Exhibit 10.3

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this "Agreement") is entered into as of February 22,
2011, by and between POWER INTEGRATIONS, INC., a Delaware corporation
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I
CREDIT TERMS

SECTION 1.1.    LINE OF CREDIT.

(a)    Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including February 1, 2013, not to exceed at any time the aggregate principal
amount of Fifty Million Dollars ($50,000,000.00) ("Line of Credit"), the
proceeds of which shall be used for Borrower's general corporate purposes.
Borrower's obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note dated as of February 22, 2011 ("Line of Credit
Note"), all terms of which are incorporated herein by this reference.

(b)    Letter of Credit Subfeature. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue commercial and standby letters of credit for the account of
Borrower to back performance (each, a "Letter of Credit" and collectively,
"Letters of Credit"); provided however, that the aggregate undrawn amount of all
outstanding Letters of Credit shall not at any time exceed Five Million Dollars
($5,000,000.00). Unless cash secured to Bank's satisfaction, no Letter of Credit
shall have an expiration date subsequent to the maturity date of the Line of
Credit. The undrawn amount of all Letters of Credit shall be reserved under the
Line of Credit and shall not be available for borrowings thereunder. Each Letter
of Credit shall be subject to the additional terms and conditions of the Letter
of Credit agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the Line
of Credit are not available, for any reason, at the time any drawing is paid,
then Borrower shall immediately pay to Bank the full amount drawn, together with
interest thereon from the date such drawing is paid to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to advances under
the Line of Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank for the
amount of any such drawing.

(c)    Borrowing and Repayment. Borrower may from time to time during the term
of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above. Borrower may terminate this Agreement at any time upon notice to Bank and
payment in full of all amounts owing by Borrower to Bank under this

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Agreement, and cash collateralization to Bank's satisfaction of any Letters of
Credit issued pursuant to this Agreement.

SECTION 1.2.    INTEREST/FEES.

(a)    Interest. The outstanding principal balance of each credit subject hereto
shall bear interest, and the amount of each drawing paid under the Standby
Letter of Credit shall bear interest from the date such drawing is paid to the
date such amount is fully repaid by Borrower, at the rate of interest set forth
in each promissory note or other instrument or document executed in connection
therewith.

(b)    Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

(c)    Standby and Commercial Letter of Credit Fees. Borrower shall pay to Bank
(i) fees upon the issuance of each Standby and Commercial Letter of Credit equal
to one and one-half percent (1.50%) per annum (computed on the basis of a
360-day year, actual days elapsed) of the face amount thereof, and (ii) fees
upon the payment or negotiation of each drawing under any Standby and Commercial
Letter of Credit and fees upon the occurrence of any other activity with respect
to any Standby and Commercial Letter of Credit (including without limitation,
the transfer, amendment or cancellation of any Standby and Commercial Letter of
Credit) determined in accordance with Bank's standard fees and charges then in
effect for such activity.

(d)    Commitment Termination. At any time (i) there is no outstanding principal
balance or unpaid interest under the Line of Credit or the Letter of Credit
subfeature described in Section 1.1(b) above, (ii) there are no issued and
outstanding Letter(s) of Credit under the Letter of Credit subfeature, and (iii)
there are no other payment obligations of Borrower to Bank outstanding hereunder
or under any other Loan Document, then Borrower, upon written notice (a
“Commitment Termination Notice”) to Bank, may request that the Line of Credit be
terminated with no prepayment fees.

SECTION 1.3.    DEPOSIT BALANCES ARRANGEMENT. Borrower shall maintain with Bank
deposit balances, calculated on a quarterly basis, equal to $25,000,000.00
(“Deposit Balances Arrangement”). To the extent such Deposit Balances
Arrangement is not maintained, Borrower shall pay to Bank a fee equal to the
product of the balance deficiency multiplied by a rate per annum of 0.35%, which
fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears within ten (10) days after each billing is sent
by Bank.

SECTION 1.4.    GUARANTIES. The payment and performance of all indebtedness and
other obligations of Borrower to Bank shall be guaranteed jointly and severally
by any current or hereafter created domestic subsidiaries of Borrower, as
evidenced by and subject to the terms of guaranties in form and substance
satisfactory to Bank.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank:

SECTION 2.1.    LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of Delaware, and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required, except in those states in which the failure to so qualify or to be so
licensed could not reasonably be expected to have a material adverse effect on
Borrower.

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SECTION 2.2.    AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same, as
applicable, enforceable in accordance with their respective terms.

SECTION 2.3.    NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Certificate of Incorporation
or By-Laws of Borrower, or result in any breach of or default under any
contract, obligation, indenture or other instrument to which Borrower is a party
or by which Borrower may be bound, except where such violation, contravention,
breach or default would not reasonably be expected to have a material adverse
effect on Borrower.

SECTION 2.4.    LITIGATION. There are no pending, or to Borrower's knowledge
threatened in writing, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
involving more than $1,000,000 individually, or $10,000,000 in the aggregate, or
which would reasonably be expected to have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing or in Borrower's periodic and other reports, proxy
statements and other materials filed with the SEC or distributed to its
stockholders (the “SEC Filings”) prior to the date hereof. As used in this
Agreement, “SEC” shall mean the Securities and Exchange Commission, any entity
succeeding to any or all of the functions of the Securities and Exchange
Commission or any national securities exchange or analogous agency, authority,
instrumentality, regulatory body, court or other entity.

SECTION 2.5.    CORRECTNESS OF FINANCIAL STATEMENT. The annual financial
statement of Borrower dated December 31, 2009, and all interim financial
statements delivered to Bank since said date, true copies of which have been
delivered by Borrower to Bank prior to the date hereof, (a) are complete and
correct in all material aspects and present fairly the financial condition of
Borrower, (b) disclose all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting principles,
whether liquidated or unliquidated, fixed or contingent, and (c) have been
prepared in accordance with generally accepted accounting principles
consistently applied. Other than for Permitted Liens, Borrower has not
mortgaged, pledged, granted a security interest in or otherwise encumbered any
of its assets or properties except in favor of Bank or as otherwise permitted by
Bank in writing. As used in this Agreement, “Permitted Liens” shall mean (i)
Liens for taxes or other governmental or regulatory assessments which are not
delinquent, or which are contested in good faith by the appropriate proceedings,
and for which appropriate reserves are maintained in accordance with GAAP; (ii)
Liens on any property held or acquired by Borrower securing indebtedness not to
exceed the amounts set forth in Section 5.2(c) below incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property or
existing on such property when acquired; (iii) liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default
(iv) liens and setoff rights in favor of other financial institutions arising in
connection with Borrower's deposit accounts held at such institutions, provided
the existence of such accounts does not conflict with the provisions of Section
4.9(c) hereof, (v) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, (vi) liens incurred or deposits made in the
ordinary course of business with utility companies, (vii) liens incurred or
deposits or pledges made to secure the performance of bids, tenders, contracts
(other than contracts for the payment of money), public or statutory or
regulatory obligations, surety, stay, appeal, indemnity, performance or other
similar bonds, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations arising in the ordinary
course of

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business (viii) materialmen's, landlord's, mechanics', repairmen's, workmen's,
employees' or other like liens arising in the ordinary course of business, (ix)
non-exclusive license of intellectual property granted to third parties in the
ordinary course of business, and licenses of intellectual property that could
not result in a legal transfer of title of the licensed property that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discrete geographical areas outside of the United States,
(x) liens on insurance proceeds in favor of insurance companies granted solely
as security for financed premiums, (xi) easements, reservations, rights-of-way,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property, and (xii) any interest or title of a
lessor or sub-lessor under any lease of real property in the ordinary course of
business.

SECTION 2.6.    INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year as
disclosed in SEC reporting.

SECTION 2.7.    NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower.

SECTION 2.8.    PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

SECTION 2.9.    ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation, in each case under any
agreements involving monetary liability, which default or defaults result in a
right by such third party or parties, whether or not exercised, to accelerate
the maturity of any indebtedness in excess of Five Million Dollars ($5,000,000).

SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in
writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

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ARTICLE III
CONDITIONS

SECTION 3.1.    CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:

(a)    Approval of Bank Counsel. All legal matters incidental to the extension
of credit by Bank shall be satisfactory to Bank's counsel.

(b)    Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

(i)    This Agreement and each promissory note or other instrument or document
required hereby.
(ii)    Corporate Resolution: Borrowing.
(iii)    Certificate of Incumbency.
(iv)    Disbursement Order.
(v)    Such other documents as Bank may require under any other Section of this
Agreement.

(c)    Financial Condition. There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower or any
guarantor hereunder, nor any material decline, as determined by Bank, in the
market value of any collateral required hereunder or a substantial or material
portion of the assets of Borrower or any such guarantor.

(d)    Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage on all Borrower's property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Bank, and where required by Bank, with
loss payable endorsements in favor of Bank.

SECTION 3.2.    CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:

(a)    Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and, except as disclosed to Bank or in the SEC
Filings, on the date of each extension of credit by Bank pursuant hereto, with
the same effect as though such representations and warranties had been made on
and as of each such date, and on each such date, no Event of Default as defined
herein, and no condition, event or act which with the giving of notice or the
passage of time or both would constitute such an Event of Default, shall have
occurred and be continuing or shall exist.

(b)    Documentation. Bank shall have received all additional documents which
may be required in connection with such extension of credit.

(c)    Additional Letter of Credit Documentation. Prior to the issuance of each
Letter of Credit, Bank shall have received a Letter of Credit Agreement on
Bank's standard form, properly completed and duly executed by Borrower.

(d)    No Material Adverse Change. There shall not exist or have occurred any
event or condition that impairs, or is substantially to impair, the prospect of
payment or performance by Borrower

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of its obligations under any of the Loan Documents.

ARTICLE IV
AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1.    PUNCTUAL PAYMENTS. Within seven (7) days after such obligations
are due and payable, pay all principal, interest, fees or other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein.

SECTION 4.2.    ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

SECTION 4.3.    FINANCIAL STATEMENTS. Provide to Bank all of the following, in
form and detail satisfactory to Bank:

(a)    not later than 120 days after and as of the end of each fiscal year, an
audited financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include balance sheet, income statement, and
statement of cash flow;

(b)    not later than 45 days after and as of the end of each fiscal quarter, a
financial statement of Borrower, prepared by Borrower, to include balance sheet,
income statement, and statement of cash flow;

(c)    not later than 90 days after the end of each fiscal year, an annual
budget and projection report, prepared by Borrower;

(d)    contemporaneously with each fiscal quarter financial statement of
Borrower required hereby, and concurrently with the submission of each advance
request under the Line of Credit, a certificate of the president or chief
financial officer of Borrower that said financial statements are accurate and
that there exists no Event of Default nor any condition, act or event which with
the giving of notice or the passage of time or both would constitute an Event of
Default;

(e)    from time to time such other information as Bank may reasonably request.

SECTION 4.4.    COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business, the
noncompliance with or violation of which could reasonably be expected to have a
material adverse effect on Borrower's business.

SECTION 4.5.    INSURANCE. Maintain and keep in force, for each business in
which Borrower is engaged, insurance of the types and in amounts customarily
carried in similar lines of business, including but not limited to fire,
extended coverage, public liability, flood, property damage and workers'
compensation, with all such insurance carried with companies and in amounts
satisfactory to Bank, and

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deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.

SECTION 4.6.    FACILITIES. Keep all properties necessary to Borrower's business
in good repair and condition, and from time to time make necessary repairs,
renewals and replacements thereto so that such properties shall be fully and
efficiently preserved and maintained.

SECTION 4.7.    TAXES AND OTHER LIABILITIES. Pay and discharge when due any and
all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision with adequate reserves under GAAP for eventual payment
thereof in the event Borrower is obligated to make such payment.

SECTION 4.8.    LITIGATION. Except as disclosed in Borrower's SEC Filings,
promptly give notice in writing to Bank of any litigation pending or threatened
in writing against Borrower involving more than $1,000,000 individually, or
$10,000,000 in the aggregate.

SECTION 4.9.    FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):

(a)    Modified Quick Ratio not less than 1.50 to 1.0 at all times, measured on
a consolidated basis at each fiscal quarter end, with "Modified Quick Ratio"
defined as the aggregate of unrestricted cash, unrestricted marketable
securities, net accounts receivable, and long term investments divided by total
current liabilities and borrowings under the Line of Credit.

(b)    Tangible Net Worth measured on a consolidated basis at each fiscal
quarter end, not less than $200,000,000 less than Borrower's actual Tangible Net
Worth at Borrower's fiscal year ending 2010, with "Tangible Net Worth" defined
as the aggregate of total stockholders' equity [plus subordinated debt] less any
intangible assets [and less any loans or advances to, or investments in, any
related entities or individuals].

(c)    Maintain Borrower's primary collection and disbursement deposit
account(s) with Bank or any banking affiliate of Bank. The transition will begin
within 30 days of closing and will be completed by June 30, 2011.

SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.

ARTICLE V
NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated, but excluding inchoate indemnity
obligations) of Borrower to Bank under any of the Loan Documents remain

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outstanding, and until payment in full of all obligations (other than inchoate
indemnity obligations) of Borrower subject hereto, Borrower will not without
Bank's prior written consent:

SECTION 5.1.    USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

SECTION 5.2.    OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b) any other
liabilities of Borrower existing as of, and disclosed to Bank prior to, the date
hereof, (c) new purchase money debt and other debt in amounts not to exceed an
aggregate of $5,000,000.00 during each fiscal year, (d) the issuance of
unsecured, subordinated convertible debt, provided, however, that such debt is
subordinated in writing on terms reasonably acceptable to Bank and that Borrower
is in proforma compliance with financial covenants both pre and post issuance of
debt, (e) indebtedness to trade creditors incurred in the ordinary course of
business, (f) indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business, (g) indebtedness
secured by Permitted Liens, (h) indebtedness between Borrower and its
subsidiaries in the ordinary course of business, and (h) extensions,
refinancings, modifications and restatements of the foregoing provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms.

SECTION 5.3.    MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Borrower may enter
into mergers or acquisitions with, and make loans or advances to and equity
investments in, and sell, lease or transfer assets to third party entities so
long as Borrower is the surviving entity (as applicable) and Borrower is in pro
forma compliance with financial covenants both before and after each such
merger, consolidation, acquisition, loan, advance, equity investment, sale,
lease or transfer of assets.

SECTION 5.4.    GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except (i) any of
the foregoing in favor of Bank, and (ii) in the ordinary course of Borrower's
business.

SECTION 5.5.    LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except (a) any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof, (b) any of the foregoing in
accordance with the provisions of Section 5.3 above, (c) additional loans,
advances or investments in or to Borrower's subsidiaries in the ordinary course
of business, or (d) investments made pursuant to a Board-approved investment
policy.

SECTION 5.6.    PLEDGE OF ASSETS. Other than for Permitted Liens, mortgage,
pledge, grant or permit to exist a security interest in, or lien upon, all or
any portion of Borrower's assets now owned or hereafter acquired, except any of
the foregoing in favor of Bank or which is existing as of, and disclosed to Bank
in writing prior to, the date hereof.

    
ARTICLE VI
EVENTS OF DEFAULT

SECTION 6.1.    The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:

(a)    Borrower shall fail to pay, within seven (7) days of when due, any
principal, interest, fees

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or other amounts payable under any of the Loan Documents (provided that such
seven (7) day cure period shall not apply to payments due upon stated maturity
of the Line of Credit Note and that during the cure period, the failure to make
or pay any payment specified under this subclause (a) is not an Event of
Default, but no credit extension will be made during the cure period).

(b)    Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.

(c)    Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those specifically described as an “Event of Default” in this
Section 6.1), and with respect to any such default that by its nature can be
cured, such default shall continue for a period of thirty (30) days from its
occurrence.

(d)    Any default in the payment or performance of any monetary obligation in
excess of $5,000,000, or any defined event of default, under the terms of any
contract, instrument or document (other than any of the Loan Documents) pursuant
to which Borrower or any guarantor hereunder (with each such guarantor referred
to herein as a "Third Party Obligor") has incurred any debt for borrowed money
in an amount greater than $5,000,000.

(e)    Borrower or any Third Party Obligor shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Third Party Obligor shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or Borrower
or any Third Party Obligor shall file an answer admitting the jurisdiction of
the court and the material allegations of any involuntary petition; or Borrower
or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief for
debtors.

(f)    The filing of a notice of judgment lien against Borrower in an amount of
at least $5,000,000 (not covered by independent third-party insurance as to
which liability has been accepted by such insurance carrier) shall remain
unsatisfied for thirty (30) days and is not discharged or stayed (whether
through the posting of a bond or otherwise) within thirty (30) days; or the
recording of any abstract of judgment against Borrower in an amount of at least
$5,000,000 (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) and the same is not,
within thirty (30) days after the occurrence thereof, discharged or stayed
(whether through the posting of a bond or otherwise) in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower and the same is not, within thirty (30) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); or the entry of one or more final judgments, orders, or decrees
for the payment of money in an amount, individually or in the aggregate, of at
least $5,000,000 (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) shall be rendered against
Borrower and the same are not, within thirty (30) days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such
judgments are not discharged prior to the expiration of any such stay; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to

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bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower or any Third Party Obligor.

(g)    [Intentionally Omitted].

(h)    The dissolution or liquidation of Borrower or any Third Party Obligor if
a corporation, partnership, joint venture or other type of entity; or Borrower
or any such Third Party Obligor, or any of its directors, stockholders or
members, shall take action seeking to effect the dissolution or liquidation of
Borrower or such Third Party Obligor.

(i)    60 days after the occurrence of any Change in Control of Borrower,
coupled with removal or departure of Balu Balakrishnan as Chief Executive
Officer. All defined terms as used in this Section 6.1 are defined below.

A “Change in Control” means the occurrence, in a single transaction or in a
series of related transactions, of any one or more of the following events:

(i) any Exchange Act Person becomes the Owner, directly or indirectly, of
securities of the Borrower representing more than fifty percent (50%) of the
combined voting power of the Borrower's then outstanding securities other than
by virtue of a merger, consolidation or similar transaction. Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Borrower directly from the Borrower, (B) on
account of the acquisition of securities of the Borrower by an investor, any
affiliate thereof or any other Exchange Act Person that acquires the Borrower's
securities in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Borrower through the issuance of
equity securities, or (C) solely because the level of Ownership held by any
Exchange Act Person (the “Subject Person”) exceeds the designated percentage
threshold of the outstanding voting securities as a result of a repurchase or
other acquisition of voting securities by the Borrower reducing the number of
shares outstanding, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of voting
securities by the Borrower, and after such share acquisition, the Subject Person
becomes the Owner of any additional voting securities that, assuming the
repurchase or other acquisition had not occurred, increases the percentage of
the then outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control shall be deemed to
occur; or

(ii) there is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Borrower and, immediately after the
consummation of such merger, consolidation or similar transaction, the
stockholders of the Borrower immediately prior thereto do not Own, directly or
indirectly, either (A) outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the surviving
corporation, partnership, limited liability company or other entity in such
merger, consolidation or similar transaction or (B) more than fifty percent
(50%) of the combined outstanding voting power of the parent of the surviving
corporation, partnership, limited liability company or other entity in such
merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the
Borrower immediately prior to such transaction.

“Exchange Act Person” means any natural person, corporation, partnership,
limited liability company or other entity, or “group” (within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the “Exchange
Act”)), except that “Exchange Act Person” shall not include (i) the Borrower or
any subsidiary of the Borrower, (ii) any employee benefit plan of the Borrower
or any subsidiary of the Borrower or any trustee or other fiduciary holding
securities under an employee benefit plan of the Borrower or any subsidiary of
the Borrower, (iii) an underwriter temporarily holding securities

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pursuant to a registered public offering of such securities, (iv) a corporation,
partnership, limited liability company or other entity Owned, directly or
indirectly, by the stockholders of the Borrower in substantially the same
proportions as their Ownership of stock of the Borrower; or (v) any natural
person, corporation, partnership, limited liability company or other entity or
“group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that,
as of the date hereof, is the Owner, directly or indirectly, of securities of
the Borrower representing more than fifty percent (50%) of the combined voting
power of the Borrower's then outstanding securities.
A person or corporation, partnership, limited liability company or other entity
shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have
acquired “Ownership” of securities if such person or corporation, partnership,
limited liability company, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares voting
power, which includes the power to vote or to direct the voting, with respect to
such securities.

SECTION 6.2.    REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

ARTICLE VII
MISCELLANEOUS

SECTION 7.1.    NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

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SECTION 7.2.    NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

BORROWER:
POWER INTEGRATIONS, INC.
 
 
5245 Hellyer Avenue
 
 
San Jose, CA 95138
 
 
 
 
 
 
 
BANK:
WELLS FARGO BANK, NATIONAL ASSOCIATION
 
 
Santa Clara Technology Regional Commercial Banking Office
 
 
121 S. Market Street, 2nd Floor
 
 
San Jose, CA 95113
 

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.

SECTION 7.4.    SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interests or rights hereunder without
Bank's prior written consent. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Bank's rights and benefits under each of the Loan Documents. In connection
therewith, Bank may disclose all documents and information which Bank now has or
may hereafter acquire relating to any credit subject hereto, Borrower or its
business, any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.

SECTION 7.5.    ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

SECTION 7.6.    NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect

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cause of action or claim in connection with, this Agreement or any other of the
Loan Documents to which it is not a party.

SECTION 7.7.    TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

SECTION 7.9.    COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.

SECTION 7.11. ARBITRATION.

(a)    Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise in any way arising out of
or relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.

(b)    Governing Rules. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the “Rules”). If
there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

(c)    No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

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(d)    Arbitrator Qualifications and Powers. Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

(e)    Discovery. In any arbitration proceeding, discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.

(f)    Class Proceedings and Consolidations. No party hereto shall be entitled
to join or consolidate disputes by or against others in any arbitration, except
parties who have executed any Loan Document, or to include in any arbitration
any dispute as a representative or member of a class, or to act in any
arbitration in the interest of the general public or in a private attorney
general capacity.

(g)    Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.

(h)    Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644

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and 645.

(i)    Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

(j)    Small Claims Court. Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court's jurisdiction. Further, this arbitration provision shall apply only to
disputes in which either party seeks to recover an amount of money (excluding
attorneys' fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
POWER INTEGRATIONS, INC.
 
WELLS FARGO BANK,
 
 
 
NATIONAL ASSOCIATION
By:
/s/ Balu Balakrishnan
 
By:
/s/ Greg P. Cohn
 
Balu Balakrishnan,
 
 
Greg P. Cohn,
 
President & CEO
 
 
Vice President

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REVOLVING LINE OF CREDIT NOTE

$50,000,000.00
 
 
 
San Jose, California
 
 
 
 
February 22, 2011

FOR VALUE RECEIVED, the undersigned POWER INTEGRATIONS, INC. ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at 121 S. Market Street, 2nd Floor, San Jose, California 95113, or
at such other place as the holder hereof may designate, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Fifty Million Dollars ($50,000,000.00), or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement as set forth herein.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

(a)    "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in California are authorized or required by law to
close.

(b)    "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), three (3), or six (6) months, as designated by Borrower,
during which all or a portion of the outstanding principal balance of this Note
bears interest determined in relation to LIBOR; provided however, that no Fixed
Rate Term may be selected for a principal amount less than One Hundred Thousand
Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall
extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would
end on a day which is not a Business Day, then such Fixed Rate Term shall be
extended to the next succeeding Business Day.

(c)    "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:

LIBOR =
Base LIBOR
 
 
100% - LIBOR Reserve Percentage
 

(i)    "Base LIBOR" means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the number of days in such Fixed Rate Term and in an amount approximately
equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(ii)    "LIBOR Reserve Percentage" means the reserve percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected

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changes in such reserve percentage during the applicable Fixed Rate Term.

(d)    "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

INTEREST:

(a)    Interest. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either,
as designated by Borrower at Borrower's option, (i) at a fluctuating rate per
annum equal to the Prime Rate in effect from time to time, or (ii) at a fixed
rate per annum determined by Bank to be one and one-half percent (1.50%) above
LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate of
interest hereunder shall become effective on the date each Prime Rate change is
announced within Bank. With respect to each LIBOR selection hereunder, Bank is
hereby authorized to note the date, principal amount, interest rate and Fixed
Rate Term applicable thereto and any payments made thereon on Bank's books and
records (either manually or by electronic entry) and/or on any schedule attached
to this Note, which notations shall be prima facie evidence of the accuracy of
the information noted.

(b)    Selection of Interest Rate Options. At any time any portion of this Note
bears interest determined in relation to LIBOR, it may be continued by Borrower
at the end of the Fixed Rate Term applicable thereto so that all or a portion
thereof bears interest determined in relation to the Prime Rate or to LIBOR for
a new Fixed Rate Term designated by Borrower. At any time any portion of this
Note bears interest determined in relation to the Prime Rate, Borrower may
convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at its sole option but
without obligation to do so, accepts Borrower's notice and quotes a fixed rate
to Borrower. If Borrower does not immediately accept a fixed rate when quoted by
Bank, the quoted rate shall expire and any subsequent LIBOR request from
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate. If no specific designation of interest is made at the time any advance is
requested hereunder or at the end of any Fixed Rate Term, Borrower shall be
deemed to have made a Prime Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied.

(c)    Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or

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directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR. In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.

(d)    Payment of Interest. Interest accrued on this Note shall be payable on
the 1st day of each month, commencing March 1, 2011.

(e)    Default Interest. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Bank's option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

(a)    Borrowing and Repayment. Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on February 1, 2013.

(b)    Advances. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of (i)
Balu Balakrishnan or Eric Verity, or Sandeep Nayyar, any one acting alone, who
are authorized to request advances and direct the disposition of any advances
until written notice of the revocation of such authority is received by the
holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any deposit account of Borrower, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by Borrower.

(c)    Application of Payments. Each payment made on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof. All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation to the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to LIBOR, with
such payments applied to the oldest Fixed Rate Term first.

PREPAYMENT:

(a)    Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.

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(b)    LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if
the outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto by
acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a
fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month:

(i)    Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.

(ii)    Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.

(iii)    If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum two percent (2.00%) above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed). Please refer to the LIBOR early termination prepayment
example attached hereto as Exhibit A for illustrative purposes only.

EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of February 22,
2011, as amended from time to time (the "Credit Agreement"). Any default in the
payment or performance of any obligation under this Note, or any defined event
of default under the Credit Agreement, shall constitute an "Event of Default"
under this Note.

MISCELLANEOUS:

(a)    Remedies. Upon the occurrence of any Event of Default, the holder of this
Note, at the holder's option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, notice of nonperformance, notice of protest, protest or notice of
dishonor, all of which are expressly waived by Borrower, and the obligation, if
any, of the holder to extend any further credit hereunder shall immediately
cease and terminate. Borrower shall pay to the holder immediately upon demand
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of the holder's in-house counsel), expended or incurred by the
holder in connection with the enforcement of

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the holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration
proceeding or otherwise, and including any of the foregoing incurred in
connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Borrower or any other person or entity.

(b)    Obligations Joint and Several. Should more than one person or entity sign
this Note as a Borrower, the obligations of each such Borrower shall be joint
and several.

(c)    Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of California.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
POWER INTEGRATIONS, INC.
 
 
 
 
 
 
 
 
By:
/s/ Balu Balakrishnan
 
 
 
 
Balu Balakrishnan,
 
 
 
 
President & CEO
 
 
 

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Exhibit A to Revolving Line of Credit Note

LIBOR EARLY TERMINATION PREPAYMENT EXAMPLE
 
 
 
Loan Amount advance under LIBOR rate
$1,000,000
 
 
 
 
Initial Date
2/1/2011
 
Initial Term
90-days
to 5/1/2011
Initial Rate (hypothetical rate for illustrative purposes only)
0.45%
 
 
 
 
Termination Date
4/1/2011
4/1/2011
Days Remaining
30-days
30-days
LIBOR at date of Termination for Days Remaining (30-day LIBOR)
0.3%
0.5%
 
 
 
Two examples - one rate higher and one lower at time of termination.
 
90-day LIBOR at initial term compared to Remaining days, 30-day LIBOR rate at
Termination Date
 
 
 
Prepayment Calculation
 
 
 
Rate Lower
Rate Higher
Interest over Remaining 30-Days if no termination (0.45%, 30days remaining)
375
375
Interest over Remaining 30-Days at new LIBOR Rate at Termination date: (example
0.30% and 0.50% with 30-days remaining)
250
417
Difference in Interest over Remaining Days in term
125
(42)
 
 
 
Prepayment that would apply:
125
none

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