Document:

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                                                                   Exhibit 10.18

                      EXECUTIVE OFFICER BENEFITS AGREEMENT

     This Executive Officer Benefits Agreement (the "Agreement") is made and
entered into as of April 25, 2002 (the "Effective Date"), by and between Power
Integrations, Inc., a Delaware corporation and Daniel M. Selleck ("Executive").

                                    Recitals
                                    --------

A.   Executive is an executive officer of the Company and possesses valuable
     knowledge of the Company, its business and operations, and the markets in
     which the Company competes.

B.   The Company draws upon the knowledge, experience and advice of Executive in
     order to manage its business for the benefit of the Company's stockholders.

C.   The Board of Directors desires to supplement Executive's employment
     arrangements so as to provide additional compensation and benefits to the
     Executive to encourage Executive to continue to devote his attention and
     dedication to the Company and to create additional incentives to continue
     his employment with the Company.

     1. Definitions. As used in this Agreement, unless the context requires a
        -----------
different meaning, the following terms shall have the meanings set forth herein:

          (a) "Cause" means:
               -----

               (i) A material act of theft, dishonesty, fraud, intentional
falsification of any employment or Company records or the commission of any
criminal act which impairs Executive's ability to perform his/her duties under
this Agreement;

               (ii) A material improper disclosure of the Company's
confidential, business or proprietary information by Executive;

               (iii) Any intentional action by Executive causing material harm
to the reputation and standing of the Company, or gross negligence or willful
misconduct in the performance of Executive's assigned duties (but not mere
unsatisfactory performance); or

               (iv) The Executive's conviction (including any plea of guilty or
nolo contendere) for a felony causing material harm to the reputation and
standing of the Company, as determined by the Company in good faith.

          (b) "Change of Control" means:
               -----------------

               (i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities of the Company under
an employee benefit plan of the Company becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the

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Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of (A) the outstanding shares of common stock of the Company or (B)
the combined voting power of the Company's then-outstanding securities;

               (ii) The Company is party to a merger or consolidation which
results in the holders of voting securities of the Company outstanding
immediately prior thereto failing to continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation;

               (iii) There occurs a change in the Board of Directors of the
Company within a two-year period, as a result of which fewer than a majority of
the Directors are Incumbent Directors. For purposes of this Agreement, an
"Incumbent Director" is any director who is either:

                    (A) A director of the Company as of the Effective Date of
this Agreement; or

                    (B) A director who is elected or nominated for election to
the Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall 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).

               (iv) The sale or disposition of 50% or more of the Company's
assets (or consummation of any transaction having similar effect); or

               (v) The dissolution or liquidation of the Company.

          (c) "Company" shall mean Power Integrations, Inc., and following a
               -------
Change of Control, any successor or assign to its business and/or assets that
agrees or otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

          (d) "Competition" shall mean rendering services for any organization
               -----------
or engaging directly or indirectly in any business directly competitive with the
Company or materially contrary or harmful to the interests of the Company,
including, but not limited to (i) accepting employment with or serving as a
consultant, advisor or in any other capacity to any employer directly competing
with the Company or materially acting against the interest of the Company or
(ii) recruiting and employing any present or future employee of the Company.

          (e) "Good Reason" means the occurrence of any of the following
               -----------
conditions, without Executive's written consent, which condition(s) remain(s) in
effect 20 days after written notice to the Board from Executive of such
condition(s):

               (i) A material decrease or planned decrease in Executive's annual
salary, targeted annual incentive bonus or employee benefits following a Change
of Control;

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               (ii) A demotion, a material reduction in Executive's position,
responsibilities or duties or a material, adverse change in Executive's
substantive functional responsibilities or duties, provided, however, that in
the event of a Change of Control, Executive will not be deemed demoted nor his
position, responsibilities or duties materially reduced or his substantive
functional responsibilities or duties materially adversely changed if Executive
is responsible for substantially the same function that Executive had in the
Company and such function and the responsibilities and duties thereof are
similar to those of like situated employees of the acquirer employed in other
subsidiaries, divisions, or units.

               (iii) The relocation of Executive's work place for the Company to
a location more than fifty (50) miles from the current location of Executive's
work place or a material adverse change in the working conditions or established
working hours which persist for a period of six continuous months; or

               (iv) Any material breach of this Agreement by the Company.

          (f) "Permanent Disability" means that:
               --------------------

               (i) The Executive has been incapacitated by bodily injury or
disease so as to be prevented thereby from engaging in the performance of the
Executive's duties;

               (ii) Such total incapacity shall have continued for a period of
six consecutive months; and

               (iii) Such incapacity will, in the opinion of a qualified
physician, be permanent and continuous during the remainder of the Executive's
life.

          (g) "Termination of Employment" means:
               -------------------------

               (i) Any termination of employment of the Executive by the Company
without Cause; and

               (ii) Any resignation by the Executive for Good Reason.

     "Termination of Employment" shall not include any termination of the
      -------------------------
employment of the Executive (a) by the Company for Cause; (b) as a result of
Permanent Disability of the Executive; (c) as a result of the death of the
Executive; (d) as a result of the voluntary termination of employment by the
Executive for reasons other than Good Reason; or (e) a Termination Upon Change
of Control.

          (h) "Termination Upon Change of Control" means:
               ----------------------------------

               (i) Any termination of the employment of the Executive by the
Company without Cause on or within eighteen (18) months after the occurrence of
a Change of Control; or

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               (ii) Any resignation by the Executive for Good Reason within
eighteen (18) months after the occurrence of a Change of Control.

     "Termination Upon Change of Control" shall not include any termination of
      ----------------------------------
the employment of the Executive (a) by the Company for Cause; (b) as a result of
the Permanent Disability of the Executive; (c) as a result of the death of the
Executive; or (d) as a result of the voluntary termination of employment by the
Executive for reasons other than Good Reason.

     2. Position and Duties. Executive shall continue to be an at-will employee
        -------------------
of the Company employed in his/her current position at his/her then current
salary rate. Executive shall also be entitled to continue to participate in and
to receive benefits on the same basis as other executive or senior staff members
under any of the Company's employee benefit plans as in effect from time to
time. In addition, Executive shall be entitled to the benefits afforded to other
employees similarly situated under the Company's vacation, holiday and business
expense reimbursement policies. Executive agrees to devote the business time,
energy and skill necessary to execute his/her duties at the Company. These
duties shall include, but not be limited to, any duties consistent with his/her
position which may be assigned to Executive from time to time.

     3. Acceleration of Vesting of Stock Options Upon a Change of Control. In
        -----------------------------------------------------------------
the event of a Change of Control, and provided that Executive's employment with
the Company has not terminated prior to such date, all stock options granted by
the Company to the Executive prior to the Change of Control shall have their
vesting accelerated, such that 25% of the then unvested shares will be deemed
vested and exercisable as of the consummation of the Change of Control.
Notwithstanding the foregoing, if the Change of Control does not require the
                                                             ---
assumption or substitution by the acquiring entity (or parent thereof) of all of
the Company's obligations of the then outstanding stock options, then 50% of the
then unvested shares will be accelerated and deemed vested and exercisable ten
(10) days prior to the consummation of the Change of Control.

     4. Termination Upon Change of Control.
        ----------------------------------

          (a) Severance Benefits. In the event of the Executive's Termination
              ------------------
Upon Change of Control, Executive shall be entitled to the following separation
benefits:

               (i) All salary, accrued but unused vacation earned through the
date of Executive's termination and Executive's target bonus for the year in
which termination occurs, prorated through the date of Executive's termination;

               (ii) Within fourteen (14) days of submission of proper expense
reports by the Executive, reimbursement by the Company for all expenses
reasonably and necessarily incurred by the Executive in connection with the
business of the Company prior to his termination of employment;

               (iii) Six (6) months of Executive's highest annual salary (with
the Company) and 50% of the Executive's targeted annual incentive bonus as in
effect as of the date

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of such termination, all less applicable withholding, paid in a lump sum within
thirty (30) days of termination of employment; and

               (iv) The ability to exercise any and all vested options granted
after the Effective Date of this Agreement (and any options granted prior to the
Effective Date of this Agreement only to the extent that such extension of
exercisability would not require the Company to incur a compensation expense for
financial statement purposes) for twelve (12) months from the date of
termination of employment.

               (v) The vesting of all stock options granted by the Company to
the Executive and outstanding immediately prior to such Termination Upon Change
of Control shall have their vesting accelerated, such that 50% of the then
unvested shares will be deemed vested and exercisable as of the date of
termination of employment.

          (b) Benefits Continuation.
              ---------------------

               (i) In the event of Executive's Termination Upon Change of
Control, Executive shall be entitled to elect continued medical and dental
insurance coverage in accordance with the applicable provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA")
and the Company shall pay such COBRA premiums for six (6) months from the date
of termination of employment. Notwithstanding the above, in the event Executive
becomes eligible to be covered under another employer's group health plan (other
than a plan which imposes a preexisting condition exclusion unless the
preexisting condition exclusion does not apply) during the period provided for
herein, the Company shall cease payment of the COBRA premiums; and

               (ii) Executive shall receive the benefits, if any, under the
Company's 401(k) Plan and other Company benefit plans to which he may be
entitled pursuant to the terms of such plans.

     5. Termination of Employment.
        -------------------------

          (a) Severance Benefits. In the event of the Executive's Termination of
              ------------------
Employment, Executive shall be entitled to all separation benefits provided in
Section 4(a)(i) through 4(a)(iii) above.

          (b) Benefits Continuation.
              ---------------------

               (i) In the event of Executive's Termination of Employment,
Executive shall be entitled to elect continued medical and dental insurance
coverage in accordance with the applicable provisions of COBRA and the Company
shall pay such COBRA premiums for six (6) months from the date of termination of
employment. Notwithstanding the above, in the event Executive becomes eligible
to be covered under another employer's group health plan (other than a plan
which imposes a preexisting condition exclusion unless the preexisting condition
exclusion does not apply) during the period provided for herein, the Company
shall cease payment of the COBRA premiums; and

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               (ii) Executive shall receive the benefits, if any, under the
Company's 401(k) Plan and other Company benefit plans to which he may be
entitled pursuant to the terms of such plans.

     6. Retirement Benefits.
        -------------------

          (a) In order to be eligible for the "Retirement Benefits" described in
Section 6(b) below, the Executive must meet both of the following criteria:

               (i) At the time of Executive's voluntary termination of
employment with the Company (other than in circumstances in which such
termination constitutes a Termination of Employment), the Executive has (1)
achieved the age of 50 and served the Company for at least 15 years; or (2)
achieved the age of 55 and served the Company for at least 10 years; and

               (ii) At any time during which the Executive is receiving
Retirement Benefits, the Executive shall not (1) be employed or on contract full
                                         ---
time by a third party or (2) engage in Competition. If the Executive engages in
either (1) or (2), then all Retirement Benefits shall terminate immediately.

          (b) If both conditions in Sections 6(a)(i) and 6(a)(ii) above are
satisfied, the Executive shall be entitled to receive the following "Retirement
Benefits:"

               (i) The ability to exercise any and all options granted after the
Effective Date of this Agreement (and any options granted prior to the Effective
Date of this Agreement only to the extent that such extension of exercisability
would not require the Company to incur a compensation expense for financial
statement purposes) to the extent such options are vested as of the date of
termination of employment for the earlier of: (i) the term of the option or (ii)
                                  -------
five years; and

               (ii) The Company shall pay the Executive's medical and dental
premiums until the Executive achieves the age of 65 and additionally, if the
Executive's medical and dental coverage on the date of termination included the
Executive's dependents, the premiums of such dependents until the Executive
achieves the age of 65, as follows:

                    (A) COBRA Continuation Coverage. Upon the termination of
Executive's active employment with the Company, Executive shall be entitled to
elect continued medical and dental insurance coverage in accordance with the
applicable provisions of COBRA and the Company shall pay such COBRA premiums.
Notwithstanding the above, in the event Executive becomes eligible to be covered
under another employer's group health plan (other than a plan which imposes a
preexisting condition exclusion unless the preexisting condition exclusion does
not apply) during the period provided for herein, the Company shall cease
payment of the COBRA premiums; and

                    (B) Coverage After COBRA & Prior to Medicare Eligibility. In
the event the Executive is not eligible for Medicare coverage at end of his
maximum applicable COBRA coverage period, then, the Executive shall identify and
locate either or both an

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individual conversion policy through the insurer providing insurance coverage in
connection with the Company sponsored medical and dental plans available to
active employees (the "Conversion Policy"), and/or a supplemental individual
policy or an individual policy on the open market (the "Individual Policy") to
be effective upon the termination of his COBRA continuation coverage so that,
when the coverages for Executive provided by the Conversion Policy and/or the
Individual Policy are combined, such coverages provide substantially similar
medical and dental benefits in the aggregate as those provided under the medical
and dental plans sponsored by the Company at such time, or at any time after the
termination of Executive's employment, for active employees (the "Comparable
Coverage"). The Company shall be responsible for the payment of any Conversion
Policy premiums and/or Individual Policy premiums for the Comparable Coverage
which payment shall not exceed the cost of premiums for medical and dental
coverage for then active employees. Notwithstanding the above, in the event
Executive becomes eligible to be covered under another employer's group health
plan (other than a plan which imposes a preexisting condition exclusion unless
the preexisting condition exclusion does not apply) during the period provided
for herein, the Company shall cease payment of such premiums; and

                    (C) Coverage After COBRA & Upon Medicare Eligibility. In the
event the Executive is eligible for Medicare coverage at the end of his maximum
applicable COBRA coverage period, the Executive may identify and locate a
Medicare supplemental policy, which may include, to the extent permitted, the
medical and dental plans sponsored by the Company at such time for active
employees, that, when combined with the coverage provided by Medicare (both
Parts A and B), provides Comparable Coverage. The Executive shall be solely
responsible for the payment of any Medicare premiums and/or Medical supplemental
policy premiums for the Comparable Coverage.

                    (D) Taxes. The Executive shall be responsible for any taxes
that may be attributable to or result from the payments made by the Company in
accordance with this Section 6(b)(ii) or receipt of medical and dental benefits
attributable to or result from such payments.

     7. Termination of Employment due to Death or Permanent Disability.
        --------------------------------------------------------------

          (a) In the event of (i) the Executive's death during his employment
with the Company and the Executive having satisfied the criteria provided at
Section 6(a)(i) as of or prior to the date of his death or (ii) the Executive's
                                                        --
death during the period while Executive was receiving Retirement Benefits as a
result of compliance with the criteria provided at Section 6(a)(i) and 6(a)(ii),
(1) the Executive's legal representative or any person empowered to act on his
behalf under his will or under the then applicable laws of descent and
distribution shall be entitled to the extension of the term of stock option
exercisability pursuant to Section 6(b)(i) and (2) the Executive's dependents,
to the extent applicable, shall be entitled to the medical and dental benefits
pursuant to Section 6(b)(ii)(A)-(D) for that period of time until the Executive
would have achieved the age of 65 if the Executive had lived.

          (b) In the event of the Executive's Permanent Disability during his
employment with the Company and the Executive having satisfied the criteria
provided at

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Section 6(a)(i), the Executive, and to the extent applicable, his dependents,
shall be entitled to the benefits provided in Section 6(b)(i)and
6(b)(ii)(A)-(D).

     8. Payment of Taxes. All payments made to Executive under this Agreement
        ----------------
shall be subject to all applicable federal and state income, employment and
payroll taxes.

     9. Parachute Payment. In the event that any of the payments and benefits
        -----------------
provided for in this Agreement or otherwise payable to the Executive in
connection with the Change of Control (collectively, the "Payments") would
result in a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), the amount of such
Payments shall be either: (i) the full amount of the Payments, or (ii) a reduced
amount which would result in no portion of the Payments being subject to the
excise tax imposed pursuant to Section 4999 of the Code (the "Excise Tax"),
whichever of the foregoing amounts, taking into account the applicable federal,
stated and local income tax and the Excise Tax, results in the receipt by the
Executive, on an after-tax basis, of the greatest amount of benefit. Unless the
Company and the Executive otherwise agree in writing, any determination required
under this Section 8 shall be made in writing by independent public accountants
appointed by the Company and reasonably acceptable to the Executive (the
"Accountants"), whose determination shall be conclusive and binding upon the
Executive and the Company for all purposes. The Company shall bear all costs the
Accountants may reasonably incur in connection with such determination, and the
Company and the Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section 9.

     10. Exclusive Remedy. The payments and benefits provided for in Section 4
         ----------------
or Section 5 shall constitute the Executive's sole and exclusive remedy for any
alleged injury or other damages arising out of the cessation of the employment
relationship between the Executive and the Company. To the extent Executive is
entitled to severance or other benefits upon termination of employment under
this Agreement and any other agreement, the benefits payable under this
Agreement shall be reduced by the amounts paid to Executive under any other such
agreement.

     11. Proprietary and Confidential Information. The Executive agrees to
         ----------------------------------------
continue to abide by the terms and conditions of any Company's confidentiality
and/or proprietary rights agreement between the Executive and the Company.

     12. Arbitration. Any claim, dispute or controversy arising out of this
         -----------
Agreement, the interpretation, validity or enforceability of this Agreement or
the alleged breach thereof shall be submitted by the parties to binding
arbitration by the American Arbitration Association in San Jose, California or
elsewhere by mutual agreement. The selection of the arbitrator and the
arbitration procedure shall be governed by the Commercial Arbitration Rules of
the American Arbitration Association. All costs and expenses of arbitration or
litigation, including but not limited to reasonable attorneys fees and other
costs reasonably incurred by the Executive, shall be paid by the Company.
Judgment may be entered on the award of the arbitration in any court having
jurisdiction.

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     13. Interpretation. Executive and the Company agree that this Agreement
         --------------
shall be interpreted in accordance with and governed by the laws of the State of
California, without regard to such state's conflict of laws rules.

     14. Conflict in Benefits. This Agreement shall supersede all prior
         --------------------
arrangements, whether written or oral, and understandings regarding the subject
matter of this Agreement. To the extent Executive is entitled to severance or
other benefits upon termination of employment under this Agreement and any other
agreement, including any change in control agreement entered into by the Company
and the Executive, the benefits payable under this Agreement shall supersede and
replace any other such agreement. However, this Agreement is not intended to and
shall not affect, limit or terminate (i) any plans, programs, or arrangements of
the Company that are regularly made available to a significant number of
employees of the Company, (ii) the Company's stock option plans, (iii) any
agreement or arrangement with the Executive that has been reduced to writing and
which does not relate to the subject matter hereof, or (iv) any agreements or
arrangements hereafter entered into by the parties in writing, except as
otherwise expressly provided herein.

     15. Release of Claims. No severance benefits shall be paid to Executive
         -----------------
under this Agreement unless and until the Executive shall, in consideration of
the payment of such severance benefit, execute a release of claims in a form
reasonably satisfactory to the Company. Notwithstanding the foregoing, the
general release shall not be construed to waive any right to indemnification or
contribution otherwise available to Executive under law or rules of corporate
governance with respect to claims by third parties for actions or omissions in
Executive's role as an officer of the Company.

     16. Successors and Assigns.
         ----------------------

          (a) Successors of the Company. The Company will require any successor
              -------------------------
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession transaction shall be a breach of this
Agreement and shall entitle the Executive to terminate his or her employment
with the Company within three (3) months thereafter and to receive the benefits
provided under Section 4 of this Agreement in the event of Termination Upon
Change of Control. As used in this Agreement, "Company" shall mean the Company
as defined above and any successor or assign to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
15 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

          (b) Heirs of Executive. This Agreement shall inure to the benefit of
              ------------------
and be enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.

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     17. Notices. For purposes of this Agreement, notices and all other
         -------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:

         if to the Company:                    Power Integrations, Inc.
                                               5245 Hellyer Avenue
                                               San Jose, California 95138
                                               Attn: Chief Executive Officer or
                                                     Chief Financial Officer

and if to the Executive at the address specified at the end of this Agreement.
Notice may also be given at such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.

     18. No Representations. Executive acknowledges that he/she is not relying
         ------------------
and has not relied on any promise, representation or statement made by or on
behalf of the Company which is not set forth in this Agreement.

     19. Validity. If any one or more of the provisions (or any part thereof) of
         --------
this Agreement shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions (or any
part thereof) shall not in any way be affected or impaired thereby.

     20. Modification. This Agreement may only be modified or amended by a
         ------------
supplemental written agreement signed by Executive and the Company.

     21. Consultation with Legal and Financial Advisors. Executive acknowledges
         ----------------------------------------------
that his Agreement confers significant legal rights, and may also involve the
waiver of rights under other agreements; that the Company has encouraged
Executive to consult with Executive's personal legal and financial advisers; and
that Executive has had adequate time to consult with Executive's advisers before
signing this Agreement.

                            [signature page follows]

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   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year written below, intending to be legally bound as of the Effective Date.

                                           POWER INTEGRATIONS, INC.

Date:                                      By: /s/ John M. Cobb
      -----------------------                  ---------------------------------

                                           Title: Chief Financial Officer
                                                  ------------------------------

                                           EXECUTIVE:

Date:                                      /s/ Daniel M. Selleck
      -----------------------              -------------------------------------
                                           Executive's Signature
                                           Daniel M. Selleck
                                           -------------------------------------
                                           Print Executive's Name

Address for Notice:

-----------------------------

-----------------------------

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                                       11<PAGE>

                                                                   Exhibit 10.19

                      EXECUTIVE OFFICER BENEFITS AGREEMENT

     This Executive Officer Benefits Agreement (the "Agreement") is made and
entered into as of April 25, 2002 (the "Effective Date"), by and between Power
Integrations, Inc., a Delaware corporation and John Tomlin ("Executive").

                                    Recitals
                                    --------

A.   Executive is an executive officer of the Company and possesses valuable
     knowledge of the Company, its business and operations, and the markets in
     which the Company competes.

B.   The Company draws upon the knowledge, experience and advice of Executive in
     order to manage its business for the benefit of the Company's stockholders.

C.   The Board of Directors desires to supplement Executive's employment
     arrangements so as to provide additional compensation and benefits to the
     Executive to encourage Executive to continue to devote his attention and
     dedication to the Company and to create additional incentives to continue
     his employment with the Company.

     1. Definitions. As used in this Agreement, unless the context requires a
        -----------
different meaning, the following terms shall have the meanings set forth herein:

          (a) "Cause" means:
               -----

               (i) A material act of theft, dishonesty, fraud, intentional
falsification of any employment or Company records or the commission of any
criminal act which impairs Executive's ability to perform his/her duties under
this Agreement;

               (ii) A material improper disclosure of the Company's
confidential, business or proprietary information by Executive;

               (iii) Any intentional action by Executive causing material harm
to the reputation and standing of the Company, or gross negligence or willful
misconduct in the performance of Executive's assigned duties (but not mere
unsatisfactory performance); or

               (iv) The Executive's conviction (including any plea of guilty or
nolo contendere) for a felony causing material harm to the reputation and
standing of the Company, as determined by the Company in good faith.

          (b) "Change of Control" means:
               -----------------

               (i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities of the Company under
an employee benefit plan of the Company becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated under

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the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of (A) the outstanding shares of common stock of the
Company or (B) the combined voting power of the Company's then-outstanding
securities;

               (ii) The Company is party to a merger or consolidation which
results in the holders of voting securities of the Company outstanding
immediately prior thereto failing to continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation;

               (iii) There occurs a change in the Board of Directors of the
Company within a two-year period, as a result of which fewer than a majority of
the Directors are Incumbent Directors. For purposes of this Agreement, an
"Incumbent Director" is any director who is either:

                    (A) A director of the Company as of the Effective Date of
this Agreement; or

                    (B) A director who is elected or nominated for election to
the Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall 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).

               (iv) The sale or disposition of 50% or more of the Company's
assets (or consummation of any transaction having similar effect); or

               (v) The dissolution or liquidation of the Company.

          (c) "Company" shall mean Power Integrations, Inc., and following a
               -------
Change of Control, any successor or assign to its business and/or assets that
agrees or otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

          (d) "Competition" shall mean rendering services for any organization
               -----------
or engaging directly or indirectly in any business directly competitive with the
Company or materially contrary or harmful to the interests of the Company,
including, but not limited to (i) accepting employment with or serving as a
consultant, advisor or in any other capacity to any employer directly competing
with the Company or materially acting against the interest of the Company or
(ii) recruiting and employing any present or future employee of the Company.

          (e) "Good Reason" means the occurrence of any of the following
               -----------
conditions, without Executive's written consent, which condition(s) remain(s) in
effect 20 days after written notice to the Board from Executive of such
condition(s):

               (i) A material decrease or planned decrease in Executive's annual
salary, targeted annual incentive bonus or employee benefits following a Change
of Control;

                                       2

<PAGE>

               (ii) A demotion, a material reduction in Executive's position,
responsibilities or duties or a material, adverse change in Executive's
substantive functional responsibilities or duties, provided, however, that in
the event of a Change of Control, Executive will not be deemed demoted nor his
position, responsibilities or duties materially reduced or his substantive
functional responsibilities or duties materially adversely changed if Executive
is responsible for substantially the same function that Executive had in the
Company and such function and the responsibilities and duties thereof are
similar to those of like situated employees of the acquirer employed in other
subsidiaries, divisions, or units.

               (iii) The relocation of Executive's work place for the Company to
a location more than fifty (50) miles from the current location of Executive's
work place or a material adverse change in the working conditions or established
working hours which persist for a period of six continuous months; or

               (iv) Any material breach of this Agreement by the Company.

          (f) "Permanent Disability" means that:
               --------------------

               (i) The Executive has been incapacitated by bodily injury or
disease so as to be prevented thereby from engaging in the performance of the
Executive's duties;

               (ii) Such total incapacity shall have continued for a period of
six consecutive months; and

               (iii) Such incapacity will, in the opinion of a qualified
physician, be permanent and continuous during the remainder of the Executive's
life.

          (g) "Termination of Employment" means:
               -------------------------

               (i) Any termination of employment of the Executive by the Company
without Cause; and

               (ii) Any resignation by the Executive for Good Reason.

     "Termination of Employment" shall not include any termination of the
      -------------------------
employment of the Executive (a) by the Company for Cause; (b) as a result of
Permanent Disability of the Executive; (c) as a result of the death of the
Executive; (d) as a result of the voluntary termination of employment by the
Executive for reasons other than Good Reason; or (e) a Termination Upon Change
of Control.

          (h) "Termination Upon Change of Control" means:
               ----------------------------------

               (i) Any termination of the employment of the Executive by the
Company without Cause on or within eighteen (18) months after the occurrence of
a Change of Control; or

                                       3

<PAGE>

               (ii) Any resignation by the Executive for Good Reason within
eighteen (18) months after the occurrence of a Change of Control.

     "Termination Upon Change of Control" shall not include any termination of
      ----------------------------------
the employment of the Executive (a) by the Company for Cause; (b) as a result of
the Permanent Disability of the Executive; (c) as a result of the death of the
Executive; or (d) as a result of the voluntary termination of employment by the
Executive for reasons other than Good Reason.

     2. Position and Duties. Executive shall continue to be an at-will employee
        -------------------
of the Company employed in his/her current position at his/her then current
salary rate. Executive shall also be entitled to continue to participate in and
to receive benefits on the same basis as other executive or senior staff members
under any of the Company's employee benefit plans as in effect from time to
time. In addition, Executive shall be entitled to the benefits afforded to other
employees similarly situated under the Company's vacation, holiday and business
expense reimbursement policies. Executive agrees to devote the business time,
energy and skill necessary to execute his/her duties at the Company. These
duties shall include, but not be limited to, any duties consistent with his/her
position which may be assigned to Executive from time to time.

     3. Acceleration of Vesting of Stock Options Upon a Change of Control. In
        -----------------------------------------------------------------
the event of a Change of Control, and provided that Executive's employment with
the Company has not terminated prior to such date, all stock options granted by
the Company to the Executive prior to the Change of Control shall have their
vesting accelerated, such that 25% of the then unvested shares will be deemed
vested and exercisable as of the consummation of the Change of Control.
Notwithstanding the foregoing, if the Change of Control does not require the
                                                             ---
assumption or substitution by the acquiring entity (or parent thereof) of all of
the Company's obligations of the then outstanding stock options, then 50% of the
then unvested shares will be accelerated and deemed vested and exercisable ten
(10) days prior to the consummation of the Change of Control.

     4. Termination Upon Change of Control.
        ----------------------------------

          (a) Severance Benefits. In the event of the Executive's Termination
              ------------------
Upon Change of Control, Executive shall be entitled to the following separation
benefits:

               (i) All salary, accrued but unused vacation earned through the
date of Executive's termination and Executive's target bonus for the year in
which termination occurs, prorated through the date of Executive's termination;

               (ii) Within fourteen (14) days of submission of proper expense
reports by the Executive, reimbursement by the Company for all expenses
reasonably and necessarily incurred by the Executive in connection with the
business of the Company prior to his termination of employment;

               (iii) Six (6) months of Executive's highest annual salary (with
the Company) and 50% of the Executive's targeted annual incentive bonus as in
effect as of the date

                                       4

<PAGE>

of such termination, all less applicable withholding, paid in a lump sum within
thirty (30) days of termination of employment; and

               (iv) The ability to exercise any and all vested options granted
after the Effective Date of this Agreement (and any options granted prior to the
Effective Date of this Agreement only to the extent that such extension of
exercisability would not require the Company to incur a compensation expense for
financial statement purposes) for twelve (12) months from the date of
termination of employment.

               (v) The vesting of all stock options granted by the Company to
the Executive and outstanding immediately prior to such Termination Upon Change
of Control shall have their vesting accelerated, such that 50% of the then
unvested shares will be deemed vested and exercisable as of the date of
termination of employment.

          (b) Benefits Continuation.
              ---------------------

               (i) In the event of Executive's Termination Upon Change of
Control, Executive shall be entitled to elect continued medical and dental
insurance coverage in accordance with the applicable provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, ("COBRA")
and the Company shall pay such COBRA premiums for six (6) months from the date
of termination of employment. Notwithstanding the above, in the event Executive
becomes eligible to be covered under another employer's group health plan (other
than a plan which imposes a preexisting condition exclusion unless the
preexisting condition exclusion does not apply) during the period provided for
herein, the Company shall cease payment of the COBRA premiums; and

               (ii) Executive shall receive the benefits, if any, under the
Company's 401(k) Plan and other Company benefit plans to which he may be
entitled pursuant to the terms of such plans.

     5. Termination of Employment.
        -------------------------

          (a) Severance Benefits. In the event of the Executive's Termination of
              ------------------
Employment, Executive shall be entitled to all separation benefits provided in
Section 4(a)(i) through 4(a)(iii) above.

          (b) Benefits Continuation.
              ---------------------

               (i) In the event of Executive's Termination of Employment,
Executive shall be entitled to elect continued medical and dental insurance
coverage in accordance with the applicable provisions of COBRA and the Company
shall pay such COBRA premiums for six (6) months from the date of termination of
employment. Notwithstanding the above, in the event Executive becomes eligible
to be covered under another employer's group health plan (other than a plan
which imposes a preexisting condition exclusion unless the preexisting condition
exclusion does not apply) during the period provided for herein, the Company
shall cease payment of the COBRA premiums; and

                                       5

<PAGE>

               (ii) Executive shall receive the benefits, if any, under the
Company's 401(k) Plan and other Company benefit plans to which he may be
entitled pursuant to the terms of such plans.

     6. Retirement Benefits.
        -------------------

          (a) In order to be eligible for the "Retirement Benefits" described in
Section 6(b) below, the Executive must meet both of the following criteria:

               (i) At the time of Executive's voluntary termination of
employment with the Company (other than in circumstances in which such
termination constitutes a Termination of Employment), the Executive has (1)
achieved the age of 50 and served the Company for at least 15 years; or (2)
achieved the age of 55 and served the Company for at least 10 years; and

               (ii) At any time during which the Executive is receiving
Retirement Benefits, the Executive shall not (1) be employed or on contract full
                                         ---
time by a third party or (2) engage in Competition. If the Executive engages in
either (1) or (2), then all Retirement Benefits shall terminate immediately.

          (b) If both conditions in Sections 6(a)(i) and 6(a)(ii) above are
satisfied, the Executive shall be entitled to receive the following "Retirement
Benefits:"

               (i) The ability to exercise any and all options granted after the
Effective Date of this Agreement (and any options granted prior to the Effective
Date of this Agreement only to the extent that such extension of exercisability
would not require the Company to incur a compensation expense for financial
statement purposes) to the extent such options are vested as of the date of
termination of employment for the earlier of: (i) the term of the option or (ii)
                                  -------
five years; and

               (ii) The Company shall pay the Executive's medical and dental
premiums until the Executive achieves the age of 65 and additionally, if the
Executive's medical and dental coverage on the date of termination included the
Executive's dependents, the premiums of such dependents until the Executive
achieves the age of 65, as follows:

                    (A) COBRA Continuation Coverage. Upon the termination of
Executive's active employment with the Company, Executive shall be entitled to
elect continued medical and dental insurance coverage in accordance with the
applicable provisions of COBRA and the Company shall pay such COBRA premiums.
Notwithstanding the above, in the event Executive becomes eligible to be covered
under another employer's group health plan (other than a plan which imposes a
preexisting condition exclusion unless the preexisting condition exclusion does
not apply) during the period provided for herein, the Company shall cease
payment of the COBRA premiums; and

                    (B) Coverage After COBRA & Prior to Medicare Eligibility. In
the event the Executive is not eligible for Medicare coverage at end of his
maximum applicable COBRA coverage period, then, the Executive shall identify and
locate either or both an

                                       6

<PAGE>

individual conversion policy through the insurer providing insurance coverage in
connection with the Company sponsored medical and dental plans available to
active employees (the "Conversion Policy"), and/or a supplemental individual
policy or an individual policy on the open market (the "Individual Policy") to
be effective upon the termination of his COBRA continuation coverage so that,
when the coverages for Executive provided by the Conversion Policy and/or the
Individual Policy are combined, such coverages provide substantially similar
medical and dental benefits in the aggregate as those provided under the medical
and dental plans sponsored by the Company at such time, or at any time after the
termination of Executive's employment, for active employees (the "Comparable
Coverage"). The Company shall be responsible for the payment of any Conversion
Policy premiums and/or Individual Policy premiums for the Comparable Coverage
which payment shall not exceed the cost of premiums for medical and dental
coverage for then active employees. Notwithstanding the above, in the event
Executive becomes eligible to be covered under another employer's group health
plan (other than a plan which imposes a preexisting condition exclusion unless
the preexisting condition exclusion does not apply) during the period provided
for herein, the Company shall cease payment of such premiums; and

                    (C) Coverage After COBRA & Upon Medicare Eligibility. In the
event the Executive is eligible for Medicare coverage at the end of his maximum
applicable COBRA coverage period, the Executive may identify and locate a
Medicare supplemental policy, which may include, to the extent permitted, the
medical and dental plans sponsored by the Company at such time for active
employees, that, when combined with the coverage provided by Medicare (both
Parts A and B), provides Comparable Coverage. The Executive shall be solely
responsible for the payment of any Medicare premiums and/or Medical supplemental
policy premiums for the Comparable Coverage.

                    (D) Taxes. The Executive shall be responsible for any taxes
that may be attributable to or result from the payments made by the Company in
accordance with this Section 6(b)(ii) or receipt of medical and dental benefits
attributable to or result from such payments.

     7. Termination of Employment due to Death or Permanent Disability.
        --------------------------------------------------------------

          (a) In the event of (i) the Executive's death during his employment
with the Company and the Executive having satisfied the criteria provided at
Section 6(a)(i) as of or prior to the date of his death or (ii) the Executive's
                                                        --
death during the period while Executive was receiving Retirement Benefits as a
result of compliance with the criteria provided at Section 6(a)(i) and 6(a)(ii),
(1) the Executive's legal representative or any person empowered to act on his
behalf under his will or under the then applicable laws of descent and
distribution shall be entitled to the extension of the term of stock option
exercisability pursuant to Section 6(b)(i) and (2) the Executive's dependents,
to the extent applicable, shall be entitled to the medical and dental benefits
pursuant to Section 6(b)(ii)(A)-(D) for that period of time until the Executive
would have achieved the age of 65 if the Executive had lived.

          (b) In the event of the Executive's Permanent Disability during his
employment with the Company and the Executive having satisfied the criteria
provided at

                                       7

<PAGE>

Section 6(a)(i), the Executive, and to the extent applicable, his dependents,
shall be entitled to the benefits provided in Section 6(b)(i)and
6(b)(ii)(A)-(D).

     8. Payment of Taxes. All payments made to Executive under this Agreement
        ----------------
shall be subject to all applicable federal and state income, employment and
payroll taxes.

     9. Parachute Payment. In the event that any of the payments and benefits
        -----------------
provided for in this Agreement or otherwise payable to the Executive in
connection with the Change of Control (collectively, the "Payments") would
result in a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), the amount of such
Payments shall be either: (i) the full amount of the Payments, or (ii) a reduced
amount which would result in no portion of the Payments being subject to the
excise tax imposed pursuant to Section 4999 of the Code (the "Excise Tax"),
whichever of the foregoing amounts, taking into account the applicable federal,
stated and local income tax and the Excise Tax, results in the receipt by the
Executive, on an after-tax basis, of the greatest amount of benefit. Unless the
Company and the Executive otherwise agree in writing, any determination required
under this Section 8 shall be made in writing by independent public accountants
appointed by the Company and reasonably acceptable to the Executive (the
"Accountants"), whose determination shall be conclusive and binding upon the
Executive and the Company for all purposes. The Company shall bear all costs the
Accountants may reasonably incur in connection with such determination, and the
Company and the Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section 9.

     10. Exclusive Remedy. The payments and benefits provided for in Section 4
         ----------------
or Section 5 shall constitute the Executive's sole and exclusive remedy for any
alleged injury or other damages arising out of the cessation of the employment
relationship between the Executive and the Company. To the extent Executive is
entitled to severance or other benefits upon termination of employment under
this Agreement and any other agreement, the benefits payable under this
Agreement shall be reduced by the amounts paid to Executive under any other such
agreement.

     11. Proprietary and Confidential Information. The Executive agrees to
         ----------------------------------------
continue to abide by the terms and conditions of any Company's confidentiality
and/or proprietary rights agreement between the Executive and the Company.

     12. Arbitration. Any claim, dispute or controversy arising out of this
         -----------
Agreement, the interpretation, validity or enforceability of this Agreement or
the alleged breach thereof shall be submitted by the parties to binding
arbitration by the American Arbitration Association in San Jose, California or
elsewhere by mutual agreement. The selection of the arbitrator and the
arbitration procedure shall be governed by the Commercial Arbitration Rules of
the American Arbitration Association. All costs and expenses of arbitration or
litigation, including but not limited to reasonable attorneys fees and other
costs reasonably incurred by the Executive, shall be paid by the Company.
Judgment may be entered on the award of the arbitration in any court having
jurisdiction.

                                       8

<PAGE>

     13. Interpretation. Executive and the Company agree that this Agreement
         --------------
shall be interpreted in accordance with and governed by the laws of the State of
California, without regard to such state's conflict of laws rules.

     14. Conflict in Benefits. This Agreement shall supersede all prior
         --------------------
arrangements, whether written or oral, and understandings regarding the subject
matter of this Agreement. To the extent Executive is entitled to severance or
other benefits upon termination of employment under this Agreement and any other
agreement, including any change in control agreement entered into by the Company
and the Executive, the benefits payable under this Agreement shall supersede and
replace any other such agreement. However, this Agreement is not intended to and
shall not affect, limit or terminate (i) any plans, programs, or arrangements of
the Company that are regularly made available to a significant number of
employees of the Company, (ii) the Company's stock option plans, (iii) any
agreement or arrangement with the Executive that has been reduced to writing and
which does not relate to the subject matter hereof, or (iv) any agreements or
arrangements hereafter entered into by the parties in writing, except as
otherwise expressly provided herein.

     15. Release of Claims. No severance benefits shall be paid to Executive
         -----------------
under this Agreement unless and until the Executive shall, in consideration of
the payment of such severance benefit, execute a release of claims in a form
reasonably satisfactory to the Company. Notwithstanding the foregoing, the
general release shall not be construed to waive any right to indemnification or
contribution otherwise available to Executive under law or rules of corporate
governance with respect to claims by third parties for actions or omissions in
Executive's role as an officer of the Company.

     16. Successors and Assigns.
         ----------------------

          (a) Successors of the Company. The Company will require any successor
              -------------------------
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession transaction shall be a breach of this
Agreement and shall entitle the Executive to terminate his or her employment
with the Company within three (3) months thereafter and to receive the benefits
provided under Section 4 of this Agreement in the event of Termination Upon
Change of Control. As used in this Agreement, "Company" shall mean the Company
as defined above and any successor or assign to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
15 or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.

          (b) Heirs of Executive. This Agreement shall inure to the benefit of
              ------------------
and be enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.

                                       9

<PAGE>

     17. Notices. For purposes of this Agreement, notices and all other
         -------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:

         if to the Company:              Power Integrations, Inc.
                                         5245 Hellyer Avenue
                                         San Jose, California 95138
                                         Attn:  Chief Executive Officer or
                                                Chief Financial Officer

and if to the Executive at the address specified at the end of this Agreement.
Notice may also be given at such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.

     18. No Representations. Executive acknowledges that he/she is not relying
         ------------------
and has not relied on any promise, representation or statement made by or on
behalf of the Company which is not set forth in this Agreement.

     19. Validity. If any one or more of the provisions (or any part thereof) of
         --------
this Agreement shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions (or any
part thereof) shall not in any way be affected or impaired thereby.

     20. Modification. This Agreement may only be modified or amended by a
         ------------
supplemental written agreement signed by Executive and the Company.

     21. Consultation with Legal and Financial Advisors. Executive acknowledges
         ----------------------------------------------
that his Agreement confers significant legal rights, and may also involve the
waiver of rights under other agreements; that the Company has encouraged
Executive to consult with Executive's personal legal and financial advisers; and
that Executive has had adequate time to consult with Executive's advisers before
signing this Agreement.

                            [signature page follows]

                                       10

<PAGE>

   IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year written below, intending to be legally bound as of the Effective Date.

                                         POWER INTEGRATIONS, INC.

Date:                                    By: /s/ John M. Cobb
      -----------------------------          -----------------------------------

                                         Title: Chief Financial Officer
                                                --------------------------------

                                         EXECUTIVE:

Date:                                    /s/ John Tomlin
      -----------------------------      ---------------------------------------
                                         Executive's Signature
                                         John Tomlin
                                         ---------------------------------------
                                         Print Executive's Name

Address for Notice:

-----------------------------------

-----------------------------------

-----------------------------------

                                       11

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