SMSC MANAGEMENT INCENTIVE PLAN FORM OF AGREEMENT
The body of this form of agreement applies to Executive Officers. Some Executive
Officers in the plan are principally devoted to specific product areas and their
incentives are based on a combination of corporate and product area goals.
Differences in application of the plan to those Executive Officers are explained
in the footnotes to this form of agreement.
This memorandum will serve as your formal Management Incentive Bonus Plan (the
"Plan") document for SMSC's (the "Company's" or "Company") fiscal year ___
ending February 28, ____. Your total "At-Plan" annual incentive bonus target is
_____. There are two components to your Plan:
1. Quarterly incentives based on the Company attaining its year-to-date
financial performance goals. (1)
2. A Year-End incentive based on the Company achieving its strategic business
goals (2), which can be adjusted based on individual performance.
1. Financial Performance Incentives (50% to 67% of total incentive bonus
opportunity, all paid in RSAs(3))
Up to one-fourth of the financial performance incentive bonus is earned in each
fiscal quarter if the Company attains its quarterly year-to-date business plan
revenue and operating income goals.(4) Revenue and operating income attainment
are separate and weighted equally for the purpose of calculating the quarterly
bonus award. Therefore, half of the quarterly incentive bonus target is based on
revenue attainment and half is based on operating income attainment.
For quarterly bonuses to be awarded, actual year-to-date revenue and operating
income must be equal to or greater than certain thresholds relative to
year-to-date business plan goals. The spread between the quarterly thresholds
and year-to-date goals vary from one quarter to another. Sixty percent of the
quarterly bonus is awarded if the year-to-date revenue (or operating income)
goal is achieved at the threshold amount and increases from 60% to 100%
proportionately up to full goal attainment.
Any portion of the quarterly incentive not earned for a quarter is carried
forward for possible payment at the end of the year if the actual full year
performance is at or above the full year threshold. Any bonus amounts that are
carried forward are awarded on a pro-rata basis at year end if the actual full
year revenue (or operating income) attainment is above the threshold amount, but
only to the extent that the total of the incentives awarded, and to-be-awarded,
is less than the pro-rata percentage calculation for the entire year. Earned
bonuses are awarded in the form of Restricted Stock Awards (RSAs), which vest
over three years (25/25/50% per year).
2. Strategic Incentive (33% to 50% of total incentive bonus opportunity, all
paid in cash(3))
This year-end incentive bonus is based on achieving strategic goals established
by the Board of Directors and may be adjusted for individual performance. Any
earned annual incentive is paid in cash.
Other Terms and Conditions:
- For purposes of this plan, actual results may exclude certain special
items that are not indicative of the normal operating performance.
- Earned cash incentives will be determined and paid following the public
release of the Company's year-end financial results.
- Earned quarterly RSAs are generally granted three days after the public
release of the Company's quarterly financial results and are subject to
approval by the Compensation Committee.
- No incentive will be paid to you if you are not employed by the Company
at the time when incentives are approved and ready for payment.
- The Company reserves the right to amend the plan in any way and at any
time upon written notice to you.
- Any dispute over any part of the plan will be judged and decided by the
Company's compensation committee.
(1) Participants within a product line have 1/3rd of their quarterly incentives
based on the Company attaining its year-to-date financial performance goals and
2/3rds based on their product line attaining its year-to-date financial
(2) Participants within product lines may be measured on product line strategic
(3) Half paid in cash and half paid of RSAs in the cases of the CEO's and the
(4) Participants within product lines have 1/12th of their financial performance
incentive bonus based on the Company attaining its financial performance goals
in each fiscal quarter and 1/6th based on their product line attaining its
financial performance goals in each fiscal quarter.