Exhibit 10.1

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Monolithic Power Systems, Inc.

6409 Guadalupe Mines Road

San Jose, CA 95120

May 24, 2007

Mr. Douglas McBurnie

Dear Douglas:

I am pleased to offer you a seat on the Board of Directors (the “Board”) of
Monolithic Power Systems, Inc. (the “Company”) as a Class I director. Your
appointment to the Board will be effective on May 24, 2007. With the hope and
expectation that you will accept this offer, I have summarized a few related
matters below for your reference.

First, should you accept this offer, the Company will, upon the effective date
of your joining the Board, recommend that the Board grant you an option (the
“Option”) to purchase up to 30,000 shares of the Company’s Common Stock under
the 2004 Equity Incentive Plan (the “Plan”) at an exercise price equal to the
fair market value of the shares on the date of grant. We will provide your
Option grant paperwork promptly after such grant has been made. Subject to the
terms of the Plan and your related option agreement, your Option will vest as to
50% of the shares one year from the date referred to as the “Vesting
Commencement Date”, and as to an additional 50% of the shares one year
thereafter such that your Option will be fully vested on the two-year
anniversary of the Vesting Commencement Date.

In addition to the time-based vesting described in the preceding paragraph, if
you are a Director of the Company on the date of a Change of Control (as defined
below) that occurs before the two-year anniversary of the Vesting Commencement
Date, in the event that a successor corporation refuses to assume or substitute
the Option with an equivalent option or right, 100% of the shares subject to the
Option shall immediately vest as of the effective date of such Change of
Control. Notwithstanding any accelerated vesting contained in this paragraph,
your total number of shares subject to the Option granted herein shall not
increase by virtue of a Change of Control.

“Change of Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting securities; or

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Letter to Douglas McBurnie

May 24, 2007

Page 2

 

(ii) The consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets;

(iii) A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

(iv) The consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation.

Second, in addition to the indemnification rights you, in your capacity as a
director of the Company, will be entitled to under the Company’s Bylaws and
Certificate of Incorporation, we propose to grant you the additional contractual
indemnification and related rights provided in the enclosed Indemnification
Agreement.

Third, you will receive an annual retainer of $25,000 in connection with your
seat on the Board of Directors and certain other amounts based on your
participation on the Audit Committee, Compensation Committee and/or Nominating
and Corporate Governance Committee. The committee assignments will be determined
by the Board of Directors.

Finally, as you know, the Company’s intellectual property and other proprietary
information is one of our most important assets and we must all be vigilant in
our protection of it. Although it goes without saying, I feel it is appropriate
to remind all new directors of their

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Letter to Douglas McBurnie

May 24, 2007

Page 3

 

fiduciary duties of loyalty and care to the Company. These include the duty to
maintain the confidentiality of the Company’s confidential and proprietary
information and the duty to not use such information other than to promote the
Company’s best interests. I am sure that you can appreciate the importance of
these matters to us.

Again, I am happy to extend this invitation to you. Your participation on our
Board would be of great benefit to the Company.

 

Best Regards,  

/s/ Michael Hsing

  Michael Hsing, CEO  

 

Acknowledged and agreed:  

/s/ Douglas McBurnie

  Douglas McBurnie   Date: May 24, 2007