EX-10.3






Exhibit 10.3




November 5, 2008



Mr. Walter Siegel


19 Hickory Drive


Great Neck, NY 11023



Re: Letter Agreement



Dear Walter:



On September 30, 2005, you received an Offer Letter from Standard Microsystems Corporation (the
“Company” or “SMSC”). As a result of Section 409A (“409A” or “Section 409A”) of the Internal
Revenue Code (the “Code”), SMSC wishes to once again reconfirm the terms of your continued
employment as Vice President and General Counsel as follows:




	 	•	 	Annual Base Salary: $294,000






	 	•	 	Annual Incentive Bonus Target: $104,958 (or approximately 36% of base salary).
Generally, one-half of any bonus is paid in cash and one half is paid as a restricted stock
award vesting 25% after each of the first two years after the date of the grant and the
remaining 50% after the third year from the date of the grant. For the Company’s fiscal
year 2007, your incentive bonus plan will be modified to provide for an additional
over-plan bonus amount consistent with what is approved by the Compensation Committee,
which is currently approximately 13% of base salary. Notwithstanding anything herein to
the contrary, any annual bonus for a particular fiscal year shall be paid to you as soon as
reasonably practicable following the end of such fiscal year and in any event no later than
2 1/2 months following the end of such fiscal year; provided that in the event payment of
such bonus to you within such 2 1/2 month period is impracticable, either administratively or
economically, as determined by the Company, payment of such bonus will be made as soon as
practicable thereafter.






	 	•	 	Monthly Car Allowance: $700






	 	•	 	Your annual salary, annual incentive bonus target, and monthly car allowance may be
reviewed and increased from time to time.






	 	•	 	Eligibility for Individual Executive Life Insurance ($250,000 death benefit), subject to
obtaining underwriting.






	 	•	 	Eligibility Individual Executive Disability Income Insurance (up to 1/3rd of
salary), subject to obtaining underwriting.






	 	•	 	Eligibility to participate in the Company’s Supplemental Executive Retirement Plan,
which, if fully vested, provides for a retirement benefit of 35% of base salary for 10
years.






	 	•	 	Eligibility for severance benefits as set forth below: If your employment is terminated
for any reason other than “Cause”, of if your compensation or duties are reduced following
a “Change in Control”, including without limitation no longer being the general counsel of
any successor to the Company, or upon a “Required Relocation” (hereinafter referred to as
“Good Reason Terminations”), then you shall receive severance in a single lump sum cash
payment equal to 12 months base salary (each a “Severance Eligible Event”). In addition,
the Company shall pay you in a lump sum cash payment an amount equal to the value, as if
fully vested, of any granted stock option, RSA or stock appreciation rights upon any Change
in Control or “Severance Eligible Event.” For purposes of this paragraph:






a) “Cause” shall mean only any material violation of the terms of any of SMSC’s personnel
policies or procedures, provided you have been given notice of the violation and a
reasonable opportunity to cure such violation; any material misstatement contained in your
employment application; commission by you of any crime or fraud against SMSC or its property
or any crime involving moral turpitude or reasonably likely to bring discredit upon SMSC; or
gross negligence or willful misconduct in the performance of your duties;




b) A “Change in Control” of SMSC shall be deemed to have occurred upon the occurrence of one
of the following events:




	 	i.	 	The merger or consolidation of SMSC with or into any other
corporation or entities whereby the shareholders of SMSC immediately before the
transaction do not own at least 50% of the new entity;






	 	ii.	 	SMSC is merged or consolidated with or into any other
corporation or other entity, and at any time after such merger or consolidation
is effected, the Continuing Directors are not or cease for any reason to
constitute a majority of the board of directors either of the surviving entity,
or of any entity in control of the surviving entity; or






	 	iii.	 	All or substantially all of the assets of SMSC are sold or
otherwise transferred to any other corporation or other entity, or more than
50% of the stock of SMSC is purchased by one entity, and at any time after such
sale or other transfer is effected, the Continuing Directors are not or cease
for any reason to constitute, a majority of the board of directors either of
the entity which has acquired and owns such assets, or of any entity in control
of the entity which has acquired and owns such assets.






In determining if a Change in Control occurs, the term “Continuing Directors” means any
person who either: (i) was elected a member of the Board at any Annual Meeting of
Stockholders of SMSC prior to the occurrence of a corporate event that is alleged to be a
Change in Control; or (ii) whose election to the Board or nomination for election to the
Board by SMSC’s stockholders was approved in advance by at least two-thirds of the
Continuing Directors then in office; and




c) A “Required Relocation” shall mean if you are required to relocate to a new position that
is more than 75 miles from the location of your employment prior to such written required
relocation.




d) You may terminate your employment hereunder for “Good Reason”, which shall be “treated”
as an involuntary termination if the following “safe harbor” rules are satisfied:




	 	(i)	 	You must Separate from Service within a limited period of time,
not to exceed 60 days following the reason for the Good Reason termination;






	 	(ii)	 	You must provide notice of the existence of the Good Reason
condition within a period not to exceed 30 days of its initial existence.






	 	(iii)	 	The Company shall be provided a period of 30 days during which
it may remedy the condition entitling you to terminate your employment for Good
Reason.






e) For purposes of this Letter Agreement the value of any stock option or SAR shall be the
spread between the grant price and the closing price of the common stock of the Company
measured on the exchange on which the Company’s stock is traded on the date of the relevant
event, or the next day on which the exchange is open if the exchange is closed on the date
of the relevant event; the value of any common stock shall be the closing price of the
common stock of the Company measured on the exchange on which it is traded on the date of
the relevant event, or the next day on which the exchange is open if the exchange is closed
on the date of the relevant event. Once the Company makes such payment all such SARS, stock
options and stock grants shall be automatically deemed cancelled.




The foregoing severance benefits may not be reduced without your written consent,
notwithstanding the terms and conditions of any Severance Plan, or the cancellation of
modification of any Severance Plan. The payment of 12 months base salary as severance is in
lieu of any base salary you would receive as part of any Severance Plan; however you shall
receive any additional benefits not set forth herein, to which you are entitled as an
Executive as part of any Severance Plan sponsored by the Company.




The parties acknowledge that the payment of some or all of the above benefits payable under
the SMSC Severance Plan or this Letter Agreement may be considered to be a form of
nonqualified deferred compensation benefits subject to 409A of the Code. In recognition of
this fact, the parties hereby agree and confirm as follows:




	 	i.	 	Notwithstanding anything to the contrary in this Agreement, in
no event shall any benefits be paid to you prior to the 6th month anniversary
of the your Separation from Service as defined in 409A, unless otherwise
permissible under 409A. Any and all payments that may not be paid prior to
such 6th month anniversary shall be delayed until the first day of
the month after such 6th anniversary occurs and shall retroactively
apply to make you whole for any lost benefits, with interest at the rate of
prime plus 2%, determined as of the first day of the month in which the
Separation from Service occurred. To the extent that you are required to pay
for the cost of any benefits to keep them in full force and effect during the 6
month delay period, you shall also be reimbursed for such out-of-pocket
expenses as of the same date provided above with the same rate of interest.






	 	ii.	 	Notwithstanding any provision to the contrary, in accordance
with the Final Regulations issued under Section 409A of the Code, to the extent
that any benefits to a Specified Employee do not exceed the lesser of the
Specified Employee salary for the past 2 years or the Section 401(a)(17)
limitations, such amount may be paid within the 6 month period of time during
which benefits may generally not be paid to Specified Employees. To the extent
benefits exceed such limitations (which is a maximum of $460,000 in 2008 and
$490,000 in 2009), the balance of any payments not otherwise payable during
such period shall be made following the expiration of the 6 month period
following a Separation of Service in a single lump sum payment on the first day
of the month after the 6 month separation period with interest equal to prime
rate as of the first day of the month in which a Separation from Service
occurs, plus 2%.






	 	iii.	 	In the event that any payment or benefit required to be paid to
you pursuant to this Agreement would violate 409A, the parties agree
notwithstanding any provisions of this Agreement to the contrary, to amend this
Agreement, to the extent necessary and reasonable to maintain the spirit of
this Agreement without resulting in a violation under 409A.






	 	iv.	 	In the event of a violation of 409A, it is not the intent of
the Company for you to incur the excise tax and other penalties under 409A.
Accordingly, to the extent any excise taxes or underpayment of interest or
penalties under 409A apply, the Company shall make a “gross up” payment to you,
to offset the effect of any excise tax, interest or penalties incurred in
accordance with 409A, and any tax on such gross up payments, to the extent such
action is legally permitted.






In the case of a Change in Control of Company, you are entitled to a “gross-up”
payment in an amount sufficient to offset the effect of any excise tax incurred in
accordance with Section 280G of the Code, and any tax on the gross-up payment;
provided, that in the event the aggregate amount of the payments and benefits, that
are otherwise subject to the excise tax of Section 4999 of the Code, you are
entitled to receive in connection with a Change in Control (the “Aggregate Payment”)
is equal to less than Twenty Thousand Dollars ($20,000.00) more than the product of
(i) three and (ii) your Base Amount (as such term is defined in Section 280G(b)(3)
of the Code and the regulations issued under Section 280G of the Code), the
Aggregate Payment will be reduced to the minimum amount as will result in no portion
of the Aggregate Payment being subject to such excise tax; provided that the
payments and/or benefits to be eliminated in effecting such reduction shall be
agreed upon between the Company and you.




All gross up payments set forth in the Letter Agreement shall be made as soon as
legally permitted under 409A, but in no event later than 2 1/2 months following the
end of the fiscal year in which the event giving rise to such gross up payment
occurs and, if permissible, before the excise tax becomes due.



In order to receive the foregoing severance benefits, you shall be required to execute a general
release within 30 days of the date of your separation from service (the “Release Period”) in
substantially the form currently set forth in Section 15 of the Severance Plan, however in addition
to the exclusions from the release set forth in the Severance Plan, the Company will also exclude
from the release any obligation of the Company to you under any indemnity agreement, and any
obligation of the Company to indemnify you pursuant to contract, law, charter, by-law or otherwise.




	 	•	 	Vacation time to be accrued at the rate of 20 days per year.






	 	•	 	Paid holidays will be according to the Company’s holiday schedule for U.S. employees.






	 	•	 	You will be eligible to participate in all other benefits programs offered to similarly
situated employees in New York.





Any payment that otherwise would be made to you prior to your delivery of such executed release
shall be paid to you on the first business day following the conclusion of the Release Period.



Your eligibility to participate in the various compensation and benefits plans offered by the
Company is subject to your compliance with the terms of each plan, which may be changed by the
Company from time to time except as set forth above.



A basic philosophy of SMSC is that we depend upon our employees to succeed. We therefore want our
relationship to be one of long-standing, which offers you the opportunity to effectively use your
skills and successfully service our customers’ needs. We are confident that you will perform
satisfactorily and follow our policies and procedures. Our objective has always been to provide
employees with career opportunities; however, this will be influenced by your performance and
SMSC’s success in the marketplace. Changes in the economy, our markets and technology will
continue to occur; therefore, notwithstanding the fact that we are a career employee oriented
Company, this offer of employment should not be construed as a contract or a commitment that your
employment will continue for a specific period of time.



We look forward to having you remain with SMSC for what I am confident will be a mutually
beneficial association. In the meantime, if you have any questions, please do not hesitate to
contact me. This Letter Agreement may be executed by each party by facsimile counterpart.



This Letter Agreement supersedes and replaces your Offer Letter and is only supplemented by your
Employee Agreement dated October 24, 2005. This Letter Agreement does not cancel any stock
options, stock appreciation rights or restricted stock awards previously granted to you; nor does
it cancel your Indemnity Agreement, which shall remain in full force and effect.



Sincerely,



/s/ Christine King

President and Chief Executive Officer




Encl.



Agreed and accepted.



	 	 	 
	SIGNATURE:

	 	/s/ Walter Siegel
	
 
	 	 
	DATE:

	 	November 6, 2008