com (UK) Plc,
Gartmore Fledging Index Trust; 58
The principal occupation for the last five years of each nominee and
director continuing in office is stated above, except that (1) Mr. Bilodeau was
employed by Robotic Vision Systems Inc. ("RVSI") as President of the
Semiconductor Equipment Group, which supplies inspection equipment to the
semiconductor industry, between 1996 and 1998 and prior thereto was an Executive
Vice President of RVSI, and (2) Mr. Caggia was employed as Senior Vice President
and Chief Financial Officer of General Semiconductor, Inc., between July 1997
and February 2000 and prior thereto was Senior Vice President of Finance of
General Instrument Corporation's Power Semiconductor Division.
COMMITTEES AND MEETINGS OF THE BOARD
SMSC's board of directors held five meetings during the last fiscal year.
Its audit committee held six meetings, its compensation committee held three
meetings, and its corporate governance committee held one meeting. The members
of the audit committee are Robert M. Brill, Peter F. Dicks, and Ivan T. Frisch;
the members of the compensation committee are James R. Berrett, Peter F. Dicks,
and Ivan T. Frisch; and the members of the corporate governance committee are
James R. Berrett, James J. Boyle, and Robert M. Brill.
The audit committee reviews SMSC's internal controls and the objectivity of
SMSC's financial reporting. It meets with appropriate SMSC financial personnel
and SMSC's independent public accountants in connection with these reviews. It
recommends to the board the appointment of the firm of independent public
accountants, subject to ratification by the stockholders at the annual meeting,
to serve as auditors for the following year. The audit committee has adopted a
charter, a copy of which is attached as Exhibit A. Members of the audit
committee are independent, within the meaning of Rule 4200(a)(15) of the NASD
Marketplace Rules.
The compensation committee makes recommendations to the board with respect
to the compensation of SMSC's officers. Members of the compensation committee
also constitute the committees that administer SMSC's employee stock option
plans and restricted stock bonus plan.
Among other responsibilities, the corporate governance committee recommends
criteria and qualifications for nominations for director, identifies possible
candidates, and recommends to the board for nomination those whom the committee
deems best qualified. The corporate governance committee will consider
recommendations for director nominations made by stockholders. Stockholder
recommendations should be in writing and mailed to the Secretary of SMSC.
AUDIT COMMITTEE REPORT
The audit committee has reviewed SMSC's audited financial statements as of
and for the year ended February 28, 2001 and discussed them with SMSC's
management. In connection with its review, the audit committee discussed with
Arthur Andersen LLP, SMSC's independent auditors, the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380); received the written disclosures and the letter from Arthur
Andersen required by Independence Standards Board Standard No. 1 (Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees);
and discussed with Arthur Andersen its independence. Based on its review and
these discussions, the audit committee recommended to SMSC's board of directors
that the audited financial statements be included in SMSC's Annual Report on
Form 10-K for the year ended February 28, 2001.
By the audit committee: Robert M. Brill Peter F. Dicks
Ivan T. Frisch
VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The management of SMSC has been informed that, as of May 17, 2001, the
persons and groups identified in the table below, including all directors,
nominees and executive officers, owned beneficially, within the meaning of
Securities and Exchange Commission ("SEC") Rule 13d-3, the shares of SMSC
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common stock reflected in such table. As of May 17, 2001, each director, nominee
or executive officer of SMSC disclaims beneficial ownership of securities of any
subsidiary of SMSC. Except as otherwise noted, the named beneficial owner claims
sole investment and voting power as to the securities reflected in the table.
NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OF CLASS
- ------------------------------------------------------ ---------- --------
James R. Berrett...................................... 59,754(1) *
Steven J. Bilodeau.................................... 196,464(2) 1.21
Robert M. Brill....................................... 50,706(3) *
James J. Boyle........................................ 168,944(4) 1.05
Andrew M. Caggia...................................... 67,436(5) *
Peter F. Dicks........................................ 66,892(6) *
Ivan T. Frisch........................................ 58,494(7) *
George W. Houseweart.................................. 100,748(8) *
Eric M. Nowling....................................... 69,810(9) *
All directors and executive officers as a group
(9 persons)......................................... 839,248(10) 5.05
Dimensional Fund Advisors Inc.
1299 Ocean Ave.
11th Floor
Santa Monica, CA 90401.............................. 1,039,400(11) 6.26
Intel Corporation
2200 Mission College Boulevard
Santa Clara, CA 95052-8119.......................... 1,542,506(12) 9.29
Citigroup Inc.
153 East 53rd Street
New York, NY 10043
and
Salomon Brothers Holding Company Inc., Salomon Smith
Barney Inc., and Salomon Smith Barney Holdings Inc.
388 Greenwich Street
New York, NY 10013.................................. 4,313,181(13) 25.98
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* Less than 1%.
(1) Includes 7,500 shares owned by the James R. Berrett Trust, 41,666 shares
covered by currently exercisable options and 4,594 phantom share units
pursuant to SMSC's Plan for Deferred Compensation in Common Stock for
Outside Directors (the "Deferred Compensation Plan").
(2) Includes 170,000 shares covered by currently exercisable options.
(3) Includes 33,332 shares covered by currently exercisable options and 9,188
phantom share units pursuant to the Deferred Compensation Plan.
(4) Includes shares held by various entities of which Mr. Boyle is the sole
owner or beneficiary, 8,334 shares covered by currently exercisable
options, and 1,794 phantom share units pursuant to the Deferred
Compensation Plan.
(5) Includes 50,000 shares covered by currently exercisable options.
(6) Includes 33,332 shares covered by currently exercisable options and 4,594
phantom share units pursuant to the Deferred Compensation Plan.
(7) Includes 33,332 shares covered by currently exercisable options and 4,594
phantom share units pursuant to the Deferred Compensation Plan.
(8) Includes 4,600 shares owned jointly with spouse, 1,000 shares owned by
spouse, and 26,799 shares covered by currently exercisable options.
(9) Includes 53,784 shares covered by currently exercisable options.
(10) Includes 450,579 shares covered by currently exercisable options and 24,764
phantom share units pursuant to the Deferred Compensation Plan.
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(11) Information is furnished in reliance on Schedule 13G dated February 2, 2001
of the named person, filed with the SEC.
(12) Information is furnished in reliance on Amendment No. 1 to Schedule 13D
dated March 22, 2000 of the named person, filed with the SEC.
(13) Voting power and investment power are shared as to all shares. Information
is furnished in reliance on Amendment No. 5 to Schedule 13G dated
January 29, 2001 of the named persons, filed with the SEC.
EXECUTIVE COMPENSATION
The following table sets forth all plan and non-plan compensation for
services rendered by the named executive officers in all capacities to SMSC and
its subsidiaries during the three years ended February 28, 2001.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------------------------
SHARES OF
ANNUAL COMPENSATION(1) STOCK
------------------------------ RESTRICTED UNDERLYING
FISCAL SALARY BONUS STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) AWARDS($)(2) GRANTED(#) COMPENSATION($)(3)
- ----------------------------------- -------- -------- -------- ------------ ----------- ------------------
Steven J. Bilodeau................. 2001 410,000 328,000 123,000 120,000 317,563(4)
Chairman, Chief Executive Officer 2000 371,000 280,000 -0- 280,000 163,804
and President
Andrew M. Caggia................... 2001 250,000 125,000 31,250 -0- 18,130
Senior Vice President 2000 9,615 50,000 -0- 200,000 205,804
and Chief Financial
Officer
George W. Houseweart............... 2001 247,722 20,007 164,538(5) 35,000 15,294
Senior Vice President and General 2000 239,700 37,512 12,600 40,000 4,247
Counsel 1999 239,700 29,483 -0- 25,000 5,396
Eric M. Nowling.................... 2001 171,600 8,000 28,530 -0- 15,253
Vice President and Controller 2000 171,600 -0- 15,000 50,000 4,404
1999 171,600 -0- -0- 35,000 4,941
- ------------------------
(1) Excludes perquisites and other personal benefits aggregating less than the
lesser of $50,000 or 10% of the total salary and bonus reported for the
named person.
(2) Restricted stock awards vest on each of the first and second anniversaries
of the grant date, to the extent of one-quarter of the shares awarded, and
on the third anniversary as to the remaining balance. Holders of restricted
stock awards are entitled to dividends to the same extent as owners of
unrestricted shares. No other named executive officer held restricted stock
as of February 28, 2001. The number of shares granted to each executive
officer as restricted stock awards are as follows:
2001 2000 1999
-------- -------- --------
Steven J. Bilodeau.......................................... 8,339 0 0
Andrew M. Caggia............................................ 2,119 0 0
George W. Houseweart........................................ 8,431 1,694 0
Eric M. Nowling............................................. 1,881 2,017 0
As of February 28, 2001, the market value of each executive officer's
holdings of restricted stock was as follows: George W. Houseweart, $145,800,
Eric Nowling, $44,709. No other executive officer held restricted stock as
of February 28, 2001.
(3) Reflects SMSC contributions under SMSC's Incentive Savings and Retirement
Plan, automobile allowances, and life insurance.
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(4) Includes forgiveness of loan SMSC made to Mr. Bilodeau in fiscal 2000 to
help him buy a home in Hauppauge NY and a bonus to offset the income tax
effect of such forgiveness totaling $292,000, automobile allowance and life
insurance.
(5) Includes a Restricted Stock Award of 5,502 shares, valued at $120,000,
granted upon cancellation of an agreement between Mr. Houseweart and SMSC
whereby Mr. Houseweart was entitled to receive specified percentages of
certain SMSC licensing revenues or revenues from sales of products
manufactured and/or sold by SMSC pursuant to certain second-sourcing,
technology transfer or other agreements with SMSC licensees.
Mr. Bilodeau and SMSC entered into an employment agreement as of March 18,
1999, pursuant to which Mr. Bilodeau will be employed as President and Chief
Executive Officer of SMSC until March 18, 2002. Mr. Bilodeau currently receives
an annual base salary of $410,000.
Mr. Caggia and SMSC entered into an employment agreement as of January 7,
2000, pursuant to which Mr. Caggia will be employed as Senior Vice President and
Chief Financial Officer of SMSC until February 14, 2003. Mr. Caggia's current
annual base salary is $250,000. To the extent the options granted by SMSC to
Mr. Caggia during his employment term do not achieve a potential value before
taxes of at least $463,000 before February 16, 2004, SMSC will pay Mr. Caggia
the shortfall in ten equal quarterly installments.
These employment agreements also provide for:
- automatic extensions for one-year periods after the initial term, unless
either party elects not to extend the term by providing at least six
months prior notice to the other;
- bonuses determined in accordance with SMSC's executive incentive
compensation policy described below;
- early termination by the executive following a change in control of SMSC,
and, in the case of Mr. Bilodeau, if SMSC's stockholders fail to elect him
as a director of SMSC;
- upon termination of executive's employment by SMSC other than for cause,
immediate vesting of certain stock options, stock grants and deferred
compensation, an amount equal to one year's base salary, pro-rated bonus
for the fiscal year in which the termination occurs, and paid coverage for
life and group health insurance for 18 months or until the executive
sooner obtains full-time employment;
- such benefits as are provided generally to SMSC's senior executive
officers;
- vesting under the below described Executive Retirement Plan of 50% after
five years and the remaining 50% ratably over the next five years; and
- customary provisions regarding assignment of inventions, trade secrets,
works of authorship, nondisclosure and noncompetition by the executive.
For recent fiscal years, SMSC implemented plans to pay certain of its
executives, including executive officers named in the preceding table, incentive
compensation, based on financial performance of SMSC and achievement of
strategic goals, as determined by the compensation committee of the board of
directors. Part of such incentive compensation was paid in the form of
restricted stock awards, as set forth in the table. The board of directors has
authorized a similar arrangement for fiscal 2002.
Under SMSC's Executive Retirement Plan, officers, including executive
officers, whose employment terminates, generally after 10 years of continuous
service or by reason of total and permanent disability (or the beneficiary of a
deceased participant), are entitled to receive, for 10 years, in equal monthly
installments, beginning at age 65 or such officer's later retirement date, an
annual benefit equal to 35% of the participant's Base Annual Salary, as defined
in the plan. As of March 1, 2001, the annual benefit that would be payable to
each of the executive officers named in the table on reaching age 65 is as
follows (assuming full vesting in the case of Messrs. Bilodeau and
Caggia): Steven J. Bilodeau, $136,675; Andrew M. Caggia, $87,500; George W.
Houseweart $84,702; Eric M. Nowling, $60,060.
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The following table sets forth information regarding individual grants of
stock options to the named executive officers during the 2001 fiscal year.
Options generally become exercisable in four equal annual installments
commencing on the first anniversary of grant and may be exercised cumulatively
at any time before expiration.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF SHARES SUBJECT OF STOCK PRICE
SECURITIES TO OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION ---------------------------
EXECUTIVE OFFICER (# OF SHARES) FISCAL YEAR ($ PER SHARE) DATE 5%($) 10%($)
- ------------------------------ --------------- -------------- ------------- ---------- ------------ ------------
Steven J. Bilodeau............ 120,000 7.59 14.09 4/4/10 1,063,561 2,695,274
George W. Houseweart.......... 5,000 .32 14.09 4/4/10 44,315 112,303
30,000 1.90 23.88 11/8/10 450,446 1,141,518
The following table sets forth aggregate information concerning stock option
exercises during fiscal 2001 by each of the named executive officers, together
with the year-end values of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- ----------- ----------- ------------- ----------- -------------
Steven J. Bilodeau........... -0- -- 70,000 330,000 586,250 1,950,030
Andrew M. Caggia............. -0- -- 50,000 150,000 100,000 300,000
George W. Houseweart......... 3,818 6,850 19,299 87,500 126,552 421,537
Eric M. Nowling.............. -0- -- 44,783 70,503 281,140 545,427
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of the board of directors is composed entirely of
outside directors and is responsible for developing and making recommendations
to the board of directors with respect to compensation of SMSC's officers,
directors and certain other employees, as well as any bonuses for officers.
The committee has developed and implemented compensation programs that seek
to enhance the profitability of SMSC and improve stockholder value by closely
aligning the financial interests of SMSC's senior management team with those of
its stockholders. A significant part of each executive's compensation depends on
appreciation of SMSC's common stock. Each executive's compensation is composed
of two elements: (1) current compensation composed of base salary and cash
bonuses and (2) long-term compensation tied directly to stockholder value,
composed of restricted stock awards and stock options.
Base pay is designed to be competitive with salary levels at similar
industry companies for equivalent positions. From time to time, the committee
utilizes independent consultants or survey information to ensure that executive
salaries are within a competitive range. Each executive is eligible to receive
an annual incentive bonus.
Long-term compensation is tied directly to stockholder return. Under the
current program, executives have typically received stock options that vest over
four years and restricted stock awards that vest over either three or four
years. The purposes of this program are to motivate SMSC's executives to enhance
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SMSC's market capitalization and hence, its stockholders' return, and to create
an incentive for the executive to remain with SMSC.
Base salary and additional compensation for certain of the named executive
officers are fixed by employment agreement, as described following the Summary
Compensation Table.
Section 162(m) of the Internal Revenue Code limits to $1,000,000 the amount
of "applicable employee remuneration" deductible by SMSC for "covered" employees
for any taxable year. No policy has been adopted with respect to Section 162(m)
of the Code for executive officers, since their "applicable employee
remuneration" levels are not expected to exceed $1,000,000. It is the
committee's policy to the extent feasible, to keep compensation within the
deductible limits.
By the compensation committee: James R. Berrett Peter F. Dicks Ivan T. Frisch
PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder return for
SMSC common stock, the Center for Research in Security Prices ("CRSP") Total
Return Index for Nasdaq Stock Market (US Companies) and the CRSP Total Return
Index for Nasdaq Computer Manufacturers Stocks, assuming an investment of $100
in each in February 1996 and the monthly reinvestment of dividends. The
performance shown on the graph is not necessarily indicative of future
performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Five-Year Cumulative Total Returns Graph Data
DATE SMSC NASDAQ MARKET NASDAQ COMPUTER MANUFACTURERS
2/29/96 $100.00 $100.00 $100.00
2/28/97 $54.40 $119.30 $113.58
2/27/98 $60.80 $163.00 $181.25
2/26/99 $52.80 $212.32 $331.12
2/29/00 $102.80 $433.71 $796.96
2/28/01 $100.40 $197.64 $310.35
Pursuant to SEC rules, the material under the caption Audit Committee Report
and under the caption Board Compensation Committee Report on Executive
Compensation through and including the line graph and related explanatory
material is not to be deemed either "soliciting material" or "filed" with the
SEC. It is specifically excluded from any material incorporated by reference in
SMSC filings under the
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Securities Act of 1933 or Securities Exchange Act of 1934, whether such filings
occur before or after the date of this proxy statement and notwithstanding
anything to the contrary set forth in any such filing.
------------------------
8
DIRECTOR COMPENSATION
Directors who are not officers of SMSC receive an annual basic retainer of
$20,000 and committee members receive an additional annual retainer of $2,000
per committee.
SMSC's Plan for Deferred Compensation in Common Stock for Outside Directors
provides for deferred payment, at the election of the director, of 100%, or 50%
of such director's annual retainer, in shares of SMSC common stock. The deferred
amount is payable in cash or stock, at the election of the director, when the
director ceases to be a director for any reason, or in cash only, upon the
occurrence of a change in control of SMSC. An amendment of the plan is being
submitted to stockholders. See Changes in Directors' Compensation Plans.
Under SMSC's 1994 Director Stock Option Plan, options to purchase an
aggregate of 250,000 shares of SMSC common stock were authorized for grant to
directors who are not employees of SMSC or any subsidiary of SMSC. Pursuant to
the plan, each eligible director upon initial election automatically was granted
a vesting option to purchase 25,000 shares. Vesting options become exercisable
to the extent of one-third of the number of shares granted on each of the first
three anniversaries of the date of grant. Each eligible director incumbent for
at least three years automatically was granted an immediately exercisable option
to purchase 8,333 shares following each annual meeting of stockholders. The per
share exercise price of each option equals the fair market value of a share of
the common stock on the date of grant. In general, options are not transferable.
Options expire ten years after grant, or, if earlier, three years after the
holder ceases to be a director. During fiscal 2001, the 1994 plan terminated,
except with respect to outstanding options.
SMSC's Retirement Plan for Directors provided for the payment to each
retired director, for a maximum of 10 years after retirement, of an amount equal
to the director's retainer in effect at his or her retirement, for service on
the board and on each board committee of which he or she was then a member.
Accruals under the plan terminated effective January 1, 2001. See Changes in
Directors' Compensation Plans.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the sale to Intel Corporation ("Intel") of 1,542,506
shares of SMSC common stock in March 1997 at $9.50 per share, SMSC granted Intel
a three-year warrant covering 1,542,606 shares at $10.45 per share until March
18, 1998, $11.40 per share between March 18, 1998 and March 18, 1999, and $12.35
per share between March 18, 1999 and March 18, 2000. In March 2000, Intel
exercised the warrant in accordance with its net exercise provision. Intel
received 200,284 shares of SMSC common stock upon the exercise, which SMSC
repurchased for $1,928,000. In connection with an investment in SMSC made by
Intel Corporation in 1997, SMSC and Intel entered into an Investors Rights
Agreement, pursuant to which Intel (a) has the right to (1) designate an
observer to attend meetings of SMSC's board of directors or a representative for
election to SMSC's board; (2) require SMSC to register Intel's SMSC common stock
for sale pursuant to the Securities Act of 1933; and (3) buy additional shares
of SMSC common stock from SMSC pursuant to a right of first refusal or to
maintain its percentage ownership of SMSC common stock; and (b) is prohibited
from acquiring more than 25% of SMSC's outstanding common stock (subject to
certain exceptions). The agreement gives SMSC a right of first refusal
respecting sales by Intel of its SMSC common stock.
In September 1999, SMSC entered into a technology exchange agreement with
Intel which is intended to accelerate SMSC's development of value-added chipset
solutions that support Intel microprocessors in personal computer and embedded
applications. As part of this agreement, SMSC gains access to Intel's complete
line of current and future memory controllers and firmware hub devices. SMSC's
chipset products will include complete solutions comprised of Intel's leading
performance memory controllers and SMSC's own value-added I/O controllers, and
in some applications, super I/O devices and Intel firmware hub devices.
8
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of copies of reports and written representations
furnished to SMSC by its executive officers and directors, SMSC believes that
all reports required to be filed by its executive officers and directors in the
2001 fiscal year were filed timely, except that Mr. Boyle reported one
transaction late.
CHANGES IN BOARD COMPENSATION PLANS
Based on a study conducted during the fiscal year, SMSC's board of directors
determined that the compensation package for non-employee directors should be
changed. The changes reduce cash compensation and other entitlement-like
payments and increase the opportunity to participate in increases in the value
of SMSC stock. As such, the board believes that these changes better align the
directors' interests with those of the shareholders. The specific changes are as
follows:
- the annual retainer was reduced from $25,000 to $20,000; the committee
retainer was reduced from $3,500 to $2,000; and per meeting fees were
eliminated.
- Options earned by each non-employee director were increased from 8,333
shares per year to 12,000 shares per year. See 2001 Director Stock Option
Plan below.
- Subject to stockholder approval, the Plan for Deferred Compensation in
Common Stock for Outside Directors was amended to include committee
retainers; and directors are required, within two years after joining the
board, to own SMSC common stock in value equal to at least two years'
annual retainer.
- Accruals under the directors' retirement plan were discontinued, as of
January 1, 2001, and each director was given an election to receive the
accrued quarterly cash benefit following the director's actual retirement
or to receive a three-year restricted stock award of a number of shares
having a value equal to the approximate present value of the cash benefit
on January 2, 2001. Accordingly, the following directors received the
indicated number as shares: Peter F. Dicks 8,966; Robert M. Brill, 8,186;
Ivan T. Frisch, 10,068; and James J. Boyle, 1,216.
The board of directors believes that adoption by stockholders of the
amendments to the plan for Deferred Compensation in Common Stock for Outside
Directors and the 2001 Director Stock Option Plan is desirable to encourage
ownership in SMSC by non-employee directors, whose serviced are considered
essential to SMSC's continued progress, by providing a further incentive to
continue to serve as directors and through utilization of the incentives
provided by the plan, to attract and retain experienced and qualified candidates
to fill vacancies on the board of directors which may occur in the future.
DEFERRED COMPENSATION PLAN
Currently, under the Plan for Deferred Compensation in Common Stock for
Outside Directors, each non-employee director elects to defer receipt of either
100% or 50% of the director's annual retainer (currently $20,000). For each
fiscal quarter of service on the board, there is credited to each director's
account a number of phantom share units equal to one-quarter of the amount of
the deferred retainer divided by the market price of a share of SMSC common
stock on the last day of the fiscal quarter. Each director's interest in the
director's account is nonforfeitable. Upon termination of the director's service
as such, the director is entitled to receive, at the director's election, either
a number of shares of common stock equal to the number of phantom share units in
the director's account or cash in amount equal to the market value of that
number of shares of common stock.
Subject to stockholder approval, the board has amended the plan so that each
director's deferral election will include each committee retainer ($2,000 per
year) to which the director is entitled, as well as the director's annual
retainer.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THESE
AMENDMENTS TO THE PLAN FOR DEFERRED COMPENSATION IN COMMON STOCK FOR OUTSIDE
DIRECTORS.
9
2001 DIRECTOR STOCK OPTION PLAN
Under the 2001 Director Stock Option Plan, options to purchase an aggregate
of not more than 250,000 shares of SMSC common stock may be granted from time to
time to directors who are not employees of SMSC or any subsidiary. Under the
plan, each eligible director first elected after the 2001 annual meeting of
stockholders, at the time of election, will be granted a vesting option to
purchase 36,000 shares of Common Stock. Vesting options become exercisable to
the extent of one-third of the number of shares granted on each of the first
three anniversaries of the date of grant or upon the earlier retirement,
permanent disability, or death of the director or change in control of SMSC. The
per share exercise price of each option equals the fair market value of a share
of the common stock on the date of grant. Immediately following each annual
meeting of stockholders, an immediately exercisable 12,000-share current service
option will be granted to each eligible director who at that time has been a
director for at least three years. Any eligible director first elected before
January 1, 2001 who is not eligible to receive a current service option
following the 2001 annual meeting of stockholders will receive a vesting option
to purchase 7,686 shares of SMSC common stock as of December 29, 2000.
Accordingly, if stockholders approve the plan, immediately following the annual
meeting, a 12,000-share current service option exercisable at the closing price
of a share of SMSC common stock on the date of the meeting will be granted to
each of Messrs. Berrett, Brill, Dicks, and Frisch, and a 7,686-share vesting
option exercisable at $20.25 per share will be granted to Mr. Boyle.
In general, options are not transferable. Each option expires upon the
earlier of (i) ten years after grant, or (ii) three years after the holder
ceases to be a director. The exercise price may be paid in cash or with SMSC
common stock.
The plan is to be administered by the board of directors. The board is
generally empowered to interpret the plan, to prescribe, amend and rescind rules
and regulations relating to it, and to determine the terms and provisions of the
respective option agreements. The board may amend, suspend, or terminate the
plan, except that, without approval of the stockholders, no amendment may change
the number of shares subject to the plan, change the eligibility provisions, or
materially increase the benefits accruing to participants under the plan.
Provisions relating to eligibility, the number of shares subject to grant, or
exercise price may not be amended more frequently than every six months, except
to comply with law.
The federal income tax consequences of grant, receipt, and exercise of stock
options under the 2001 Directors Stock Option Plan are the same as those
described under 2001 Stock Option Plan--Tax Consequences in respect of employee
stock options that are not ISOs. A recent price quotation for SMSC common stock
immediately precedes that caption.
The plan is set forth as Exhibit B to this proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE 2001
DIRECTOR STOCK OPTION PLAN.
2001 STOCK OPTION AND RESTRICTED STOCK PLAN
SMSC's board of directors has adopted the 2001 Stock Option and Restricted
Stock Plan, subject to stockholder approval. The board of directors believes
that the plan is desirable to attract and retain executives and other key
employees and consultants of outstanding ability.
Under the plan, awards of restricted common stock and options to purchase
common stock covering not more than 1,500,000 shares in total may be granted
from time to time to salaried employees of SMSC or any subsidiary of SMSC,
including executive officers, or individuals, excluding nonemployee directors,
who are consultants to SMSC.
If the 2001 Stock Option and Restricted Stock Plan is approved, SMSC will
cancel its current Restricted Stock Bonus Plan. As of May 17, 2001 there were
189,987 shares remaining unissued under the Restricted Stock Bonus Plan.
10
The number of shares subject to options granted to a single individual
during any fiscal year may not exceed 120,000. Approximately 500 persons,
including four executive officers, are expected to be eligible to participate in
the plan.
The plan authorizes awards, to management employees, of shares of SMSC stock
that may not be transferred, and are subject to forfeiture upon termination of
employment with SMSC, until such restrictions lapse. Unless the committee
otherwise determines in respect of a particular award, the restrictions lapse as
to 25% of the shares awarded on each of the first and second anniversaries of
the date of grant, and the restrictions lapse as to the remaining 50% of the
shares on the third anniversary of the date of grant, or upon the earlier death
or disability of the employee while employed by SMSC. The awards are made
primarily as sign-on bonuses and in part payment of bonuses under SMSC's
Management Incentive Bonus Plan, which are earned if SMSC achieves quarterly
financial or other strategic objectives, or the employee meets other goals, set
by the compensation committee or SMSC's CEO. Approximately 40 employees were
eligible to receive restricted stock awards in fiscal year 2001.
The plan is to be administered by the 2001 stock option and restricted stock
plan committee. The committee may in general exercise all of the powers of the
board in relation to the plan. The committee is generally empowered to interpret
the plan, to prescribe rules and regulations relating thereto, to determine the
terms of option and restricted stock agreements, to amend them with the consent
of the optionee, to determine the optionees to whom options are to be granted,
and to determine the number of shares subject to each option granted.
The per share exercise price of each option is established by the 2001 stock
option and restricted stock plan committee and in each instance will not be less
than the fair market value of a share of common stock on the date the option is
granted (110% of fair market value on the date of grant of an ISO (as
hereinafter defined) if the optionee owns stock possessing more than 10% of the
total combined voting power of all classes of stock of SMSC or any of its
subsidiaries). Upon exercise of an option, the optionee may pay the purchase
price with cash and, unless the 2001 stock option and restricted stock plan
committee shall otherwise determine, securities of SMSC previously acquired by
the optionee (excluding restricted stock).
Options will be exercisable for a term determined by the 2001 stock option
plan committee, which term will not be greater than 10 years from the date of
grant. Unless otherwise provided in an option agreement, generally, an option
will have a ten-year term and become fully exercisable four years after the date
of grant. Prior thereto, each option will become exercisable, as to one-quarter
of the number of shares covered thereby, cumulatively upon each anniversary of
the date of the grant. Except in the event of certain terminations of employment
or death or permanent and total disability, no option granted to an employee may
be exercised unless the holder is then an employee of SMSC or a subsidiary. Any
impact on the exercisability of options granted to a consultant of the
termination of the optionee's consultancy relationship with SMSC will be
specified in the option agreement. Options will not be transferable other than
by will or the laws of descent and distribution and may be exercised during the
optionee's lifetime only by the optionee or the optionee's guardian or legal
representative.
Options granted pursuant to the plan may be designated as incentive stock
options ("ISOs"), with the attendant tax benefits provided under Sections 421
and 422 of the Internal Revenue Code of 1986 (the "Code"). Accordingly, the plan
provides that the aggregate fair market value (determined at the time an ISO is
granted) of the common stock subject to ISOs exercisable for the first time by
an employee during any calendar year (under all plans of SMSC and any
subsidiary) may not exceed $100,000.
Shares subject to the plan may be either authorized but unissued shares or
issued shares reacquired by SMSC. The number of shares subject to each option
and the exercise price of options are subject to adjustment as the board
considers appropriate in the event of changes in the outstanding common stock by
reason of stock dividends, recapitalizations, mergers, and similar events. In
the event of certain basic changes in SMSC, including a change in control of
SMSC, in the discretion of the board, each option shall
11
become fully exercisable, regardless of whether any installment is then
exercisable and restrictions on shares subject to restricted stock awards lapse.
The board of directors may suspend, terminate, modify or amend the plan,
provided, however, that (except for adjustments by reason of stock dividends,
recapitalizations, mergers, and similar events) any increase in the aggregate
number of shares subject to the plan, any reduction in the purchase price of the
common stock covered by any option, any extension of the period during which
options or awards may be granted, any increase in the maximum term of options,
and any material modification in the requirements as to eligibility for
participation in the plan shall be subject to the approval of stockholders. No
suspension, termination, modification or amendment of the plan may, without the
consent of the plan participant, adversely affect the participant's rights under
an option or award theretofore granted.
No option or award may be granted under the plan after April 3, 2011.
On May 17, 2001, the closing sale price reported on the Nasdaq National
Market for SMSC common stock was $13.35 per share.
The plan is set forth as Exhibit C to this proxy statement.
TAX CONSEQUENCES
SMSC has been advised as follows regarding the federal income tax
consequences with respect to the grant of the award and the grant and exercise
of stock options and the payment in stock of the exercise price of options under
the plan. Grantees of restricted stock generally do not recognize income at the
time of a restricted stock grant. Grantees are taxed, at ordinary income tax
rates, when the shares of restricted stock are no longer subject to a
substantial risk of forfeiture, in an amount equal to the fair market value of
the stock at such time, less the amount paid, if any, for the stock.
Alternatively, the grantee of restricted stock may elect to recognize income at
the time of the grant of the stock award, based on the fair market value of the
stock at such time, less the amount paid, if any, for the stock. If such
election is made, no further tax is due at the time the restrictions lapse. To
receive such treatment, the grantee must file an election with the Internal
Revenue Service, under Section 83(b) of the Code, not later than 30 days after
the restricted stock is issued. SMSC is entitled to a deduction for the
restricted stock grant at the time and in the amount that the grantee recognizes
income from issuance of the stock to the grantee, based on whether the grantee
has made a Section 83(b) election, if SMSC complies with applicable reporting
requirements.
Optionees will not be taxed upon the grant of an option. At the time of
exercise of an option other than an ISO, the optionee generally will realize
ordinary income equal to the excess of the fair market value of the shares over
the option price, SMSC will be entitled to a deduction in the same amount
(provided applicable reporting requirements are met), and the shares so acquired
will have a basis to the optionee equal to their fair market value. Upon the
sale of a share so acquired, any gain or loss will result in a capital gain or
loss measured by the difference between the optionee's basis and the amount
realized on such sale, provided the share is a capital asset in the hands of the
holder.
At the time of exercise of an ISO, the optionee will realize no income and
SMSC will not be entitled to any deduction. However, the optionee generally will
have an item of adjustment, for purposes of calculating alternative minimum
taxable income, equal to the excess of the fair market value of the shares at
such time over the option price. Upon the sale of a share acquired pursuant to
the exercise of an ISO, any gain or loss will result in a capital gain or
capital loss (measured by the difference between the amount realized on such
sale and the exercise price), provided the share sold is a capital asset in the
hands of the holder. However, if at the time of sale or other disposition of
such share, the optionee has held the share for less than one year, or less than
two years have elapsed since the grant of the ISO (a "premature disposition"), a
portion (or all) of any gain will be taxed at ordinary income rates at the time
of the disposition in an amount equal to the excess of the fair market value of
the shares on the date of exercise
12
(or, if less, the amount realized upon disposition) over the option price, and
SMSC will be entitled to a deduction in the same amount.
If an optionee uses previously acquired shares of common stock to pay the
exercise price of an option, the optionee will not ordinarily recognize any
taxable income to the extent that the number of new shares of common stock
received upon exercise of the option does not exceed the number of previously
acquired shares so used. If non-recognition treatment applies to the payment for
option shares with previously acquired shares, the tax basis of the option
shares received without recognition of taxable income is the same as the basis
of the shares surrendered as payment. If a greater number of shares of common
stock is received upon exercise than the number of shares surrendered in payment
of the option price, if an ISO is being exercised, such excess shares will have
a zero basis in the hands of the optionee; if an option other than an ISO is
being exercised, the optionee will be required to include in gross income (and
SMSC will be entitled to deduct) an amount equal to the fair market value of the
additional shares on the date the option is exercised less any cash paid for the
shares, and the excess shares will have a basis equal to the fair market value
of such shares on the exercise date.
Moreover, if stock previously acquired by exercise of an ISO is transferred
in connection with the exercise of an ISO, and if, at the time of such transfer,
the stock so transferred has not been held for the holding period required in
order to receive favorable treatment under the rules governing ISOs, then such
transfer will be treated as a premature disposition. Accordingly, with respect
to the shares so transferred, an optionee will recognize ordinary income under
the rules governing a premature disposition discussed earlier in this section.
Nonetheless, the shares acquired upon exercise can still qualify for ISO
treatment, if all of the other ISO requirements are fulfilled.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE 2001 STOCK
OPTION AND RESTRICTED STOCK PLAN.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders, the board of directors has
selected Arthur Andersen LLP as independent public accountants for SMSC for the
fiscal year ending February 28, 2002. Arthur Andersen was the independent public
accountant for SMSC for its fiscal year ended February 28, 2001. A
representative of Arthur Andersen is expected to be present at the annual
meeting, with the opportunity to make a statement, if he or she desires to do
so, and is expected to be available to respond to appropriate questions.
If the selection of Arthur Andersen is not ratified, or if prior to the next
annual meeting of stockholders such firm shall decline to act or otherwise
become incapable of acting, or if its engagement shall be otherwise discontinued
by the board of directors, the board of directors will appoint other independent
auditors whose selection for any period subsequent to the next annual meeting
will be subject to stockholder ratification at such meeting.
AUDIT FEES
The fees billed or expected to be billed by Arthur Andersen for professional
services rendered for the audit of SMSC's annual financial statements for the
fiscal year ended February 28, 2001 and the reviews of the financial statements
included in SMSC's Quarterly Reports on Form 10-Q for the fiscal year totaled
approximately $205,300.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Arthur Andersen did not perform any financial information systems design and
implementation services for SMSC for the fiscal year ended February 28, 2001.
13
ALL OTHER FEES
The aggregate fees billed or expected to be billed by Arthur Andersen for
other services rendered to SMSC for the fiscal year ended February 28, 2001
totaled approximately $28,900.
The Audit Committee has considered whether Arthur Andersen's provision of
non-audit services to SMSC is compatible with maintaining Arthur Andersen's
independence.
VOTING PROCEDURES
Every stockholder of SMSC is entitled to cast, in person or by proxy, one
vote for each share of SMSC common stock held at the close of business on
May 17, 2001, the record date for the annual meeting. At that date, SMSC had
outstanding 16,127,525 shares. The proxy hereby solicited is revocable at any
time prior to its exercise in any manner permitted by law.
The election of directors is decided by a plurality of the votes cast. A
majority of the votes cast is required to approve each other matter to be acted
on at the meeting. Abstentions and broker non-votes have no effect on the
proposals being acted upon.
The proxies named in the enclosed form of proxy or their substitutes will
vote the shares represented by the enclosed form of proxy, if the proxy appears
to be valid on its face, and, where a choice is specified on the form of proxy,
the shares will be voted in accordance with the specification so made.
GENERAL
The cost of preparing, assembling and mailing the proxy statement and
related material will be borne by SMSC. In addition to soliciting proxies by
mail, SMSC may make requests for proxies by telephone, facsimile transmission or
messenger or by personal solicitation by officers, directors, or employees of
SMSC, at nominal cost to SMSC, or by any one or more of the foregoing means.
Georgeson Shareholder has been retained by SMSC to assist in the solicitation of
proxies, for fees anticipated to aggregate approximately $5,000, plus reasonable
out-of-pocket expenses. SMSC will reimburse brokerage firms and other nominees
in accordance with the New York Stock Exchange schedule of charges for the cost
of forwarding proxy material to beneficial owners of SMSC common stock.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Stockholder proposals intended for inclusion in the proxy statement for the
next annual meeting must be received by SMSC by February 1, 2002 and should be
sent to the Vice President and Controller, Standard Microsystems Corporation, 80
Arkay Drive, P.O. Box 18047, Hauppauge, New York 11788. The persons named on the
form of proxy to be sent in connection with the solicitation of proxies on
behalf of SMSC's board of directors for the next annual meeting will vote in
their own discretion on any matter as to which SMSC shall not have received
notice by April 25, 2002.
By order of the Board of Directors,
/s/ David C. Fischer
Dated: May 31, 2001
DAVID C. FISCHER
SECRETARY
YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. PLEASE VOTE BY
PHONE, INTERNET OR MAIL TODAY.
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EXHIBIT A
STANDARD MICROSYSTEMS CORPORATION
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary mission is to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal financial and accounting controls.
- Monitor the independence and performance of the Company's independent
auditors.
- Provide an avenue of communication among the independent auditors,
management and the Board of Directors.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee and its members shall meet the composition requirements
of the National Association of Securities Dealers Marketplace Rule 4460(d)(2),
through the following:
- The Audit Committee shall be comprised of a minimum of three directors
appointed annually by the Board of Directors, one of whom shall serve as
the Committee Chairperson.
- Each member shall be an independent, non-executive director, free from any
relationship that would interfere with the exercise of his or her
judgment.
- All members of the Committee shall have a basic understanding of finance
and accounting and be able to read and understand fundamental financial
statements.
- At least one Committee member shall have accounting or related financial
management expertise. This member must have past employment experience in
finance or accounting, requisite professional certification in accounting,
or other comparable experience or background that results in the
individual's financial sophistication.
The Audit Committee shall meet at least four times per fiscal year, or more
frequently as circumstances dictate. Formal minutes shall be recorded for all
Audit Committee meetings.
The Committee shall report to the Board concerning its activities at each
full Board of Directors' meeting.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
MAINTENANCE OF CHARTER
The Audit Committee shall review and reassess the adequacy of this charter
annually.
FINANCIAL STATEMENT REVIEW
The Committee shall review with financial management and the independent
auditors, the Company's quarterly and annual financial results prior to the
public release and/or filing of such results. This review should include a
discussion of any significant changes to the Company's accounting principles and
any items required to be communicated by the independent auditors in accordance
with Statement of Auditing Standards No. 61.
ANNUAL AUDIT OVERSIGHT
Before the commencement of the annual audit, the Audit Committee will meet
with financial management and the independent auditors to review and approve the
scope and fees of the annual audit.
During or upon completion of the audit, the Audit Committee shall discuss
with the independent auditors and management the independent auditors' judgment
about the quality of the Company's
A-1
accounting principles, as applied in the Company's financial reporting. As
appropriate, the discussion shall cover the following:
- The consistency of the Company's accounting policies and their
application.
- The clarity and completeness of the Company's financial statements.
- Issues having a significant impact on the accounting information included
in the financial statements, such as
- changes in accounting policies;
- estimates, judgments, and uncertainties;
- unusual transactions; and
- policies relating to significant financial statement items, including
timing of transactions and periods in which recorded.
- The auditors' observations regarding the Company's internal financial
controls, choice of accounting principles, and management reporting
systems, and any recommendations the independent auditors may have to
improve such controls and systems.
INDEPENDENT AUDITORS
The Audit Committee shall review the independence and performance of the
independent auditors and recommend to the Board of Directors the annual
appointment of the auditors, subject to shareholder approval, or approve any
discharge of the auditors should circumstances so warrant. The independent
auditors shall ultimately be accountable to the Committee and to the Board, as
representatives of the Company's shareholders.
The Audit Committee shall require the independent auditors, at least
annually, to report, disclose and/or discuss the following:
- In accordance with Independence Standards Board Standard No. 1, disclose
to the Audit Committee, in writing, all relationships between the
independent auditors and its related entities and the Company and its
related entities that, in the independent auditors' professional judgment,
may reasonably be thought to bear on independence.
- Confirm in the letter that, in its professional judgment, it is
independent of the Company within the meaning of the federal securities
laws.
- Discuss the auditors' independence with the Audit Committee.
AUDIT COMMITTEE REPORT
The Audit Committee will prepare an annual report to shareholders, to be
included in the Company's annual proxy statement, stating whether the Audit
Committee has performed the following:
- Reviewed and discussed the audited financial statements with management.
- Discussed with the independent auditors the matters required to be
discussed by Statement of Accounting Standards No. 61, as it may be
modified or supplemented.
- Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, as it
may be modified or supplemented, and has discussed with the independent
auditors the independent auditors' independence.
- Based on the foregoing review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K.
OTHER DUTIES
The Committee shall perform any other activities consistent with its
charter, the Company's bylaws and governing law, as the Committee or the Board
deems necessary or appropriate.
A-2
EXHIBIT B
STANDARD MICROSYSTEMS CORPORATION
2001 DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this 2001 Director Stock Option Plan (the "Plan") of Standard
Microsystems Corporation (the "Company"), is to encourage ownership in the
Company by outside directors of the Company whose services are considered
essential to the Company's continued progress and thus to 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 which may occur in the future.
2. ADMINISTRATION
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 option 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.
3. PARTICIPATION IN THE PLAN
Each person who is now or shall become an incumbent 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"). 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. STOCK SUBJECT TO THE PLAN
The stock subject to the Plan shall consist of 250,000 shares of Common
Stock, $.10 par value, of the Company ("Common Stock"). Such shares may, as the
Board shall from time to time determine, be either authorized and unissued
shares of Common Stock or issued shares of Common Stock which have been
reacquired by the Company. If an option shall expire or terminate for any reason
without having been exercised in full, the shares represented by the portion
thereof not so exercised shall (unless the Plan shall have been terminated)
become available for other options to be granted under the Plan.
5. STOCK OPTIONS
A. FORM OF OPTIONS. Each option granted under this Plan shall be evidenced
by a written agreement in such form as the Board shall from time to time
approve, which agreement shall comply with and be subject to the terms and
conditions set forth in the Plan.
B. VESTING OPTIONS. Any Eligible Director first elected at or after the 2001
Annual Meeting of Stockholders, upon such election, shall be granted under the
Plan an option to purchase 36,000 shares of Common Stock. Any Eligible Director
first elected before January 1, 2001 who shall not be eligible to receive a
Current Service Option following the 2001 Annual Meeting of Stockholders shall
receive, as of January 2, 2001, a Vesting Option to purchase 7,686 shares of
Common Stock. Each option granted pursuant to this Section 5B (a "Vesting
Option") shall become exercisable, to the extent of one-third of the
B-1
number of shares granted, on the first anniversary of the date of grant, and
cumulatively to the extent of an additional one-third, on each of the next two
succeeding anniversaries, so that on the third anniversary of the date of grant,
each Vesting Option granted to an Eligible Director shall be fully exercisable.
C. CURRENT SERVICE OPTIONS. In addition to Vesting Options, immediately
following each Annual Meeting of Stockholders, commencing with the 2001 Annual
Meeting, each Eligible Director shall be granted under the Plan an option to
purchase 12,000 shares of Common Stock ("Current Service Option"), which shall
be fully vested upon the granting thereof and, subject to the provisions of
Sections 5H, 10 and 12, shall be immediately exercisable. Notwithstanding
anything else contained herein, no Eligible Director shall be granted a Current
Service Option prior to the third annual meeting after he or she shall have
become an Eligible Director.
D. OPTION PRICE PER SHARE. All options granted hereunder shall be
exercisable at a price per share equal to the fair market value (as hereinafter
defined) of a share of Common Stock on the date of the grant. For purposes of
the Plan, 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 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 such sale 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. In the event that the Board
shall determine such stock price quotation is not representative of fair market
value, the Board may determine fair market value in such a manner as it shall
deem appropriate under the circumstances.
E. OPTIONS NONTRANSFERABLE. Each option granted under the Plan by its terms
shall not be transferable by the optionee otherwise than by will, or by the laws
of descent and distribution, and shall be exercisable during the lifetime of the
optionee only by him or her. No option or interest therein may be transferred,
assigned, pledged, or hypothecated by the optionee during his or her lifetime,
whether by operation of law or otherwise, or be made subject to execution,
attachment, or similar process.
F. ACCELERATED VESTING. Notwithstanding the provisions hereof specifying the
installments in which Vesting Options shall be exercisable, Vesting Options
shall become exercisable in full (i) upon the retirement of the director in
accordance with any mandatory retirement policy for members of the Board, which
policy may be established by the Board, (ii) upon the total and permanent
disability or death of the director, or (iii) if any of the following events
shall occur: (a) the Company shall execute a definitive agreement to merge or
consolidate with or into another corporation and the Company shall not be the
surviving corporation in the merger (or shall become a subsidiary of any other
corporation party to such merger agreement, unless such transaction shall
involve no significant change in beneficial ownership of the Company) and the
stockholders of the Company shall have approved the terms of such agreement;
(b) the Company shall enter into a definitive agreement to sell or otherwise
dispose of all or substantially all of its assets and the stockholders of the
Company shall have approved the terms of such agreement; or (c) any person or
group shall acquire, or increase its ownership to, more than 33% of the
Company's then outstanding voting stock.
G. EXPIRATION OF OPTIONS. No option shall be exercisable after the
expiration of the earlier of (i) ten years from the date when such option was
granted or (ii) three years following (x) the retirement or resignation of the
optionee as a director of the Company, (y) the failure of the optionee to be
reelected a director of the Company, or (z) the total and permanent disability
or death of the optionee.
H. EXERCISE OF OPTIONS. Options may be exercised only by notice to the
Company, accompanied by payment of the full purchase price for the shares as to
which they are exercised. Such purchase price shall be paid in full upon any
exercise of an option (i) by cash, including a personal check payable to the
order of the Company or (ii) by delivering at fair market value, valued as of
the close of the last trading day prior to delivery, Common Stock owned by the
optionee, or (iii) by any combination of (i) and (ii). If the Company
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shall be advised that the exercise of an option is subject to any tax
withholding, the Company may require, as a condition of exercise, that payment
of the purchase price be accompanied by the applicable withholding amount, as
determined by the Company.
I. NONSTATUTORY OPTIONS. No option granted under the Plan shall constitute
an "incentive stock option" as that term is defined in the Internal Revenue Code
of 1986.
6. MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS
The Board shall have the power to modify, extend or renew outstanding
options and authorize the grant of new options in substitution therefor,
provided that such power may not be exercised in a manner which would (i) alter
or impair any rights or obligations under any option previously granted without
the written consent of the optionee or (ii) adversely affect the qualification
of the Plan or any other stock-related plan of the Company under Rule 16b-3
under the Securities Exchange Act of 1934 or any successor provision.
7. ASSIGNMENT
The rights and benefits under this Plan may not be assigned and any
attempted assignment of such rights and benefits shall be null and void.
8. LIMITATION OF RIGHTS
A. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the granting of
an option 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.
B. NO STOCKHOLDER'S RIGHTS FOR OPTIONEES. An optionee or his or her
representative shall have no rights as a stockholder with respect to the shares
covered by his or her option until the date of the issuance to him or her or his
or her representative of a stock certificate therefor, and no adjustment will be
made for dividends or other rights for which the record date is prior to the
date such certificate is issued.
9. CHANGES IN PRESENT STOCK
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split or other change in the corporate structure or
capitalization affecting the Company's Common Stock, appropriate adjustment
shall be made by the Board in the number and kind of shares which are or may
become subject to options granted or to be granted hereunder and the per share
option price to be paid therefor.
10. EFFECTIVE DATE AND DURATION OF THE PLAN
Options shall be granted under the Plan, subject to its authorization and
adoption by the stockholders of the Company, at any time or from time to time
after its adoption by the Board of Directors, but no option shall be exercisable
under the Plan until the Plan shall have been adopted and approved at the
meeting of stockholders of the Company next following adoption of the Plan by
the Board. If so adopted by stockholders, this Plan shall become effective as of
October 17, 2000, the date of its adoption by the Board. In the event the Plan
is not so adopted by stockholders, all options which may have been granted shall
be null and void. The Plan shall terminate on October 16, 2010 (unless earlier
discontinued by the Board), but such termination shall not affect the rights of
the holder of any option outstanding on such date of termination.
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11. 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
stockholders, no revision or amendment shall change the number of shares subject
to the Plan (except as provided in Section 9), change the definition of the
class of directors eligible to receive options, or materially increase the
benefits accruing to participants under the Plan. Notwithstanding the preceding
sentence, none of Sections 3, 5B, 5C, or 5D shall be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, federal securities laws or
rules thereunder.
12. COMPLIANCE WITH LAW, ETC.
Notwithstanding any other provision of this Plan or agreements made pursuant
hereto, the Company shall not be required to issue or deliver any certificate or
certificates for shares of Common Stock under this Plan prior to fulfillment of
all of the following conditions:
(i) Effectiveness of any registration or other qualification of such shares
or of the Company under any state or federal law or regulation which the
Board shall, in its absolute discretion or upon the advice of counsel,
deem necessary or advisable; and
(ii) Grant of any other consent, approval or permit from any state or
federal governmental agency or securities exchange which the Board
shall, in its absolute discretion or upon the advice of counsel, deem
necessary or advisable.
13. 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.
14. 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 and construed accordingly.
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EXHIBIT C
2001 STOCK OPTION AND RESTRICTED STOCK PLAN
OF
STANDARD MICROSYSTEMS CORPORATION
1. PURPOSE OF THE PLAN
The purpose of this Plan is to provide a method whereby present and future
officers and key employees of, and individuals, excluding non-employee
directors, who are consultants to, Standard Microsystems Corporation, a Delaware
corporation (the "Company"), who are responsible for the management, growth and
promotion of the business and who are making and can continue to make
substantial contributions to the success of the business, may be encouraged to
acquire capital stock ownership in the Company, thus increasing their
proprietary interest in the business, or may be rewarded for outstanding
performance, providing them with greater incentive, encouraging their
continuance in the service of the Company and promoting the interests of the
Company and all its stockholders. Accordingly, the Company will, from time to
time, on or before April 4, 2011, grant (i) to such employees and consultants as
may be selected in the manner hereinafter provided, options ("options") to
purchase shares of Common Stock, $.10 par value, of the Company ("Common Stock")
or (ii) to employees so selected awards of restricted Common Stock ("awards")
subject to the conditions hereinafter provided.
2. ADMINISTRATION OF THE PLAN
(a) This Plan will be administered by a Stock Option and Restricted Stock
Committee (the "Committee") consisting of not fewer than two directors of the
Company, who shall be appointed and serve at the pleasure of the Board of
Directors (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 Securities Exchange Act of 1934 (the "Exchange Act") and
"outside directors" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury Regulations promulgated
thereunder. 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
options; to determine the numbers of shares of Common Stock covered by each
option or award, the purchase price of the Common Stock covered by each option,
the individuals to whom and the time or times at which, options or awards shall
be granted or options 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
options or awards 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
optionees in connection with options or employees in connection with awards that
may be granted under the Plan ("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 optionee or awardee; and to make all
other determinations the Committee may deem necessary or advisable for the
administration of the Plan.
(c) Each option under this Plan shall be deemed to have been granted when
the determination of the Committee with respect to such option is made. Once an
option has been granted, all conditions and
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requirements of this Plan with respect to such option shall be deemed to be
conditions upon the exercise of the option but not upon the grant thereof.
(d) 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 option or award granted under this Plan.
3. STOCK SUBJECT TO THIS PLAN
(a) The shares to be issued upon exercise of options or constituting awards
granted under this Plan shall be made available, at the discretion of the Board,
either from the authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by the Company, including shares purchased in the open
market. The aggregate number of shares of Common Stock for which options and
awards may be granted under this Plan shall not exceed 1,500,000. The maximum
number of shares that may be subject to options granted to any one individual
within one fiscal year shall be 120,000. Such aggregate numbers shall be subject
to adjustment as provided in paragraph 12. If any option granted under this Plan
shall expire or terminate for any reason without having been exercised in full,
or if any Common Stock subject to an award shall be forfeited, the unpurchased
or forfeited shares shall (unless this Plan shall have been terminated) become
available for grant of options or awards to other individuals.
(b) In the discretion of the Board, but subject to the provisions of the
Plan and Section 422 of the Code, options granted to employees may, at the time
of grant, be designated as incentive stock options ("ISOs") with the attendant
tax benefits provided under Sections 421 and 422 of the Code. The aggregate fair
market value (determined at the time an ISO is granted) of the Common Stock
covered by ISOs exercisable for the first time by an employee during any
calendar year (under all plans of the Company), may not exceed $100,000.
(c) An employee to whom an award has been made shall have, after delivery to
him of, or after notification that there is being held in custody for him, a
certificate or certificates for the number of shares of Common Stock awarded,
absolute ownership of such shares including the right to vote the same and to
receive dividends thereon, subject however, to the terms, conditions and
restrictions described in this Plan and in any Agreement relating to the award.
4. ELIGIBILITY OF OPTIONEES AND AWARDEES
(a) Options or awards may be granted only to salaried employees (including
officers) of, and individuals who are consultants to, the Company. In
determining to whom an option or award shall be granted and the number of shares
to be covered by any Agreement, the Committee shall take into account the duties
of the individual, the present and potential contributions of the individual to
the success of the Company, the number of years of service remaining before the
anticipated retirement of the individual, and other factors deemed relevant by
the Committee in connection with accomplishing the purpose of this Plan.
(b) An individual who has been granted an option or award of restricted
stock under this Plan or otherwise may, if the Committee shall so determine, be
granted one or more additional options or awards.
5. OPTION PRICE
(a) The purchase price per share of Common Stock under each option shall be
established by the Committee, but shall not be less than the fair market value
(as hereinafter defined) of a share of Common Stock on the date such option is
granted.
(b) In the case of an individual who at the time the option is granted owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company, the purchase price of the
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Common Stock covered by any ISO shall in no event be less than 110% of the fair
market value of the Common Stock on the date such ISO is granted.
6. RESTRICTIONS
(a) No option granted under this Plan shall be transferable by the grantee,
either voluntarily or by operation of law, otherwise than by last will and
testament or by laws of descent and distribution, and such option shall be
exercised during the lifetime of the grantee, only by the grantee, or by his or
her guardian or legal representative.
(b) Until the restrictions set forth in this paragraph 6(b) shall lapse
pursuant to paragraph 6(c) or 6(d), shares of Common Stock awarded to an
employee pursuant to an award:
(i) shall not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, and
(ii) shall, if delivered to or to the order of the employee, be returned
to the Company forthwith, and all rights of the employee to such shares
shall immediately terminate without any payment of consideration by the
Company, if the employee's continuous employment with the Company or any of
its subsidiaries shall terminate for any reason, except as provided in
paragraph 6(d); provided, however, that the Board of Directors shall have
the right to waive such forfeiture, in whole or in part, and in connection
with such waiver to impose any terms or restrictions on the continued
ownership of such shares by the employee under the Plan. If the employee's
interests in the shares of Common Stock granted, pursuant to an award shall
be terminated pursuant to this clause (ii), the employee shall forthwith
deliver to the Secretary or any Assistant Secretary of the Company the
certificates for shares of Common Stock so terminated, accompanied by such
instrument of transfer as may be required by the Secretary or any Assistant
Secretary of the Company.
(c) Unless the Committee shall fix a different schedule in an Agreement
relating to an award, except as set forth in paragraph 6(d), the restrictions
set forth in paragraph 6(b) hereof shall lapse to the extent of 25% of the
shares covered by an award on each of the first and second anniversaries of the
date of grant of the award and as to the remaining 50% on the third anniversary
of the date of grant.
(d) Any provision of paragraph 6(b) hereof to the contrary notwithstanding,
if an employee who has been in the continuous employment of the Company or of
any subsidiary since the date on which an award was granted to him shall, while
in such employment, die, terminate employment by reason of disability as defined
in this paragraph 6(d), or attain age 65 and any of such events shall occur more
than one year after the date on which an award shall have been granted to him,
then the restrictions set forth in paragraph 6(b) hereof shall lapse, as to all
shares of Common Stock awarded to such employee pursuant to such award, on the
date of such event. As used in this paragraph 6(d) the term "disability" shall
mean a condition that the Committee determines has rendered an employee
substantially unable to perform the duties of his regular occupation.
(e) Each employee granted a restricted stock award shall agree that, subject
to the provisions of paragraph 6(f).
(i) no later than the date of the lapse of the restrictions mentioned in
paragraph 6(b) hereof and in any Agreement respecting the award, the
employee will pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, any federal, state or local withholding
taxes of any kind required by law to be paid by the Company or its
subsidiaries with respect to the shares of Common Stock subject to the
award, and
(ii) the Company and its subsidiaries shall, to the extent permitted by
law, have the right to deduct from any payment of any kind otherwise due to
the employee any federal, state or local taxes of any kind required by law
to be withheld with respect to the shares of Common Stock subject to the
award.
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(f) If an employee granted an award properly files with the Internal Revenue
Service a written election within 30 days of the date of grant, to include in
gross income for federal income tax purposes an amount equal to the fair market
value of the shares of Common Stock awarded on the date of grant, the employee
shall make arrangements satisfactory to the Committee to pay in the year of such
grant any federal, state or local withholding taxes required to be paid by the
Company or its subsidiaries with respect to such shares. If the employee shall
fail to make such payments, the Company and its subsidiaries shall, to the
extent permitted by law, have the right to deduct from any payment of any kind
otherwise due to the employee any federal, state or local taxes of any kind
required by law to be withheld with respect to such shares of Common Stock.
(g) Certificates evidencing shares of Common Stock subject to awards shall
bear an appropriate legend referring to the terms, conditions, and restrictions
described in the Plan and in any Agreement relating to the award. Any attempt to
dispose of any such shares of Common Stock in contravention of the terms,
conditions and restrictions described in the Plan or any related Agreement shall
be ineffective. The shares acquired, together with stock powers (if required by
the Company) or other instruments of transfer appropriately endorsed in blank by
the employee, shall be held by the Company, for the use and benefit and subject
to the rights of such employee as owner thereof. After the lapse of all
restrictions with respect to particular shares, the Company shall deliver the
certificates for such shares held by the Company to the employee concerned.
7. EXERCISE OF OPTION
(a) Each option granted under this Plan shall by its terms expire not later
than ten years from the date on which it was granted.
(b) Unless the Committee shall fix a different schedule at the time a
particular option is granted, each option granted under this Plan shall become
exercisable, to the extent of one-quarter of the aggregate number of shares
optioned thereby, one year after the date of grant and, cumulatively, to the
extent of an additional one-quarter, at the expiration of each year thereafter,
so that, four years after the date of grant, each option shall be fully
exercisable, subject to the provisions set forth elsewhere in the Plan.
Notwithstanding the foregoing, the Committee may declare any outstanding option
immediately and fully exercisable (but in no event prior to the first
anniversary of the date of grant).
(c) A person electing to exercise an option shall give written notice to the
Company of such election and of the number of shares he or she has elected to
purchase; provided that no option may be exercised as to fewer than 100 shares
unless it is then exercised as to all of the shares then purchasable thereunder.
Such notice shall be accompanied by payment to the Company of the full purchase
price in cash; provided that, unless otherwise determined by the Committee, the
purchase price may be paid in whole or in part, by surrender or delivery to the
Company of Common Stock of the Company having a fair market value on the date of
exercise equal to the portion of the purchase price being so paid. In addition,
an employee shall, upon notification of the amount due and prior to or
concurrently with delivery to the employee of a certificate representing such
shares, pay, in cash, any amount necessary to satisfy federal, state and local
tax requirements.
(d) No person shall have the rights of a stockholder with respect to shares
covered by an option until such person becomes the holder of record of such
shares.
(e) Except as provided in paragraph 8 or paragraph 9, no option granted to
an employee may be exercised, unless, at the time of exercise, the optionee is
an employee of the Company. Options granted under the Plan to an employee shall
not be affected by any change of duties or position so long as the optionee
continues to be an employee of the Company.
(f) Notwithstanding any other provision of this Plan, the Company shall not
be required to issue or deliver any share of stock upon the exercise of an
option prior to (a) the admission of such share to listing
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on any stock exchange or automated quotation system on which the Company's
Common Stock may then be listed and (b) the completion of such registration or
other qualification of such share under any state or federal law, rule or
regulation as the Company shall determine to be necessary or advisable.
8. TERMINATION OF OPTIONEE'S RELATIONSHIP TO THE COMPANY
(a) In the case of an option granted to an employee of the Company, if the
optionee shall cease to be an employee of the Company, other than by reason of
death or permanent and total disability, any option held by such optionee may be
exercised (to the extent that the optionee was entitled to exercise such option
at the termination of such employment) at any time within three months after
such termination, but not later than the expiration date of such option;
provided, however, that any option held by an employee whose employment shall be
terminated by the Company for cause shall, to the extent not theretofore
exercised, forthwith terminate.
(b) Notwithstanding the provisions of paragraph 7 specifying the
installments in which an option shall be exercisable, in the case of an option
granted to an employee of the Company, upon an optionee's actual retirement at
age 65 or thereafter, the option shall be exercisable (within the time periods
set forth in paragraph 8(a)) as to all shares of Common Stock remaining subject
to the option.
(c) Any Agreement may contain such provisions as the Board shall approve
with reference to the determination of the date employment terminates for
purposes of the Plan (which provisions may allow periods of consultancy to be
treated as periods of employment) and the effect of leaves of absence, which
provisions may vary from one another.
(d) In the case of an option granted to an individual who is a consultant
to, and not an employee of the Company, the option agreement shall specify the
impact, if any, that a termination of the optionee's consultancy relationship
with the Company shall have on the exercisability of the option.
(e) Nothing in the Plan or in any Agreement shall confer upon any employee
or consultant any right to continue in the employ or consultancy of the Company
or affect the right of the Company to terminate such employment or consultancy
relationship at any time for any reason, or for no reason.
9. DEATH OR DISABILITY OF OPTIONEE
Notwithstanding the provisions of paragraph 7 specifying installments in
which an option shall be exercisable, if an optionee shall die or become
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code, while he or she is employed by the Company or within three months after
the termination of his or her employment (other than termination by the Company
for cause or voluntarily on the part of the optionee and without the consent of
the Company), such option may be exercised, as to all shares of Common Stock
remaining subject to the option, within the later to occur of (a) three months
after the termination of the optionee's employment or (b) thirty days after the
appointment of a legal representative or guardian, but in no case more than one
year after termination of employment and in no case after the original
expiration date of the option.
10. AMENDMENTS TO THE PLAN
The Board may at any time terminate or from time to time modify, amend or
suspend this Plan, including any amendment for the purpose of complying with or
securing the benefit of any change in the Exchange Act or the Code or any
regulation adopted under either; provided that no such modification without the
approval of stockholders shall increase the aggregate number of shares subject
hereto, permit the granting of options at an option price less than 100% of the
fair market value of the Common Stock at the date of the grant, reduce the
exercise price of outstanding options (except pursuant to paragraph 12), extend
the period during which options or awards or granted, extend the period during
which options may be exercised, or otherwise materially increase the benefits
accruing to optionees or awardees under this
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Plan or materially modify the requirements as to eligibility of optionees or
awardees under this Plan, except that any increase, reduction or change that may
result from any adjustment authorized by paragraph 12 or any modification based
on any revision to the Code or any regulation promulgated thereunder (to the
extent permitted by the Code or the Internal Revenue Service) shall not require
such approval. No suspension, termination, modification or amendment of the Plan
may, without the consent of the individual to whom an option or award of
restricted stock shall theretofore have been granted, adversely affect the
rights of such individual under such option or award of restricted stock.
11. GRANTING OF OPTIONS AND AWARDS
(a) The grant of any option pursuant to the Plan shall be entirely in the
discretion of the Committee, and nothing in the Plan shall be construed to
confer on any officer, employee, or consultant any right to receive any option
or award under the Plan.
(b) Subject to the terms, conditions and restrictions of the Plan, the
Committee shall, in its sole discretion, select from among the key employees of
the Company and its subsidiaries those employees to whom awards are to be
granted. The Committee shall also have power to determine (i) whether awards are
to be made, (ii) the number of shares of Common Stock covered by each award,
(iii) the time or times when restricted stock awards will be made, and (iv) in
accordance with paragraph 6, the restrictions applicable to shares of Common
Stock awarded pursuant to restricted stock awards.
(c) The grant of an option or award pursuant to the Plan shall not
constitute an agreement or an understanding, express or implied, to employ the
optionee or awardee for any specified period.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) The Board may at any time make such provision as it shall consider
appropriate for the adjustment of the number and class of shares covered by each
option or award and the price as to which an option shall be exercisable, in the
event of changes in the outstanding Common Stock of the Company by reason of any
stock dividend, split-up, reorganization, liquidation, and the like. In the
event of any such change in the outstanding Common Stock of the Company, the
aggregate number of shares as to which options and awards may be granted under
the Plan shall be appropriately adjusted by the Board, whose determination shall
be conclusive. No adjustment shall be made in the requirements set forth in
paragraph 7 with respect to the minimum number of shares that must be purchased
upon any exercise of an option.
(b) In the event (i) of a dissolution, liquidation, merger or consolidation
of the Company or (ii) of a sale of all or substantially all of the assets of
the Company or the sale of substantially all of the assets or stock of a
subsidiary of which an optionee or awardee is then an employee, or (iii) a
change in control (as hereinafter defined) of the Company has occurred or is
about to occur, then, the Board may determine that each option under the Plan,
if such event shall occur with respect to the Company, or each option granted to
an employee or consultant of such subsidiary, shall become immediately and fully
exercisable or that restrictions on shares subject to any award shall
immediately lapse.
13. EFFECTIVE DATE OF THE PLAN
Options or awards may be granted under the Plan, subject to its
authorization and adoption by the stockholders of the Company, at any time or
from time to time after its adoption by the Board, but no option shall be
exercised under this Plan until this Plan shall have been authorized and adopted
at a meeting of stockholders of the Company. If so adopted by stockholders, this
Plan shall become effective as of April 4, 2001, the date of its adoption by the
Board of Directors.
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14. 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.
15. EFFECT ON PRIOR OPTION PLANS
The adoption of the 2001 Plan shall have no effect on outstanding options or
awards granted by the Company under any other plan.
16. CERTAIN DEFINITIONS
(a) The terms "parent" and "subsidiary" shall have the meanings
respectively, of "parent corporation" and "subsidiary corporation" as set forth
in Sections 424(e) and (f) of the Code, respectively.
(b) 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. In the event that the Board
or the Committee shall determine such stock price quotation is not
representative of fair market value, the Board or the Committee may determine
fair market value in such a manner as it shall deem appropriate under the
circumstances.
(c) The term "termination of employment for cause" or words to like effect
shall mean termination by the Company of the employment of the optionee by
reason of the optionee'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.
(d) The term "Company" shall include any parent or subsidiary of the
Company.
(e) The term "change in control" shall mean 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. 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 have constituted the Board
immediately prior to the occurrence of the event or series of events
constituting such change in control.
C-7
STANDARD MICROSYSTEMS CORPORATION
PROXY - ANNUAL MEETING OF STOCKHOLDERS - JULY 11, 2001
STEVEN J. BILODEAU and GEORGE W. HOUSEWEART, and each of them, each with full power of substitution, hereby are authorized to
vote, by a majority of those or their substitutes present and acting at the meeting, or, if only one shall be present and acting,
then that one, all of the shares of Standard Microsystems Corporation that the undersigned would be entitled, if personally present,
to vote at the 2001 annual meeting of stockholders, and at any adjournment thereof, upon such business as may properly come before
the meeting, including the items set forth on the reverse side hereof and in the notice of annual meeting.
PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE, AND MAIL IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
(CONTINUED AND TO BE DATED AND SIGNED ON OTHER SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
STANDARD MICROSYSTEMS CORPORATION
JULY 11, 2001
Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------------------------------------------------------------
| | PLEASE MARK YOUR
A | X | VOTES AS IN THIS
| | EXAMPLE.
FOR WITHHOLD
ALL NOMINEES AUTHORITY
(except as marked to to vote for all THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3,
the contrary) nominees listed 4 AND 5.
FOR AGAINST ABSTAIN
1. ELECTION |_| |_| 2. ADOPTION AND APPROVAL OF
OF AMENDMENTS TO THE PLAN FOR |_| |_| |_|
DIRECTORS DEFERRED COMPENSATION IN
COMMON STOCK FOR OUTSIDE
NOMINEES: James R. Barrett, Andrew M. Caggia. DIRECTORS.
Ivan T. Frisch
3. ADOPTION AND APPROVAL OF THE |_| |_| |_|
INSTRUCTION: To withhold authority to vote for any individual 2001 DIRECTOR STOCK OPTION
nominee, write that nominee's name in the space provided PLAN.
below.
------------------------------------------------------------- 4. ADOPTION AND APPROVAL OF THE |_| |_| |_|
2001 STOCK OPTION AND
RESTRICTED STOCK PLAN.
5. SELECTION OF ARTHUR ANDERSEN |_| |_| |_|
LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD of
DIRECTORS. UNLESS OTHERWISE PROPERLY MARKED, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, S, 4 AND 5, AS
RECOMMENDED BY THE BOARD of DIRECTORS.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY.
Signature ______________________________________ Signature ______________________________________ Date ___________________, 2001
NOTE: (Please sign exactly as your name appears hereon If the named holder is a corporation, partnership or other association,
please sign its name, and add your own name and title. When signing as attorney, executor, administrator, trustee or
guardian, please also give your full title. If shares are held jointly, EACH holder should sign.)
ANNUAL MEETING of STOCKHOLDERS of
STANDARD MICROSYSTEMS CORPORATION
July 11, 2001
-------------------------
PROXY VOTING INSTRUCTIONS
-------------------------
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your control number and the proxy card available when you
call.
TO VOTE BY INTERNET
- -------------------
Please access the web page at www.voteproxy.com and follow the on-screen instructions. Have your control number available when you
access the web page.
------------------------------
YOUR CONTROL NUMBER IS ---------| |
------------------------------
To Vote By Mail, Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------------------------------------------------------------
| | PLEASE MARK YOUR
A | X | VOTES AS IN THIS
| | EXAMPLE.
FOR WITHHOLD
ALL NOMINEES AUTHORITY
(except as marked to to vote for all THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3,
the contrary) nominees listed 4 AND 5.
FOR AGAINST ABSTAIN
1. ELECTION |_| |_| 2. ADOPTION AND APPROVAL OF
OF AMENDMENTS TO THE PLAN FOR |_| |_| |_|
DIRECTORS DEFERRED COMPENSATION IN
COMMON STOCK FOR OUTSIDE
NOMINEES: James R. Barrett, Andrew M. Caggia. DIRECTORS.
Ivan T. Frisch
3. ADOPTION AND APPROVAL OF THE |_| |_| |_|
INSTRUCTION: To withhold authority to vote for any individual 2001 DIRECTOR STOCK OPTION
nominee, write that nominee's name in the space provided PLAN.
below.
------------------------------------------------------------- 4. ADOPTION AND APPROVAL OF THE |_| |_| |_|
2001 STOCK OPTION AND
RESTRICTED STOCK PLAN.
5. SELECTION OF ARTHUR ANDERSEN |_| |_| |_|
LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD of
DIRECTORS. UNLESS OTHERWISE PROPERLY MARKED, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, S, 4 AND 5, AS
RECOMMENDED BY THE BOARD of DIRECTORS.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY.
Signature ______________________________________ Signature ______________________________________ Date ___________________, 2001
NOTE: (Please sign exactly as your name appears hereon If the named holder is a corporation, partnership or other association,
please sign its name, and add your own name and title. When signing as attorney, executor, administrator, trustee or
guardian, please also give your full title. If shares are held jointly, EACH holder should sign.)