Document:

Prepared by R.R. Donnelley Financial -- Registrant's 1998 Stock Plan and Form of Option Agreement

 Exhibit 10.1 
  
 MONOLITHIC POWER SYSTEMS, INC. 
  
 1998 STOCK PLAN 
  
 (Amended as of June 22, 2004) 
  
 1. Purposes of the Plan. The purposes of this Stock Plan are to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as
determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 
  
 2. Definitions. As used herein, the following definitions shall apply: 
  
 (a) “Administrator” means the Board or any of its Committees as shall be administering the
Plan in accordance with Section 4 hereof. 
  
 (b)
“Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan. 
  
 (c) “Board” means the Board of Directors of the Company. 
  
 (d) “Code” means the Internal Revenue Code
of 1986, as amended. 
  
 (e)
“Committee” means a committee of Directors appointed by the Board in accordance with Section 4 hereof. 
  
 (f) “Common Stock” means the Common Stock of the Company. 
  
 (g) “Company” means Monolithic Power Systems, Inc., a California corporation. 

 
 (h) “Consultant” means any person who is
engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity. 
  
 (i) “Director” means a member of the Board of Directors of the Company. 
  
 (j) “Disability” means total and permanent
disability as defined in Section 22(e)(3) of the Code. 
  
 (k) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers 

  

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between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave
may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director’s fee by the
Company shall be sufficient to constitute “employment” by the Company. 
  
 (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 (m) “Fair Market Value” means, as of any
date, the value of Common Stock determined as follows: 
  
 (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall
be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; 
  
 (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the last market
trading day prior to the day of determination; or 
  
 (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. 
  
 (n) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code. 
  
 (o) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option. 
  
 (p) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder. 
  
 (q) “Option” means a stock option granted pursuant to the Plan. 
  
 (r) “Option Agreement” means a written or electronic agreement between the Company and an Optionee evidencing the terms
and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. 
  
 (s) “Option Exchange Program” means a program whereby outstanding Options are exchanged for Options with a lower exercise
price. 
  

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 (t) “Optioned Stock” means the Common Stock subject to an Option or a
Stock Purchase Right. 
  
 (u)
“Optionee” means the holder of an outstanding Option or Stock Purchase Right granted under the Plan. 
  
 (v) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of
the Code. 
  
 (w) “Plan” means
this 1998 Stock Plan. 
  
 (x) “Restricted
Stock” means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under Section 11 below. 
  
 (y) “Service Provider” means an Employee, Director or Consultant. 
  
 (z) “Share” means a share of the Common
Stock, as adjusted in accordance with Section 12 below. 
  
 (aa) “Stock Purchase Right” means a right to purchase Common Stock pursuant to Section 11 below. 
  
 (bb) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section
424(f) of the Code. 
  
 3. Stock Subject to the Plan.
Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be subject to option and sold under the Plan is 11,807,024 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.

  
 If an Option or Stock Purchase Right expires
or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the
Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 
  
 4. Administration of the Plan. 
  
 (a) Administrator. The Plan shall be administered by the Board or a Committee appointed by the Board,
which Committee shall be constituted to comply with Applicable Laws. 
  
 (b) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority in its discretion: 
  
 (i) to determine the Fair Market Value; 
  

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 (ii) to select the Service Providers to whom Options and Stock Purchase Rights may from
time to time be granted hereunder; 
  
 (iii) to
determine the number of Shares to be covered by each such award granted hereunder; 
  
 (iv) to approve forms of agreement for use under the Plan; 
  
 (v) to determine the terms and conditions, of any Option or Stock Purchase Right granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; 
  
 (vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock; 
  
 (vii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since the date the Option was granted;

  
 (viii) to initiate an Option Exchange
Program; 
  
 (ix) to prescribe, amend and rescind
rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; 
  
 (x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and 
  
 (xi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan. 
  
 (c) Effect of Administrator’s Decision. All decisions, determinations and interpretations of the Administrator shall be final
and binding on all Optionees. 
  

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 5. Eligibility. 
  
 (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive
Stock Options may be granted only to Employees. 
  
 (b) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is
granted. 
  
 (c) Neither the Plan nor any Option
or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s right
to terminate such relationship at any time, with or without cause. 
  
 6. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan. 
  
 7. Term of Option. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option
Agreement. 
  
 8. Option Exercise Price and Consideration.

  
 (a) The per share exercise price for the
Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following: 
  
 (i) In the case of an Incentive Stock Option 
  
 (A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. 
  
 (B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant. 
  
 (ii) In the case of a Nonstatutory Stock Option 
  

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 (A) granted to a Service Provider who, at the time of grant of such Option, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. 
  
 (B) granted to any other Service Provider, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. 
  
 (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction. 
  
 (b)
The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant).
Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and
(y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) consideration received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company. 
  
 9. Exercise of
Option. 
  
 (a) Procedure for Exercise;
Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Except in the case of
Options granted to Officers, Directors and Consultants, Options shall become exercisable at a rate of no less than 20% per year over five (5) years from the date the Options are granted. Unless the Administrator provides otherwise, vesting of
Options granted hereunder to Officers and Directors shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. 
  
 An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise
(in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other 

  

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right for which the record date is prior to the date the Shares are issued, except as provided in Section 12 of the Plan. 
  
 Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service
Provider, such Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least thirty (30) days) to the extent that the Option is vested on the date of termination (but in no event later than
the expiration of the term of the Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on
the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the
time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 
  
 (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the
Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement (of at least six (6) months) to the extent the Option is vested on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 
  
 (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (of at least six (6) months) to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the
Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the
Optionee’s termination. If, at the time of death, the Optionee is not vested as to the entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 
  
 (e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 
  

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 10. Non-Transferability of Options and Stock Purchase Rights. The Options and Stock Purchase
Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

  
 11. Stock Purchase Rights. 
  
 (a) Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must
accept such offer. The terms of the offer shall comply in all respects with Section 260.140.42 of Title 10 of the California Code of Regulations. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form
determined by the Administrator. 
  
 (b)
Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s service
with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine. Except with respect to Shares purchased by Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of purchase. 
  
 (c) Other Provisions. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole discretion. 
  
 (d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a
shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan. 
  

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 12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale. 
  
 (a) Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but
as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such
outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be
deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an
Option or Stock Purchase Right. 
  
 (b)
Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option or Stock Purchase Right until fifteen (15) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares
as to which the Option or Stock Purchase Right would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right
shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action. 
  
 (c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase
Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase
Right shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock
Purchase Right shall be considered assumed if, following the merger 

  

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or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase
Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger
or sale of assets. 
  
 13. Time of Granting Options and Stock
Purchase Rights. The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by
the Administrator. Notice of the determination shall be given to each Service Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 
  
 14. Amendment and Termination of the Plan. 
  
 (a) Amendment and Termination. The Board may at any
time amend, alter, suspend or terminate the Plan. 
  
 (b) Shareholder Approval. The Board shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. 
  
 (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the
Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination. 
  
 15. Conditions Upon Issuance of Shares. 
  
 (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. 
  
 (b) Investment Representations. As a condition to the
exercise of an Option, the Administrator may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present 

  

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intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 
  
 16. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 
  
 17. Reservation of Shares. The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan. 
  
 18.
Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under
Applicable Laws. 
  
 19. Information to Optionees and
Purchasers. The Company shall provide to each Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Optionee or purchaser has one or more Options or Stock Purchase
Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements
to key employees whose duties in connection with the Company assure their access to equivalent information. 
  

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 MONOLITHIC POWER SYSTEMS, INC. 
  
 1998 STOCK PLAN 
  
 STOCK OPTION AGREEMENT 
  
 Unless otherwise defined herein, the terms defined in the 1998 Stock Plan shall have the same defined meanings in this Stock Option Agreement. 

 

	I.	NOTICE OF STOCK OPTION GRANT 

  
 Optionee Name 
  
 Optionee Address 
  
 The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows: 
  

			
	Date of Grant 	  	______________
		
	Vesting Commencement Date 	  	______________
		
	Exercise Price per Share	  	$_____________
		
	Total Number of Shares Granted	  	______________
		
	Total Exercise Price	  	$_____________
		
	Type of Option:	  	___ Incentive Stock Option
		
	 	  	___ Nonstatutory Stock Option
		
	Term/Expiration Date:	  	______________

  
 Vesting
Schedule: 
  
 This Option shall be exercisable, in whole or in
part, according to the following vesting schedule: 
  
 [Twenty
five percent (25%) of the Shares subject to the Option shall vest twelve (12) months after the Vesting Commencement Date, and 1/48th of the Shares subject to the Option shall vest each month thereafter, subject to Optionee’s continuing to be a Service Provider on such dates.] 
  

 Termination Period: 
  
 This Option shall be exercisable for thirty (30) days after Optionee ceases to be a Service Provider. Upon Optionee’s
death or Disability, this Option may be exercised for one year after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above. 
  

	II.	AGREEMENT 

  
 1. Grant of Option. The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an
option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), and subject to the terms and conditions of the
Plan, which is incorporated herein by reference. Subject to Section 14(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail. 

 
 If designated in the Notice of Grant as an Incentive
Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated
as a Nonstatutory Stock Option (“NSO”). 
  
 2.
Exercise of Option. 
  
 (a) Right to
Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement. 
  
 (b) Method of Exercise. This Option shall be
exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised,
and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt
by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price. 
  
 No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with Applicable Laws.
Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 
  
 3. Optionee’s Representations. In the event the Shares have not been registered under the Securities Act of
1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver 

  

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to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B. 
  
 4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period (or such other period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the
effective date of a registration statement of the Company filed under the Securities Act. Such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to
be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such
Market Standoff Period. 
  
 5. Method of Payment. Payment
of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee: 
  
 (a) cash or check; 
  
 (b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or

  
 (c) surrender of other Shares which, (i) in
the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares. 
  
 6. Restrictions on Exercise. This
Option may not be exercised until such time as the Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation
of any Applicable Law. 
  
 7. Non-Transferability of
Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement
shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 
  
 8. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. 
  
 9.
Tax Consequences. Set forth below is a brief summary as of the date of this Option of some of the federal tax consequences of exercise of this Option and disposition of the Shares. 
  

 3 

 THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. 
  
 (a) Exercise of NSO. There may be a regular federal income tax liability upon the exercise of an NSO. The Optionee will be treated
as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee’s compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. 
  
 (b) Exercise of ISO. If this Option qualifies as an ISO, there will be no regular federal income tax liability upon the exercise of
the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise. 
  
 (c) Disposition of Shares. In the case of an NSO, if Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. In the case of an
ISO, if Shares transferred pursuant to the Option are held for at least one year after exercise and of at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for
federal income tax purposes. If Shares purchased under an ISO are disposed of within one year after exercise or two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the sale price of the Shares. Any additional gain will be taxed as capital gain,
short-term or long-term depending on the period that the ISO Shares were held. 
  
 (d) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in
writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. 
  
 10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement
constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws but not the choice of law rules of California. 
  

 4 

 11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. 
  
 Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under
the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below. 
  

									
	 OPTIONEE
	 	 	 	 MONOLITHIC POWER SYSTEMS, INC.

				
	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
	 Signature
	 	 	 	 By
	 	 
	 	 	 	 	 	 	 	

				
	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
	 Print Name
	 	 	 	 Title
	 	 
	 	 	 	 	 	 	 
				
	 Residence Address
	 	 	 	 	 	 

  

 5 

 EXHIBIT A 
  
 1998 STOCK PLAN 
  
 EXERCISE NOTICE 
  
 Monolithic Power Systems, Inc. 
 3777 Stevens Creek Boulevard, Suite 400

 Santa Clara, CA 95051-7364 
  
 Attention: Chief Financial Officer 
  
 1. Exercise of Option. Effective as of today,
                    ,             , the undersigned (“Optionee”)
hereby elects to exercise Optionee’s option to purchase                      shares of the Common Stock (the “Shares”) of
Monolithic Power Systems, Inc. (the “Company”) under and pursuant to the 1998 Stock Plan (the “Plan”) and the Stock Option Agreement dated
                    ,              (the “Option Agreement”).

  
 2. Delivery of Payment. Purchaser herewith delivers to
the Company the full purchase price of the Shares, as set forth in the Option Agreement. 
  
 3. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

  
 4. Rights as Shareholder. Until the issuance of the
Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date is prior to the
date of issuance except as provided in Section 12 of the Plan. 
  
 5. Company’s Right of First Refusal. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the “Right of First Refusal”). 
  
 (a) Notice of Proposed Transfer. The Holder of the
Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed
Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the 

  

 1 

 
Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). 
  
 (b) Exercise of Right of First Refusal. At any time
within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. 
  
 (c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s)
under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.

  
 (d) Payment. Payment of the Purchase
Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice. 
  
 (e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the
Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. 
  
 (f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any
or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the
provisions of this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. 
  
 (g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any
Shares upon the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended.

  

 2 

 6. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a
result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not
relying on the Company for any tax advice. 
  
 7. Restrictive
Legends and Stop-Transfer Orders. 
  
 (a)
Legends. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by the Company or by state or federal securities laws: 
  
 THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. 
  
 THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES. 
  
 (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 
  
 (c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so transferred. 
  
 8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns
of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns. 
  

 3 

 9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be
submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties. 
  
 10. Governing Law; Severability. This Exercise Notice is governed by
the internal substantive laws but not the choice of law rules, of California. 
  
 11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the
Optionee’s interest except by means of a writing signed by the Company and Optionee. 
  

									
	 Submitted by:
	 	 	 	 Accepted by

			
	 OPTIONEE
	 	 	 	 MONOLITHIC POWER SYSTEMS, INC.

				
	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
	 Signature
	 	 	 	 By
	 	 
	 	 	 	 	 	 	 	

				
	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
	 Print Name
	 	 	 	 Title
	 	 
	 	 	 	 	 	 	 
				
	 Address:
	 	 	 	 Address:
	 	 
				
	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
				
	 	 	 	 	 	 	 
	
	 	 	 	 	 	 
				
	 	 	 	 	 	 	 Date Received

  

 4 

 EXHIBIT B 
  
 INVESTMENT REPRESENTATION STATEMENT 
  

			
	OPTIONEE:	  	 
		
	COMPANY:	  	MONOLITHIC POWER SYSTEMS, INC.
		
	SECURITY:	  	COMMON STOCK
		
	AMOUNT:	  	 
		
	DATE:	  	 

  
 In connection with the
purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following: 
  
 (a) Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). 
  
 (b) Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a
deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the
certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, and any other
legend required under applicable state securities laws. 
  

 1 

 (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the
Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations
specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. 
  
 In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.

  
 (d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are
not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a
substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee
understands that no assurances can be given that any such other registration exemption will be available in such event. 
  

	
	 Signature of Optionee:

	
	 Date: _________________________________, 20

  

 2Prepared by R.R. Donnelley Financial -- Registrant's 2004 Equity Incentive Plan and Form of Option Agreement

 Exhibit 10.2 
  
 MONLITHIC POWER SYSTEMS, INC. 
  

2004 EQUITY INCENTIVE PLAN 
  
 1. Purposes of the Plan. The purposes of this Plan are: 
  

	 	•	to attract and retain the best available personnel for positions of substantial responsibility, 

  

	 	•	to provide additional incentive to Employees, Directors and Consultants, and 

  

	 	•	to promote the success of the Company’s business. 

  
 The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights,
Performance Units and Performance Shares. 
  
 2.
Definitions. As used herein, the following definitions will apply: 
  
 (a) “Administrator” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan. 
  
 (b) “Affiliated SAR” means an SAR that is granted in connection with a related Option, and
which automatically will be deemed to be exercised at the same time that the related Option is exercised. 
  
 (c) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state
corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be,
granted under the Plan. 
  
 (d)
“Award” means, individually or collectively, a grant under the Plan of Options, SARs, Restricted Stock, Performance Units or Performance Shares. 
  
 (e) “Award Agreement” means the written or electronic agreement setting forth the terms and
provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. 
  
 (f) “Board” means the Board of Directors of the Company. 
  
 (g) “Change in Control” means the occurrence of any of the following events: 
  
 (i) Any “person” (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power
represented by the Company’s then outstanding voting securities; or 
  

 (ii) The consummation of the sale or disposition by the Company of all or substantially
all of the Company’s assets; 
  
 (iii) A
change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the
effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose
election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or 
  
 (iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation. 
  
 (h) “Code” means the Internal Revenue Code
of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code. 
  
 (i) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

  
 (j) “Common Stock” means the
common stock of the Company. 
  
 (k)
“Company” means Monolithic Power Systems, Inc., a Delaware corporation, or any successor thereto. 
  
 (l) “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render
services to such entity. 
  
 (m)
“Director” means a member of the Board. 
  
 (n) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its
discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time. 
  
 (o) “Employee” means any person, including Officers and Directors, employed by the Company
or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company. 
  
 (p) “Exchange Act” means the Securities
Exchange Act of 1934, as amended. 
  

 -2- 

 (q) “Exchange Program” means a program under which (i) outstanding
Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, and/or (ii) the exercise price of an outstanding Award is reduced. The
Administrator will determine the terms and conditions of any Exchange Program in its sole discretion. 
  
 (r) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: 
  
 (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
  
 (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; 
  
 (iii) For purposes of any Awards granted on the Registration Date, the Fair Market Value will be the initial price to the public as set forth in the final prospectus included within the registration statement in Form
S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company’s Common Stock; or 
  
 (iv) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the
Administrator. 
  
 (s) “Fiscal
Year” means the fiscal year of the Company. 
  
 (t) “Freestanding SAR” means a SAR that is granted independently of any Option. 
  
 (u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder. 
  
 (v) “Inside Director” means a Director who is an Employee. 
  
 (w) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an
Incentive Stock Option. 
  
 (x)
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
  
 (y) “Option” means a stock option granted pursuant to the Plan. 
  

 -3- 

 (z) “Optioned Stock” means the Common Stock subject to an Award.

  
 (aa) “Outside Director”
means a Director who is not an Employee. 
  
 (bb)
“Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
  
 (cc) “Participant” means the holder of an outstanding Award. 
  
 (dd) “Performance Share” means an Award
granted to a Participant pursuant to Section 9. 
  
 (ee) “Performance Unit” means an Award granted to a Participant pursuant to Section 9. 
  
 (ff) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the
Administrator. 
  
 (gg) “Plan”
means this 2004 Equity Incentive Plan. 
  
 (hh)
“Registration Date” means the effective date of the first registration statement that is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s
securities. 
  
 (ii) “Restricted
Stock” means shares of Common Stock issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued pursuant to the early exercise of an Option. 
  
 (jj) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as
in effect when discretion is being exercised with respect to the Plan. 
  
 (kk) “Section 16(b) “ means Section 16(b) of the Exchange Act. 
  
 (ll) “Service Provider” means an Employee, Director or Consultant. 
  
 (mm) “Share” means a share of the Common
Stock, as adjusted in accordance with Section 13 of the Plan. 
  
 (nn) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant to Section 8 is designated as a SAR. 
  
 (oo) “Subsidiary” means a “subsidiary
corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code. 
  
 (pp) “Tandem SAR” means a SAR that is granted in connection with a related Option, the exercise of which will require
forfeiture of the right to purchase an equal number of 

  

 -4- 

 
Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the same extent). 
  
 (qq) “Unvested Awards” will mean Options or
Restricted Stock that (i) were granted to an individual in connection with such individual’s position as an Employee and (ii) are still subject to vesting or lapsing of Company repurchase rights or similar restrictions. 
  
 3. Stock Subject to the Plan. 
  
 (a) Stock Subject to the Plan. Subject to the
provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is the sun of 800,000 Shares plus (i) the number of Shares which have been reserved but not issued under the Company’s
1998 Stock Plan (the “1998 Plan”) as of the Registration Date, (ii) any Shares returned to the 1998 Plan as a result of termination of options or repurchase of Shares issued under such plan, and (iii) an annual increase to be added on the
first day of each fiscal year of the Company beginning in fiscal year 2005, equal to the lesser of (A) 2,400,000 Shares, (B) 5% of the outstanding Shares on such date (for purposes of which calculation only shares actually outstanding shall
be counted and not shares issuable upon conversion or exercise of other securities) or (C) an amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. Shares will not be deemed to have been issued
pursuant to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in Shares pursuant to the exercise of an SAR, the number of Shares available for issuance under the Plan will be reduced only by the number of Shares
actually issued in such payment. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of Shares available for issuance under the Plan will be reduced by
the gross number of Shares for which the Option is exercised. 
  
 (b) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Exchange Program, the unpurchased Shares which were subject thereto will
become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Award, will not be returned to the Plan and
will not become available for future distribution under the Plan, except that if unvested Shares are forfeited or repurchased by the Company, such Shares will become available for future grant under the Plan. 
  
 (c) Share Reserve. The Company, during the term of
this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan. 
  
 4. Administration of the Plan. 
  
 (a) Procedure. 
  
 (i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the
Plan. 
  
 (ii) Section 162(m). To the
extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two or
more “outside directors” within the meaning of Section 162(m) of the Code. 
  

 -5- 

 (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. 
  
 (iv) Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which
committee will be constituted to satisfy Applicable Laws. 
  
 (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the
authority, in its discretion: 
  
 (i) to
determine the Fair Market Value; 
  
 (ii) to
select the Service Providers to whom Awards may be granted hereunder; 
  
 (iii) to determine the number of Shares to be covered by each Award granted hereunder; 
  
 (iv) to approve forms of agreement for use under the Plan; 
  
 (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine; 
  
 (vi) to institute an Exchange Program; 
  
 (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan; 
  
 (viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws; 
  
 (ix) to modify or amend each Award (subject to Section 17(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise provided for in the Plan; 
  
 (x) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued
upon exercise of an Award that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld (the Fair Market Value of the Shares to be withheld will be determined on the date that the amount of tax to be withheld
is to be determined and all elections by a Participant to have Shares withheld for this 

  

 -6- 

 
purpose will be made in such form and under such conditions as the Administrator may deem necessary or advisable); 
  
 (xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Award previously granted by the Administrator; 
  
 (xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such
Participant under an Award 
  
 (xiii) to make all
other determinations deemed necessary or advisable for administering the Plan. 
  
 (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final
and binding on all Participants and any other holders of Awards. 
  
 5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units and Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

  
 6. Stock Options. 
  
 (a) Limitations. 
  
 (i) Each Option will be designated in the Award Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first
time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options
will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. 
  
 (ii) The following limitations will apply to grants of
Options and Stock Appreciation Rights: 
  
 (1)
No Service Provider will be granted, in any Fiscal Year, Options to purchase more than 750,000 Shares. 
  
 (2) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,250,000
Shares, which will not count against the limit set forth in Section 6(a)(2)(ii)(1) above. 
  
 (3) The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as
described in Section 13. 
  
 (4) If an Option is
cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 13), the cancelled 

  

 -7- 

 
Option will be counted against the limits set forth in subsections (1) and (2) above. For this purpose, if the exercise price of an Option is reduced, the
transaction will be treated as a cancellation of the Option and the grant of a new Option. 
  
 (b) Term of Option. The term of each Option will be stated in the Award Agreement. In the case of an Incentive Stock Option, the
term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such
shorter term as may be provided in the Award Agreement. 
  
 (c) Option Exercise Price and Consideration. 
  
 (i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined
by the Administrator, subject to the following: 
  
 (1) In the case of an Incentive Stock Option 
  
 a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. 
  
 b) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price will be no
less than 100% of the Fair Market Value per Share on the date of grant. 
  
 c) Notwithstanding the foregoing, Incentive Stock Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described
in, and in a manner consistent with, Section 424(a) of the Code. 
  
 (2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on the date of grant. 
  
 (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix
the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised. 
  
 (iii) Form of Consideration. The Administrator will determine the acceptable form of consideration for exercising an Option,
including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; 

  

 -8- 

 
(3) promissory note; (4) other Shares, provided Shares acquired directly or indirectly from the Company, (A) have been owned by the Participant and not
subject to substantial risk of forfeiture for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised; (5)
consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (6) a reduction in the amount of any Company liability to the Participant, including any liability attributable to the
Participant’s participation in any Company-sponsored deferred compensation program or arrangement; (7) any combination of the foregoing methods of payment; or (8) such other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws. 
  
 (d)
Exercise of Option. 
  
 (i) Procedure
for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An
Option may not be exercised for a fraction of a Share. 
  
 An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specify from time to time) from the person entitled to exercise the Option, and (ii) full payment
for the Shares with respect to which the Option is exercised (together with an applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement
and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued,
except as provided in Section 13 of the Plan. 
  
 Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (ii) Termination of Relationship as a Service
Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain
exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will
revert to the Plan. 
  

 -9- 

 (iii) Disability of Participant. If a Participant ceases to be a Service Provider
as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination.
Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the
Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  
 (iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be
exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of
the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in
accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the
Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time
specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan. 
  
 7. Restricted Stock. 
  
 (a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to
time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine. 
  
 (b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period
of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as
escrow agent until the restrictions on such Shares have lapsed. 
  
 (c) Transferability. Except as provided in this Section 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction. 
  
 (d) Other
Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate. 
  

 -10- 

 (e) Removal of Restrictions. Except as otherwise provided in this Section 7,
Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may accelerate the time
at which any restrictions will lapse or be removed. 
  
 (f) Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.

  
 (g) Dividends and Other Distributions.
During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such
dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. 
  
 (h) Return of Restricted Stock to Company. On the
date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan. 
  
 8. Stock Appreciation Rights. 
  
 (a) Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be granted to Service
Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. The Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. 
  
 (b) Number of Shares. The Administrator will have
complete discretion to determine the number of SARs granted to any Service Provider. 
  
 (c) Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to
determine the terms and conditions of SARs granted under the Plan. However, the exercise price of Tandem or Affiliated SARs will equal the exercise price of the related Option. 
  
 (d) Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to
the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR
granted in connection with an Incentive Stock Option: (a) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR will be for no more than one
hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (c)
the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option. 
  

 -11- 

 (e) Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be exercised
upon the exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option. 
  
 (f) Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such terms and conditions
as the Administrator, in its sole discretion, will determine. 
  
 (g) SAR Agreement. Each SAR grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine. 
  
 (h) Expiration of SARs. An SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d)
also will apply to SARs. 
  
 (i) Payment of
SAR Amount. Upon exercise of an SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying: 
  
 (i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times 
  
 (ii) The number of Shares with respect to which the SAR is
exercised. 
  
 At the discretion of the Administrator, the payment
upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 
  
 9. Performance Units and Performance Shares. 
  
 (a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and
from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant. 
  
 (b) Value of Performance Units/Shares. Each
Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. 
  
 (c) Performance Objectives and Other Terms. The
Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or
value of Performance Units/Shares that will be paid out to the Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of
Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance
objectives based upon the achievement of Company-wide, divisional, or 

  

 -12- 

 
individual goals, applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion. 
  
 (d) Earning of Performance Units/Shares. After the
applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or
other vesting provisions for such Performance Unit/Share. 
  
 (e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The
Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable
Performance Period) or in a combination thereof. 
  
 (f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.

  
 10. Formula Option Grants to Outside Directors.

  
 All grants of Options to Outside Directors pursuant to this
Section will be automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance with the following provisions: 
  
 (a) Type of Option. All Options granted pursuant to this Section will be Nonstatutory Stock Options and, except as otherwise
provided herein, will be subject to the other terms and conditions of the Plan. 
  
 (b) No Discretion. No person will have any discretion to select which Outside Directors will be granted Options under this Section
or to determine the number of Shares to be covered by such Options (except as provided in Sections 10(f) and 13). 
  
 (c) First Option. Each person who first becomes an Outside Director following the Registration Date will be automatically granted
an Option to purchase 30,000 Shares (the “First Option”) on or about the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a
vacancy; provided, however, that an Inside Director who ceases to be an Inside Director, but who remains a Director, will not receive a First Option. 
  
 (d) Subsequent Option. Each Outside Director will be automatically granted an Option to purchase 15,000 Shares (a “Subsequent
Option”) on each date of the annual meeting of the stockholders of the Company beginning in 2005, if as of such date, he or she will have served on the Board for at least the preceding six (6) months. 
  

 -13- 

 (e) Terms. The terms of each Option granted pursuant to this Section will be as
follows: 
  
 (i) The term of the Option will be
ten (10) years. 
  
 (ii) The exercise price per
Share will be 100% of the Fair Market Value per Share on the date of grant of the Option. 
  
 (iii) Subject to Section 14, the First Option will vest and become exercisable as to 50% of the Shares subject to the First Option on each
anniversary of its date of grant, provided that the Participant continues to serve as a Director through each such date. 
  
 (iv) Subject to Section 14, the Subsequent Option will vest and become exercisable as to 100% of the Shares subject to the Subsequent
Option on the first anniversary of its date of grant, provided that the Participant continues to serve as a Director through such date. 
  
 (f) Amendment. The Administrator in its discretion may change the number of Shares subject to the First Options and Subsequent
Options. 
  
 11. Leaves of Absence. Unless the
Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the 91st day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

  
 12. Transferability of Awards. Unless determined
otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 
  
 13. Adjustments; Dissolution or Liquidation; Merger or Change in
Control. 
  
 (a) Adjustments. In the
event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award,
the numerical 

  

 -14- 

 
Share limits in Sections 3 and 6 of the Plan and the number of Shares issuable pursuant to Options to be granted under Section 10. 
  
 (b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will
terminate immediately prior to the consummation of such proposed action. 
  
 (c) Change in Control. In the event of a Change in Control, each outstanding Award will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights,
including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Performance Shares and Performance Units, all performance goals or other vesting criteria
will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control,
the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option
or Stock Appreciation Right will terminate upon the expiration of such period. 
  
 With respect to Awards granted to an Outside Director that are assumed or substituted for, if on the date of or following such assumption
or substitution the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant, then the Participant will fully vest in and have the
right to exercise Options and/or Stock Appreciation Rights as to all of the Optioned Stock, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to
Performance Shares and Performance Units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. 
  
 For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock
Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger
or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied
shares determined by dividing the value of the Performance Units by the per share consideration received by holders of 

  

 -15- 

 
Common Stock in the Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control. 
  
 Notwithstanding anything in this Section 13(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its
successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not
be deemed to invalidate an otherwise valid Award assumption. 
  
 14. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they
interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws. 
  
 15. Date of Grant. The date of grant of an Award will be, for all
purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time
after the date of such grant. 
  
 16. Term of Plan. Subject
to Section 20 of the Plan, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 17 of the Plan. 
  
 17. Amendment and Termination of the Plan. 
  
 (a) Amendment and Termination. The Board may at any
time amend, alter, suspend or terminate the Plan. 
  
 (b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. 
  
 (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the
Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect
the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. 
  
 18. Conditions Upon Issuance of Shares. 
  
 (a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the
exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance. 
  

 -16- 

 (b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required. 
  
 19. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained. 
  
 20. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12)
months after the date the Plan is adopted. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. 
  

 -17- 

 MONLITHIC POWER SYSTEMS, INC. 
  
 2004 EQUITY INCENTIVE PLAN 
  
 STOCK OPTION AGREEMENT 
  
 Unless otherwise defined herein, the terms defined in the 2004 Equity Incentive Plan shall have the same defined meanings in this Option Agreement.

  

	I.	NOTICE OF STOCK OPTION GRANT 

  
 Name: 
  
 Address: 
  
 You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as
follows: 
  

			
	 Grant Number
	 	 _________________________________________

		
	 Date of Grant
	 	 _________________________________________

		
	 Vesting Commencement Date
	 	 _________________________________________

		
	 Exercise Price per Share
	 	 $________________________________________

		
	 Total Number of Shares Granted
	 	 _________________________________________

		
	 Total Exercise Price
	 	 $________________________________________

		
	 Type of Option:
	 	 _____ Incentive Stock Option

		
	 	 	 _____ Nonstatutory Stock Option

		
	 Term/Expiration Date:
	 	 _________________________________________

  
 Vesting
Schedule: 
  
 This Option may be exercised, in whole or in
part, in accordance with the following schedule: 
  
 [Twenty-five percent (25%) of the Shares subject to the Option shall vest twelve (12) months after the Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter on the same day of the month
as the Vesting Commencement Date, subject to the Optionee continuing to be a Service Provider on such dates]. 
  

 Termination Period: 
  
 This Option may be exercised for [three (3) months] after Optionee ceases to be a Service Provider. Upon the death or
Disability of Optionee, this Option may be exercised for [twelve (12) months] after Optionee ceases to be a Service Provider. In no event shall this Option be exercised later than the Term/Expiration Date as provided above. 
  

	II.	AGREEMENT 

  

	 	A.	Grant of Option. 

  
 The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Option
Agreement (the “Optionee”) an option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject
to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 17(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail. 
  
 If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”). 
  

	 	B.	Exercise of Option. 

  
 (a) Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of
Grant and the applicable provisions of the Plan and this Option Agreement. 
  
 (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be completed by the Optionee and delivered to the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the
Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price. 
  
 No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws.
Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares. 
  

 -2- 

	 	C.	Method of Payment. 

  
 Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

  
 1. cash; 
  
 2. check; 
  
 3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or 
  
 4. surrender of other Shares, which in the case of Shares acquired from the Company, (i) have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares. 
  

	 	D.	Non-Transferability of Option. 

  
 This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 
  

	 	E.	Term of Option. 

  
 This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement. 
  

	 	F.	Tax Obligations. 

  
 1. Withholding Taxes. Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or
retaining Optionee) for the satisfaction of all Federal, state, and local income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and
refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. 
  
 2. Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (a) the date two (2) years after the Date of Grant, or (b) the date one (1) year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. 
  

 -3- 

	 	G.	Entire Agreement; Governing Law. 

  
 The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest
except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. 
  

	 	H.	NO GUARANTEE OF CONTINUED SERVICE. 

  
 OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND
THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. 
  
 By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted
under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and
Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. 
  

									
	 OPTIONEE:
	 	 	 	 MONLITHIC POWER SYSTEMS, INC.

				
	 	 	 	 	 	 	 
	
	 	 	 	

	 Signature
	 	 	 	 By

					
	 	 	 	 	 	 	 	 	 
	
	 	 	 	

	 Print Name
	 	 	 	 Title

				
	 	 	 	 	 	 	 
	
	 	 	 	 	 
	 Residence Address
	 	 	 	 
			
	 	 	 	 	 
	
	 	 	 	 	 	 

  

 -4- 

 EXHIBIT A 
  
 MONLITHIC POWER SYSTEMS, INC. 
  

2004 EQUITY INCENTIVE PLAN 
  
 EXERCISE NOTICE 
  
 Monolithic Power Systems, Inc. 
 983 University Ave. Building A 
 Los Gatos, CA 95032 
  
 Attention: Chief Financial Officer 
  
 1. Exercise of Option. Effective as of today,
                                        
    ,                     , the undersigned (“Purchaser”) hereby elects to purchase
                                        
     shares (the “Shares”) of the Common Stock of Monolithic Power Systems, Inc. (the “Company”) under and pursuant to the 2004 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement
dated,
                                        
     (the “Option Agreement”). The purchase price for the Shares shall be $                    , as required
by the Option Agreement. 
  
 2. Delivery of Payment.
Purchaser herewith delivers to the Company the full purchase price for the Shares and any required withholding taxes to be paid in connection with the exercise of the Option. 
  
 3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and
the Option Agreement and agrees to abide by and be bound by their terms and conditions. 
  
 4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan. 
  

5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax
advice. 
  
 6. Entire Agreement; Governing Law. The Plan
and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all 

  

 
prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the
Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. 
  

									
	 Submitted by:
	 	 	 	 Accepted by:

			
	 PURCHASER:
	 	 	 	 MONLITHIC POWER SYSTEMS, INC.

					
	 	 	 	 	 	 	 	 	 
	
	 	 	 	

	 Signature
	 	 	 	 By

					
	 	 	 	 	 	 	 	 	 
	
	 	 	 	

	 Print Name
	 	 	 	 Its

			
	 Address:
	 	 	 	 Address:

				
	 	 	 	 	 	 	 983 University Ave. Building A

	
	 	 	 	 	 
				
	 	 	 	 	 	 	 Los Gatos, CA 95032

	
	 	 	 	 	 
	 	 	 	 	 
				
	 	 	 	 	 	 	 
	 	 	 	 	 	

	 	 	 	 	 Date Received

  

 -2-

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