<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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
STANDARD MICROSYSTEMS CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 14, 1998
------------------------
To the Stockholders of
STANDARD MICROSYSTEMS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Standard
Microsystems Corporation ("SMSC" or the "Company") will be held on July 14,
1998, at 10:00 A.M., at The Wyndham Wind Watch 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 SMSC for the fiscal year ending February 28, 1999.
(3) Adoption and approval of the 1998 Stock Option Plan.
(4) Amendment of the 1994 Director Stock Option Plan.
(5) Transaction of 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 20, 1998 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 1, 1998
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 14, 1998
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Standard Microsystems Corporation, a Delaware
corporation ("SMSC" or the "Company"), for use at the Annual Meeting of
Stockholders of SMSC to be held on July 14, 1998 and at any adjournment thereof.
June 1, 1998 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, three directors are to be elected for terms expiring
in 2001.
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 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), 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 SMSC, PRINCIPAL OCCUPATION, CERTAIN OTHER DIRECTOR
NAME DIRECTORSHIPS AND AGE AS OF MAY 20, 1998 SINCE
- --------------------------- ---------------------------------------------------------------------- ------------
<S> <C> <C>
NOMINEES TO SERVE UNTIL THE 2001 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; 58
Kathleen B. Earley......... Vice President, Networked Commerce Services, AT&T Corp., 1996
telecommunications services; 46
Ivan T. Frisch............. Executive Vice President and Provost, Polytechnic University; 60 1992
DIRECTORS CONTINUING TO SERVE UNTIL THE 2000 ANNUAL MEETING:
Robert M. Brill............ General Partner, Newlight Associates, L.P., General Partner, Poly 1994
Ventures, L.P. and Poly Ventures II, L.P., venture capital
investment in high technology; Director, Level 8 Systems, Inc.; 51
Paul Richman............... Chief Executive Officer and Chairman, SMSC; President, The Consortium 1974
for Technology Licensing, Ltd.; 55
DIRECTORS CONTINUING TO SERVE UNTIL THE 1999 ANNUAL MEETING:
Evelyn Berezin............. Management consultant; Director, DNA Plant Technology Corp.; 73 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; 55
</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 SMSC Board of Directors held nine meetings during the last fiscal year.
The audit committee held four meetings, the compensation committee held six
meetings, and the corporate governance committee (formerly the nominating
committee) held ten meetings. The members of the audit committee are James R.
Berrett, Robert M. Brill and Kathleen B. Earley; the members of the compensation
committee are Evelyn Berezin, James R. Berrett and Peter F. Dicks; and the
members of the corporate governance committee are Robert M. Brill, Kathleen B.
Earley and Ivan T. Frisch.
The audit committee reviews the internal controls of SMSC and the
objectivity of its financial reporting. It meets with appropriate SMSC 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 SMSC; members of the compensation committee also constitute the committees
that administer SMSC's stock option plans (other than the Director Stock Option
Plan) 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 made
by stockholders. Such recommendations should be in writing, mailed to the
Secretary of SMSC.
VOTING SECURITIES OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The management of SMSC has been informed that, as of May 20, 1998, 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 Common
Stock reflected in such table. As of May 20, 1998, 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.
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL OWNER SHARES(1)
- --------------------------------------------------------------------------------- -----------
<S> <C>
Evelyn Berezin................................................................... 33,833(2)
James R. Berrett................................................................. 8,334(3)
Robert M. Brill.................................................................. 34,333(4)
Peter F. Dicks................................................................... 53,333(4)
Kathleen B. Earley............................................................... 8,334(3)
Ivan T. Frisch................................................................... 23,833(5)
George W. Houseweart............................................................. 81,224(6)
Eric M. Nowling.................................................................. 18,420(7)
Paul Richman..................................................................... 215,512(8)
Arthur Sidorsky.................................................................. 61,095(9)
All directors and executive officers as a group (10 persons)..................... 538,251(10)
Dimensional Fund Advisors Inc.
1299 Ocean Ave.
11th Floor
Santa Monica, CA 90401......................................................... 801,200(11)
Franklin Resources, Inc., Franklin Advisory Services, Inc., Charles B. Johnson
and
Rupert H. Johnson, Jr.
777 Mariners Island Boulevard
6th Floor
San Mateo, CA 94404............................................................ 1,108,000(12)
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052-8119..................................................... 3,085,112(13)
Mutual Management Corp., Salomon Smith Barney Holdings Inc. and Travelers Group
Inc.
388 Greenwich St.
New York, NY 10013............................................................. 1,719,745(14)
</TABLE>
- ------------------------
(1) Shares held by each beneficial owner constitute less than 1% of the class,
except for Paul Richman (1.34%), all directors and executive officers as a
group (3.31%), Dimensional Fund Advisors Inc. (5.02%), Franklin Resources,
Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisory
Services, Inc. (6.94%) Intel Corporation (17.62%), and Mutual Management
Corp., Salomon Smith Barney Holdings Inc. and Travelers Group Inc.
(10.77%). Excludes approximately 7,000 phantom share units credited to the
accounts of Eligible Directors pursuant to SMSC's Plan for Deferred
Compensation in Common Stock for Outside Directors described on page 8.
(2) Includes 500 shares owned jointly with spouse and 33,333 shares covered by
currently exercisable options.
(3) Includes 8,334 shares covered by currently exercisable options.
(4) Includes 33,333 shares covered by currently exercisable options.
(5) Includes 18,333 shares covered by currently exercisable options.
(6) Includes 4,600 shares owned jointly with spouse, 1,000 shares owned by
spouse and 24,777 shares covered by currently exercisable options.
(7) Includes 12,019 shares covered by currently exercisable options.
(8) Includes 95,964 shares covered by currently excercisable options.
(9) Includes 10,545 shares owned jointly with spouse and 28,152 shares covered
by currently exercisable options.
(10) Includes 295,912 shares covered by currently exercisable options.
(11) Voting power is disclaimed as to 275,100 shares. Information is furnished
in reliance on Schedule 13G dated February 6, 1998 of the named person,
filed with the SEC.
(12) Information is furnished in reliance on Schedule 13G dated January 30, 1998
of the named persons, filed with the SEC.
(13) 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.
(14) Voting power and investment power are shared among Mutual Management Corp.,
Salomon Smith Barney Holdings Inc. and Travelers Group Inc. as to all
shares. Information is furnished in reliance on Amendment No. 2 to Schedule
13G dated March 9, 1998 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 SMSC and
its subsidiaries during the three years ended February 28, 1998.
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....................... 1998 400,000 500,000 -0- -0- 4,938
Chairman and Chief 1997 390,768 500,000 -0- 168,405 4,904
Executive Officer 1996 360,000 450,000 -0- 116,544 4,393
Arthur Sidorsky.................... 1998 296,300 -0- -0- -0- 4,903
President and Chief Operating 1997 289,461 -0- -0- 77,168 4,847
Officer 1996 264,550 264,550 52,910 14,155 4,597
George W. Houseweart............... 1998 230,480 36,653 -0- -0- 4,929
Senior Vice President of Law and 1997 225,161 109,844 -0- 39,150 4,597
Intellectual Property 1996 190,260 64,659 24,995 10,180 4,756
Eric M. Nowling.................... 1998 165,000 -0- 22,620 10,000 5,275
Vice President, Finance and Chief 1997 130,907 -0- -0- 41,084 4,725
Financial Officer 1996 123,000 17,500 24,603 10,000 3,444
Lance E. Murrah.................... 1998 200,000 387,500 -0- -0- 4,089
Senior Vice President(4) 1997 195,384 -0- -0- 41,759 4,756
1996 150,000 45,000 30,000 10,000 4,242
</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 for fiscal 1996 was made in part payment of the
executive officer's fiscal 1996 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>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Paul Richman......................................................... -0- -0- -0-
Arthur Sidorsky...................................................... -0- -0- 3,470
George W. Houseweart................................................. -0- -0- 1,639
Eric M. Nowling...................................................... 2,000 -0- 1,514
Lance E. Murrah...................................................... -0- -0- 1,548
</TABLE>
As of February 28, 1998, the market value of each executive officer's
holdings of restricted stock was as follows: Paul Richman, $92,008; Arthur
Sidorsky, $83,610; George W. Houseweart, $55,537; Eric M. Nowling, $43,757;
Lance E. Murrah, $0.
(3) Reflects SMSC contributions under the Incentive Savings and Retirement Plan.
(4) Mr. Murrah served as Senior Vice President of the Company through October 7,
1997.
4
<PAGE>
Pursuant to an employment agreement the other substantive terms of which
have expired, Mr. Richman 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 any second-sourcing, technology transfer, or
other agreement with an SMSC licensee, in total not exceeding $500,000 in fiscal
1998. Such additional compensation is included in the Summary Compensation
Table.
Mr. Richman and SMSC 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. As Chairman of the Board, Mr. Richman is required to devote 80% of
his business time to rendering services to SMSC, 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 SMSC. The agreement continues Mr. Richman's right
to receive specified percentages of certain SMSC 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 SMSC).
The agreement was amended in January 1998 to specify hourly rates and minimum
and maximum hours per month applicable to Mr. Richman's services as a
consultant, should his employment by SMSC be terminated.
Mr. Sidorsky and SMSC entered into an employment agreement as of March 1,
1996 pursuant to which Mr. Sidorsky is employed 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. SMSC 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.
Pursuant to an employment agreement the other substantive terms of which
have expired, Mr. Houseweart is entitled to receive specified percentages of
certain SMSC licensing revenues or revenues from sales of products manufactured
and/or sold by SMSC pursuant to any second-sourcing, technology transfer or
other agreement with an SMSC licensee.
For recent fiscal years, SMSC 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 SMSC (or a specified division of SMSC) before income taxes, as
defined. The amounts of this incentive compensation are included under the Bonus
column in the Summary Compensation Table. For fiscal 1996, 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 SMSC'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. Murrah
will become entitled to annual benefits under the plan in the amount of $63,600
for 10 years. As of March 1, 1998, 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, $134,300; Arthur Sidorsky, $100,000; George W.
Houseweart $75,400; Eric M. Nowling, $48,900.
The following table sets forth information regarding individual grants of
stock options to the named executive officers during the 1998 fiscal year.
Options generally become exercisable in four equal annual installments
commencing on the first anniversary of grant and may be exercised cumulatively
at any time before expiration.
5
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL SHARES AT ASSUMED ANNUAL RATES OF
SECURITIES SUBJECT TO STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION --------------------------
EXECUTIVE OFFICER (# OF SHARES) FISCAL YEAR ($ PER SHARE) DATE 5%($) 10%($)
- -------------------------------------- --------------- ----------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul Richman.......................... -0- 0% -- -- -- --
Arthur Sidorsky....................... -0- 0% -- -- -- --
George W. Houseweart.................. -0- 0% -- -- -- --
Eric M. Nowling....................... 10,000 4.25% 11.31 9/8/07 71,128 180,252
Lance E. Murrah....................... -0- 0% -- -- -- --
</TABLE>
The following table sets forth aggregate information concerning stock option
exercises during fiscal 1998 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- 100,690 40,715 50,345 20,357
Arthur Sidorsky..................... -0- -0- 28,406 22,612 14,203 11,306
George W. Houseweart................ -0- -0- 19,213 10,872 9,606 5,436
Eric M. Nowling..................... -0- -0- 9,761 24,275 4,880 7,137
Lance E. Murrah..................... 25,076 173,403 -0- -0- -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 SMSC 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.
6
<PAGE>
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 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 policy of
the Committee, to the extent feasible, to keep compensation within the
deductible limits.
Evelyn Berezin James R. Berrett Peter F. Dicks
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 1993 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>
FIVE-YEAR CUMULATIVE TOTAL RETURNS GRAPH DATA
<S> <C> <C> <C>
Date SMSC NASDAQ Market NASDAQ Computer Manufacturers
2/26/93 $100.00 $100.00 $100.00
2/28/94 $102.00 $118.30 $106.10
2/28/95 $141.30 $120.00 $108.90
2/29/96 $83.30 $167.20 $188.60
2/28/97 $45.30 $199.50 $214.80
2/27/98 $50.70 $273.10 $343.20
</TABLE>
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 SMSC 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.
------------------------
7
<PAGE>
DIRECTOR COMPENSATION
Directors who are not officers of SMSC 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.
SMSC's Plan for Deferred Compensation in Common Stock for Outside Directors,
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 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.
Under SMSC's 1990 Director Stock Option Plan, options to purchase an
aggregate of 200,000 shares of SMSC Common Stock were authorized for grant to
directors who were not employees of SMSC 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.
AMENDMENT OF THE 1994 DIRECTOR STOCK OPTION PLAN
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
Eligible Directors. Pursuant to the plan, on July 7, 1994, each of the Eligible
Directors who last received an option to purchase SMSC Common Stock pursuant to
an SMSC 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 SMSC Common Stock pursuant to
an SMSC 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 is 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. Subject to stockholder approval at the 1998 annual
meeting, the 1994 Plan was amended so that options granted subsequent to such
amendment will expire upon the earlier of (i) ten, rather than five, years after
grant, or (ii) three years after the holder ceases to be a director.
SMSC'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 on 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.
8
<PAGE>
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. SMSC 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 SMSC's Board of Directors or a
representative for election to SMSC's Board; (ii) require SMSC to register
Intel's SMSC Common Stock for sale pursuant to the Securities Act of 1993; and
(iii) 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 addition, Intel
agreed to design SMSC's I/O components into at least seven of Intel's
motherboard designs through December 31, 1997, to permit SMSC to compete for
additional design-ins through December 31, 1998, and to make SMSC a preferred
supplier of Low Pin Count Specification ("LPC") compliant components. SMSC has
agreed to sell the designed-in I/O components to Intel at prices no higher than
SMSC charges any unaffiliated party for comparable production volumes of the
same or substantially the same products. During fiscal 1998, sales to Intel
totaled $3.97 million. Such sales were made pursuant to the above-described
agreement in the Company's ordinary course of business.
1998 STOCK OPTION PLAN
FOR OFFICERS AND KEY EMPLOYEES
The Board of Directors has adopted the 1998 Stock Option Plan (the "Plan"),
subject to stockholder approval. The Board of Directors believes that the Plan
is desirable to attract and retain executives and other key employees of
outstanding ability.
The Plan is set forth as Exhibit A to this proxy statement, and the
following description is qualified in its entirety by this reference thereto.
Under the Plan, options to purchase an aggregate of not more than 1,000,000
shares of Common Stock may be granted from time to time to salaried employees of
SMSC or of any subsidiary of SMSC, including executive officers and directors
who are so employed immediately prior to the grant of the option. The number of
shares subject to options granted to a single employee during any fiscal year
may not exceed 50,000. Approximately 500 persons, including four executive
officers, are expected to be eligible to participate in the Plan.
The Plan is to be administered by the 1998 Stock Option Plan Committee. Such
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 the
option agreements, to amend them with the consent of the optionee, to determine
the employees 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 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 securities of SMSC previously acquired
by him or her unless the Committee shall otherwise determine.
Options will be exercisable for a term determined by the Committee, which
term will not be greater than 10 years from the date of grant. Unless otherwise
provided in an option agreement, generally, an
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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
may be exercised unless the holder is then an employee of SMSC or a subsidiary.
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 his or her 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 option 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 become fully
exercisable, regardless of whether any installment is then exercisable.
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 issuable upon the exercise of options, any reduction in the
purchase price of the Common Stock covered by any option, any extension of the
period during which options 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 optionee, adversely affect the optionee's rights under an option
theretofore granted.
No option may be granted under the Plan after March 2, 2008.
On May 22, 1998, the closing sale price reported on the Nasdaq National
Market for SMSC Common Stock was $11.00 per share.
TAX CONSEQUENCES
SMSC has been advised as follows regarding the federal income tax
consequences with respect to the grant and exercise of stock options and the
payment in stock of the exercise price of options under the Plan.
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 withholding 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
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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 (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 would 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 would 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 1998 STOCK
OPTION PLAN.
1994 DIRECTOR STOCK OPTION PLAN
The Board of Directors has amended the 1994 Director Stock Option Plan (the
"Director Plan"), subject to stockholder approval. The Director Plan was amended
to provide that options granted subsequent to such amendment will expire upon
the earlier of (i) ten, rather than five, years after grant, or (ii) three years
after the holder ceases to be a director. The Board of Directors believes that
the amendment to the Director Plan is desirable to attract and retain the most
talented, experienced, knowledgeable and committed individuals to serve as
outside directors, as well as to make the benefits provided by the Director Plan
more consistent with the current practice under SMSC's various stock option
plans for officers and key employees.
To recruit and retain highly sought individuals for Board service, SMSC 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.
The Board firmly believes that the Director Plan described on page 8, as
amended, is an appropriate component of the compensation package for
non-employee directors and is reasonably designed to encourage talented
individuals to join and continue to serve on the SMSC Board for the significant
period of time required to gain experience with, and knowledge of, SMSC's
complex business.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE 1994 DIRECTOR
STOCK OPTION PLAN.
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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 SMSC for the fiscal year ending February 28, 1999. Arthur
Andersen was the independent public accountant for SMSC for its fiscal year
ended February 28, 1998. 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 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
20, 1998, the record date for the Annual Meeting. At that date, SMSC had
outstanding 15,965,835 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.
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 & Company has been retained by SMSC to assist in the solicitation of
proxies, for fees anticipated to aggregate approximately $4,500, 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 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, 1999 and should be
sent to the Vice President and Chief Financial Officer, Standard Microsystems
Corporation, 80 Arkay Drive, Hauppauge, New York 11788.
As of the date of this proxy statement, the Board of Directors of SMSC knows
of no matter, other than the election of directors, the adoption and approval of
the 1998 Stock Option Plan, the amendment of the 1994 Director Stock Option Plan
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
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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 1, 1998
SECRETARY
YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. PLEASE SIGN AND MAIL
IT TODAY.
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EXHIBIT A
1998 STOCK OPTION PLAN
FOR OFFICERS AND KEY EMPLOYEES 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 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, 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 March 2, 2008, grant to such employees as
may be selected in the manner hereinafter provided, options to purchase shares
of Common Stock, $.10 par value, of the Company ("Common Stock") subject to the
conditions hereinafter provided.
2. ADMINISTRATION OF THE PLAN
(a) This Plan will be administered by a Stock Option 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 disinterested persons, as
hereinafter defined, and shall be "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 grant of
options, to determine the number of shares and purchase price of the Common
Stock covered by each option, the employees to whom and the time or times at
which, options shall be granted and 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 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 Securities Exchange Act
of 1934 (the "Exchange Act"); to determine the terms and provisions of, and to
cause the Company to enter into, agreements with employees in connection with
options 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; and to make all
other determinations the Committee may deem necessary or advisable for the
administration of the Plan.
(c) Each option granted 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 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.
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(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 granted under this Plan.
3. STOCK SUBJECT TO THIS PLAN
(a) The shares to be issued upon exercise of options 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 may be granted
under this Plan shall not exceed 1,000,000. The maximum number of shares that
may be subject to options granted to any one employee within one fiscal year
shall be 50,000. 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, the unpurchased
shares shall (unless this Plan shall have been terminated) become available for
option to other employees.
(b) In the discretion of the Board, but subject to the provisions of the
Plan and Section 422 of the Code, options 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.
4. ELIGIBILITY OF OPTIONEES
(a) Options may be granted only to salaried employees (including officers
and directors who are such employees) of the Company. In its determination of
any employee to whom an option shall be granted and the number of shares to be
covered by such option, the Committee shall take into account the duties of the
employee, the present and potential contributions of the employee to the success
of the Company, the number of years of service remaining before the anticipated
retirement of the employee, and other factors deemed relevant by the Committee
in connection with accomplishing the purpose of this Plan.
(b) An employee who has been granted an option under this Plan or otherwise
may, if the Committee shall so determine, be granted one or more additional
options.
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 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. NONTRANSFERABILITY OF OPTION
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
guardian or legal representative.
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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,
the 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 may be
exercised, unless, at the time of exercise, the optionee is an employee of the
Company. Options granted under the Plan 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 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 RELATIONSHIP TO THE COMPANY
(a) In the event that any 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 either (A) by the Company for
cause (as hereinafter defined) or (B) voluntarily by the employee and without
the consent of the Company (which consent shall be presumed in the case of
retirement at age 65 or thereafter) 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, 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.
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(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 and the effect of leaves of absence, which provisions may
vary from one another.
(d) Nothing in the Plan or in any Agreement shall confer upon any employee
any right to continue in the employ of the Company or affect the right of the
Company to terminate such employment 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 reserved
for issuance upon the exercise of options, 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, extend the period during which options may be exercised or
granted, or otherwise materially increase the benefits accruing to optionees
under this Plan or materially modify the requirements as to eligibility of
optionees 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 employee to whom an option shall
theretofore have been granted, adversely affect the rights of such employee
under such option.
11. GRANTING OF OPTIONS
(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 or employee any right to receive any option under the
Plan.
(b) The grant of an option pursuant to the Plan shall not constitute an
agreement or an understanding, express or implied, to employ the optionee 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, the exercise price and the number of shares as to which such 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
may be granted under the Plan shall be appropriately adjusted by the Board,
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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.
(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 the optionee 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 of such subsidiary, shall become immediately and fully exercisable.
13. EFFECTIVE DATE OF THE PLAN
Options 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 March 3, 1998, the date of its adoption by the Board of
Directors.
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 1998 Plan shall have no effect on outstanding options
granted by the Company under any other option 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 "disinterested person" shall mean a director who is not, during
the one year prior to service as an administrator of the Plan, or during such
service, granted or awarded equity securities pursuant to the Plan or any other
plan of the Company or any of its affiliates, except that: (A) participation in
a formula plan meeting the conditions in paragraph (c)(2)(ii) of Rule 16b-3
promulgated under the Exchange Act ("Rule 16b-3") shall not disqualify a
director from being a disinterested person, and (B) participation in an ongoing
securities acquisition plan meeting the conditions in paragraph (d)(2)(i) of
Rule 16b-3 shall not disqualify a director from being a disinterested person.
(c) 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
A-5
<PAGE>
or the Committee may determine fair market value in such a manner as it shall
deem appropriate under the circumstances.
(d) 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.
(e) The term "Company" shall include any parent or subsidiary of the
Company.
(f) 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 in
a proxy or information statement distributed by the Company pursuant to Schedule
14A or Schedule 14C 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 disinterested persons who shall have
constituted the Board immediately prior to the occurrence of the event or series
of events constituting such change in control.
A-6
<PAGE>
STANDARD MICROSYSTEMS CORPORATION
PROXY-Annual Meeting of Stockholders-July 14, 1998
PAUL RICHMAN 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 1998 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.
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FOLD AND DETACH HERE
<PAGE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
<S> <C>
This proxy is solicited on behalf of the Board of Directors. Unless otherwise properly marked, this Please mark \ /
proxy will be voted for proposals 1, 2, 3 and 4, as recommended by the Board of Directors. your vote as \ /
indicated in x
this example / \
</TABLE>
The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS 2. SELECTION OF ARTHUR ANDERSEN 3. ADOPTION AND APPROVAL 4. AMENDMENT OF THE 1994
LLP AS INDEPENDENT PUBLIC OF THE 1998 STOCK OPTION DIRECTOR STOCK OPTION
FOR WITHHOLD ACCOUNTANTS. PLAN. PLAN.
all nominees AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
__ __ __ __ __ __ __ __ __ __ __
|__| |__| |__| |__| |__| |__| |__| |__| |__| |__| |__|
</TABLE>
Nominees: James R. Berrett, Kathleen B. Earley, Ivan T. Frisch
<TABLE>
<S> <C>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name PLEASE DATE AND SIGN THIS
on the space provided below.) PROXY AND RETURN IT PROMPTLY.
_________________________________________________________________________________________________
____
|
|
|
Signature_________________________________ Signature____________________________________________ Date_____________________, 1998
(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.)
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FOLD AND DETACH HERE
</TABLE>
