Document:

EX-10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is made as of October 1, 2008 (the “Agreement”), among
Standard Microsystems Corporation, a Delaware corporation (the “Employer” or
“SMSC”), and Christine King (the “Employee”).

1. Employment, Duties and Agreements.

(a) The Employer hereby agrees to employ the Employee as its Chief Executive Officer, and the
Employee shall serve, subject to shareholder election after her initial appointment, without
additional compensation, as a member of the Board of Directors of the Employer (the
“Board”), subject to the By-laws of the Employer, as applicable, and the Employee hereby
accepts such positions and agrees to serve the Employer in such capacities during the employment
period fixed by Section 3 hereof (the “Employment Period”). The Employee shall report to
the Board and shall have such duties, authority and responsibilities, and shall act in accordance
with all reasonable instructions and directions of the Board and of the Employer, in each case, as
are consistent with her position as Chief Executive Officer of the Employer.

(b) During the Employment Period, excluding any periods of vacation and sick leave to which
the Employee is entitled, the Employee shall devote her full working time, energy and attention to
the performance of her duties and responsibilities hereunder and shall faithfully and diligently
endeavor to promote the business and best interests of the Employer.

(c) During the Employment Period, the Employee may not, without the prior written consent of
the Employer, operate, participate in the management, operations or control of, or act as an
employee, officer, consultant, agent or representative of, any type of business or service (other
than as an employee and director of the Employer), provided that it shall not be a violation of the
foregoing or of Section 1(b) above for the Employee to (i) act or serve as a director, trustee or
committee member of any civic or charitable organization, (ii) manage her personal, financial and
legal affairs, or (iii) serve as a director of ON Semiconductor Corporation, Atheros
Communications, and Open Silicon Inc., so long as such activities (described in clauses (i), (ii),
and (iii)) do not interfere with the performance of her duties and responsibilities to the
Employer as provided hereunder. Service on any other entity’s board of directors must be approved
by the Board.

2. Compensation.

(a) As compensation for the agreements made by the Employee herein and the performance by the
Employee of her obligations hereunder, during the Employment Period, the Employer shall pay the
Employee, pursuant to the Employer’s normal and customary payroll procedures, a base salary (the
“Base Salary”) at the rate of $625,000.00 per annum. The Board shall review the Employee’s
Base Salary annually and may (but is not required to) increase the Base Salary in its sole
discretion.

(b) (i) In addition to the Base Salary, during the Employment Period the Employee shall have
an opportunity, subject to the terms and conditions of the Employer’s annual incentive plan for
executive officers (the “Management Incentive Plan or MIP”), to earn an annual bonus (the
“Bonus”) with a target amount of 150% of Base Salary (the “Target Bonus”) based on
the achievement of annual performance objectives which shall be established and approved by the
Board or any authorized committee thereof for the Employee and the other members of the management
team of the Employer. No less than one-half of any bonus is paid in cash, with the balance paid as
a restricted stock award (“RSA”) vesting as follows: 25% on each of the first and second
anniversaries of the date of the grant, and the remaining 50% on the third anniversary of the date
of the grant provided that the Employee continues to be employed by the Employer through the
applicable vesting date. The Employee will also be eligible for an additional annual over-plan
bonus amount, to be paid in cash, consistent with the terms and conditions of the then current
Management Incentive Plan which for Employee shall not be less than an additional maximum of 20% of
Base Salary. Notwithstanding anything in the Management Incentive Plan or this Agreement to the
contrary, in no event shall such Bonus (or any other amount payable pursuant to this Section
2(b)(i)) be paid later than the fifteenth (15) day of the third month following the end of the
fiscal year with respect to which such Bonus (or such other amount) was earned, if at all.

(ii) Notwithstanding anything in Section 2(b)(i) to the contrary, Employee shall not be
entitled to receive a Bonus in respect of fiscal year 2009 pursuant to the Employer’s fiscal year
2009 MIP. In lieu of such Bonus, the Employee shall receive a bonus in an amount equal to $300,000
(the “FY 09 Bonus”). Half of the FY 09 Bonus ($150,000) will be paid to the Employee in a
cash lump sum on May 20, 2009 and the remaining half of the FY 09 Bonus ($150,000) will be paid in
RSAs to the Employee on the same date the full fiscal year 2009 RSAs are granted to participants in
the MIP with the same vesting schedule as set forth in Section 2(b)(i) above, (provided that if no
RSAs are granted to participants in the MIP, then the RSAs shall be granted to the Employee on the
third business day following the Employer’s release of its full fiscal year 2009 earnings),
subject, in each case, to the Employee continuing to be employed by the Employer on the applicable
payment date.

(c) On or as soon as practicable after the Effective Date (as defined below), the Employer
shall grant the Employee options (the “Option”) to purchase 300,000 shares of common stock
of the Employer at an exercise price equal to the fair market value of a share of Employer common
stock on the grant date. The Option shall be subject to and governed by the terms and conditions
of the plan from which it is granted (the “Option Plan”) and shall be evidenced by a stock
option grant agreement as provided under the Option Plan. 25% of the Option will vest on each of
the first four anniversaries of the grant date of such Option provided the Employee continues to
remain employed by the Employer on each such vesting date. In addition, the Employer shall grant
to the Employee 37,500 stock appreciation rights (“SARS”) on a quarterly basis on the same
schedule as such grants are made to the Directors of the Employer pursuant to the terms and
conditions of the plan from which such grants are made. The first such SAR grant will be granted
in April, 2009. In addition, Employer shall grant to the Employee 18,750 SARS in January, 2009 on
the same schedule as such grants are made to the Directors of the Employer pursuant to the terms
and conditions of the plan from which such grants are made. 33% of each such SAR grant will vest
on each of the first three anniversaries of the grant date of such SAR provided the Employee
continues to remain employed by the Employer on each of the applicable vesting dates.
Notwithstanding anything herein to the contrary, from time to time the Board or the Compensation
Committee, in its sole discretion, may modify the grant, (which may include a partial or total
substitution of an alternative equity based instruments, such as without limitation, stock
options), provided the result is an equivalent equity based grant measured as of the Effective
Date.

(d) With respect to the sale of Employee’s current personal residence in Pocatello, Idaho, the
Employee shall be eligible to sell such home through the Employer’s relocation program with Paragon
Relocation Resources and shall also receive the following relocation benefits pursuant to the
Employer’s standard relocation policies for executives (collectively the “Relocation
Program” which is attached hereto as Exhibit A).

On the Effective Date, Employer shall grant to the Employee RSAs with an intrinsic value,
calculated as of the date of grant, of $250,000, 25% of which will vest on the second anniversary
of the date of the grant, 25% of which will vest on the third anniversary of the date of the grant
and 50% of which will vest on the fourth anniversary of the date of the grant, provided, in each
case, that the Employee remains employed by the Employer through the applicable vesting date.

(e) On or as soon as practicable after the Employee closes on the purchase of a primary
residence in the Hauppauge, New York area, (but in no event more than thirty (30) days after
closing), the Employer shall pay to the Employee a lump-sum cash payment in an amount equal to the
difference between $2,100,000 and (1) the amount paid to the Employee by Paragon Relocation
Resources (“Paragon”) for Employee’s current residence in Pocatello, Idaho pursuant to its standard
policies with Employer or (2) some higher amount that Employee realizes in a direct sale of the
property without using Paragon, which will later be grossed up for applicable taxes (the
“Gross-Up”), to the Employee (collectively the “Cash Payment”). In the event the
Employee voluntarily resigns from her employment with the Employer prior to the second anniversary
of the Effective Date, then the Employee shall be obligated to repay no later than 30 days from the
Date of Termination to the Employer an amount equal to the product of (i) the Cash Payment and
(ii) a fraction, the numerator of which is 730 minus the number of days in the period commencing on
the Effective Date and ending on the date of the Employee’s resignation and the denominator of
which is 730. Notwithstanding the foregoing, the Gross-Up shall be paid to the Employee on May 20,
2009. Notwithstanding anything herein to the contrary, under no circumstances will the Cash
Payment be paid to the Employee before the Effective Date.

(f) During the Employment Period: (i) the Employee shall be entitled to participate in the
following benefits on the terms and conditions generally in effect for such plans, practices,
policies and programs from time to time for all employees: SMSC Flex Benefit Plan, including
medical, dental and vision coverage; health care and dependent care reimbursement accounts; basic
life/AD&D insurance; long term disability insurance and 401(k) savings and retirement plan.

(g) During the Employment Period, the Employee shall be entitled to take paid vacation of six
weeks per year; Employee shall comply with all other aspects of the Employer’s vacation policy as
may be in effect from time to time.

(h) The Employer shall promptly reimburse the Employee for all reasonable business expenses
incurred by the Employee in connection with the performance of her duties and responsibilities
hereunder upon the presentation of statements of such expenses in accordance with the Employer’s
policies and procedures now in force or as such policies and procedures may be modified from time
to time; provided that in no event shall such reimbursement be made later than the date that is two
and one-half months following the end of the taxable year following the taxable year in which such
expenses were incurred.

(i) In addition to the indemnification of the Employee as provided for under the Employer’s
certificates of incorporation and by-laws, the Employer shall provide, at its expense, the Employee
with coverage under its directors’ and officers’ liability insurance policy at the same level
provided the other directors and officers of the Employer, and the standard form indemnity
agreement annexed hereto as Exhibit B.

(j) For purposes of clarification, nothing herein shall hinder or interfere with the right of
the Employer to amend, modify or terminate any plan, practice, policy and program as it deems
appropriate, from time to time, in its sole discretion.

3. Employment Period.

The Employment Period shall commence on October 20, 2008 (the “Effective Date”) and
shall continue for an initial term of four (4) years. Thereafter, the Employment Period shall
automatically renew for one (1) year terms unless the Employer provides a Notice of Non-Renewal of
the Agreement at least one hundred eighty (180) days prior to the expiration of the Employment
Period. Notwithstanding the foregoing, the Employee’s employment hereunder may be terminated
during the Employment Period upon the earliest to occur of the following events (at which time the
Employment Period shall be terminated in accordance with Section 4).

(a) Death. The Employee’s employment hereunder shall terminate upon her death.

(b) Disability. The Employer shall be entitled to terminate the Employee’s employment
hereunder for “Disability” as a result of (i) the inability of the Employee to engage in
any substantial gainful activity or (ii) the receipt by the Employee of income replacement benefits
for a period of not less than 3 months under an accident and health plan covering employees of the
Employer, in each case by reason of any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous period of not less
than 12 months, as determined by the Employer.

(c) Cause. The Employer may terminate the Employee’s employment hereunder for Cause. For
purposes of this Agreement, the term “Cause” shall mean the Employee’s (A) gross negligence
or willful misconduct in the performance of the Employee’s duties for the Employer (other than due
to the Employee’s physical or mental incapacity), (B) breach or violation, in any material respect,
of any written agreement between the Employee and the Employer or any material policy of the
Employer, as may be in effect from time to time (including, without limitation, the Employer’s code
of conduct or similar employee conduct policy), (C) commission of a non-de minimis act of
dishonesty or breach of trust with regard to the Employer, any of its subsidiaries or affiliates,
or (D) commission of a felony or other crime of moral turpitude.

(d) Without Cause; for Good Reason; and Non-Renewal by Employer. The Employer may terminate
the Employee’s employment hereunder during the Employment Period without Cause, and the Employee
may terminate her employment hereunder during the Employment Period for Good Reason. In addition,
the Employer may terminate the Employee’s employment pursuant to a Notice of Non-Renewal given by
the Employer. For purposes of this Agreement, the term “Good Reason” shall mean the
occurrence of any of the following events, without the Employee’s prior written consent: (i) any
materially adverse change to the Employee’s then base salary and bonus opportunity,
responsibilities, duties, authority or status or any material adverse change in the Employee’s then
positions, titles or reporting responsibilities; provided, that, the Employer ceasing to be or
becoming a publicly traded company shall not be deemed a material adverse change; (ii) a relocation
of the Employee’s principal business location to an area outside a 50 mile radius of her principal
business location as of the Effective Date; or (iii) a material breach by the Employer of this
Agreement; provided, that, within sixty (60) days following the occurrence of any of the events set
forth therein, the Employee has delivered written notice to the Employer of the Employee’s
intention to terminate the Employee’s employment for Good Reason, and the Employer shall not have
cured such circumstances (if susceptible to cure) within thirty (30) days following receipt of such
notice (or, in the event that such grounds cannot be corrected within such thirty (30) day period,
the Employer has not taken reasonable steps within such thirty (30) day period to correct such
grounds as promptly as practicable thereafter).

(e) Voluntarily. The Employee may voluntarily terminate her employment hereunder, provided
that the Employee provides the Employer with written notice of her intent to terminate her
employment at least one hundred eighty (180) days in advance of the Date of Termination (as defined
in Section 4 below).

4. Termination Procedure.

(a) Notice of Termination. Any termination of the Employee’s employment by the Employer or by
the Employee during the Employment Period (other than termination pursuant to Section 3(a)) shall
be communicated by written “Notice of Termination” to the other party hereto in accordance
with Section 8(a).

(b) Date of Termination. “Date of Termination” shall mean (i) if the Employee’s
employment is terminated by her death, the date of her death, (ii) if the Employee’s employment is
terminated pursuant to Section 3(b), thirty (30) days after Notice of Termination, (iii) if the
Employee voluntarily terminates her employment, the date specified in the notice given pursuant to
Section 3(e) herein which shall not be less than one hundred eighty (180) days after the Notice of
Termination (iv) if the Employee’s employment is terminated in connection with the Employer’s
delivery of a Notice of Non-Renewal, the expiration of the then current Employment Period, and (v)
if the Employee’s employment is terminated for any other reason, the date on which a Notice of
Termination is given or any later date set forth in such Notice of Termination.

(c) Board/Committee Resignation. Upon termination of Employee’s employment with the Employer
for any reason, Employee agrees to resign, as of the Date of Termination and to the extent
applicable, all positions and titles with the Employer, including as a member of the Board (and any
committee thereof) and all positions and titles, including service as a member of the Board of
Directors (and any committee thereof), of any of the Employer’s affiliates.

5. Termination Payments.

(a) Without Cause and for Good Reason. In the event of the termination of the Employee’s
employment during the Employment Period by the Employer without Cause the Employer shall pay to the
Employee (i) within thirty (30) days following the Date of Termination, (A) Employee’s accrued but
unused vacation, (B) Employee’s Base Salary through the Date of Termination (to the extent not
theretofore paid), (C) any unreimbursed business expenses properly incurred by Employee in
accordance with Section 2(i) hereof (provided that claims for such expenses are submitted to the
Employer within fifteen (15) days following the Date of Termination) (collectively, the
“Accrued Obligations”), (ii) a lump sum payable with thirty (30) days following the Date
of Termination equal to the sum of (A) a payment (the “Base Salary Termination Payment”)
equal to two times the Employee’s Base Salary as in effect immediately prior to the Date of
Termination and (B) two times the Bonus Termination Payment (as defined below) (it being
understood that the payment of the Bonus Termination Payment shall be in lieu of any annual bonus
Employee would otherwise be eligible to receive pursuant to Section 2(b) herein or otherwise in
respect of the fiscal year in which the Date of Termination occurs), and (iii) all stock options,
stock appreciation rights or other equity awards held by the Employee and outstanding as of the
Date of Termination that would have vested within one (1) year from the Date of Termination shall
immediately vest on the Date of Termination. In the event such Date of Termination occurs within
the one-year period immediately following a Change of Control (as defined below), (i) all stock
options, stock appreciation rights or other equity awards held by the Employee and outstanding as
of the Date of Termination shall immediately vest as of the Date of Termination, and (ii) in lieu
of receiving the Bonus Termination Payment and any annual bonus Employee would otherwise be
eligible to receive pursuant to Section 2(b) herein or otherwise in respect of the fiscal year in
which the Date of Termination occurs, Employee shall receive a lump sum payment equal to two times
her Target Bonus as in effect on the date immediately preceding her Date of Termination.
Notwithstanding the foregoing, all of the foregoing payments and benefits (other than the Accrued
Obligations) are subject to and conditioned upon the Employee, within forty-five (45) days of the
Date of Termination (the “Release Period”), executing a valid general release and waiver
(in a form satisfactory to the Employer), waiving all claims the Employee may have against the
Employer, its successors, assigns, affiliates, employees, officers and directors. Any payment that
otherwise would be made prior to Executive’s delivery of such executed release shall be paid to the
Executive on the first business day following the conclusion of the Release Period.

For purposes of this Agreement, “Change of Control” has the meaning ascribed to the phrase
“Change in the Ownership or Effective Control of a Corporation or in the Ownership of a Substantial
Portion of the Assets of a Corporation” under Treasury Department Final Regulation 1.409A-3(i)(5),
or any successor thereto, and in the event that such regulations are withdrawn or such phrase (or a
substantially similar phrase) ceases to be defined, as determined (reasonably and in good faith) by
the Board.

For purposes of this Agreement, “Bonus Termination Payment” shall be defined as follows:
(i) if the Date of Termination is on or before February 28, 2010, then the Bonus Termination
Payment shall be equal to the Employee’s Target Bonus for the fiscal year in which the Date of
Termination occurred, (ii) if the Date of Termination is after February 28, 2010 but on or before
February 28, 2011, then the Bonus Termination Payment shall be equal to the average of the
Employee’s Target Bonus for fiscal year 2011 and the actual bonus received by the Employee pursuant
to the MIP for fiscal year 2010, and (iii) if the Date of Termination is after February 28, 2011,
then the Bonus Termination Payment shall be equal to the average of the last two bonuses received
by the Employee pursuant to the MIP.

(b) For Non-Renewal by the Employer. In the event of Employer sends a Notice of Non-Renewal
to the Employee the Employer shall pay to the Employee , within fifteen (15) days following the
Date of Termination (but in no event later than the fifteenth day of the third month following the
end of the fiscal year in which such Notice of Non-Renewal was sent to the Employee), (i) the
Accrued Obligations, (ii) a lump-sum payment equal to the Employee’s Base Salary as in effect
immediately prior to the Date of Termination, (iii) the Bonus Termination Payment and (iv) all
stock options, stock appreciation rights or other equity awards held by the Employee and
outstanding as of the Date of Termination that would have vested within one (1) year from the Date
of Termination shall immediately vest on the Date of Termination. Notwithstanding the foregoing,
all of the foregoing payments and benefits (other than the Accrued Obligations) are subject to and
conditioned upon the Employee, within the Release Period, executing a valid general release and
waiver (in a form satisfactory to the Employer), waiving all claims the Employee may have against
the Employer, its successors, assigns, affiliates, employees, officers and directors. Any
payment that otherwise would be made prior to Executive’s delivery of such executed release shall
be paid to the Executive on the first business day following the conclusion of the Release Period.

(c) Disability or Death. If the Employee’s employment is terminated during the Employment
Period as a result of the Employee’s death or Disability, the Employer shall pay the Employee or
the Employee’s estate, as the case may be, (i) within thirty (30) days following the Date of
Termination, the Accrued Obligations, and (ii) a “Pro-Rata Bonus” equal to the product of
the Bonus that the Employee would have earned for such fiscal year pursuant to Section 2(b) herein
and a fraction, the numerator of which is the number of calendar days beginning on the first day of
the Employer’s fiscal year in which the Date of Termination occurs and ending on and including the
Date of Termination and the denominator of which is 365, such Pro-Rata Bonus to be paid on the date
annual bonuses are otherwise paid to other executive officers of the Employer (but in no event
later than the date that is two and one-half months following the end of the fiscal year in which
the Date of Termination occurs).

(d) Cause or Voluntarily. If the Employee’s employment is terminated during the Employment
Period by the Employer for Cause or voluntarily by the Employee without Good Reason, the Employer
shall pay to the Employee, within thirty (30) days following the Date of Termination, the Accrued
Obligations.

(e) (i) If all or any portion of the amounts payable or benefits provided to Employee
under this Agreement or otherwise are “excess parachute payments” and, as a result, are subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”, and such excise tax, the “Excise Tax”), and if the net after-tax amount
(taking into account all applicable taxes payable by the Employee, including without limitation the
Excise Tax) that Employee would receive with respect to such payments or benefits exceeds the net
after-tax amount Employee would receive if the amount of such payments and benefits were reduced to
the maximum amount which could otherwise be payable to Employee without the imposition of the
Excise Tax, then, only to the extent necessary to eliminate the imposition of the Excise Tax, such
payments and benefits shall be reduced, in the order and of the type mutually agreed to by the
Employee and the Employer. The calculations required under this Section 5(e) shall be prepared by
the Employer and reviewed for accuracy by the Employee and the Employer’s regular certified public
accountants.

(ii) Notwithstanding anything herein to the contrary, if at the time of Employee’s
termination of employment with the Employer, Employee is a “specified employee” as defined in
Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise
payable hereunder as a result of such termination of employment is necessary in order to prevent
any accelerated or additional tax under Section 409A of the Code, then the payments to which
Employee would otherwise be entitled during the first six months following her termination of
employment shall be deferred and accumulated (without any reduction in such payments or benefits
ultimately paid or provided to Employee) for a period of six months from the date of the Employee’s
separation from service (as determined under Section 409A of the Code) and paid in a lump sum on
the first day of the seventh month following such separation from service (or, if earlier, the
date of the Employee’s death).

(f) Except as provided in this Section 5, the Employer shall have no additional obligations to
the Employee under this Agreement or otherwise and the Employee shall not be entitled to any other
severance or similar benefits under any other plan, program, policy or agreement. Notwithstanding
the foregoing, the terms and conditions of any agreements relating to stock options, stock
appreciation rights or other equity awards held by the Employee on the Date of Termination shall
continue in full force and effect except as specifically set forth herein or unless inconsistent
with or prohibited by the applicable plan document.

6. Restrictive Covenants. The Employee acknowledges and recognizes the highly
competitive nature of the businesses of the Employer (which, for purposes of this Section 6, shall
include the Employer, all of Employer’s subsidiaries and all affiliated companies and joint
ventures connected by ownership to Employer at any time) and accordingly agrees as follows:

(a) Non-competition with Employer. During the Restricted Period, Employee shall not become an
employee, director, or independent contractor of, or consultant to, or perform any services for,
any Competitor of Employer. For purposes of this Agreement, a “Competitor of Employer”
shall mean (i) any unit, division, line of business, parent, subsidiary or subsidiary of the parent
of any of the competitors listed in the Employer’s Annual Report on Form 10-K filed immediately
preceding termination; or (ii) any individual or entity that within the one-year period immediately
following the Date of Termination could reasonably be expected to generate more than $5 million in
annualized gross revenue from any activity that competes, or combination of activities that
competes, with any business of Employer. For purposes of this Agreement, Restricted Period shall
mean the period commencing on the Effective Date and ending on (i) in the event the Employee’s
employment is terminated without Cause or for Good Reason, the twenty four month anniversary of the
Date of Termination or (ii) in the event the Employee’s employment is terminated for any other
reason, the twelve month anniversary of the Date of Termination.

(b) Non-solicitation of Employer Customers. During the Restricted Period, Employee shall not,
directly or indirectly, on behalf of Employee or of anyone other than Employer, solicit or attempt
to solicit (or assist any third party in soliciting or attempting to solicit) any of Employer’s
then current and actively sought potential customers (“Customers”) in connection with any
business activity that is operated by a Competitor of Employer.

(c) Non-solicitation of Employer Employees. During the Restricted Period, , Employee shall
not, without the prior written consent of the Board, directly or indirectly, on behalf of Employee
or any third party, solicit or hire or recruit or, other than in the good faith performance of
Employee’s duties hereunder, induce or encourage (or assist any third party in hiring, soliciting,
recruiting, inducing or encouraging) any employees of Employer or any individuals who were
employees within the six-month period immediately prior thereto to terminate or otherwise alter her
employment with Employer. Notwithstanding the foregoing, the restrictions contained in this
Section 6(c) shall not apply to general published solicitations that are not specifically directed
to employees of the Employer.

(d) Non-disclosure of Confidential Information and Trade Secrets. During the Restricted Period
and thereafter, except in the good faith performance of Employee’s duties hereunder or where
required by law, statute, regulation or rule of any governmental body or agency, or pursuant to a
subpoena or court order, Employee shall not, directly or indirectly, for Employee’s own account or
for the account of any other person, firm or entity, use or disclose any Confidential Information
or proprietary Trade Secrets of Employer (each as defined below) to any third person. For purposes
of this Agreement, “Confidential Information” shall mean all information regarding Employer
and any of its affiliates, any Employer activity or the activity of any affiliate, Employer
business or the business of any affiliate or Employer Customer or the Customers of any affiliate
that is not generally known to persons not employed or retained (as employees or as independent
contractors or agents) by Employer, that is not generally disclosed by Employer practice or
authority to persons not employed by Employer, that does not rise to the level of a Trade Secret
and that is the subject of reasonable efforts to keep it confidential. Confidential Information
shall, to the extent such information is not a Trade Secret, include, but not be limited to product
code, product concepts, production techniques, technical information regarding Employer or
affiliate products or services, production processes and product/service development, operations
techniques, product/service formulas, information concerning Employer or affiliate techniques for
use and integration of its website and other products/services, current and future development and
expansion or contraction plans of Employer or any affiliate, sale/acquisition plans and contacts,
marketing plans and contacts, information concerning the legal affairs of Employer or any affiliate
and certain information concerning the strategy, tactics and financial affairs of Employer or any
affiliate. “Confidential Information” shall not include information that (i) has become generally
known or available to the public, other than information that has become available as a result,
directly or indirectly, of the Employee’s failure to comply with any of her obligations to Employer
or its affiliates, or (ii) is already known by the Employee prior to the Effective Date of this
Agreement and not subject to a duty of confidentiality to Employer or another party, or (iii) is
hereafter rightfully furnished to the Employee by a third party without a confidentiality
obligation and without breach of this Agreement. This definition shall not limit any definition of
“confidential information” or any equivalent term under the Uniform Trade Secrets Act or any other
state, local or federal law.

For purposes of this Agreement, “Trade Secret” shall mean all secret, proprietary or
confidential information regarding Employer (which shall mean and include all of Employer’s
subsidiaries and all affiliated companies and joint ventures connected by ownership to Employer at
any time) or any Employer activity that fits within the definition of “trade secrets” under the
Uniform Trade Secrets Act or other applicable law. Without limiting the foregoing or any
definition of Trade Secrets, Trade Secrets protected hereunder shall include all source codes and
object codes for Employer’s software and all website design information to the extent that such
information fits within the Uniform Trade Secrets Act. Nothing in this agreement is intended, or
shall be construed, to limit the protections of any applicable law protecting trade secrets or
other confidential information. “Trade Secrets” shall not include information that (i) has become
generally known or available to the public, other than information that has become available as a
result, directly or indirectly, of the Employee’s failure to comply with any of Employee’s
obligations to Employer or its affiliates, or (ii) is already known by the Employee prior to the
Effective Date of this Agreement and not subject to a duty of confidentiality to Employer or
another party, or (iii) is hereafter rightfully furnished to the Employee by a third party without
a confidentiality obligation and without breach of this Agreement. This definition shall not limit
any definition of “trade secrets” or any equivalent term under the Uniform Trade Secrets Act or any
other state, local or federal law.

(e) Intellectual Property. Employee agrees that all right, title and interest to all works of
whatever nature generated in the course of her employment with the Employer or its affiliates
resides with Employer and its affiliates, and that Employee will do all acts and execute all
documents necessary to vest such right, title and interest with the Employer. Employee agrees that
in connection with any termination of Employee’s employment with the Employer she will return to
Employer, not later than the Date of Termination, all property, in whatever form (including
computer files and other electronic data), of Employer or its affiliates in her possession,
including without limitation, all copies (in whatever form) of all files or other information
pertaining to Employer, its officers, directors, shareholders, customers or affiliates, and any
business or business opportunity of Employer and its affiliates.

(f) No Disparagement. During the Employment Period and the Restricted Period, the Employee
shall not make any statements, encourage others to make statements or release information to
disparage or defame Employer, any of its affiliates or any of their respective directors or
officers. Notwithstanding the foregoing, nothing in this Section 6(f) shall prohibit the Employee
from making truthful statements when required by order of a court or other body having jurisdiction
or as required by law.

(g) Employer Property. In connection with any termination of Employee’s employment with the
Employer, the Employee hereby agrees to return to Employer and to cease using any property of
Employer, including without limitation, security key cards, corporate credit cards, telephone
calling cards or home office equipment provided by Employer and to return such property no later
than the Date of Termination.

(h) Enforceability of Covenants. Employee acknowledges that Employer has a present and future
expectation of business from and with the Customers. Employee acknowledges the reasonableness of
the term, geographical territory, and scope of the covenants set forth in this Section 6, and
Employee agrees that Employee will not, in any action, suit or other proceeding, deny the
reasonableness of, or assert the unreasonableness of, the premises, consideration or scope of the
covenants set forth herein and Employee hereby waives any such defense. Employee further
acknowledges that complying with the provisions contained in this Agreement will not preclude
Employee from engaging in a lawful profession, trade or business, or from becoming gainfully
employed. Employee agrees that Employee’s covenants under this Section 6 are separate and distinct
obligations under this Agreement, and the failure or alleged failure of Employer or the Board to
perform obligations under any other provisions of this Agreement shall not constitute a defense to
the enforceability of Employee’s covenants and obligations under this Section 6. Employee agrees
that any breach of any covenant under this Section 6 will result in irreparable damage and injury
to Employer and that Employer will be entitled to injunctive relief in any court of competent
jurisdiction without the necessity of posting any bond.

7. Representations.

(a) The parties hereto hereby represent that they each have the authority to enter into this
Agreement, and the Employee hereby represents to the Employer that the execution of, and
performance of duties under, this Agreement shall not constitute a breach of or otherwise violate
any other agreement to which the Employee is a party.

(b) The Employee hereby represents to the Employer that she will not utilize or disclose any
confidential information obtained by the Employee in connection with her former employment with
respect to her duties and responsibilities hereunder.

(c) The Employee is not a party to any litigation.

8. Miscellaneous.

(a) Any notice or other communication required or permitted under this Agreement shall be
effective only if it is in writing and delivered personally or sent by registered or certified
mail, postage prepaid, addressed as follows (or if it is sent through any other method agreed upon
by the parties).

If to the Employer, to:

SMSC

80 Arkay Drive

Hauppauge, NY 11788

Attention: Walter Siegel, Esq.

Vice President and General Counsel

Copy: Chairman of the Compensation Committee of the Employer

If to the Employee, to the address on record with Employer; or, for either party, to such other
address as any party hereto may designate by notice to the others, and shall be deemed to have been
given upon receipt.

(b) This Agreement shall constitute the entire agreement among the parties hereto with respect
to the Employee’s employment hereunder, and supersedes and is in full substitution for any and all
prior understandings or agreements with respect to the Employee’s employment.

(c) This Agreement may be amended only by an instrument in writing signed by the parties
hereto, and any provision hereof may be waived only by an instrument in writing signed by the party
or parties against whom or which enforcement of such waiver is sought. The failure of any party
hereto at any time to require the performance by any other party hereto of any provision hereof
shall in no way affect the full right to require such performance at any time thereafter, nor shall
the waiver by any party hereto of a breach of any provision hereof be taken or held to be a waiver
of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.

(d) The parties hereto acknowledge and agree that each party has reviewed and negotiated the
terms and provisions of this Agreement and has had the opportunity to contribute to its revision.
Accordingly, the rule of construction to the effect that ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement. Rather, the terms of
this Agreement shall be construed fairly as to both parties hereto and not in favor or against
either party.

(e) Employee shall provide Employee’s reasonable cooperation in connection with any action or
proceeding (or any appeal from any action or proceeding) which relates to events occurring during
Employee’s employment hereunder. In such an event, Employer shall reimburse Employee for all
reasonable expenses incurred at Employer’s request; provided that in no event shall such
reimbursement be made later than the date that is two and one-half months following the end of the
taxable year following the taxable year in which such expenses were incurred. This provision
shall survive any termination of this Agreement, without implication of the survival of any other
provision of this Agreement.

(f) (i) This Agreement is binding on and is for the benefit of the parties hereto and their
respective successors, permitted assigns, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or obligation hereunder may be assigned by
the Employee.

(ii) The Employer shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or assets of
the Employer to assume this Agreement in the same manner and to the same extent that the Employer
would have been required to perform it if no such succession had taken place. As used in the
Agreement, “the Employer” shall mean both the Employer as defined above and any such successor that
assumes this Agreement, by operation of law or otherwise.

(g) Any provision of this Agreement (or portion thereof) which is deemed invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this Section, be
ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in
any way the remaining provisions thereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any
covenant should be deemed invalid, illegal or unenforceable because its scope is considered
excessive, such covenant shall be modified so that the scope of the covenant is reduced only to the
minimum extent necessary to render the modified covenant valid, legal and enforceable. No waiver
of any provision or violation of this Agreement by Employer shall be implied by Employer’s
forbearance or failure to take action.

(h) The Employer may withhold from any amounts payable to the Employee hereunder all federal,
state, city or other taxes that the Employer may reasonably determine are required to be withheld
pursuant to any applicable law or regulation (it being understood that the Employee shall be
responsible for payment of all taxes in respect of the payments and benefits provided herein).

(i) This Agreement shall be governed by and construed in accordance with the laws of the State
of New York, without reference to its principles of conflicts of law.

(j) Any disagreement, dispute, controversy or claim arising out of or relating to this
Agreement or the interpretation hereof or any agreements relating hereto or contemplated herein or
the interpretation, breach, termination, validity or invalidity hereof shall be settled exclusively
and finally by arbitration; provided that the Employer shall not be required to submit claims for
injunctive relief to enforce the covenants contained in Sections 6 of this Agreement to
arbitration. The arbitration shall be conducted in accordance with the Commercial Arbitration
Rules (the “Rules”) of the American Arbitration Association (the “AAA”), except as
amplified or otherwise varied hereby. The Employer and the Employee jointly shall appoint one
individual to act as arbitrator within thirty (30) days of initiation of the arbitration. If the
parties shall fail to appoint such arbitrator as provided above, such arbitrator shall be appointed
by the President of the New York Bar Association and shall be a person who maintains her principal
place of business in the New York metropolitan area and shall be an attorney, accountant or other
professional licensed to practice by the State of New York who has substantial experience in
employment and executive compensation matters. All fees and expenses of such arbitrator shall be
shared equally by the Employer and the Employee. The situs of the arbitration shall be New York
City. Any decision or award of the arbitral tribunal shall be final and binding upon the parties
to the arbitration proceeding. The parties hereto hereby waive to the extent permitted by law any
rights to appeal or to seek review of such award by any court or tribunal. The arbitration award
shall be paid within thirty (30) days after the award has been made. Judgment upon the award may
be entered in any federal or state court having jurisdiction over the parties and shall be final
and binding. Each party shall be required to keep all proceedings related to any such arbitration
and the final award and judgment strictly confidential; provided that either party may disclose
such award as necessary to enter the award in a court of competent jurisdiction or to enforce the
award, and to the extent required by law, court order, regulation or similar order

(k) This Agreement may be executed in several counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.

(l) The headings in this Agreement are inserted for convenience of reference only and shall
not be a part of or control or affect the meaning of any provision hereof.

(m) If any provision of this Agreement (or any award of compensation or benefits provided
under this Agreement) would cause Employee to incur any additional tax or interest under Section
409A of the Code, the Employer shall use reasonable efforts to reform such provision to comply with
409A and agrees to maintain, to the maximum extent practicable without violating 409A of the Code,
the original intent and economic benefit to Employee of the applicable provision; provided that
nothing herein shall require the Employer to provide the Employee with any gross-up for any tax,
interest or penalty incurred by Employee under Section 409A of the Code.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written
above.

	 
	Standard Microsystems Corporation.

	/s/ Timothy P. Craig

	By: Timothy P. Craig

	Title: Chairman of the Compensation Committee of the Board of Directors

	/s/ Christine King

	 

	By: Christine King

Exhibit A

SMSC Executive Relocation Program Summary

For Christine King

Relocation Administration:

All benefits will be administered through Paragon Relocation Resources. Your Paragon contact will
be:

	 	 	 
	Michelle Falcinelli, Sr. Director Global Relocation

Services

	 	

Work: (203) 546-1010
	7 Kenosia Avenue, Suite B

	 	Cell: (203) 733-5602
	Danbury, CT 06810

	 	Fax: (203) 546-1115
	Terri Hamilton, Client Relations Consultant

	 	Work: (203) 546-1037

Paragon oversees and centrally coordinates all of the activities of your move including expense
reimbursement and selection of preferred vendors such as real estate professionals and household
goods movers.

Marketing/Homesale Assistance:

Paragon will coordinate gathering 2 Broker Market Analyses to assist you with establishing the
initial list price of your home. The home should be listed within 5% of the average of the 2
recommended listing prices. The listing agreement must include the Broker Exclusion Clause to
insure a tax safe homesale transaction. Please don’t contact any realtors prior to speaking with
Paragon.

Paragon will provide a Guaranteed Buy-Out Offer at 100% of the average of 2 ERC relocation
appraisals. You will have up to 60 days to accept the Guaranteed Buy-Out Offer and an additional
30 days to vacate the property after accepting the offer.

If a bona-fide offer is received from an outside buyer during the time you are marketing the home
and prior to acceptance of the Guaranteed Buy-Out Offer, Paragon will amend the value of the
Guaranteed Buy-Out Offer to reflect the higher sales price after approving the terms of the sale.

The Guaranteed Buy-Out is contingent upon verification of clear title and inspections of the
property. Paragon Relocation Resources will acquire your home in Idaho approximately 1 week before
the closing date on your new home to allow time for processing and releasing your equity if needed.
You will not incur any closing expenses as a result of this transaction.

Temporary Living

Temporary living will be provided for a maximum of 6 months including lodging and return trips home
every 2 weeks. It is recommended that you pre-ship 1 vehicle during the first 30 days of
employment. A rental car will be provided for the first 30 days. Total temporary living expenses
will be capped at $60,000.00. This includes lodging, meals and return trips home when necessary.

Household Goods

Paragon will select a moving company to assist you with the movement of your household goods
including:

	 	•	 	Shipment of primary residence household goods including grand piano, pool table and 2
gun safes.

	 	•	 	Packing, loading, unloading and partial packing.

	 	•	 	Storage up to 6 months (but not to exceed actual period of temporary living) and
delivery out of storage.

	 	•	 	In addition, the shipment of the following items are authorized :

	 	1.	 	2 cars

	 	2.	 	2 motorcycles

	 	3.	 	2001 Formula 38’ boat with trailer

	 	4.	 	Kubota ATV

	 	5.	 	23hp lawn tractor with attachments

Final Move

Reasonable transportation, lodging, and meals will be reimbursed by Paragon Relocation Resources.
In no event shall any of the foregoing reimbursements be made later than the date this is two and
one-half months following the end of the taxable year following the taxable year in which such
expenses were incurred.

Exhibit B

INDEMNITY AGREEMENT

This Indemnity Agreement (“Agreement”) is made as of November 21, 2005 by

and between Standard Microsystems Corporation, a Delaware corporation (the

“Company”), and      (“Indemnitee”).

RECITALS

WHEREAS, highly competent persons have become more reluctant to serve

publicly-held corporations as directors or officers or in other capacities

unless they are provided with adequate protection through insurance or adequate

indemnification against inordinate risks of claims and actions against them

arising out of their service to and activities on behalf of the corporation and

as a result of the added liabilities imposed by the Sarbanes Oxley Act;

WHEREAS, the Board of Directors of the Company (the “Board”) has determined

that, in order to attract and retain qualified individuals, the Company will

attempt to maintain on an ongoing basis, at its sole expense, liability

insurance to protect persons serving the Company and its subsidiaries from

certain liabilities. Although the furnishing of such insurance has been a

customary and widespread practice among United States-based corporations and

other business enterprises, the Company believes that, given current market

conditions and trends, such insurance may be available to it in the future only

at higher premiums and with more exclusions. At the same time, directors,

officers and other persons in service to corporations or business enterprises

are being increasingly subjected to expensive and time-consuming litigation

relating to, among other things, matters that traditionally would have been

brought only against the Company or business enterprise itself. The By-Laws of

the Company (the “By-Laws”) require indemnification of the officers and

directors of the Company. Indemnitee may also be entitled to indemnification

pursuant to applicable provisions of the Delaware General Corporation Law

(“DGCL”). The By-Laws and the DGCL expressly provide that the indemnification

provisions set forth therein are not exclusive, and thereby contemplate that

contracts may be entered into between the Company and members of the board of

directors, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to

indemnification have increased the difficulty of attracting and retaining such

persons;

WHEREAS, the Board has determined that the increased difficulty in

attracting and retaining such persons is detrimental to the best interests of

the Company’s stockholders and that the Company should act to assure such

persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company

contractually to obligate itself to indemnify, and to advance expenses on behalf

of, such persons to the fullest extent permitted by applicable law so that they

will serve or continue to serve the Company free from undue concern that they

will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the

By-Laws of the Company and any resolutions adopted pursuant thereto, and shall

not be deemed a substitute therefor, nor to diminish or abrogate any rights of

Indemnitee thereunder; and

WHEREAS, Indemnitee is willing to serve, continue to serve and to take on

additional service for or on behalf of the Company on the condition that he be

so indemnified;

NOW, THEREFORE, in consideration of the premises and the covenants

contained herein, the Company and Indemnitee do hereby covenant and agree as

follows:

1. SERVICES TO THE COMPANY. Indemnitee will serve or continue to serve as

an officer, or director or key employee of the Company for so long as Indemnitee

is duly elected or appointed or until Indemnitee tenders his or her resignation

or is terminated by the Company.

2. DEFINITIONS. As used in this Agreement:

(a) References to “agent” shall mean any person who is or was a

director, officer, or employee of the Company or a Subsidiary of the Company or

other person authorized by the Company to act for the Company serving in such

capacity as a director, officer, employee, fiduciary or other official of

another corporation, partnership, limited liability company, joint venture,

trust or other enterprise at the request of, for the convenience of, or to

represent the interests of the Company or a Subsidiary of the Company.

(b) The terms “Beneficial Owner” and “Beneficial Ownership” shall have

the meanings set forth in Rule 13d-3 promulgated under the Exchange Act (as

defined below) as in effect on the date hereof.

(c) A “Change in Control” shall be deemed to occur upon the earliest

to occur after the date of this Agreement of any of the following events:

(i) Acquisition of Stock by Third Party. Any Person (as defined

below) is or becomes the Beneficial Owner, directly or indirectly, of securities

of the Company representing twenty percent (20%) or more of the combined voting

power of the Company’s then outstanding securities entitled to vote generally in

the election of directors, unless (1) the change in the relative Beneficial

Ownership of the Company’s securities by any Person results solely from a

reduction in the aggregate number of outstanding shares of securities entitled

to vote generally in the election of directors, or (2) such acquisition was

approved in advance by the Continuing Directors (as defined below) and such

acquisition would not constitute a Change in Control under part (iii) of this

definition;

(ii) Change in Board of Directors. Individuals who, as of the date

hereof, constitute the Board, and any new director whose election by the Board

or nomination for election by the Company’s stockholders was approved by a vote

of at least a majority of the directors then still in office who were directors

on the date hereof or whose election for nomination for election was previously

so approved (collectively, the “Continuing Directors”), cease for any reason to

constitute at least a majority of the members of the Board;

(iii) Corporate Transactions. The effective date of a

reorganization, merger or consolidation of the Company (a “Business

Combination”), in each case, unless, following such Business Combination: (1)

all or substantially all of the individuals and entities who were the Beneficial

Owners of securities entitled to vote generally in the election of directors

immediately prior to such Business Combination beneficially own, directly or

indirectly, more than 51% of the combined voting power of the then outstanding

securities of the Company entitled to vote generally in the election of

directors resulting from such Business Combination (including, without

limitation, a corporation which as a result of such transaction owns the Company

or all or substantially all of the Company’s assets either directly or through

one or more Subsidiaries) in substantially the same proportions as their

ownership, immediately prior to such Business Combination, of the securities

entitled to vote generally in the election of directors; (2) no Person

(excluding any corporation resulting from such Business Combination) is the

Beneficial Owner, directly or indirectly, of 15% or more of the combined voting

power of the then outstanding securities entitled to vote generally in the

election of directors of such corporation except to the extent that such

ownership existed prior to the Business Combination; and (3) at least a majority

of the Board of Directors of the corporation resulting from such Business

Combination were Continuing Directors at the time of the execution of the

initial agreement, or of the action of the Board of Directors, providing for

such Business Combination;

(iv) Liquidation. The approval by the stockholders of the Company

of a complete liquidation of the Company or an agreement or series of agreements

for the sale or disposition by the Company of all or substantially all of the

Company’s assets, other than factoring the Company’s current receivables or

escrows due (or, if such approval is not required, the decision by the Board to

proceed with such a liquidation, sale, or disposition in one transaction or a

series of related transactions); or

(v) Other Events. There occurs any other event of a nature that

would be required to be reported in response to Item 6(e) of Schedule l4A of

Regulation 14A (or a response to any similar item on any similar schedule or

form) promulgated under the Exchange Act (as defined below), whether or not the

Company is then subject to such reporting requirement.

(d) “Corporate Status” describes the status of a person who is or was

a director, officer, trustee, general partner, managing member, fiduciary,

employee or agent of the Company or of any other Enterprise (as defined below)

which such person is or was serving in such capacity at the request of the

Company.

(e) “Delaware Court” shall mean the Court of Chancery of the State of

Delaware.

(f) “Disinterested Director” shall mean a director of the Company who

is not and was not a party to the Proceeding (as defined below) in respect of

which indemnification is sought by Indemnitee.

(g) “Enterprise” shall mean the Company and any other corporation,

constituent corporation (including any constituent of a constituent) absorbed in

a consolidation or merger to which the Company (or any of its wholly owned

subsidiaries) is a party, limited liability company, partnership, joint venture,

trust, employee benefit plan or other enterprise of which Indemnitee is or was

serving at the request of the Company as a director, officer, trustee, general

partner, managing member, fiduciary, employee or agent.

(h) “Exchange Act” shall mean the Securities Exchange Act of 1934, as

amended.

(i) “Expenses” shall include reasonable attorneys’ fees and costs,

retainers, court costs, transcript costs, fees of experts, witness fees, travel

expenses, duplicating costs, printing and binding costs, telephone charges,

postage, delivery service fees, and all other disbursements or expenses in

connection with prosecuting, defending, preparing to prosecute or defend,

investigating, being or preparing to be a witness in, or otherwise participating

in, a Proceeding (as defined below) . Expenses also shall include Expenses

incurred in connection with any appeal resulting from any Proceeding (as defined

below), including without limitation the premium, security for, and other costs

relating to any cost bond, supersedeas bond, or other appeal bond or its

equivalent. Expenses, however, shall not include amounts paid in settlement by

Indemnitee or the amount of judgments or fines against Indemnitee.

(j) “Independent Counsel” shall mean a law firm or a member of a law

firm that is experienced in matters of corporation law and neither presently is,

nor in the past five years has been, retained to represent: (i) the Company or

Indemnitee in any matter material to either such party (other than with respect

to matters concerning the Indemnitee under this Agreement, or of other

indemnitees under similar indemnification agreements); or (ii) any other party

to the Proceeding (as defined below) giving rise to a claim for indemnification

hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall

not include any person who, under the applicable standards of professional

conduct then prevailing, would have a conflict of interest in representing

either the Company or Indemnitee in an action to determine Indemnitee’s rights

under this Agreement.

(k) References to “fines” shall include any excise tax assessed on

Indemnitee with respect to any employee benefit plan; references to “serving at

the request of the Company” shall include any service as a director, officer,

employee, agent or fiduciary of the Company which imposes duties on, or involves

services by, such director, officer, employee, agent or fiduciary with respect

to an employee benefit plan, its participants or beneficiaries; and if

Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to

be in the best interests of the participants and beneficiaries of an employee

benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed

to the best interests of the Company” as referred to in this Agreement.

(l) The term “Person” shall have the meaning as set forth in Sections

13(d) and 14(d) of the Exchange Act as in effect on the date hereof; provided,

however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries (as

defined below) of the Company; (iii) any employment benefit plan of the Company

or of a Subsidiary (as defined below) of the Company or of any corporation

owned, directly or indirectly, by the stockholders of the Company in

substantially the same proportions as their ownership of stock of the Company;

and (iv) any trustee or other fiduciary holding securities under an employee

benefit plan of the Company or of a Subsidiary (as defined below) of the Company

or of a corporation owned directly or indirectly by the stockholders of the

Company in substantially the same proportions as their ownership of stock of the

Company.

(m) A “Potential Change in Control” shall be deemed to have occurred

if: (i) the Company enters into an agreement or arrangement, the consummation of

which would result in the occurrence of a Change in Control; (ii) any Person or

the Company publicly announces an intention to take or consider taking actions

which if consummated would constitute a Change in Control; (iii) any Person who

becomes the Beneficial Owner, directly or indirectly, of securities of the

Company representing five percent (5%) or more of the combined voting power of

the Company’s then outstanding securities entitled to vote generally in the

election of directors increases such Person’s Beneficial Ownership of such

securities by five percent (5%) or more over the percentage so owned by such

Person on the date hereof; or (iv) the Board adopts a resolution to the effect

that, for purposes of this Agreement, a Potential Change in Control has

occurred.

(n) The term “Proceeding” shall include any threatened, pending or

completed action, suit, arbitration, alternate dispute resolution mechanism,

investigation, inquiry, administrative hearing or any other actual, threatened

or completed proceeding, whether brought in the right of the Company or

otherwise and whether of a civil (including intentional or unintentional tort

claims), criminal, administrative or investigative nature, in which Indemnitee

was, is or will be involved as a party or otherwise by reason of the fact that

Indemnitee is or was a director or officer or key employee of the Company, by

reason of any action (or failure to act) taken by him or of any action (or

failure to act) on his part while acting as a director or officer of the

Company, or by reason of the fact that he is or was serving at the request of

the Company as a director, officer, trustee, general partner, managing member,

fiduciary, employee or agent of any other Enterprise, in each case whether or

not serving in such capacity at the time any liability or expense is incurred

for which indemnification, reimbursement, or advancement of expenses can be

provided under this Agreement.

(o) The term “Subsidiary,” with respect to any Person, shall mean any

corporation or other entity of which a majority of the voting power of the

voting equity securities or equity interest is owned, directly or indirectly, by

that Person.

3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. The Company shall indemnify and

hold harmless Indemnitee in accordance with the provisions of this Section 3 if

Indemnitee was, is, or is threatened to be made, a party to or a participant (as

a witness or otherwise) in any Proceeding, other than a Proceeding by or in the

right of the Company to procure a judgment in its favor. Pursuant to this

Section 3 Indemnitee shall be indemnified against all Expenses, judgments,

liabilities, fines, penalties and amounts paid in settlement (if such settlement

is approved in advance by the Company, which approval shall not be unreasonably

withheld) (including all interest, assessments and other charges paid or payable

in connection with or in respect of such Expenses, judgments, fines, penalties

and amounts paid in settlement) actually and reasonably incurred by or on behalf

of Indemnitee in connection with such Proceeding or any claim, issue or matter

therein, if Indemnitee acted in good faith and in a manner he reasonably

believed to be in or not opposed to the best interests of the Company and, in

the case of a criminal Proceeding, had no reasonable cause to believe that his

conduct was unlawful.

4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The

Company shall indemnify and hold harmless Indemnitee in accordance with the

provisions of this Section 4 if Indemnitee was, is, or is threatened to be made,

a party to or a participant (as a witness or otherwise) in any Proceeding by or

in the right of the Company to procure a judgment in its favor. Pursuant to this

Section 4, Indemnitee shall be indemnified against all Expenses actually and

reasonably incurred by or on behalf of Indemnitee in connection with such

Proceeding or any claim, issue or matter therein, if Indemnitee acted in good

faith and in a manner he reasonably believed to be in or not opposed to the best

interests of the Company. No indemnification for Expenses shall be made under

this Section 4 in respect of any claim, issue or matter as to which Indemnitee

shall have been finally adjudged by a court to be liable to the Company, unless

and only to the extent that any court in which the Proceeding was brought or the

Delaware Court shall determine upon application that, despite the adjudication

of liability but in view of all the circumstances of the case, Indemnitee is

fairly and reasonably entitled to indemnification.

5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY

SUCCESSFUL. Notwithstanding any other provisions of this Agreement, to the

extent that Indemnitee is a party to (or a participant in) and is successful, on

the merits or otherwise, in any Proceeding or in defense of any claim, issue or

matter therein, in whole or in part, the Company shall indemnify and hold

harmless Indemnitee against all Expenses actually and reasonably incurred by him

in connection therewith. If Indemnitee is not wholly successful in such

Proceeding but is successful, on the merits or otherwise, as to one or more but

less than all claims, issues or matters in such Proceeding, the Company shall

indemnify and hold harmless Indemnitee against all Expenses actually and

reasonably incurred by him or on his behalf in connection with each successfully

resolved claim, issue or matter. For purposes of this Section and without

limitation, the termination of any claim, issue or matter in such a Proceeding

by dismissal, with or without prejudice, shall be deemed to be a successful

result as to such claim, issue or matter.

6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other

provision of this Agreement, to the extent that Indemnitee is, by reason of his

Corporate Status, a witness in any Proceeding to which Indemnitee is not a

party, he shall be indemnified and held harmless against all Expenses actually

and reasonably incurred by or on behalf of Indemnitee in connection therewith.

7. ADDITIONAL INDEMNIFICATION. Notwithstanding any limitation in Sections

3, 4, or 5, the Company shall indemnify and hold harmless, to the extent

permitted by law, against all Expenses, judgments, fines, penalties and amounts

paid in settlement (including all interest, assessments and other charges paid

or payable in connection with or in respect of such Expenses, judgments, fines,

penalties and amounts paid in settlement) actually and reasonably incurred by

Indemnitee if, by reason of Indemnitee’s Corporate Status, Indemnitee is a party

to or threatened to be made a party to any Proceeding (including a Proceeding by

or in the right of the Company to procure a judgment in its favor). The only

limitation that shall exist upon the Company’s obligations pursuant to this

Agreement shall be that the Company shall not be obligated to make any payment

to Indemnitee that is finally determined (under the procedures, and subject to

the presumptions, set forth in Sections 12, 13 and 14) to be unlawful.

8. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY.

(a) To the fullest extent permissible under applicable law, if the

indemnification and hold harmless rights provided for in this Agreement are

unavailable to Indemnitee in any Proceeding in which the Company is jointly

liable with Indemnitee (or would be if joined in such Proceeding), the Company,

in lieu of indemnifying and holding harmless Indemnitee, shall pay, in the first

instance, the entire amount incurred by Indemnitee, whether for judgments,

liabilities, fines, penalties, amounts paid or to be paid in settlement and/or

for Expenses, in connection with any Proceeding without requiring Indemnitee to

contribute to such payment, and the Company hereby waives and relinquishes any

right of contribution it may have at any time against Indemnitee.

(b) The Company shall not enter into any settlement of any Proceeding

in which the Company is jointly liable with Indemnitee (or would be if joined in

such Proceeding) unless such settlement provides for a full and final release of

all claims asserted against Indemnitee.

(c) The Company hereby agrees fully to indemnify and hold harmless

Indemnitee from any claims for contribution which may be brought by officers,

directors or employees of the Company other than Indemnitee who may be jointly

liable with Indemnitee.

9. EXCLUSIONS. Notwithstanding any provision in this Agreement, the

Company shall not be obligated under this Agreement to make any indemnity in

connection with any claim made against Indemnitee:

(a) for which payment has actually been received by or on behalf of

Indemnitee under any insurance policy or other indemnity provision, except with

respect to any excess beyond the amount actually received under any insurance

policy, contract, agreement, other indemnity provision or otherwise;

(b) for an accounting of profits made from the purchase and sale (or

sale and purchase) by Indemnitee of securities of the Company within the meaning

of Section 16(b) of the Exchange Act or similar provisions of state statutory

law or common law; or

(c) except as otherwise provided in Sections l4(e) — (f) hereof, in

connection with any Proceeding (or any part of any Proceeding) initiated by

Indemnitee, including any Proceeding (or any part of any Proceeding) initiated

by Indemnitee against the Company or its directors, officers, employees or other

indemnitees, unless (i) the Board authorized the Proceeding (or any part of any

Proceeding) prior to its initiation or (ii) the Company provides the

indemnification, in its sole discretion, pursuant to the powers vested in the

Company under applicable law.

10. ADVANCES OF EXPENSES; DEFENSE OF CLAIM.

(a) Notwithstanding any provision of this Agreement to the contrary,

and to the fullest extent permitted by applicable law, the Company shall advance

the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be

incurred by Indemnitee within three months) in connection with any Proceeding

within ten (10) days after the receipt by the Company of a statement or

statements requesting such advances from time to time, whether prior to or after

final disposition of any Proceeding. Advances shall be unsecured and interest

free. Advances shall be made without regard to Indemnitee’s ability to repay the

Expenses and without regard to Indemnitee’s ultimate entitlement to

indemnification under the other provisions of this Agreement. Advances shall

include any and all reasonable Expenses incurred pursuing a Proceeding to

enforce this right of advancement, including Expenses incurred preparing and

forwarding statements to the Company to support the advances claimed. The

Indemnitee shall qualify for advances, to the fullest extent permitted by

applicable law, solely upon the execution and delivery to the Company of an

undertaking providing that the Indemnitee undertakes to repay the advance to the

extent that it is ultimately determined that Indemnitee is not entitled to be

indemnified by the Company under the provisions of this Agreement, the By-Laws,

applicable law or otherwise. This Section 10(a) shall not apply to any claim

made by Indemnitee for which indemnity is excluded pursuant to Section 9.

(b) The Company will be entitled to participate in the Proceeding at

its own expense.

(c) The Company shall not settle any action, claim or Proceeding (in

whole or in part) which would impose any Expense, judgment, fine, penalty or

limitation on the Indemnitee without the Indemnitee’s prior written consent,

which consent shall not be unreasonably withheld.

11. PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.

(a) Indemnitee agrees to notify promptly the Company in writing upon

being served with any summons, citation, subpoena, complaint, indictment,

information or other document relating to any Proceeding or matter which may be

subject to indemnification or advancement of Expenses covered hereunder. The

failure of Indemnitee to so notify the Company shall not relieve the Company of

any obligation which it may have to the Indemnitee under this Agreement, or

otherwise.

(b) Indemnitee may deliver to the Company a written application to

indemnify and hold harmless Indemnitee in accordance with this Agreement. Such

application(s) may be delivered from time to time and at such time(s) as

Indemnitee deems appropriate in his or her sole discretion. Following such a

written application for indemnification by Indemnitee, the Indemnitee’s

entitlement to indemnification shall be determined according to Section 12(a) of

this Agreement.

12. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.

(a) A determination, if required by applicable law, with respect to

Indemnitee’s entitlement to indemnification shall be made in the specific case

by one of the following methods, which shall be at the election of Indemnitee:

(i) by a majority vote of the Disinterested Directors, even though less than a

quorum of the Board or (ii) by Independent Counsel in a written opinion to the

Board, a copy of which shall be delivered to Indemnitee. The Company promptly

will advise Indemnitee in writing with respect to any determination that

Indemnitee is or is not entitled to indemnification, including a description of

any reason or basis for which indemnification has been denied. If it is so

determined that Indemnitee is entitled to indemnification, payment to Indemnitee

shall be made within ten (10) days after such determination. Indemnitee shall

reasonably cooperate with the person, persons or entity making such

determination with respect to Indemnitee’s entitlement to indemnification,

including providing to such person, persons or entity upon reasonable advance

request any documentation or information which is not privileged or otherwise

protected from disclosure and which is reasonably available to Indemnitee and

reasonably necessary to such determination. Any costs or Expenses (including

attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with

the person, persons or entity making such determination shall be borne by the

Company (irrespective of the determination as to Indemnitee’s entitlement to

indemnification) and the Company hereby indemnifies and agrees to hold

Indemnitee harmless therefrom.

(b) In the event the determination of entitlement to indemnification

is to be made by Independent Counsel pursuant to Section 12(a) hereof, the

Independent Counsel shall be selected as provided in this Section 12(b). The

Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall

request that such selection be made by the Board), and Indemnitee shall give

written notice to the Company advising it of the identity of the Independent

Counsel so selected and certifying that the Independent Counsel so selected

meets the requirements of “Independent Counsel” as defined in Section 2 of this

Agreement. If the Independent Counsel is selected by the Board, the Company

shall give written notice to Indemnitee advising him of the identity of the

Independent Counsel so selected and certifying that the Independent Counsel so

selected meets the requirements of “Independent Counsel” as defined in Section 2

of this Agreement. In either event, Indemnitee or the Company, as the case may

be, may, within ten (10) days after such written notice of selection shall have

been received, deliver to the Company or to Indemnitee, as the case may be, a

written objection to such selection; provided, however, that such objection may

be asserted only on the ground that the Independent Counsel so selected does not

meet the requirements of “Independent Counsel” as defined in Section 2 of this

Agreement, and the objection shall set forth with particularity the factual

basis of such assertion. Absent a proper and timely objection, the person so

selected shall act as Independent Counsel. If such written objection is so made

and substantiated, the Independent Counsel so selected may not serve as

Independent Counsel unless and until such objection is withdrawn or a court of

competent jurisdiction has determined that such objection is without merit. If,

within twenty (20) days after submission by Indemnitee of a written request for

indemnification pursuant to Section 11(a) hereof, no Independent Counsel shall

have been selected and not objected to, either the Company or Indemnitee may

petition the Delaware Court for resolution of any objection which shall have

been made by the Company or Indemnitee to the other’s selection of Independent

Counsel and/or for the appointment as Independent Counsel of a person selected

by the Delaware Court, and the person with respect to whom all objections are so

resolved or the person so appointed shall act as Independent Counsel under

Section 12(a) hereof. Upon the delivery of its opinion pursuant to Section 12(a)

or, if earlier, the due commencement of any judicial proceeding or arbitration

pursuant to Section 14(a) of this Agreement, Independent Counsel shall be

discharged and relieved of any further responsibility in such capacity (subject

to the applicable standards of professional conduct then prevailing).

(c) The Company agrees to pay the reasonable fees and expenses of

Independent Counsel and to fully indemnify and hold harmless such Independent

Counsel against any and all Expenses, claims, liabilities and damages arising

out of or relating to this Agreement or its engagement pursuant hereto.

13. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.

(a) In making a determination with respect to entitlement to

indemnification hereunder, the person, persons or entity making such

determination shall presume that Indemnitee is entitled to indemnification under

this Agreement if Indemnitee has submitted a request for indemnification in

accordance with Section 11(b) of this Agreement, and the Company shall have the

burden of proof to overcome that presumption in connection with the making by

any person, persons or entity of any determination contrary to that presumption.

Neither the failure of the Company (including by its directors or Independent

Counsel) to have made a determination prior to the commencement of any action

pursuant to this Agreement that indemnification is proper in the circumstances

because Indemnitee has met the applicable standard of conduct, nor an actual

determination by the Company (including by its directors or Independent Counsel)

that Indemnitee has not met such applicable standard of conduct, shall be a

defense to the action or create a presumption that Indemnitee has not met the

applicable standard of conduct.

(b) If the person, persons or entity empowered or selected under

Section 12 of this Agreement to determine whether Indemnitee is entitled to

indemnification shall not have made a determination within thirty (30) days

after receipt by the Company of the request therefor, the requisite

determination of entitlement to indemnification shall be deemed to have been

made and Indemnitee shall be entitled to such indemnification, absent (i) a

misstatement by Indemnitee of a material fact, or an omission of a material fact

necessary to make Indemnitee’s statement not materially misleading, in

connection with the request for indemnification, or (ii) a final judicial

determination that any or all such indemnification is expressly prohibited under

applicable law; provided, however, that such 30-day period may be extended for a

reasonable time, not to exceed an additional fifteen (15) days, if the person,

persons or entity making the determination with respect to entitlement to

indemnification in good faith requires such additional time for the obtaining or

evaluating of documentation and/or information relating thereto.

(c) The termination of any Proceeding or of any claim, issue or matter

therein, by judgment, order, settlement or conviction, or upon a plea of nolo

contendere or its equivalent, shall not (except as otherwise expressly provided

in this Agreement) of itself adversely affect the right of Indemnitee to

indemnification or create a presumption that Indemnitee did not act in good

faith and in a manner which he reasonably believed to be in or not opposed to

the best interests of the Company or, with respect to any criminal Proceeding,

that Indemnitee had reasonable cause to believe that his conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee shall

be deemed to have acted in good faith if Indemnitee’s action is based on the

records or books of account of the Enterprise, including financial statements,

or on information supplied to Indemnitee by the officers of the Enterprise in

the course of their duties, or on the advice of legal counsel for the Enterprise

or on information or records given or reports made to the Enterprise by an

independent certified public accountant or by an appraiser or other expert

selected by the Enterprise. The provisions of this Section 13(d) shall not be

deemed to be exclusive or to limit in any way the other circumstances in which

the Indemnitee may be deemed or found to have met the applicable standard of

conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any other

director, officer, trustee, partner, managing member, fiduciary, agent or

employee of the Enterprise shall not be imputed to Indemnitee for purposes of

determining the right to indemnification under this Agreement.

14. REMEDIES OF INDEMNITEE.

(a) In the event that (i) a determination is made pursuant to Section

12 of this Agreement that Indemnitee is not entitled to indemnification under

this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by

applicable law, is not timely made pursuant to Section 10 of this Agreement,

(iii) no determination of entitlement to indemnification shall have been made

pursuant to Section 12(a) of this Agreement within thirty (30) days after

receipt by the Company of the request for indemnification, (iv) payment of

indemnification is not made pursuant to Section 5, 6, 7 or the last sentence of

Section 12(a) of this Agreement within ten (10) days after receipt by the

Company of a written request therefor, (v) a contribution payment is not made in

a timely manner pursuant to Section 8 of this Agreement, or (vi) payment of

indemnification pursuant to Section 3 or 4 of this Agreement is not made within

ten (10) days after a determination has been made that Indemnitee is entitled to

indemnification, Indemnitee shall be entitled to an adjudication by the Delaware

Court to such indemnification, contribution or advancement of Expenses.

Alternatively, Indemnitee, at his option, may seek an award in arbitration to be

conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of

the American Arbitration Association. Except as set forth herein, the provisions

of Delaware law (without regard to its conflict of laws rules) shall apply to

any such arbitration. The Company shall not oppose Indemnitee’s right to seek

any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made pursuant to

Section 12(a) of this Agreement that Indemnitee is not entitled to

indemnification, any judicial proceeding or arbitration commenced pursuant to

this Section 14 shall be conducted in all respects as a de novo trial, or

arbitration, on the merits and Indemnitee shall not be prejudiced by reason of

that adverse determination. In any judicial proceeding or arbitration commenced

pursuant to this Section 14, Indemnitee shall be presumed to be entitled to

indemnification under this Agreement and the Company shall have the burden of

proving Indemnitee is not entitled to indemnification or advancement of

Expenses, as the case may be, and the Company may not refer to or introduce into

evidence any determination pursuant to Section 12(a) of this Agreement adverse

to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or

arbitration pursuant to this Section 14, Indemnitee shall not be required to

reimburse the Company for any advances pursuant to Section 10 until a final

determination is made with respect to Indemnitee’s entitlement to

indemnification (as to which all rights of appeal have been exhausted or

lapsed).

(c) If a determination shall have been made pursuant to Section 12(a)

of this Agreement that Indemnitee is entitled to indemnification, the Company

shall be bound by such determination in any judicial proceeding or arbitration

commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee

of a material fact, or an omission of a material fact necessary to make

Indemnitee’s statement not materially misleading, in connection with the request

for indemnification, or (ii) a prohibition of such indemnification under

applicable law.

(d) The Company shall be precluded from asserting in any judicial

proceeding or arbitration commenced pursuant to this Section 14 that the

procedures and presumptions of this Agreement are not valid, binding and

enforceable and shall stipulate in any such court or before any such arbitrator

that the Company is bound by all the provisions of this Agreement.

(e) The Company shall indemnify and hold harmless Indemnitee to the

fullest extent permitted by law against all Expenses and, if requested by

Indemnitee, shall (within ten (10) days after the Company’s receipt of such

written request) advance to Indemnitee, to the fullest extent permitted by

applicable law, such Expenses which are incurred by Indemnitee in connection

with any judicial proceeding or arbitration brought by Indemnitee (i) to enforce

his rights under, or to recover damages for breach of, this Agreement or any

other indemnification, advancement or contribution agreement or provision of the

Company’s By-Laws now or hereafter in effect; or (ii) for recovery or advances

under any insurance policy maintained by any person for the benefit of

Indemnitee, regardless of whether Indemnitee ultimately is determined to be

entitled to such indemnification, advance, contribution or insurance recovery,

as the case may be.

(f) Interest shall be paid by the Company to Indemnitee at the legal

rate under Delaware law for amounts which the Company indemnifies or is obliged

to indemnify for the period commencing with the date on which Indemnitee

requests indemnification, contribution, reimbursement or advancement of any

Expenses and ending with the date on which such payment is made to Indemnitee by

the Company.

15. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control,

the Company shall, upon written request by Indemnitee, create a “Trust” for the

benefit of Indemnitee and from time to time upon written request of Indemnitee

shall fund such Trust in an amount sufficient to satisfy any and all Expenses

reasonably anticipated at the time of each such request to be incurred in

connection with investigating, preparing for, participating in or defending any

Proceedings, and any and all judgments, fines, penalties and amounts paid in

settlement (including all interest, assessments and other charges paid or

payable in connection with or in respect of such judgments, fines penalties and

amounts paid in settlement) in connection with any and all Proceedings from time

to time actually paid or claimed, reasonably anticipated or proposed to be paid.

The trustee of the Trust (the “Trustee”) shall be a bank or trust company or

other individual or entity chosen by the Indemnitee and reasonably acceptable to

the Company. Nothing in this Section 15 shall relieve the Company of any of its

obligations under this Agreement. The amount or amounts to be deposited in the

Trust pursuant to the foregoing funding obligation shall be determined by mutual

agreement of the Indemnitee and the Company or, if the Company and the

Indemnitee are unable to reach such an agreement, by Independent Counsel

selected in accordance with Section 12(b) of this Agreement. The terms of the

Trust shall provide that, except upon the consent of both the Indemnitee and the

Company, upon a Change in Control: (a) the Trust shall not be revoked or the

principal thereof invaded, without the written consent of the Indemnitee; (b)

the Trustee shall advance, to the fullest extent permitted by applicable law,

within two (2) business days of a request by the Indemnitee and upon the

execution and delivery to the Company of an undertaking providing that the

Indemnitee undertakes to repay the advance to the extent that it is ultimately

determined that Indemnitee is not entitled to be indemnified by the Company, any

and all Expenses to the Indemnitee; (c) the Trust shall continue to be funded by

the Company in accordance with the funding obligations set forth above; (d) the

Trustee shall promptly pay to the Indemnitee all amounts for which the

Indemnitee shall be entitled to indemnification pursuant to this Agreement or

otherwise; and (e) all unexpended funds in such Trust shall revert to the

Company upon mutual agreement by the Indemnitee and the Company or, if the

Indemnitee and the Company are unable to reach such an agreement, by Independent

Counsel selected in accordance with Section 12(b) of this Agreement, that the

Indemnitee has been fully indemnified under the terms of this Agreement. The

Trust shall be governed by Delaware law (without regard to its conflicts of laws

rules) and the Trustee shall consent to the exclusive jurisdiction of the

Delaware Court in accordance with Section 23 of this Agreement.

16. SECURITY. Notwithstanding anything herein to the contrary, to the

extent requested by the Indemnitee and approved by the Board, the Company may at

any time and from time to time provide security to the Indemnitee for the

Company’s obligations hereunder through an irrevocable bank line of credit,

funded trust or other collateral. Any such security, once provided to the

Indemnitee, may not be revoked or released without the prior written consent of

the Indemnitee.

17. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.

(a) The rights of indemnification and to receive advancement of

Expenses as provided by this Agreement shall not be deemed exclusive of any

other rights to which Indemnitee may at any time be entitled under applicable

law, the Company’s By-Laws, any agreement, a vote of stockholders or a

resolution of directors, or otherwise. No amendment, alteration or repeal of

this Agreement or of any provision hereof shall limit or restrict any right of

Indemnitee under this Agreement in respect of any action taken or omitted by

such Indemnitee in his Corporate Status prior to such amendment, alteration or

repeal. To the extent that a change in applicable law, whether by statute or

judicial decision, permits greater indemnification or advancement of Expenses

than would be afforded currently under the Company’s By-Laws or this Agreement,

it is the intent of the parties hereto that Indemnitee shall enjoy by this

Agreement the greater benefits so afforded by such change. No right or remedy

herein conferred is intended to be exclusive of any other right or remedy, and

every other right and remedy shall be cumulative and in addition to every other

right and remedy given hereunder or now or hereafter existing at law or in

equity or otherwise; provided, however, that to the extent the provisions of

this Agreement are inconsistent with the Company’s By-Laws and this Agreement

provides Indemnitee with a greater benefit, the provisions of this Agreement

shall apply. The assertion or employment of any right or remedy hereunder, or

otherwise, shall not prevent the concurrent assertion or employment of any other

right or remedy.

(b) The DGCL and the Company’s By-Laws permit the Company to purchase

and maintain insurance or furnish similar protection or make other arrangements

including, but not limited to, providing a trust fund, letter of credit, or

surety bond (“Indemnification Arrangements”) on behalf of Indemnitee against any

liability asserted against him or incurred by or on behalf of him or in such

capacity as a director, officer, employee or agent of the Company, or arising

out of his status as such, whether or not the Company would have the power to

indemnify him against such liability under the provisions of this Agreement or

under the DGCL, as it may then be in effect. The purchase, establishment, and

maintenance of any such Indemnification Arrangement shall not in any way limit

or affect the rights and obligations of the Company or of the Indemnitee under

this Agreement except as expressly provided herein, and the execution and

delivery of this Agreement by the Company and the Indemnitee shall not in any

way limit or affect the rights and obligations of the Company or the other party

or parties thereto under any such Indemnification Arrangement.

(c) To the extent that the Company maintains an insurance policy or

policies providing liability insurance for directors, officers, trustees,

partners, managing members, fiduciaries, employees, or agents of the Company or

of any other Enterprise which such person serves at the request of the Company,

Indemnitee shall be covered by such policy or policies in accordance with its or

their terms to the maximum extent of the coverage available for any such

director, officer, trustee, partner, managing member, fiduciary, employee or

agent under such policy or policies. If, at the time the Company receives notice

from any source of a Proceeding as to which Indemnitee is a party or a

participant (as a witness or otherwise), the Company has director and officer

liability insurance in effect, the Company shall give prompt notice of such

Proceeding to the insurers in accordance with the procedures set forth in the

respective policies. The Company shall thereafter take all necessary or

desirable action to cause such insurers to pay, on behalf of the Indemnitee, all

amounts payable as a result of such Proceeding in accordance with the terms of

such policies.

(d) In the event of any payment under this Agreement, the Company

shall be subrogated to the extent of such payment to all of the rights of

recovery of Indemnitee, who shall execute all papers required and take all

action necessary to secure such rights, including execution of such documents as

are necessary to enable the Company to bring suit to enforce such rights.

(e) The Company’s obligation to indemnify or advance Expenses

hereunder to Indemnitee who is or was serving at the request of the Company as a

director, officer, trustee, partner, managing member, fiduciary, employee or

agent of any other Enterprise shall be reduced by any amount Indemnitee has

actually received as indemnification or advancement of expenses from such

Enterprise.

18. DURATION OF AGREEMENT. All agreements and obligations of the Company

contained herein shall continue during the period Indemnitee serves as a

director or officer of the Company or as a director, officer, trustee, partner,

managing member, fiduciary, employee or agent of any other corporation,

partnership, joint venture, trust, employee benefit plan or other Enterprise

which Indemnitee serves at the request of the Company and shall continue

thereafter so long as Indemnitee shall be subject to any possible Proceeding

(including any rights of appeal thereto and any Proceeding commenced by

Indemnitee pursuant to Section 14 of this Agreement) by reason of his Corporate

Status, whether or not he is acting in any such capacity at the time any

liability or expense is incurred for which indemnification can be provided under

this Agreement.

19. SEVERABILITY. If any provision or provisions of this Agreement shall

be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)

the validity, legality and enforceability of the remaining provisions of this

Agreement (including, without limitation, each portion of any Section, paragraph

or sentence of this Agreement containing any such provision held to be invalid,

illegal or unenforceable, that is not itself invalid, illegal or unenforceable)

shall not in any way be affected or impaired thereby and shall remain

enforceable to the fullest extent permitted by law; (b) such provision or

provisions shall be deemed reformed to the extent necessary to conform to

applicable law and to give the maximum effect to the intent of the parties

hereto; and (c) to the fullest extent possible, the provisions of this Agreement

(including, without limitation, each portion of any Section, paragraph or

sentence of this Agreement containing any such provision held to be invalid,

illegal or unenforceable, that is not itself invalid, illegal or unenforceable)

shall be construed so as to give effect to the intent manifested thereby.

20. ENFORCEMENT AND BINDING EFFECT.

(a) The Company expressly confirms and agrees that it has entered into

this Agreement and assumed the obligations imposed on it hereby in order to

induce Indemnitee to serve as a director, or officer or key employee of the

Company, and the Company acknowledges that Indemnitee is relying upon this

Agreement in serving as a director, or officer or key employee of the Company.

(b) Without limiting any of the rights of Indemnitee under the By-Laws

as they may be amended from time to time, this Agreement constitutes the entire

agreement between the parties hereto with respect to the subject matter hereof

and supersedes all prior agreements and understandings, oral, written and

implied, between the parties hereto with respect to the subject matter hereof.

(c) The indemnification and advancement of expenses provided by or

granted pursuant to this Agreement shall be binding upon and be enforceable by

the parties hereto and their respective successors and assigns (including any

direct or indirect successor by purchase, merger, consolidation or otherwise to

all or substantially all of the business or assets of the Company), shall

continue as to an Indemnitee who has ceased to be a director, officer, employee

or agent of the Company or of any other Enterprise at the Company’s request, and

shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs,

devisees, executors and administrators and other legal representatives.

(d) The Company shall require and cause any successor (whether direct

or indirect by purchase, merger, consolidation or otherwise) to all or

substantially all of the business or assets of the Company, by written agreement

in form and substance satisfactory to the Indemnitee, expressly to assume and

agree to perform this Agreement in the same manner and to the same extent that

the Company would be required to perform if no such succession had taken place.

(e) The Company and Indemnitee agree herein that a monetary remedy for

breach of this Agreement, at some later date, may be inadequate, impracticable

and difficult of proof, and further agree that such breach may cause Indemnitee

irreparable harm. Accordingly, the parties hereto agree that Indemnitee may

enforce this Agreement by seeking injunctive relief and/or specific performance

hereof, without any necessity of showing actual damage or irreparable harm and

that by seeking injunctive relief and/or specific performance, Indemnitee shall

not be precluded from seeking or obtaining any other relief to which he may be

entitled. The Company and Indemnitee further agree that Indemnitee shall be

entitled to such specific performance and injunctive relief, including temporary

restraining orders, preliminary injunctions and permanent injunctions, without

the necessity of posting bonds or other undertaking in connection therewith. The

Company acknowledges that in the absence of a waiver, a bond or undertaking may

be required of Indemnitee by the Court, and the Company hereby waives any such

requirement of such a bond or undertaking.

21. MODIFICATION AND WAIVER. Except as provided in Section 17(a), no

supplement, modification or amendment of this Agreement shall be binding unless

executed in writing by the parties hereto. No waiver of any of the provisions of

this Agreement shall be deemed or shall constitute a waiver of any other

provisions of this Agreement nor shall any waiver constitute a continuing

waiver.

22. NOTICES. All notices, requests, demands and other communications under

this Agreement shall be in writing and shall be deemed to have been duly given

(i) if delivered by hand and receipted for by the party to whom said notice or

other communication shall have been directed, or (ii) mailed by certified or

registered mail with postage prepaid, or (iii) sent by a courier service (paid

by sender) on the third (3rd) business day after the date on which it is so

mailed:

(a) If to Indemnitee, at the address indicated on the signature page

of this Agreement, or such other address as Indemnitee shall provide in writing

to the Company.

(b) If to the Company, to:

Standard Microsystems Corporation

80 Arkay Drive

Hauppauge, New York 11788

Attention: General Counsel

or to any other address as may have been furnished to Indemnitee in writing by

the Company.

23. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and the

legal relations among the parties shall be governed by, and construed and

enforced in accordance with, the laws of the State of Delaware, without regard

to its conflict of laws rules. Except with respect to any arbitration commenced

by Indemnitee pursuant to Section 14(a) of this Agreement, the Company and

Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or

proceeding arising out of or in connection with this Agreement shall be brought

only in the Delaware Court and not in any other state or federal court in the

United States of America or any court in any other country; (b) consent to

submit to the exclusive jurisdiction of the Delaware Court for purposes of any

action or proceeding arising out of or in connection with this Agreement; (c)

waive any objection to the laying of venue of any such action or proceeding in

the Delaware Court; and (d) waive, and agree not to plead or to make, any claim

that any such action or proceeding brought in the Delaware Court has been

brought in an improper or inconvenient forum, or is subject (in whole or in

part) to a jury trial.

24. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more

counterparts, each of which shall for all purposes be deemed to be an original

but all of which together shall constitute one and the same Agreement. Only one

such counterpart signed by the party against whom enforceability is sought needs

to be produced to evidence the existence of this Agreement.

25. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to include

usage of the feminine pronoun where appropriate. The headings of the paragraphs

of this Agreement are inserted for convenience only and shall not be deemed to

constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as

of the day and year first above written.

STANDARD MICROSYSTEMS CORPORATION

By: /s/

INDEMNITEE

By: /s/

Name:

Address:Filed by Bowne Pure Compliance

EXHIBIT 10.1

LETTER AGREEMENT

September 30, 2008

Digital Angel Corporation

490 Villaume Avenue

South St. Paul, MN 55075

Attention: President

Re: Omnibus Amendment to Loan Documents

Ladies and Gentlemen:

Reference is made to (a) the Securities Purchase Agreement dated as of August 31, 2007 between
Digital Angel Corporation f/k/a Applied Digital Solutions, Inc. (the “Company”) and Kallina
Corporation (“Kallina”) (as amended, restated, modified and/or supplemented from time to
time, the “Kallina SPA”); (b) the Secured Term Note dated as of August 31, 2007 from the
Company in favor of Kallina in the original principal amount of $7,000,000 (as amended, restated,
modified and/or supplemented from time to time, the “2007 Kallina Note”); (c) the Stock
Pledge Agreement dated as of August 31, 2007 by and among Kallina, the Company, Computer Equity
Corporation, Destron Fearing Corporation f/k/a Digital Angel Corporation and Digital Angel
Technology Corporation (as amended, restated, modified and/or supplemented from time to time, the
“Kallina Pledge Agreement”); and (d) the other Related Agreements as defined in the Kallina
SPA (collectively with the Kallina SPA, the 2007 Kallina Note, the Kallina Pledge Agreement and all
instruments, documents and agreements related thereto, the “Existing Kallina Agreements”).
Capitalized terms used herein that are not defined shall have the meanings given to them in the
Kallina SPA.

Reference is also made to the (a) the Securities Purchase Agreement dated as of August 24,
2006 between the Company and Laurus Master Fund, Ltd. (“Laurus”) (as amended, restated,
modified and/or supplemented from time to time, the “Laurus SPA”); (b) the Secured Term
Note dated as of August 24, 2006 from the Company in favor of Laurus in the original principal
amount of $13,500,000 (as amended, restated, modified and/or supplemented from time to time, the
“2006 Laurus Note”); (c) the Stock Pledge Agreement dated as of August 24, 2006 by and
among Laurus, the Company and Computer Equity Corporation (as amended, restated, modified and/or
supplemented from time to time, the “Laurus Pledge Agreement”); and (d) the other Related
Agreements as defined in the Laurus SPA (collectively with the Laurus SPA, the 2006 Laurus Note,
the Laurus Pledge Agreement and all instruments, documents and agreements related thereto, the
“Existing Laurus Agreements,” and collectively with the Existing Kallina Agreements, the
“Existing Agreements”).

As you are aware, by way of one or more instruments of partial assignment, Kallina’s and
Laurus’ respective rights in and interest under the Existing Kallina Agreements and the Existing
Laurus Agreements, respectively, were assigned to one or more of the following entities: Valens
Offshore SPV II, Corp. (“Valens Offshore II”), Valens U.S. SPV I, LLC (“Valens
U.S.”), Valens Offshore SPV I, Ltd. (“Valens Offshore I”) and PSource Structured Debt
Limited (“PSource,” and collectively with Kallina, Laurus, Valens Offshore II, Valens U.S. and Valens Offshore I,
each a “Laurus/Kallina Related Party” and collectively, the “Laurus/Kallina Related
Parties”).

 

1

 

The Company has requested that the Laurus/Kallina Related Parties amend the Kallina SPA, the
2007 Kallina Note, the 2006 Laurus Note and certain of the other Existing Agreements and the
Laurus/Kallina Related Parties are willing to do so on the terms and conditions set forth below.

In consideration of the foregoing and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

Subject to satisfaction of the conditions precedent set forth below, the Existing Agreements
are hereby amended as follows:

(a) The Kallina SPA is hereby amended as follows:

(i) The defined term “Note” set forth in the fourth line of the first paragraph of the
Recitals to the Kallina SPA is deleted and replaced with the defined term “Closing Date Term Note”.

(ii) Section 1 of the Kallina SPA is hereby deleted and replaced in its entirety with the
following:

“1. Agreement to Sell and Purchase.

(a) Pursuant to the terms and conditions set forth in this Agreement, on the
Closing Date (as defined in Section 3), the Company shall sell to the Purchaser, and
the Purchaser shall Purchase from the Company, the Closing Date Term Note. The sale
of the Closing Date Term Note on the Closing Date shall be known as the “Closing
Date Offering.” The Closing Date Term Note will mature on the Maturity Date (as
defined in the Closing Date Term Note).

(b) Pursuant to the terms and conditions set forth in this Agreement and the
Related Agreements, on September 30, 2008, the Company shall sell to Valens Offshore
SPV II, Corp. (“Valens Offshore II”), and Valens Offshore II shall purchase from the
Company, a Secured Term Note in the aggregate principal amount of Two Million
Dollars ($2,000,000) (as amended, modified and/or supplemented from time to time,
the “Second Term Note”). The sale of the Second Term Note shall be known as the
“Second Offering”. The Closing Date Offering and the Second Offering shall be known
collectively as the “Offering”. The Second Term Note will mature on the Maturity
Date (as defined in the Second Term Note). The Closing Date Term Loan Note and the
Second Term Note are referred to collectively herein sometimes as the “Note” and
sometimes as the “Securities.”

(iii) All references to the term “Note” set forth in Section 3.2 of the Kallina SPA shall
hereafter be deemed to refer to the Closing Date Term Note.

 

2

 

(iv) Section 6.5 of the Kallina SPA is hereby deleted and replaced in its entirety with the
following:

“6.5 Use of Funds. The Company shall use the proceeds of (a) the sale
of the Closing Date Term Note (i) to make an intercompany loan to its Pledged
Subsidiary, DOC, which shall use such proceeds to repay in full the DOC’s existing
secured indebtedness with (x) Imperium Master Fund Ltd. and its affiliates,
including Gemini Master Fund, Ltd. and (y) Greater Bay Business Funding and (ii) for
working capital purposes only and (b) the sale of the Second Term Note for working
capital purposes only.”

(b) The 2007 Kallina Note is hereby amended as follow:

(i) Section 1.1 of the 2007 Kallina Note is hereby deleted and replaced in its entirety with
the following:

“1.1 Contract Rate. Subject to Sections 3.2 and 4.10, interest payable
on the outstanding principal amount of this Note (the “Principal Amount”) shall
accrue at a rate of twelve per cent (12%) per annum (the “Contract Rate”). Interest
shall be (i) calculated on the basis of a 360 day year, and (ii) payable monthly, in
arrears, on the first business day of each consecutive calendar month thereafter
through and including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.”

(ii) Section 1.2 of the 2007 Kallina Note is hereby deleted and replaced in its entirety with
the following:

“1.2 Intentionally Omitted.”

(ii) Section 1.3 of the 2007 Kallina Note is hereby deleted and replaced in its entirety with
the following:

“1.3 Principal Payments. Amortizing payments of the Principal Amount
shall be made by the Company on the first business day of each month through and
including the Maturity Date (each, an “Amortization Date”). The Company shall make
monthly payments to the Holder on each Amortization Date. Each monthly payment of
the outstanding Principal Amount due during the period commencing November 1, 2008
through and including April 1, 2009 is to be in the amount of $84,287.21 and each
monthly payment of the outstanding Principal Amount due during the period commencing
May 1, 2009 through and including January 1, 2010 is to be in the amount of
$150,190.77, together, in each case, with any accrued and unpaid interest on such
portion of the Principal Amount plus any and all other unpaid amounts which are then
owing under this Note, the Purchase Agreement and/or any other Related Agreement
(collectively, the “Monthly Amount”). Any outstanding Principal Amount together
with any accrued and unpaid interest and any and all other unpaid amounts which are
then owing by the Company to the Holder under this Note, the Purchase Agreement and/or any other
Related Agreement shall be due and payable on the Maturity Date.”

 

3

 

(c) The 2006 Laurus Note is hereby amended as follow:

(i) Section 1.2 of the 2006 Laurus Note is hereby deleted and replaced in its entirety with
the following:

“1.2 Intentionally Omitted.”

(ii) Section 1.3 of the 2006 Laurus Note is hereby deleted and replaced in its entirety with
the following:

“1.3 Principal Payments. Amortizing payments of the aggregate
principal amount outstanding under this Note at any time (the “Principal Amount)
shall be made by the Company on the first business day of each month through and
including the Maturity Date (each, an “Amortization Date”). The Company shall make
monthly payments to the Holder on each Amortization Date. Each monthly payment of
the outstanding Principal Amount due during the period commencing November 1, 2008
through and including April 1, 2009 is to be in the amount of $132,379.45 and each
monthly payment of the outstanding Principal Amount due during the period commencing
May 1, 2009 through and including January 1, 2010 is to be in the amount of
$266,475.89, together, in each case, with any accrued and unpaid interest on such
portion of the Principal Amount plus any and all other unpaid amounts which are then
owing under this Note, the Purchase Agreement and/or any other Related Agreement
(collectively, the “Monthly Amount”). Any outstanding Principal Amount together
with any accrued and unpaid interest and any and all other unpaid amounts which are
then owing by the Company to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the Maturity Date.”

(d) The Kallina Pledge Agreement is amended by deleting Schedules A and B thereto and
replacing Schedules A and B in their entirety with Schedules A and B attached hereto.

(e) The Laurus Pledge Agreement is amended by deleting Schedules A and B thereto and replacing
Schedules A and B in their entirety with Schedules A and B attached hereto.

(f) The Consent and Waiver Agreement dated as of May 15, 2008 by and among the Laurus/Kallina
Related Parties and the Company is hereby amended by deleting the reference to “eighty percent
(80%)” set forth in the second line of paragraph 3.a. thereof and replacing such reference with
“one hundred percent (100%)”.

(g) To induce the Laurus/Kallina Related Parties to, among other things, agree to the
amendments set forth above and for Valens Offshore II to purchase the Second Term Note, the
Company:

 

4

 

(i) acknowledges, ratifies and confirms that, in consideration thereof, the Company shall
issue to Valens Offshore II, 1,500,000 shares of the Company’s common stock (the “Closing
Shares”);

(ii) covenants that the Company shall, simultaneously with the execution of this letter
agreement, provide an irrevocable instruction letter to its transfer agent (a copy of which the
Company has provided to Valens Offshore II) with respect to the Closing Shares, instructing the
transfer agent to issue the Closing Shares to Valens Offshore II;

(iii) acknowledges, ratifies and confirms, that its failure to deliver to Valens Offshore II
the original stock certificates evidencing the Closing Shares on or prior to October 7, 2008 shall
constitute an Event of Default under and as defined in each Existing Agreement where such term is
defined; and

(iv) represents and warrants that except as disclosed in the disclosure schedule attached
hereto (A) except as disclosed in the Company’s Exchange Act Filing and other than the Closing
Shares, there are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal), proxy or stockholder agreements, or arrangements or agreements
of any kind for the purchase or acquisition from the Company of any of its securities, (B) the
issuance of the Closing Shares will not result in a change in the price or number of any securities
of the Company outstanding under anti-dilution or other similar provisions contained in or
affecting any such securities, (C) all issued and outstanding shares of the Company’s common stock
have been duly authorized and validly issued and are fully paid and nonassessable, (D) the rights,
preferences, privileges and restrictions of the shares of the Company’s common stock are as stated
in the Company’s Certificate of Incorporation as amended through the date hereof (the
“Charter”), (E) the Closing Shares are validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances, (F) the Closing Shares are not subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied with and (G) all
issued and outstanding shares of the Company’s capital stock has been and shall be issued in
compliance with all applicable state and federal laws concerning the issuance of securities.

(h) Valens Offshore II hereby represents and warrants to the Company as follows:

(i) Valens Offshore II is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Valens Offshore II is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in all jurisdictions in
which the nature or location of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to do so has not, or
could not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect.

(ii) Valens Offshore II and its affiliates and investment partners have not, will not and
will not cause any person or entity, to directly engage in “short sales” of the Company’s Common
Stock as long as the Second Term Note shall be outstanding.

 

5

 

(iii) Valens Offshore II has all necessary power and authority under all applicable
provisions of law to execute and deliver this letter agreement, all instruments, documents and
agreements related hereto and to carry out their provisions. All corporate action on Valens
Offshore II’s part required for the lawful execution and delivery of this letter agreement and the
instruments, documents and agreements related hereto has been taken or will be taken prior to the
closing of the transactions contemplated hereby and thereby. Upon their execution and delivery,
this letter agreement and the instruments, documents and agreements executed in connection herewith
will be valid and binding obligations of Valens Offshore II, enforceable in accordance with their
terms, except:

(A) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights; and

(B) as limited by general principles of equity that restrict the availability of
equitable and legal remedies.

(iv) Valens Offshore II understands that the Closing Shares and the Second Term Note are
being offered and sold pursuant to an exemption from registration contained in the Securities Act
based in part upon Valens Offshore II’s representations contained in this letter agreement,
including, without limitation, that Valens Offshore II is an “accredited investor” within the
meaning of Regulation D under the Securities Act. Valens Offshore II confirms that it has received
or has had full access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Second Term Note and the Closing Shares to be
purchased by it under this letter agreement and the Kallina SPA. Valens Offshore II further
confirms that it has had an opportunity to ask questions and receive answers from the Company
regarding the Company’s and its subsidiaries’ business, management and financial affairs and the
terms and conditions of the Second Offering and the Second Term Note and to obtain additional
information (to the extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to Valens Offshore II
or to which Valens Offshore II had access.

(v) Valens Offshore II has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the capacity to protect
its own interests. Valens Offshore II must bear the economic risk of this investment until the
Securities are sold pursuant to: (A) an effective registration statement under the Securities Act;
or (B) an exemption from registration is available with respect to such sale.

(vi) Valens Offshore II is acquiring the Second Term Note and the Closing Shares for Valens
Offshore II’s own account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.

(vii) Valens Offshore II represents that by reason of its, or of its management’s, business
and financial experience, Valens Offshore II has the capacity to evaluate the merits and risks of
its investment in the Second Term Note and the Closing Shares and to protect its own interests in
connection with the transactions contemplated in this letter agreement and the instruments, documents
and agreements related hereto. Further, Valens Offshore II is
aware of no publication of any advertisement in connection with the transactions contemplated in
this letter agreement and the instruments, documents and agreements related hereto.

 

6

 

(viii) Valens Offshore II represents that it is an accredited investor within the meaning of
Regulation D under the Securities Act.

(i) To induce the Laurus/Kallina Related Parties to, among other things, agree to the
amendments set forth above and for Valens Offshore II to purchase the Second Term Note, each of the
undersigned (other than the Laurus/Kallina Related Parties):

(i) acknowledges, ratifies and confirms that except as disclosed in the disclosure schedule
attached hereto all of the terms, conditions, representations and covenants contained in the
Existing Agreements to which it is a party are in full force and effect and shall remain in full
force and effect after giving effect to the execution and effectiveness of this letter agreement
and all of the instruments, documents and agreements contemplated hereby, including without
limitation, the Second Term Note (collectively, the “New Agreements”);

(ii) acknowledges, ratifies and confirms that the defined term “Obligations” under the Master
Security Agreement dated August 31 2007 from the Company in favor of Kallina (as amended, restated,
modified and/or supplemented from time to time, the “Kallina Security Agreement”) and the
Kallina Pledge Agreement, include, without limitation, all obligations and liabilities of the
Company under the New Agreements;

(iii) acknowledges and confirms that (A) the occurrence of a breach and/or an Event of Default
under any of the New Agreements shall constitute a breach and/or an Event of Default under each of
the Existing Agreements and (B) the occurrence of a breach and/or an Event of Default under any of
the Existing Agreements shall constitute a breach and/or an Event of Default under the New
Agreements;

(iv) represents and warrants that no offsets, counterclaims or defenses exist as of the date
hereof with respect to the undersigned’s obligations under the Existing Agreements to which they
are a party;

(v) acknowledges, ratifies and confirms (A) that the security interest grants and pledges to
each of Kallina and Laurus set forth in the Existing Agreements extend to each Laurus/Kallina
Related Party, as assignees of Kallina and Laurus or their assignees, to the extent such
Laurus/Kallina Related Parties have heretofore been assigned an interest in an Existing Agreement,
(B) that the grant by the Company and each of the undersigned parties which have granted a
security interest to Kallina and/or Laurus and/or any of the other Laurus/Kallina Related Parties
under the Existing Agreements (each, a Security Party” and collectively, the “Security
Parties”) extends to and covers all assets (including, without limitation, the equity interests
owned by such Security Party) of each Security Party as more specifically set forth in the Existing
Agreements and the New Agreements, as applicable (the “Security Interest Grants”), (C) that
the Security Interest Grants secure all obligations and liabilities of each of the undersigned to
any Laurus/Kallina Related Party under each Existing Agreement and New Agreement (including
interest accruing after the filing of any petition in

 

7

 

bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether
or not a claim for post-filing or post-petition interest is allowed or allowable in such
proceeding), whether now existing or hereafter arising, direct or indirect, liquidated or
unliquidated, absolute or contingent (collectively, the “Obligations”); and (D) that each
Laurus/Kallina Related Party has all rights and remedies of a secured creditor under the Existing
Agreements, the New Agreements, applicable law and in equity. To the extent not otherwise granted
by the terms of the Existing Agreements and to secure all Obligations, each Security Party grants
to each Laurus/Kallina Related Party a security interest in all cash, cash equivalents, accounts,
accounts receivable, deposit accounts, inventory, equipment, goods, fixtures, documents,
instruments (including, without limitation, promissory notes and equity securities), contract
rights, general intangibles (including, without limitation, payment intangibles), chattel paper,
supporting obligations, investment property, letter-of-credit rights, trademarks, trademark
applications, tradestyles, patents, patent applications, copyrights, copyright applications and
other intellectual property in which each Security Party now has or hereafter may acquire any
right, title or interest, all proceeds and products thereof (including, without limitation,
proceeds of insurance) and all additions, accessions and substitutions thereto or therefor;

(iv) represents and warrants that except as disclosed in the disclosure schedule attached
hereto (A) all of the representations made by or on behalf of the undersigned in the Existing
Agreements to which it is a party are true and correct in all material respects on and as of the
date hereof; (B) each of the undersigned has the corporate power and authority to execute and
deliver the New Agreements to which it is a party; (iii) all corporate action on the part of each
of the undersigned (including their respective officers and directors) necessary for the
authorization of the New Agreements, the performance of all obligations of the undersigned
hereunder and thereunder and, the authorization, sale, issuance and delivery of the Second Term
Note and the Closing Shares has been taken; and (iv) the New Agreements, when executed and
delivered and, to the extent it is a party thereto, will be valid and binding obligations of the
undersigned; and

(v) releases, remises, acquits and forever discharges each Laurus/Kallina Related Party and
its respective employees, agents, representatives, consultants, attorneys, fiduciaries, officers,
directors, partners, predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter called the
“Released Parties”), from any and all actions and causes of action, judgments, executions,
suits, debts, claims, demands, liabilities, obligations, damages and expenses of any and every
character, known or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or
nature, for or because of any matter or things done, omitted or suffered to be done by any of the
Released Parties prior to and including the date of execution hereof, and in any way directly or
indirectly arising out of or in any way connected to this letter agreement, the Existing
Agreements, the New Agreements and any other document, instrument or agreement made by the
undersigned in favor of a Laurus/Kallina Related Party.

(j) This letter agreement shall become effective upon satisfaction of the following conditions
precedent: (i) such certificates, instruments, documents, agreements and opinions of counsel as
may be required by the Laurus/Kallina Related Parties or their counsel, each of which shall be in
form and substance satisfactory to the Laurus/Kallina Related Parties and their counsel, shall have
been delivered to the Laurus/Kallina Related Parties, (ii) the

 

8

 

Closing Shares shall have been delivered to Valens Offshore II or the Company shall have
furnished Valens Offshore II with proof satisfactory to Valens Offshore II that the Company has
instructed its transfer agent to cause the Closing Shares to be issued to Valens Offshore II by no
later than October 7, 2008 and that the Company has taken all other steps necessary to cause the
Closing Shares to be issued to Valens Offshore II by no later than October 7, 2008, (iii) the
Company shall have reimbursed the Laurus/Kallina Related Parties for the full amount of all of the
Laurus/Kallina Related Parties’ attorneys’ fees and costs incurred in connection with the
preparation and negotiation of the letter agreement and each of the other New Agreements and in
connection with the closing of the transactions described herein and therein and (iv) the Company
shall have paid (A) to Valens Capital Management, LLC, the investment manager of Valens Offshore II
(“VCM”), a non-refundable payment in an amount equal to $30,000; (B) to Valens Offshore II,
a non-refundable payment in an amount equal to $20,000; and (C) to Valens Offshore II, an advance
prepayment discount deposit equal to $20,000. The payments set forth in clauses (iv)(A) and (B)
above shall be deemed fully earned on the date hereof and shall not be subject to rebate or
proration for any reason. The payments set forth in clauses (iii) and (iv) above shall be paid at
closing out of funds held pursuant to a funds escrow agreement for the purchase of the Second Term
Note and a disbursement letter executed in connection herewith.

(k) Digital Angel Holdings, LLC (“Holdings”), a wholly-owned subsidiary of Destron
Fearing Corporation (“Destron”), is the owner of real property located in the city of St.
Paul, Minnesota (the “Premises”). In consideration of the transactions contemplated by
this letter agreement and in order to secure all of the Company’s and Destron’s obligations and
liabilities to the Laurus/Kallina Related Parties including, without limitation, those arising
under the Existing Agreements, the Company agreed that it would use commercially reasonable efforts
to obtain the necessary consents to cause Destron to cause Holdings to grant a mortgage in favor of
the Laurus/Kallina Related Parties with respect to the Premises which consents are required as the
charter documents of Holdings prohibit the granting of such mortgage and the Premises are currently
subject to an existing mortgage in favor of Principal Life Insurance Company (the
“Mortgagee”) which prohibits (i) the granting of such a mortgage in favor of the
Laurus/Kallina Related Parties and (ii) the modification of the charter documents of Holdings, in
each case without the Mortgagee’s consent. The Company hereby agrees to use commercially
reasonable efforts to obtain the consent of the Mortgagee to (i) the modification of the charter
documents to allow for the mortgage in favor of the Laurus/Kallina Related Parties, which
modification to allow for such mortgage shall not constitute an event of default under any of the
Existing Agreements and (ii) the granting of the mortgage by Holdings in favor of Laurus/Kallina
Related Parties, which mortgage shall be subordinate to the mortgage in favor of Mortgagee. In
addition, the Company further agrees that is shall not permit Destron to permit Holdings to permit
any additional liens (other than those in favor of the Mortgagee and those that are permitted by
the mortgage in favor of Mortgagee) to exist on the Premises. The failure to use best efforts to
obtain such consent or to permit such additional liens to exists on the Premises shall constitute
an Event of Default under the Existing Agreements.

(l) Nothing contained herein shall (i) limit in any manner whatsoever the Company’s, each
guarantor’s and each other Person’s obligation to comply with, and the Laurus/Kallina Related
Parties’ right to insist on the Company’s, such guarantor’s and such other Person’s compliance
with, each and every term of the Existing Agreements, or (ii) constitute a waiver of any Event of
Default or any right or remedy available to any Laurus/Kallina Related Party, or of the Company’s, any guarantor’s or any other Person’s obligation to pay and
perform all of its obligations, in each case whether arising under the Existing Agreements,
applicable law and/or in equity, all of which rights and remedies howsoever arising are hereby
expressly reserved, are not waived and may be exercised by any Laurus/Kallina Related Party at any
time.

 

9

 

(m) The Company acknowledges that it has an affirmative obligation to make prompt public
disclosure of material agreements and material amendments to the Existing Agreements. The Company
intends to file a Form 8-K with respect to the transactions contemplated by this letter agreement
no later than four (4) Business Days following the date hereof, a copy of which shall be delivered
to the Laurus/Kallina Related Parties.

(n) Except as specifically amended herein, the Existing Agreements shall remain in full force
and effect, and are hereby ratified and confirmed. The execution, delivery and effectiveness of
this letter agreement shall not operate as a waiver of any right, power or remedy of any
Laurus/Kallina Related Party, nor constitute a waiver of any provision of any of the Existing
Agreements. This letter agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns and shall be governed by and construed in
accordance with the laws of the State of New York.

(o) This letter agreement may be executed by the parties hereto in one or more counterparts,
each of which shall be deemed an original and all of which when taken together shall constitute one
and the same agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.

Very truly yours,

LAURUS MASTER FUND, LTD.

By: Laurus Capital Management, LLC, its

       investment manager

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Scott Bluestein 	 
	 	 	Name:  	Scott Bluestein	 
	 	 	Title:	Authorized Signatory 	 

KALLINA CORPORATION

By: Laurus Capital Management, LLC, its

       investment manager

	 	 	 	 	 
	 	 	 
	 	By:  	                                                     /s/ Scott Bluestein
 	 
	 	 	Name:  	Scott Bluestein	 
	 	 	Title:  	Authorized Signatory 	 

 

10

 

VALENS U.S. SPV I, LLC

VALENS OFFSHORE SPV I, LTD.

VALENS OFFSHORE SPV II, CORP.

By: Valens Capital Management, LLC, its

       investment manager

	 	 	 	 	 
	 	 	 
	 	By:  	                                                     /s/ Scott Bluestein
 	 
	 	 	Name:  	Scott Bluestein 	 
	 	 	Title:  	Authorized Signatory 	 
	 

PSOURCE STRUCTURED DEBT LIMITED

By: PSource Capital Limited, its investment

       consultant

	 	 	 	 	 
	 	 	 
	 	By:  	                                                    /s/ John Gilfillan
 	 
	 	 	Name:  	John Gilfillan	 
	 	 	Title:  	Authorized Signatory - Director 	 
	 

CONSENTED AND AGREED TO:

DIGITAL ANGEL CORPORATION

(f/k/a Applied Digital Solutions, Inc.)

	 	 	 	 
	 	 
	By:  	/s/ Joseph J. Grillo 	 
	 	Name:  	Joseph J. Grillo 	 
	 	Title:  	Chief Executive Officer 	 
	 

DESTRON FEARING CORPORATION

(f/k/a Digital Angel Corporation)

	 	 	 	 
	 	 
	By:  	/s/ Lorraine M. Breece
 	 
	 	Name:  	Lorraine M. Breece 	 
	 	Title:  	Chief Financial Officer 	 
	 

DIGITAL ANGEL TECHNOLOGY CORPORATION

	 	 	 	 
	 	 
	By:  	/s/ Lorraine M. Breece
 	 
	 	Name:  	Lorraine M. Breece 	 
	 	Title:  	Chief Financial Officer 	 
	 

DIGITAL ANGEL INTERNATIONAL, INC.

	 	 	 	 
	 	 
	By:  	/s/ Lorraine M. Breece
 	 
	 	Name:  	Lorraine M. Breece 	 
	 	Title:  	Chief Financial Officer 	 

 

11

 

	 	 	 	 

FEARING MANUFACTURING CO. INC.

	 	 	 	 
	 	 
	By:  	/s/ Lorraine M. Breece
 	 
	 	Name:  	Lorraine M. Breece 	 
	 	Title:  	Chief Financial Officer 	 
	 

 

12

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]