<PAGE>
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 / /
Check the appropriate box:
/ / 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
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 15, 1997
------------------------
To the Stockholders of
STANDARD MICROSYSTEMS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Standard
Microsystems Corporation ("SMC" or the "Company") will be held on July 15, 1997,
at 10:00 A.M., at The Wind Watch Marriott Hotel, 1717 Vanderbilt Motor Parkway,
Hauppauge, New York for the following purposes:
(1) Election of directors.
(2) Ratification of the selection of Arthur Andersen LLP as independent
public accountants for SMC for the fiscal year ending February 28, 1998.
(3) A stockholder proposal relating to director retirement plans, if
such proposal is brought before the meeting.
(4) Transaction of such other business as may properly come before the
meeting or any adjournment thereof.
In accordance with the bylaws of SMC, the Board of Directors has fixed the
close of business on May 21, 1997 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,
HAROLD I. KAHEN
SECRETARY
Dated: June 2, 1997
AFTER READING THE FOLLOWING PROXY STATEMENT, PLEASE SIGN AND MAIL THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
80 ARKAY DRIVE
HAUPPAUGE, NEW YORK 11788
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS, JULY 15, 1997
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Standard Microsystems Corporation, a Delaware
corporation ("SMC" or the "Company"), for use at the Annual Meeting of
Stockholders of SMC to be held on July 15, 1997 and at any adjournment thereof.
June 2, 1997 is the approximate date on which this statement and the
accompanying proxy are first being mailed to stockholders.
ELECTION OF DIRECTORS
At the annual meeting, two directors are to be elected for terms expiring in
2000.
NOMINEES OF THE BOARD OF DIRECTORS
It is the intention of the persons named in the proxy hereby solicited to
vote for the election as directors of the two 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), it is the
intention of the persons designated as proxies 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:
<TABLE>
<CAPTION>
OTHER POSITIONS WITH SMC, PRINCIPAL OCCUPATION, CERTAIN OTHER DIRECTOR
NAME DIRECTORSHIPS AND AGE AS OF MAY 21, 1997 SINCE
- --------------------------- ---------------------------------------------------------------------- ------------
<S> <C> <C>
NOMINEES TO SERVE UNTIL THE 2000 ANNUAL MEETING:
Robert M. Brill............ General Partner, Poly Ventures, L.P. and Poly Ventures II, L.P., 1994
venture capital investment in high technology; 50
Paul Richman............... Chief Executive Officer and Chairman, SMC; President, The Consortium 1974
for Technology Licensing, Ltd.; 54
DIRECTORS CONTINUING TO SERVE UNTIL THE 1999 ANNUAL MEETING:
Evelyn Berezin............. Management consultant; Director, DNA Plant Technology Corp.; 72 1993
Peter F. Dicks............. Corporate Director; Directorships include, among others, The East 1992; also
German Investment Trust Plc, Henderson Technology Trust Plc, Second 1976-1991
London American Growth Trust Plc, Action Computer Suppliers Holdings
Plc; 54
DIRECTORS CONTINUING TO SERVE UNTIL THE 1998 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; 57
Kathleen B. Earley......... Vice President, Networked Commerce Services, AT&T Corp., 1996
telecommunications services; 45
Ivan T. Frisch............. Executive Vice President and Provost, Polytechnic University; 59 1992
</TABLE>
<PAGE>
The principal occupation for the last five years of each nominee and
director continuing in office is stated above, except that (1) Mr. Richman
became Chief Executive Officer in 1995; (2) prior to January 1994, Ms. Earley
was Director, Corporate Business Development, International Business Machines
Corporation, having previously served that corporation in various information
services positions; and (3) Mr. Frisch became Executive Vice President of
Polytechnic University in September 1994.
COMMITTEES AND MEETINGS OF THE BOARD
The SMC Board of Directors held six meetings during the last fiscal year.
The audit committee held five meetings, the compensation committee held seven
meetings, and the governance committee (formerly the nominating committee) held
four meetings. The members of the audit committee are Robert M. Brill, Kathleen
B. Earley and Herman Fialkov; the members of the compensation committee are
Evelyn Berezin, James R. Berrett and Peter F. Dicks; and the members of the
governance committee are Robert M. Brill, Herman Fialkov and Ivan T. Frisch.
The audit committee reviews the internal controls of SMC and the objectivity
of its financial reporting. It meets with appropriate SMC financial personnel
and the 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 compensation committee makes
recommendations to the Board with respect to the compensation of officers of
SMC; members of the compensation committee also constitute the committees that
administer SMC's stock option plans (other than the Director Stock Option Plan)
and restricted stock bonus plan. Among other responsibilities, the 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 governance committee will consider
recommendations for director made by stockholders. Such recommendations should
be in writing, mailed to the Secretary of SMC.
VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The management of SMC has been informed that, as of May 21, 1997, 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 SMC Common
Stock reflected in such table. As of May 21, 1997, each director, nominee or
executive officer of
2
<PAGE>
SMC disclaims beneficial ownership of securities of any subsidiary of SMC.
Except as otherwise noted, the named beneficial owner claims sole investment and
voting power as to the securities reflected in the table.
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL OWNER SHARES(1)
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Evelyn Berezin....................................................................................... 25,500(2)
James R. Berrett..................................................................................... --
Robert M. Brill...................................................................................... 26,000(3)
Anthony M. D'Agostino................................................................................ 5,353(4)
Peter F. Dicks....................................................................................... 45,000(3)
Kathleen B. Earley................................................................................... --
Herman Fialkov....................................................................................... 86,003(3)
Ivan T. Frisch....................................................................................... 24,500(5)
Lance E. Murrah...................................................................................... 14,659(6)
Eric M. Nowling...................................................................................... 9,991(7)
Paul Richman......................................................................................... 216,705(8)
Arthur Sidorsky...................................................................................... 58,396(9)
All directors and executive officers as a group (11 persons)......................................... 512,107(10)
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052-8119......................................................................... 3,085,112(11)
Smith Barney Holdings Inc.
and Travelers Group Inc.
388 Greenwich St.
New York, NY 10013................................................................................. 893,591(12)
</TABLE>
- ------------------------
(1) Shares held by each beneficial owner constitute less than 1% of the class,
except for all directors and executive officers as a group (3.26%), Intel
Corporation (18.17%), and Smith Barney Holdings Inc. and Travelers Group
Inc. (5.79%).
(2) Includes 500 shares owned jointly with husband and 25,000 shares covered by
currently exercisable options.
(3) Includes 25,000 shares covered by currently exercisable options.
(4) Mr. D'Agostino served as Senior Vice President-Finance and Treasurer
through January 31, 1997.
(5) Includes 19,000 shares covered by currently exercisable options.
(6) Includes 8,944 shares covered by currently exercisable options.
(7) Includes 6,011 shares covered by currently exercisable options.
(8) Includes 98,488 shares covered by currently excercisable options.
(9) Includes 16,282 shares owned jointly with wife and 28,406 shares covered by
currently exercisable options.
(10) Includes 260,849 shares covered by currently exercisable options.
(11) Includes 1,542,606 shares covered by a currently exercisable warrant.
Information is furnished in reliance on Schedule 13D dated March 27, 1997 of
the named person, filed with the SEC.
(12) Voting power and investment power are shared as to all shares. Information
is furnished in reliance on Schedule 13G dated February 13, 1997 of the
named persons, filed with the SEC.
3
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all plan and non-plan compensation paid to
the named executive officers for services rendered in all capacities to SMC and
its subsidiaries during the three years ended February 28, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
- ------------------------------ ----------- ---------- ---------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Paul Richman.................. 1997 390,768 500,000 -0- 168,405 4,904
Chairman and Chief 1996 360,000 450,000 -0- 116,544 4,393
Executive Officer 1995 386,500 386,500 -0- 22,245 4,711
Arthur Sidorsky............... 1997 289,461 -0- -0- 77,168 4,847
Executive Vice President 1996 264,550 264,550 52,910 14,155 4,597
1995 240,500 240,500 48,100 13,842 4,695
Anthony M. D'Agostino......... 1997 186,266 -0- -0- -0- 5,033
Senior Vice President-- 1996 200,000 25,000 24,995 28,293 4,682
Finance 1995 155,000 108,606 31,000 8,921 4,677
and Treasurer(4)
Lance E. Murrah............... 1997 195,384 -0- -0- 41,759 4,756
Senior Vice President 1996 150,000 45,000 30,000 10,000 4,242
Eric M. Nowling............... 1997 130,907 -0- -0- 41,084 4,725
Vice President and 1996 123,000 17,500 24,603 10,000 3,444
Controller
</TABLE>
- ------------------------
(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 second, third, and fourth
anniversaries of the grant date, to the extent of one-third of the shares
awarded. Each award was made in part payment of the executive officer's
fiscal 1997, 1996, or 1995 bonus, following the end of such fiscal year.
Holders of restricted stock awards are entitled to dividends to the same
extent as owners of unrestricted shares. The numbers of shares granted to
each executive officer as restricted stock awards are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Paul Richman......................................................... -0- -0- -0-
Arthur Sidorsky...................................................... -0- 3,470 2,829
Anthony M. D'Agostino................................................ -0- 1,639 1,824
Lance E. Murrah...................................................... -0- 1,548 --
Eric M. Nowling...................................................... -0- 1,514 --
</TABLE>
As of February 28, 1997, the market value of each executive officer's
holdings of restricted stock was as follows: Paul Richman, $82,323; Arthur
Sidorsky, $100,521; Anthony M. D'Agostino, $0; Lance E. Murrah, $23,936;
Eric M. Nowling, $22,151.
(3) Reflects SMC contributions under the Incentive Savings and Retirement Plan.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
4
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(4) Mr. D'Agostino served as Senior Vice President--Finance and Treasurer of the
Company through January 31, 1997.
Pursuant to an employment agreement the other substantive terms of which
have expired, Mr. Richman was entitled to receive specified percentages of
certain SMC licensing revenues or revenues from sales of products manufactured
and/or sold by SMC pursuant to any second-sourcing, technology transfer, or
other agreement with an SMC licensee, in total not exceeding $500,000 in fiscal
1997. Such additional compensation is included in the Summary Compensation
Table.
Mr. Richman and SMC entered into an employment agreement as of March 1,
1995, pursuant to which Mr. Richman will be employed as Chairman of the Board
until February 29, 2000, unless, prior to such time, the Board of Directors
declines to elect him to such position or Mr. Richman declines to serve in such
position, in which case Mr. Richman will continue to render services as a
consultant. Mr. Richman is required to devote 80% of his business time to
rendering services to SMC, subject to the right of either party to reduce such
percentage. Mr. Richman's salary for such service is at a rate equal to $400,000
annually, subject to annual increases based on changes in the Consumer Price
Index and adjustment for changes in the percentage of his time required to be
devoted to SMC. The agreement continues Mr. Richman's right to receive specified
percentages of certain SMC licensing or sales revenues, described above (or that
of his estate to receive lesser percentages for five years, if Mr. Richman dies
while employed by or acting as consultant to SMC).
Mr. Sidorsky and SMC entered into an employment agreement as of March 1,
1996 pursuant to which Mr. Sidorsky is employed as Executive Vice President
until February 29, 2000. Mr. Sidorsky's salary is $296,300, subject to annual
increase, in the discretion of the Board of Directors, after review and
recommendation of the Compensation Committee. SMC may terminate Mr. Sidorsky's
employment before the contract expiration date on notice accompanied by payment
equal to one and one-half year's salary.
For recent fiscal years, SMC has agreed to pay certain of its executives,
including certain of the executive officers named in the preceding table,
incentive compensation based on specified percentages of the consolidated net
income of SMC (or a specified division of SMC) before income taxes, as defined.
The amounts of this incentive compensation are included under the Bonus column
in the Summary Compensation Table. For fiscal 1997, 1996 and 1995, part of such
incentive compensation was paid in cash and is included under the Bonus column,
and the balance was paid in the form of restricted stock awards, as set forth in
note 2 to the table.
Under SMC's Executive Retirement Plan, officers, including executive
officers, whose employment terminates after 10 years of 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. At age 65, Mr.
D'Agostino will become entitled to annual benefits under the plan in the amount
of $64,519 for 10 years. As of March 1, 1997, the annual benefit that would be
payable to each of the remaining executive officers named in the table on
reaching age 65 is as follows: Paul Richman, $132,681; Arthur Sidorsky, $93,491;
Lance E. Murrah, $55,461; Eric M. Nowling, $42,923.
The following table sets forth information regarding individual grants of
stock options to the named executive officers during the 1997 fiscal year.
Options generally become exercisable in four equal annual installments
commencing on the first anniversary of grant and may be exercised cumulatively
at any time before expiration, except that options granted in January 1997, in
respect of options surrendered, become exercisable in accordance with the
vesting schedules of the surrendered options in respect of which they were
granted.
5
<PAGE>
The option grants reported in the table immediately following are also
reported in the 10-Year Option/SAR Repricings table appearing on page 9.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL SHARES AT ASSUMED ANNUAL RATES OF
SECURITIES SUBJECT TO STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION --------------------------
EXECUTIVE OFFICER (# OF SHARES) FISCAL YEAR ($ PER SHARE) DATE 5%($) 10%($)
- -------------------------------------- --------------- ----------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul Richman.......................... 27,000 1.50% 16.13 6/19/06 273,889.90 694,090.78
17,063 0.95% 9.00 6/29/98 11,010.05 22,242.16
16,684 0.93% 9.00 5/6/99 17,596.31 36,290.87
12,408 0.69% 9.00 5/5/00 19,324.42 40,855.94
21,217 1.18% 9.00 9/14/00 37,031.12 79,007.98
53,783 2.99% 9.00 9/14/05 253,439.52 617,776.61
20,250 1.13% 9.00 6/19/06 105,935.94 263,835.97
Arthur Sidorsky....................... 26,150 1.45% 16.13 6/19/06 265,267.44 672,239.77
10,406 0.58% 9.00 6/29/98 6,714.57 13,564.55
10,382 0.58% 9.00 5/6/99 10,950.76 22,585.00
10,617 0.59% 9.00 5/5/00 16,533.52 34,955.40
19,613 1.09% 9.00 6/19/06 104,705.62 261,984.05
Anthony M. D'Agostino................. -0- 0% -- -- -- --
Lance E. Murrah....................... 4,918 0.27% 15.25 4/9/06 47,166.78 119,529.89
11,765 0.65% 16.13 6/19/06 119,344.99 302,443.63
2,813 0.16% 9.00 6/30/98 1,818.74 3,674.40
2,250 0.13% 9.00 11/30/99 3,010.86 6,297.62
3,750 0.21% 9.00 9/14/05 17,670.98 43,074.25
3,750 0.21% 9.00 12/31/05 18,418.70 45,271.64
3,689 0.21% 9.00 4/9/06 18,802.75 46,571.00
8,824 0.49% 9.00 6/19/06 46,161.91 114,967.34
Eric M. Nowling....................... 1,148 0.06% 15,25 4/9/06 11,010.06 27,901.65
5,900 0.33% 16.13 6/19/06 59,850.01 151,671.69
10,000 0.56% 9.50 12/31/06 59,744.99 151,405.53
3,750 0.21% 9.00 6/30/99 4,233.28 8,763.17
7,500 0.42% 9.00 9/14/05 35,341.96 86,148.50
861 0.05% 9.00 4/9/06 4,388.50 10,869.51
4,425 0.25% 9.00 6/19/06 23,148.96 57,653.05
7,500 0.42% 9.00 12/31/06 42,054.28 106,347.60
</TABLE>
6
<PAGE>
The following table sets forth aggregate information concerning stock option
exercises during fiscal 1997 by each of the named executive officers, together
with the year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
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
- ------------------------------------- --------------- ----------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul Richman......................... -0- -0- 80,201 61,204 -0- -0-
Arthur Sidorsky...................... -0- -0- 20,555 30,463 -0- -0-
Anthony M. D'Agostino................ -0- -0- -0- -0- -0- -0-
Lance E. Murrah...................... -0- -0- 4,878 20,198 -0- -0-
Eric M. Nowling...................... -0- -0- 3,751 20,285 -0- -0-
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of outside directors and is responsible for developing and
making recommendations to the Board of Directors with respect to compensation of
the Company's officers, directors and certain other employees, as well as any
bonuses for officers.
The Committee has developed and implemented compensation programs which seek
to enhance the profitability of SMC and improve stockholder value by closely
aligning the financial interests of the Company's senior management team with
those of its stockholders. A significant part of each executive's compensation
depends on appreciation of the Company's Common Stock. Each executive's
compensation is composed of two elements: (1) current compensation composed of
basic 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
industrial companies for equivalent positions. From time to time, the Committee
utilizes independent consultants and/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 received stock options which vest over four
years and restricted stock awards which vest over four years. The purposes of
this program are (1) to motivate the Company's executives to enhance the
Company's market capitalization and hence, the stockholders' return, and (2) to
create an incentive for the executive to remain with the Company.
Base salary and additional compensation for the Chief Executive Officer are
fixed by his 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 SMC 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 policy of
the Committee, to the extent feasible, to keep compensation within the
deductible limits.
During the fiscal year, all active SMC employees were offered the
opportunity to exchange their outstanding options for new options having the
same terms as the outstanding options being surrendered, except that the
exercise price was reduced to $9.00 per share, the closing market price of a
share of SMC Common Stock on the day before the offer was announced. In the case
of SMC officers, including
7
<PAGE>
executive officers, the number of shares covered by the new options was reduced
to 75% of the number of shares covered by the old options being surrendered. The
Board of Directors authorized such repricing, because the decline in the price
of SMC stock made it appear unlikely that outstanding options would be
significantly in-the-money prior to their expiration, and, accordingly, the
value of the outstanding options as incentives to employee performance had been
lost. The Board considered it particularly appropriate to reprice the options to
help improve employee morale at a time when a salary reduction was in effect and
a number of employees had been laid off.
Certain of the option grants reported in the table immediately following are
also reported in the Option Grants in Last Fiscal Year table appearing on page
6.
8
<PAGE>
10-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE EXERCISE
UNDERLYING OF STOCK AT PRICE AT TIME LENGTH OF ORIGINAL
OPTIONS/SARS TIME OF OF REPRICING NEW OPTION TERM REMAINING
REPRICED OR REPRICING OR OR AMENDMENT EXERCISE AT DATE OF REPRICING
NAME DATE AMENDED (#) AMENDMENT ($) ($) PRICE ($) OR AMENDMENT
- ------------------------------ --------- ------------- ------------- ------------- ----------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Paul Richman.................. 1/27/97 17,063 9.00 16.00 9.00 1 year 5 months
Chairman and Chief Executive 1/27/97 16,684 9.00 17.38 9.00 2 years 3 months
Officer 1/27/97 12,408 9.00 18.69 9.00 3 years 3 months
1/27/97 21,217 9.00 16.25 9.00 3 years 8.5 months
1/27/97 53,783 9.00 16.25 9.00 8 years 8.5 months
1/27/97 20,250 9.00 16.13 9.00 9 years 5.5 months
3/22/88 1,435 5.75 22.94 5.75 7 months
3/22/88 7,230 5.75 13.88 5.75 2 years 6 months
3/22/88 3,410 5.75 13.88 5.75 2 years 9 months
3/22/88 7,850 5.75 14.00 5.75 4 years 3 months
Arthur Sidorsky............... 1/27/97 10,406 9.00 16.00 9.00 1 year 5 months
Executive Vice President 1/27/97 10,382 9.00 17.38 9.00 2 years 3 months
1/27/97 10,617 9.00 18.69 9.00 3 years 3 months
1/27/97 19,613 9.00 16.13 9.00 9 years 5.5 months
3/22/88 1,410 5.75 22.94 5.75 7 months
3/22/88 6,588 5.75 13.88 5.75 2 years 6 months
3/22/88 772 5.75 13.88 5.75 2 years 9 months
3/22/88 6,350 5.75 14.00 5.75 4 years 3 months
Anthony M. D'Agostino......... 3/22/88 750 5.75 18.50 5.75 1 year 7 months
Senior Vice President-- 3/22/88 500 5.75 13.88 5.75 2 years 6 months
Finance and Treasurer(1) 3/22/88 500 5.75 14.75 5.75 4 years 1 month
3/22/88 350 5.75 14.00 5.75 4 years 3 months
Lance E. Murrah............... 1/27/97 2,813 9.00 16.50 9.00 1 year 5 months
Senior Vice President 1/27/97 2,250 9.00 23.88 9.00 2 years 11 months
1/27/97 3,750 9.00 16.25 9.00 8 years 8.5 months
1/27/97 3,750 9.00 16.50 9.00 8 years 11 months
1/27/97 3,689 9.00 15.25 9.00 9 years 3 months
1/27/97 8,824 9.00 16.13 9.00 9 years 5.5 months
3/22/88 2,000 5.75 15.75 5.75 2 years 5 months
3/22/88 325 5.75 14.00 5.75 4 years 3 months
Eric M. Nowling............... 1/27/97 3,750 9.00 14.25 9.00 2 years 5 months
Vice President and 1/27/97 7,500 9.00 16.25 9.00 8 years 8.5 months
Controller 1/27/97 861 9.00 15.25 9.00 9 years 3 months
1/27/97 4,425 9.00 16.13 9.00 9 years 5.5 months
1/27/97 7,500 9.00 9.50 9.00 9 years 11 months
3/22/88 750 5.75 10.63 5.75 3 years 6 months
3/22/88 280 5.75 14.00 5.75 4 years 3 months
</TABLE>
Evelyn Berezin James R. Berrett Peter F. Dicks
- ------------------------
(1) Mr. D'Agostino served as Senior Vice President-Finance and Treasurer of the
Company through January 31, 1997.
9
<PAGE>
The following line graph compares cumulative total stockholder return for
SMC 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 1992 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
<TABLE>
<CAPTION>
SMC NASDAQ MARKET NASDAQ COMPUTER MANUFACTURERS
<S> <C> <C> <C>
2/28/92 100.00 100.00 100.00
2/28/93 205.50 106.50 105.80
2/28/94 209.60 126.00 112.20
2/28/95 290.40 127.70 115.30
2/28/96 174.00 179.20 200.10
2/28/97 93.20 212.50 227.30
</TABLE>
10
<PAGE>
Pursuant to SEC rules, the material 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 SMC filings under the 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.
------------------------
Directors who are not officers of SMC receive an annual basic retainer of
$25,000, plus $1,200 per meeting attended; committee members receive an
additional annual retainer of $3,500 per committee, plus $800 per committee
meeting attended.
SMC's Plan for Deferred Compensation in Common Stock for Outside Directors,
effective July 15, 1997, provides for deferred payment, at the election of the
director, of 100%, 50%, or (for directors serving as such on March 4, 1997) 0%
of such director's annual retainer, in shares of SMC 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 SMC.
Under SMC's 1990 Director Stock Option Plan, options to purchase an
aggregate of 200,000 shares of SMC Common Stock were authorized for grant to
directors who were not employees of SMC or any subsidiary ("Eligible
Directors"). Pursuant to the plan, on October 11, 1989, each of the Eligible
Directors was granted an immediately exercisable option to purchase 10,000
shares and a vesting option to purchase 15,000 shares. Any director who became
an Eligible Director upon initial election after October 11, 1989, automatically
was granted a vesting option to purchase 15,000 shares. Vesting options become
exercisable to the extent of 5,000 shares on each of the first three
anniversaries of the date of grant. 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 and expire the earlier of five
years after grant or three years after the holder ceases to be a director. The
1990 Plan has been terminated, except with respect to outstanding options.
Under SMC's 1994 Director Stock Option Plan, options to purchase an
aggregate of 250,000 shares of SMC Common Stock were authorized for grant to
Eligible Directors. Pursuant to the plan, on July 7, 1994, each of the Eligible
Directors who last received an option to purchase SMC Common Stock pursuant to
an SMC stock option plan prior to the 1992 annual meeting of stockholders was
granted a vesting option to purchase 25,000 shares and each of the Eligible
Directors who last received an option to purchase SMC Common Stock pursuant to
an SMC stock option plan immediately following any of the 1992, 1993 or 1994
annual meetings of stockholders was granted a vesting option to purchase 10,000
shares. Any director who becomes an Eligible Director upon initial election
after July 7, 1994 automatically is 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. Commencing with the 1997 annual meeting of stockholders, each Eligible
Director automatically will be granted an immediately exercisable option to
purchase 8,333 shares following each annual meeting of stockholders, provided
that such Eligible Director shall have been an Eligible Director for the three
prior annual meetings. 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 and expire the earlier of five years after
grant or three years after the holder ceases to be a director.
SMC's Retirement Plan for Directors provides 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 each Board committee of which he or she was then a member. Payments for a
shorter period are made to the spouse of a director who dies while in service or
within 10 years after his or her retirement. Mr. Richman has waived all rights
under this Plan.
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Herman Fialkov, who was one of the founders of SMC, has been engaged by SMC
as a consultant through June 30, 1997, at a fee equivalent to $57,500 per annum.
In the event of Mr. Fialkov's death while so engaged, his compensation is to be
continued for six months following the month in which death occurred. The
agreement requires Mr. Fialkov to keep information received from SMC
confidential, so long as such information is not otherwise publicly disclosed,
and prohibits him, except with SMC's consent, from serving any competitor of SMC
engaged in the design or manufacture of semiconductor devices. Mr. Fialkov's
duties are to be performed at times and places convenient to him, and he is not
required to devote more than twelve hours in any week nor more than five days in
any calendar month to his consulting activities. The agreement provides that, if
he is called upon to perform services beyond the scope of ordinary consulting
duties, he shall be compensated for such services on a basis to be agreed
between him and SMC.
In connection with the sale to Intel Corporation ("Intel") of 1,542,506
shares of SMC Common Stock in March 1997 at $9.50 per share, SMC 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. SMC and Intel also entered into
an Investors Rights Agreement, pursuant to which Intel (a) has the right to (i)
designate an observer to attend meetings of SMC's Board of Directors or a
representative for election to SMC's Board; (ii) require SMC to register Intel's
SMC Common Stock for sale pursuant to the Securities Act of 1933; and (iii) buy
additional shares of SMC Common Stock from SMC pursuant to a right of first
refusal or to maintain its percentage ownership of SMC Common Stock; and (b) is
prohibited from acquiring more than 25% of SMC's outstanding Common Stock
(subject to certain exceptions). The agreement gives SMC a right of first
refusal respecting sales by Intel of its SMC Common Stock. In addition, Intel
has agreed to design SMC's I/O components into at least seven of Intel's
motherboard designs through December 31, 1997, to permit SMC to compete for
additional design-ins through December 31, 1998, and to make SMC a preferred
supplier of Low Pin Count Specification ("LPC") compliant components. SMC has
agreed that it will sell the designed-in I/O components to Intel at prices no
higher than SMC charges any unaffiliated party for equivalent production volumes
of the same or substantially the same products.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Based solely on a review of copies of reports and written representations
furnished to SMC by its executive officers and directors, SMC believes that all
reports required to be filed by its executive officers and directors in the 1997
fiscal year were filed timely, except for reports on Form 5, covering option
grants previously disclosed in SMC's 1995 Proxy Statement, filed late by each of
Ms. Berezin and Messrs. Brill, Dicks, Fialkov and Frisch, due to an oversight by
company counsel.
STOCKHOLDER PROPOSAL
A stockholder has submitted the following proposal, which will be voted on
at the Annual Meeting, if presented by its proponent. The name and address of,
and number of shares held by, the proponent will be furnished by SMC to any
person, orally or in writing as requested, promptly upon the receipt of any oral
or written request therefor. Such a request may be addressed to the Secretary of
the Company.
NON-EMPLOYEE RETIREMENT PLANS RESOLUTION
"RESOLVED, that the shareholders assembled in person and by proxy, recommend
(i) that all future non-employee directors not be granted pension benefits and
(ii) current non-employee directors voluntarily reliquish their pension
benefits."
SUPPORTING STATEMENT
Aside from the usual reasons, presented in the past, regarding "double
dipping", that is outside (non-employee) directors who are in almost all cases
amply rewarded with their pension at their primary place
12
<PAGE>
of employment, and in many instances serving as outside pensioned directors with
other companies, there are other cogent reasons that render this policy as
unacceptable.
Traditionally, pensions have been granted in both the private and public
sectors for long term service. The service component usually represents a
significant number of hours per week. The practice of offering pensions for
consultants is a rarity. Outside directors' service could logically fit the
definition of consultants and pensions for this type of service is an abuse of
the term.
But more importantly, outside directors, although retained by corporate
management, namely the C.E.O., are in reality representatives of shareholders.
Their purpose is to serve as an impartial group to which management is
accountable. Although outside directors are certainly entitled to compensation
for their time and expertise, pensions have the pernicious effect of
compromising their impartiality. In essence, pensions are management's grants to
outside directors to insure their unquestioning loyalty and acquiescence to
whatever policy management initiates, and at times, serving their own self
interests. Thus, pensions become another device to enhance and entrench
management's controls over corporate policies while being accountable only to
themselves. I am a founding member of the Investors Rights Association of
America and I feel this practice perpetuates a culture of corporate managment
"cronyism" that can easily be at odds with shareholder and company interest.
A final note in rebuttal to management's contention that many companies
offer their outside directors pensions, so they can attract and retain persons
of the highest quality. Since there are also companies that do not offer their
outside directors pensions, can management demonstate that those companies that
offer pensions have a better performance record then their non-pensioned peers?
In addition, do we have any evidence of a significant improvement in corporate
profitability with the advent of pensions for outside directors?
I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION.
MANAGEMENT RECOMMENDATION
The Board believes that the best interests of SMC and its stockholders are
served by attracting the most talented, experienced, knowledgeable and committed
individuals to serve as outside directors. To recruit and retain such highly
sought individuals for Board service, SMC must provide a compensation package,
competitive with that offered by other public corporations. The package must
recognize the increasing time commitments, diligence requirements and risks
associated with Board service.
According to a 1996 study of major corporations by the Spencer Stuart
consulting firm, an overwhelming majority of such corporations provide
retirement plans to their non-employee directors. The Board believes that such
plans have become increasingly necessary to attract and retain quality
directors.
The Board firmly believes that the Retirement Plan for Directors, described
on page 11, which plan, over a 10-year period, provides a benefit equal at
maximum to the director's retainer at retirement, is an appropriate component of
the compensation program for non-employee directors and is reasonably designed
to encourage talented individuals to join and continue to serve on the SMC Board
for the significant period of time required to gain experience with, and
knowledge of, SMC's complex business. Retirement benefits are a form of deferred
compensation, based upon the years of service of the director on SMC's Board.
The retirement benefit payable to SMC directors is payable only for a period
not exceeding the number of years that the director served on SMC's Board, and
for not more than ten years, in any case. The benefit is based upon annual
directors' compensation in effect at the time of the director's retirement.
The proponent makes various unsupported statements that the prospect of
receiving retirement benefits somehow compromises the Board's independence and
allegiance to the best interests of SMC and its stockholders. While the
proponent recognizes that outside directors are ". . . certainly entitled to
compensation for their time and expertise," he contends that compensation for
that time and expertise, which is not paid until after the director retires from
the Board, should be viewed differently from any
13
<PAGE>
other form of compensation. The Board rejects these arguments and notes that,
during the past several years, it has taken various steps which demonstrate its
independence and allegiance to SMC and its stockholders, including the creation
of the Committee on Corporate Governance and the adoption of a requirement that
each non-employee director elected to the Board after March 4, 1997 must
annually elect to purchase Common Stock in an amount equal to either 50% or 100%
of such director's Basic Retainer.
Removal of the retirement benefit would place the Company at a significant
disadvantage to its competitors in recruiting outside directors. The Company
cannot afford to eliminate incentives for qualified people to serve on the
Board.
Outside directors are not, as the proponent asserts, "retained by corporate
management, namely the C.E.O." Rather, they are nominated by the Board, after
investigation and review by the Corporate Governance Committee. All members of
that Committee and all but one of the entire Board of SMC directors are
themselves non-employee directors, elected by and owing allegiance only to the
stockholders.
The Board also opposes the proposal to deny retirement benefits because the
proposal seeks to abrogate benefits already accrued for directors who are
currently serving. The Company's Retirement Plan for Directors was an inducement
for non-employee directors to join the Board and remain in the service of the
Company. To ask such directors to relinquish benefits would be, in the Board's
view, an act of bad faith and a breach of a contractual commitment.
Your Board believes that, for SMC to stay competitive and to attract quality
persons to serve in the future, the Retirement Plan for Directors should remain
in place.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders, the Board of Directors has
selected Arthur Andersen LLP ("Arthur Andersen") as independent public
accountants for SMC for the fiscal year ending February 28, 1998. Arthur
Andersen was the independent public accountant for SMC for its fiscal year ended
February 28, 1997. 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.
VOTING PROCEDURES
Every stockholder of SMC is entitled to cast, in person or by proxy, one
vote for each share of SMC Common Stock held at the close of business on May 21,
1997, the record date for the Annual Meeting. At that date, SMC had outstanding
15,437,605 shares. The proxy hereby solicited is revocable at any time prior to
its exercise and may be revoked in any manner permitted by law.
The presence at the meeting in person or by proxy of stockholders entitled
to cast a majority of the votes at the meeting constitutes a quorum. 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 and 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.
14
<PAGE>
GENERAL
The cost of preparing, assembling and mailing the proxy statement and
related material will be borne by SMC. In addition to soliciting proxies by
mail, SMC may make requests for proxies by telephone, facsimile transmission or
messenger or by personal solicitation by officers, directors, or employees of
SMC, at nominal cost to SMC, or by any one or more of the foregoing means.
Georgeson & Company has been retained by SMC to assist in the solicitation of
proxies, for fees anticipated to aggregate approximately $4,500, plus reasonable
out-of-pocket expenses. SMC 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 SMC stock.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Stockholder proposals intended for inclusion in the proxy statement for the
next Annual Meeting must be received by SMC by February 2, 1998 and should be
sent to the Vice President and Controller, Standard Microsystems Corporation, 80
Arkay Drive, Hauppauge, New York 11788.
As of the date of this proxy statement, the Board of Directors of SMC knows
of no matter, other than the election of directors, the stockholder proposal,
and the ratification of the selection of independent public accountants, to come
before the meeting. If any other matter should properly come before the meeting,
it is the intention of the persons named on the accompanying form of proxy to
vote such proxy in accordance with their judgment on such matter.
By order of the Board of Directors,
HAROLD I. KAHEN
Dated: June 2, 1997
SECRETARY
YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. PLEASE SIGN AND MAIL
IT TODAY.
15
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
PROXY-Annual Meeting of Stockholders-July 15, 1997
PAUL RICHMAN, HERMAN FIALKOV and HAROLD I. KAHEN, 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 1997 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.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
This proxy is solicited on behalf of the Board of Please mark
Directors. Unless otherwise properly marked, this proxy your votes as [X]
will be voted for proposals 1 and 2 and AGAINST proposal indicated in
3, as recommended by the Board of Directors. this example
The Board of Directors recommends a vote FOR proposals 1 and 2:
1. ELECTION OF DIRECTORS
FOR WITHHOLD
all nominees AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
[ ] [ ]
Nominees: Robert M. Brill, Paul Richman
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
_______________________________________________________________________________
2. SELECTION OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Board of Directors recommends a vote AGAINST proposal 3:
3. ADOPTION OF STOCKHOLDER PROPOSAL RELATING TO DIRECTOR
RETIREMENT PLANS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE DATE AND SIGN THIS PROXY AND
RETURN IT PROMPTLY.
Signature_____________________ Signature_____________________ Date________, 1997
(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.)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
