| 1. | Purpose.  The      purpose of this 2006 Directors Stock Appreciation Rights Plan (the “Plan”      or the “SAR Plan”) of Standard Microsystems Corporation (the “Company” or      “SMSC”), is to link the compensation of outside directors of the Company,      whose services are considered essential to the Company’s continued      progress, to the performance of SMSC stock, and to also provide them with      a further incentive to continue to serve as directors of the      Company.  The Plan is also intended to assist the Company      through utilization of the incentives provided by the Plan to attract and      retain experienced and qualified candidates to fill vacancies in the Board      that may occur in the future. |
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|   | a. | The      Plan will be administered by the Board of Directors (the “Board”) of the      Company.  The Board may delegate all or a portion of the      administrative responsibilities for the SAR Plan to the Compensation      Committee of the Board. Subject to the express provisions of the Plan, the      Board will have complete authority to interpret the Plan; to prescribe,      amend, and rescind rules and regulations relating to it; to determine the      terms and provisions of the respective Stock Appreciation Rights (“SAR”)      Agreements (which need not be identical); and to make all other      determinations necessary or advisable for the administration of the      Plan.  The Board’s determinations on the matters referred to in      this Section 2 will be conclusive and binding on all    parties. |
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|   | b. | No      member of the Board, or any employee of the Company authorized to      administer the Plan, shall be liable for any action or determination made      in good faith with respect to this Plan or any SAR Grant. To the full      extent permitted by law, the Company shall indemnify and hold harmless      each person made or threatened to be made a party to any civil or criminal      action or proceeding by reason of the fact that such person, or such      person's testator or intestate, is or was a member of the Board, or an      authorized employee. |
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| 3. | Participation      in the Plan.  Each person who is now or shall become a      director of the Company and who is not, while serving as director, an      employee of the Company or any Subsidiary of the Company, shall be      eligible to participate in the Plan (an “Eligible Director”, hereinafter      also referred to as a “Grantee”).  A director of the Company      shall not be deemed to be an employee of the Company solely by reason of      the existence of a consulting contract between such director and the      Company or any Subsidiary thereof pursuant to which the director agrees to      provide consulting services as an independent consultant to the Company or      its Subsidiaries on a regular or occasional basis for a stated      consideration. |
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| 4. | SAR      Shares Subject to the Plan.  Subject to the provisions of      Section 10 hereof, this Plan has 400,000 “hypothetical” shares (the      “Shares”) of $.10 par value common stock of SMSC (the “Common Stock”)      available for the granting of SARs under the Plan.  The Plan      does not permit any payments for a SAR Grant to be made in the Common      Stock of SMSC. |
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| 5. | General      Terms and Conditions of SARGrants |
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|   | a. | Form      of SARs.  Each SAR granted under this Plan shall be      evidenced by a written SAR Agreement in such form as the Board shall from      time to time approve, which SAR Agreement shall set forth the applicable      date of grant (the “Grant Date”) and shall comply with and be subject to      the terms and conditions set forth in thePlan. |
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|   | b. | Initial      SARs.  .  Any Eligible Director first elected      or appointed after June 1, 2009 shall automatically be granted 28,000      Initial SARs.  All Initial SARs shall be subject to the Vesting      Schedule contained in Section 5(f)below. |
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|   | c. | Current      Service SARs.  In addition to Initial SARs, each Eligible      Director shall be automatically granted SARs equal to 3,500 shares      (“Current SAR Grant”) on a quarterly basis beginning after one year of      incumbency for each Eligible Director who was first elected or appointed      after June 1, 2009 and after three years of incumbency for all Eligible      Directors first elected or appointed prior to June 1, 2009.  All      shares granted pursuant to a Current SAR Grant shall be fully vested upon      the first anniversary of each Grant Date.  Current Service SARs      shall be granted on each January 15, April 15, July 15, and October 15      (or, if any such day shall not be a business day, then on the next      succeeding business day). |
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|   | d. | SAR      Grant Value.  All SARs granted hereunder shall have a      “Grant Value” equal to the “Fair Market Value” of a share of Common Stock      on the Grant Date, as defined in Section13(f). |
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|   | e. | SARs      Nontransferable.  Each SAR granted under the Plan by its      terms shall not be transferable by the Grantee otherwise than by will, or      by the laws of descent and distribution.  No SAR or interest      therein may be transferred, assigned, pledged, or hypothecated by the      Grantee during his or her lifetime, whether by operation of law or      otherwise, or be made subject to execution, attachment, or similar      process. |
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|   | f. | Vesting      of SARs.  For all Initial SARS granted after June 1,      2009, one-half (1/2) of the number of Initial SARs granted shall vest on      the first anniversary of the date of grant, and the remaining one half      (1/2) shall vest on the second anniversary of the date of grant. In the      event of death, Disability or any termination from the Board, the Board      shall have the discretion to accelerate the vesting of any Initial or      Current Service SARs. |
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|   | g. | Exercise      of SARs.  Any SAR, once vested, can be exercised within      the complete discretion of the Grantee at any point in time prior to the      expiration of any SAR. |
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|   | h. | Payments      Upon Exercise.  Upon the exercise of a SAR, a Grantee      shall be entitled to receive an amount in cash equal to the excess of the      fair market value of one share over the Grant Value per share specified in      the related SAR Grant, multiplied by the number of shares in respect of      which the SAR Grant is exercised. Full or fractional shares may be      exercised.  Payment will be made within ten (10) business days      of any exercise. |
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|   | i. | Termination      of Grantee’s Directorship.  If a Grantee's directorship      with the Company is terminated for any reason, other than by reason of      death or Disability (as described in Subsections (j) and (k) below) prior      to exercise, any vested SARs shall remain exercisable for a period equal      to the lesser of three (3) years from the date of the termination of a      Grantee’s Directorship or the outstanding exercise period for any      SAR. |
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|   | j. | Death      of Grantee.  If a Grantee’s directorship is terminated by      reason of his death prior to the exercise of his SAR Grant, or if a      Grantee whose directorship is terminated as a result of a Disability (as      described in Subsection (k) below) shall die following the Grantee's      termination of being a director, but prior to exercise of any vested SAR      Grant, such SAR Grant shall be exercisable by the Grantee's Beneficiary to      the extent of the number of SARs in which the Grantee was vested for a      period equal to the lesser of three (3) years from the date of the      termination of a Grantee’s Directorship or the outstanding exercise period      for any SAR. |
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|   | k. | Disability      of Grantee.  If a Grantee shall become Disabled during      the Grantee's directorship with the Company and the Grantee's directorship      with the Company is terminated as a consequence of such Disability, or if      a Grantee whose directorship is terminated shall become Disabled following      the Grantee’s termination of being a Director, but prior to the exercise      of any vested SAR Grant, any SAR Grant shall be exercisable by the Grantee      or the Grantee’s personal representative for a period equal to the lesser      of three (3) years from the date of the termination of a Grantee’s      Directorship or the outstanding exercise period for any    SAR. |
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|   | l. | Delivery      of Notice and Execution of SAR Grant Agreement.  Upon the      determination to issue a SAR Award, the Company shall promptly issue a      notice representing the Shares subject to the SAR Grant to the      Grantee.  Each Grantee shall enter into, and be bound by the      terms of, a SAR Grant Agreement which shall include or incorporate by      reference the terms of the Plan and which shall contain such other terms,      conditions and restrictions not inconsistent with the Plan as the Board      shall determine. |
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|   | m. | Tax      Withholding.  The obligation of the Company to make      payment upon any Payment Date of an SAR Grant shall be subject to all      applicable Federal, state and local tax withholding      requirements.  A Grantee shall be responsible for any portion of      the Grantee’s tax liabilities associated with the exercise of any SAR      Grants. |
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|   | n. | Next      Business Day Rule.  To the      extent that any SAR is granted on a day that is not a business day in      which the NASDAQ is open, the Grant Date of any SAR shall be the next      business day upon which the NASDAQ isopen. |
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| 6. | No      Right to Continue as a Director.  Neither the Plan, the      execution of any SAR Grant Agreement, nor any other action taken pursuant      to the Plan, shall constitute or be evidence of any agreement or      understanding, express or implied, that the Company will retain a director      for any period of time, or at any particular rate of      compensation. |
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| 7. | No      Stockholder’s Rights for Grantees.  A Grantee shall have      no rights as a stockholder with respect to any Shares covered by SAR      Grant, and no adjustments shall be made for any dividends paid before or      after the exercise of any SAR. |
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| 8. | No      Right to Vote.  A Grantee shall have no right to vote any      Shares as a result of the granting of anySAR. |
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| 9. | No      Right to Dividends.  A Grantee shall have no right to      dividends as a result of the granting of any  SARs. |
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| 10. | Adjustments.  The      number of Shares representing the number of SARs which may be issued under      the Plan, as stated in Section 4 hereof, as well as the Grant Value per      share under such outstanding SAR Awards, and the amount to be paid upon      the Payment Date of any SAR, shall be suitably adjusted by the Board to      reflect any stock dividend, stock split, shares combination, or similar      change in the capitalization of the Company.  The Board shall      use its reasonable judgment in determining a suitable      adjustment. |
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|   | In      the event the Company is liquidated or a corporate transaction described      in Section 424(a) of the Code and the Treasury Regulations issued      thereunder occurs (as, for example, a merger, consolidation, acquisition      of property or stock, separation or reorganization), each outstanding SAR      Grant shall be assumed by the surviving or successor corporation if      any. |
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| 11. | Change      in Control.  Notwithstanding any provisions to the      contrary, in the event of a Change in Control, the Board may, within its      discretion, within a period of twelve (12) months after such Change in      Control, determine that each SAR Grant outstanding hereunder shall      terminate within thirty (30) days after notice to the Grantees, and such      Grantees shall receive, with respect to each SAR Grant, an amount equal to      the excess of the Fair Market Value of such SAR Grant over the Grant      Value, as determined under Section 5(d), to the extent such action is      consistent with Section 409A of the Code, and any guidance issued      thereunder.  Such amount shall be payable in    cash. |
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| 12. | Amendment      or Discontinuance of the Plan.  The Board may suspend or      discontinue the Plan or revise or amend it in any respect whatsoever;      provided, however, that, without approval of the Grantees, no revision or      amendment shall change the rights under any granted or vested      SARs. |
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| 13. | Definition.  For      purposes of the Plan the words and phrases used herein shall have the      following meanings: |
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|   | a. | “Beneficiary”      shall mean a Grantee’s spouse, if married, or the Grantee’s estate, if no      spouse exists as of any applicable Payment Date.  A Grantee may,      however, designate other individuals or entities as a Beneficiary for any      payment, in accordance with procedures established by the      Board. |
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|   | c. | “Change      in Control” shall mean: (i) the acquisition of ownership of stock of the      Company, by any person (including, without limitation, a corporation,      trust, partnership, joint venture, limited liability company (a "Person")      or by any group of Persons), whether directly, indirectly, beneficially or      of record, in which acquisition, together with stock held by such person      or group, represents more than 20% of the total voting power of all      outstanding stock of the Company; (ii) any merger or consolidation of the      Company which the stockholders of the Company before such merger or      consolidation do not, as a result of the merger or consolidation, own at      least 50% of the merger or consolidation; or (iii) any nomination and      election of 50% or more of all members of the Board of Directors of the      Company within a 36-month period whose election is without the      recommendation of the Board.  "Change in Control" shall not      include acquisition of the Company's stock by any Company employee benefit      plans. |
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|   | d. | “Code”      means the Internal Revenue Code of 1986, as amended from time to      time. |
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|   | e. | “Disability”      means a Grantee is unable to engage in any substantial gainful activity by      reason of any medically determinable physical or mental impairment which      can be expected to result in death, or can be expected to last for a      continuous period of not less than twelve (12)  months. |
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|   | f. | “Fair      Market Value” means, as of the date on which such Fair Market Value is to      be determined, the closing price of a share of Common Stock as reported in      The Wall Street Journal (or a publication or reporting service deemed      equivalent to The Wall Street Journal for such purpose by the Board) for      the over-the-counter market or any national securities exchange and other      securities market which at the time are included in the stock price      quotations of such publication. |
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|   | h. | “Stock      Appreciation Right” means a contractual right that allows a Grantee to      receive payment for a SAR Grant equal to the value of any appreciation in      the value of SMSC Common Stock over the Grant Value, as provided in      Section 5(d), on the applicable exercisedate. |
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|   | i. | “Subsidiary”      means any entity as defined in Section 424(f) of the  Code. |
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| 14. | Section      409A.  Section 409A of the Code was enacted as part of      the American Jobs Creation Act of 2004 (“AJCA”).  The Final      Regulations issued under Section 409A provide that SARs are not treated as      a form of nonqualified deferred compensation, as long as the base value      for each SAR is not less than the fair market value of a share of stock of      service recipient at the time of grant and the right does not include any      additional deferral features.  It is intended that the SAR Plan      is not subject to the provisions of Section 409A, and the Plan shall be      amended, if necessary, to comply with Final Regulations under Section      409A.  Notwithstanding the foregoing or anything herein to the      contrary, in no event shall the Corporation be liable for any taxes or      penalties owed as a result of the failure of the Plan or any deferral or      payment made hereunder to comply with Section  409A. |
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| 15. | Notice.  Any      notice to the Company required by this Plan shall be in writing addressed      to the General Counsel of the Company at its principal office, and shall      be deemed delivered only when it is received by the General      Counsel. |
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| 16. | Expenses.  The      administrative or other expenses of the Plan shall be paid by the      Company. |
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| 17. | Severability.  In      the event that any one or more provisions of the Plan or any Agreement, or      any action taken pursuant to the Plan or such Agreement, should, for any      reason, be unenforceable or invalid in any respect under the laws of the      United States, any state of the United States or any other government,      such unenforceability or invalidity shall not affect any other provision      of the Plan or of such or any other Agreement, but in such particular      jurisdiction and instance the Plan and the affected Agreement shall be      construed as if such unenforceable or invalid provision had not been      contained therein or as if the action in question had not been taken      thereunder. |
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| 18. | Gender      and Number.  The masculine gender, where appearing      herein, shall be deemed to include the feminine gender, and the singular      shall be deemed to include the plural, unless the context clearly      indicates to the contrary. |
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| 19. | Conflict.  In      the event of a conflict between the terms of this Plan and the terms of      any Agreement, the terms of this Plan shall  govern. |
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| 20. | Governing      Law.  This Plan and all determinations made and actions      taken pursuant hereto shall be governed by the law of the State of New      York, without regard to the provisions governing conflict of laws, and      construed accordingly. |
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