Document:

Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement

 Exhibit 10.1 
 [Form of Agreement for Employees with Executive Officer Benefits Agreement] 
 POWER
INTEGRATIONS, INC. 
 PERFORMANCE STOCK UNIT
GRANT NOTICE 
 (2007 EQUITY INCENTIVE PLAN) 

Power Integrations, Inc. (the “Company”), pursuant to its 2007 Equity Incentive Plan (the “Plan”) hereby grants to Participant the Maximum Number
of Performance Stock Units as set forth below (the “PSU Grant”). This PSU Grant is subject to all of the terms and conditions as set forth herein, and in the Performance Stock Unit Agreement and the Plan, each of which is attached hereto
and incorporated herein in its entirety. This PSU Grant is a “restricted stock unit” granted pursuant to Section 6(b) of the Plan and a “performance stock award” granted pursuant to Section 6(d) of the Plan. Capitalized
terms not otherwise defined herein will have the meanings set forth in the Plan or the Performance Stock Unit Agreement. Except as otherwise expressly provided herein, in the event of any conflict between the terms in the PSU Grant and the Plan, the
terms of the Plan will control. 
  

					
	Participant:	  	  
	  	
	Date of Grant:	  	[                                ]	  	
	Target Number of Performance Stock Units:	  	  
	  	
	Maximum Number of Performance Stock Units:	  	  
	  	
	Consideration:	  	Participant’s services	  	
	Employment Vesting Date:	  	[                                ]	  	
	Final Issuance Date:	  	[                                ]	  	

			
	PSU Vesting Criteria:	  	The actual number of shares of Common Stock to be issued to Participant pursuant to this PSU Grant will be determined in accordance with the vesting conditions specified on Attachment I to
this Grant Notice (the “PSU Vesting Criteria”).
		
	Issuance Schedule:	  	Delivery of one share of common stock for each Performance Stock Unit that vests will occur in accordance with the issuance schedule set forth in Section 4 of the Performance Stock Unit
Agreement.

 Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and
agrees to, this Grant Notice, the Performance Stock Unit Agreement and the Plan. Participant also acknowledges receipt of the Power Integrations, Inc. 2007 Equity Incentive Plan Prospectus. In addition, Participant acknowledges that Attachments I
and IV to this Grant Notice govern the treatment of the PSU Grant under Participant’s [Amended and Restated] Executive Officer Benefits Agreement. Participant further acknowledges that, as of the Date of Grant, this Grant Notice, the
Performance Stock Unit Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the PSU Grant and supersede all prior oral and written agreements on that subject. 
  

									
	POWER INTEGRATIONS, INC.	 		 	PARTICIPANT:
				
	By:	 	  
	 		 	  

		 	Signature	 		 		 	Signature
					
	Title:	 	  
	 		 	Date:	 	  

					
	Date:	 	  
	 		 		 	

  

			
	ATTACHMENTS:	  	PSU Vesting Criteria, Performance Stock Unit Agreement, the Plan, Treatment under [Amended and Restated] Executive Officer Benefits Agreement 

 ATTACHMENT I 
 PSU VESTING CRITERIA 
 Capitalized terms used herein but not
defined will have the meanings set forth in the Grant Notice or the Company’s 2007 Equity Incentive Plan, as applicable. A Performance Stock Unit will vest only if the Performance Vesting Criteria with respect to such Performance Stock Unit are
satisfied and if the Participant remains in Continuous Service as an Employee, Director or Consultant through the Employment Vesting Date indicated in the Grant Notice. 
 PERFORMANCE VESTING CRITERIA 
 The number of
Performance Stock Units that will satisfy the Performance Vesting Criteria will be determined by the Company’s Compensation Committee or its designee (the “Committee”) subject to the performance conditions as determined by the
Committee (the “Performance Conditions”) as set forth below: 
 The Performance Conditions for a target award of the Performance Stock Units will
be based on “Net Revenue” and “Non-GAAP Operating Income.” Vesting is calculated independently for Net Revenue and Non-GAAP Operating Income. Vesting of [        ]% of the PSUs is based on
achievement of Net Revenue Performance Conditions, and vesting of [        ]% of the PSUs is based on Non-GAAP Operating Income Performance Conditions. The following table sets forth the percentage of the
Target Number of Performance Stock Units (as set forth in the Grant Notice) vested (i.e., earned) at the given Performance Condition achieved: 
  

							
	[            ] Net Revenue	  	Non-GAAP Operating Income
				
	 Net Revenue
 (in thousands)
	  	 Percentage of
 Target PSUs
 Vested
	  	 Non-GAAP
 Operating
 Income
 (in thousands)
	  	 Percentage of
 Target PSUs
 Vested

		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	

  

 1. 

							
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	
		  		  		  	

 In the event the actual Performance Condition achieved falls between two levels, the percentage vested will be
determined by straight line interpolation. For the purposes of satisfaction of the Performance Conditions, the term “Net Revenue” is as set forth in the Company’s annual report for
[            ] filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. 
 For the purposes of satisfaction of the Performance Conditions, the term “Non-GAAP Operating Income” means operating income for [            ]
determined in accordance with generally accepted accounting principles but excluding (i) any FAS 123R expenses; and (ii) any extraordinary income and or expenses associated with mergers and acquisitions or divestitures, patent lawsuit
settlements and IRS settlements. 
 In the event of a divestiture of a portion of the Company’s business operations in
[            ], the Performance Conditions will be adjusted and/or the results of the divested operations excluded in the computation in a manner to reflect the portion of the Performance
Criteria expected to be satisfied by the divested operations during the balance of the fiscal year. 
  

 2. 

 No later than the earlier of (a) [            ]
(            ) days after the receipt by the Committee of the audited financial statements for [            ] or
(b) [            ] (            ) days prior to the Final Issuance Date indicated in the Grant Notice, the Committee will
determine to what extent the Performance Conditions for the PSU Grant were achieved, and what number of Performance Stock Units subject to the PSU Grant will therefore be vested. Performance Stock Units will not be deemed to be vested based upon the
attainment of Performance Conditions unless and until the Committee makes such determination and only if the Participant remains in Continuous Service as an Employee, Director or Consultant through the Employment Vesting Date. The Committee will
have the sole and absolute discretion to reduce the number of Performance Stock Units that are deemed to vest in accordance with the Performance Vesting Conditions. The Committee will not have discretion to increase the number of Performance Stock
Units that are deemed to vest in accordance with the Performance Vesting Conditions. 
 For purposes of satisfaction of the Performance Conditions, no
subsequent agreement will be effective to amend, alter or waive satisfaction of the Performance Conditions applicable to the PSU Grant unless such agreement specifically provides for amendment of the Performance Conditions applicable to the PSU
Grant. 
 TREATMENT UPON A CHANGE IN
CONTROL 
 Upon the occurrence of a “Termination Upon Change in Control” (as defined in the
Participant’s [Amended and Restated] Executive Officer Benefits Agreement), the Performance Stock Units will be treated as a “target bonus” under Section [4(a)(i)] of Participant’s [Amended and Restated]
Executive Officer Benefits Agreement. For purposes of Section [4(a)(i)] of the Participant’s [Amended and Restated] Executive Officer Benefits Agreement, “target bonus” will be based on the Target Number of Performance
Stock Units. The Performance Stock Units deemed vested pursuant to this paragraph will be paid in shares of the Company’s common stock equal to the number of Performance Stock Units deemed vested. 
  

 3. 

 ATTACHMENT II 
 POWER INTEGRATIONS, INC. 
 PERFORMANCE STOCK UNIT AGREEMENT 
 Power Integrations, Inc. (the
“Company”) hereby grants to the Participant (“you”) named in the attached Performance Stock Unit Grant Notice (“Grant Notice”), and you hereby accept, the grant of Performance Stock Units (the “PSU Grant”)
pursuant to the terms set forth in the Grant Notice, its attached PSU Vesting Criteria, the Plan and this Performance Stock Unit Agreement (“Agreement”). A copy of the PSU Vesting Criteria is attached to the Grant Notice as Attachment I,
and a copy of the Plan is attached to the Grant Notice as Attachment III. Capitalized terms not explicitly defined in this Agreement but defined in the Plan or the PSU Vesting Criteria will have the same definitions as in the Plan or PSU Vesting
Criteria, as applicable. 
 The details of your PSU Grant, in addition to those set forth in the Grant Notice, the PSU Vesting Criteria and
the Plan are as follows: 
 1. PSU GRANT. This PSU Grant represents the right to be awarded on a future date a number
of Performance Stock Units not exceeding the Maximum Number of Performance Stock Units indicated in the Grant Notice in the event the PSU Vesting Criteria are met and if you remain in Continuous Service as an Employee, Director or Consultant through
the Employment Vesting Date. This PSU Grant was granted in consideration of your services to the Company. Except as otherwise provided herein, you will not be required to make any payment to the Company (other than past or future services to the
Company) with respect to your receipt of the PSU Grant, the award of Performance Stock Units, the vesting of the Performance Stock Units, or the delivery of common stock in respect of the PSU Grant. 
 2. VESTING. Subject to the limitations contained herein, your awarded Performance Stock Units will vest, if at all, in accordance
with the PSU Vesting Criteria set forth on Attachment I to the Grant Notice. Any awarded Performance Stock Units that have vested in accordance with the PSU Vesting Criteria are “Vested Units.” Any awarded Performance Stock Units that do
not vest in accordance with the PSU Vesting Criteria will be automatically forfeited, will revert to the Plan, and you will have no rights with respect to such forfeited Performance Stock Units. 
 3. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained
herein, you may not be issued any shares of common stock in respect of your PSU Grant unless either (i) the shares of common stock are then registered under the Securities Act; or (ii) if the shares of common stock are not then so
registered, the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your PSU Grant also must comply with other applicable laws and regulations governing your PSU Grant, and you may not
receive such shares if the Company determines that such receipt would not be in compliance with such laws and regulations. 
  

 1. 

 4. DATE OF ISSUANCE. 
 (a) The Company will deliver to you a number of shares of the Company’s common stock equal to the number of Vested Units subject to your PSU
Grant within thirty (30) days following the Committee’s determination that Performance Conditions have been satisfied and only if you remain in Continuous Service as an Employee, Director or Consultant through the Employment Vesting Date
indicated in the Grant Notice. If a scheduled delivery date falls on a date that is not a business day, such delivery date will instead fall on the next following business day. 
 (b) Notwithstanding the foregoing, in the event that you are subject to the Company’s policy permitting officers and directors to sell shares
only during certain “window” periods, in effect from time to time, or you are otherwise prohibited from selling shares of the Company’s common stock in the public market and any shares in respect of your PSU Grant are scheduled to be
delivered on a day (the “Original Distribution Date”) that does not occur during an open “window period” applicable to you, as determined by the Company in accordance with such policy, or does not occur on a date
when you are otherwise permitted to sell shares of the Company’s common stock on the open market, then such shares will not be delivered on such Original Distribution Date and will instead be delivered on the first business day of the next
occurring open “window period” applicable to you pursuant to such policy (regardless of whether you are still providing continuous services at such time) or the next business day when you are not prohibited from selling shares of the
Company’s common stock in the open market, but in no event later than the Final Issuance Date indicated in the Grant Notice. The form of such delivery (e.g., a stock certificate or electronic entry evidencing such shares) will be
determined by the Company. 
 5. EXECUTION OF DOCUMENTS. You hereby acknowledge and agree
that the manner selected by the Company by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and of this Agreement. You further agree that such manner of indicating consent may be relied
upon as your signature for establishing your execution of any documents to be executed in the future in connection with your PSU Grant. 
 6. DIVIDENDS. You will receive no benefit or adjustment to your PSU Grant with respect to any cash dividend, stock dividend or other distribution that does not result in a capitalization adjustment as provided in the
Plan; provided, however, that this sentence will not apply with respect to any shares of common stock that are delivered to you in connection with your PSU Grant after such shares have been delivered to you. 
 7. NON-TRANSFERABILITY OF THE PSU GRANT. Your PSU Grant is not
transferable, except by will or by the laws of descent and distribution. In addition to any other limitation on transfer created by applicable securities laws, you agree not to assign, hypothecate, donate, encumber or otherwise dispose of any
interest in any of the shares of common stock that may be issued to you in respect of the PSU Grant until the shares are issued to you in accordance with Section 4 of this Agreement. After the shares have been issued to you, you are free to
assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such 

  

 2. 

 
actions are in compliance with the provisions herein and applicable securities laws. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, will thereafter be entitled to receive any distribution of common stock to which you were entitled at the time of your death pursuant to
this Agreement. 
 8. RESTRICTIVE LEGENDS. The shares issued in respect of your PSU Grant will have
endorsed thereon appropriate legends as determined by the Company. 
 9. PSU GRANT NOT A
SERVICE CONTRACT. Your PSU Grant is not an employment or service contract, and nothing in your PSU Grant will be deemed to create in any way whatsoever any obligation on your part to continue in the
employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your PSU Grant will obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate. 
 10.
WITHHOLDING OBLIGATIONS. 
 (a) On or before the time you receive a distribution of the shares in
respect of your PSU Grant, or at any time thereafter as requested by the Company, you hereby authorize the Company to withhold shares of common stock from the shares of common stock issued or otherwise issuable to you in connection with the PSU
Grant with a Fair Market Value (measured as of the date shares of common stock are issued to you pursuant to Section 4) equal to the amount of any federal, state, local and foreign tax withholding obligations of the Company or any affiliate
which arise in connection with your PSU Grant (the “Withholding Taxes”); provided, however, that the number of such shares of common stock so withheld will not exceed the amount necessary to satisfy the Company’s
required tax withholding obligations using the minimum required statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income. Additionally, the Company
may, in its sole discretion, satisfy all or any portion of the Withholding Taxes obligation relating to your PSU Grant by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to
you by the Company; or (ii) causing you to tender a cash payment. 
 (b) Unless the tax withholding obligations of the Company or
any Affiliate are satisfied, the Company will have no obligation to deliver to you any common stock. 
 11. UNSECURED
OBLIGATION. Your PSU Grant is unfunded, and as a holder of a vested PSU Grant, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this
Agreement. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 4 of this Agreement. Upon such
issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary
relationship between you and the Company or any other person. 
  

 3. 

 12. TAX CONSEQUENCES. You have reviewed with your own tax advisors
the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. You are relying solely on such advisors and not on any statements or representations of the Company or any of its agents.
You understand that you (and not the Company) will be responsible for your own tax liability that may arise as a result of your PSU Grant. 
 13. NOTICES. Any notices provided for in this Agreement or the Plan will be given in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company
to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents
related to participation in the Plan and this PSU Grant by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, to agree to
participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. 
 14. MISCELLANEOUS. 
 (a) The rights and obligations of the Company under your
PSU Grant will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by, the Company’s successors and assigns. Your rights and obligations under your
PSU Grant may only be assigned with the prior written consent of the Company. 
 (b) You acknowledge and agree that you have reviewed
your PSU Grant in its entirety and have had an opportunity to obtain the advice of counsel prior to executing and accepting your PSU Grant. 
 (c) This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 
 (d) All obligations of the Company under the Plan and this Agreement will be binding on any successor to the Company, whether the existence of
such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 
 15. GOVERNING PLAN DOCUMENTS. Your PSU Grant is subject to all the
provisions of the Plan, including any limits on the number of shares that may be issued to you as set forth in Section 6(d) of the Plan, the provisions of which are hereby made a part of your PSU Grant, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time be 

  

 4. 

 
promulgated and adopted pursuant to the Plan. Except as otherwise expressly provided herein in the event of any conflict between the terms in the PSU Grant
and the Plan, the terms of the Plan will control. 
 16. SEVERABILITY. If all or any part of this Agreement or the Plan
is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or
part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

 17. EFFECT ON OTHER EMPLOYEE BENEFIT
PLANS. The value of the PSU Grant subject to this Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the
Company or any affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any affiliate’s employee benefit plans. 
 18. CHOICE OF LAW. The interpretation, performance and enforcement of this Agreement will be governed
by the law of the state of Delaware without regard to such state’s conflicts of laws rules. 
 19. AMENDMENT. This
Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Company by a
writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent.
For the avoidance of doubt, nothing in this Section 19 limits the authority or power of the Compensation Committee to reduce the number of shares of common stock to be received as set forth in the PSU Vesting Criteria. Without limiting the
foregoing, the Company reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable tax or
securities laws or regulations or any future tax or securities law, regulation, ruling, or judicial decision. 
 * * * * * 
 This Performance Stock Unit Agreement will be deemed to be signed by the Company and the Participant upon the signing by the Participant of the
Performance Stock Unit Grant Notice to which it is attached in the manner permitted by Section 5. 
  

 5. 

 ATTACHMENT III 
 2007 EQUITY INCENTIVE PLAN 
  

 1. 

 ATTACHMENT IV 
 TREATMENT UNDER 
 [AMENDED
AND RESTATED] EXECUTIVE OFFICER BENEFITS AGREEMENT 
 Upon the
occurrence of a “Termination Upon Change in Control” (as defined in the Participant’s [Amended and Restated] Executive Officer Benefits Agreement), the Performance Stock Units will be treated as a “target bonus” under
Section [4(a)(i)] of Participant’s [Amended and Restated] Executive Officer Benefits Agreement. For purposes of Section [4(a)(i)] of the Participant’s [Amended and Restated] Executive Officer Benefits Agreement,
“target bonus” will be based on the Target Number of Performance Stock Units. The Performance Stock Units deemed vested pursuant to this paragraph will be paid in shares of the Company’s common stock equal to the number of Performance
Stock Units deemed vested. 
 Upon the occurrence of a “Termination of Employment” (as defined in the Participant’s [Amended and
Restated] Executive Officer Benefits Agreement), the Performance Stock Units will be treated as a “targeted annual incentive bonus” under Section [5(a)] of Participant’s [Amended and Restated] Executive Officer
Benefits Agreement. For purposes of Section [5(a)] of the Participant’s [Amended and Restated] Executive Officer Benefits Agreement, “targeted annual incentive bonus” will be based on the Target Number of Performance
Stock Units. The Performance Stock Units deemed vested pursuant to this paragraph will be paid in shares of the Company’s common stock equal to the number of Performance Stock Units deemed vested. 
  

 2.2007 Equity Incentive Plan

 Exhibit 10.2 
 POWER INTEGRATIONS, INC. 
 2007 EQUITY
INCENTIVE PLAN 
 ADOPTED BY THE BOARD:
SEPTEMBER 10, 2007 
 APPROVED BY THE STOCKHOLDERS:
NOVEMBER 7, 2007 
 AMENDED BY THE BOARD:
JANUARY 29, 2008 
 AMENDED BY THE BOARD:
JULY 28, 2009 
 TERMINATION DATE: SEPTEMBER 9, 2017

  

	1.	GENERAL. 

 (a) Amendment and
Restatement. The Plan is adopted to amend and restate the Company’s 1997 Stock Option Plan (the “Original Plan”). All outstanding Stock Awards granted before the amendment and restatement of the Plan shall continue
to be governed by the terms of the Original Plan. All Stock Awards granted after the Effective Date shall be governed by the terms contained herein. 
 (b) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are Employees, Directors and Consultants. 
 (c) Available Stock Awards. The Plan provides for the grant of the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards,
(iv) Restricted Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, and (vii) Other Stock Awards. 
 (d) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of the group of persons eligible to receive Stock Awards as set forth in Section 1(b), to provide incentives for such persons to exert
maximum efforts for the success of the Company and any Affiliate, and to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Stock Awards.

  

	2.	ADMINISTRATION. 

 (a)
Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c). 
 (b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: 
 (i) To determine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards; (B) when and how each
Stock Award shall be granted; (C) what type or combination of types of Stock Award shall be granted; (D) the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be 

  

 1. 

 
permitted to receive cash or Common Stock pursuant to a Stock Award; (E) the number of shares of Common Stock with respect to which a Stock Award shall
be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award. 
 (ii) To construe and interpret the
Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan or Stock Award fully effective. 
 (iii) To settle all controversies regarding the Plan and Stock Awards granted under it. 
 (iv) To accelerate the time
at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or
the time during which it will vest. 
 (v) To suspend or terminate the Plan at any time. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant. 
 (vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, relating to Incentive Stock Options and certain nonqualified deferred compensation under
Section 409A of the Code and/or to bring the Plan or Stock Awards granted under the Plan into compliance therewith, subject to the limitations, if any, of applicable law. However, except as provided in Section 9(a) relating to
Capitalization Adjustments, to the extent required by applicable law or listing requirements, stockholder approval shall be required for any amendment of the Plan that either (i) materially increases the number of shares of Common Stock
available for issuance under the Plan, (ii) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces
the price at which shares of Common Stock may be issued or purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of Stock Awards available for issuance under the Plan. Except as provided above,
rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.
 
 (vii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of (i) Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered
Employees, (ii) Section 422 of the Code regarding Incentive Stock Options, or (iii) Rule 16b-3. 
 (viii) To approve
forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject
to any specified limits in the Plan that are not subject to Board discretion; provided however, that, the 

  

 2. 

 
rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and
(ii) such Participant consents in writing. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent if
necessary to maintain the qualified status of the Stock Award as an Incentive Stock Option or to bring the Stock Award into compliance with Section 409A of the Code and the related guidance thereunder. 
 (ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the
Company and that are not in conflict with the provisions of the Plan or Stock Awards. 
 (x) To adopt such procedures and sub-plans as
are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States. 
 (c) Delegation to Committee. 
 (i) General. The Board may delegate some or all of the
administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have
been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the
Committee and may, at any time, revest in the Board some or all of the powers previously delegated. 
 (ii) Section 162(m) and Rule
16b-3 Compliance. In the sole discretion of the Board, the Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with
Rule 16b-3. In addition, the Board or the Committee, in its sole discretion, may (A) delegate to a Committee who need not be Outside Directors the authority to grant Stock Awards to eligible persons who are either (I) not then Covered
Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Stock Award, or (II) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code, or
(B) delegate to a Committee who need not be Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. 
 (d) Delegation to Officers. The Board may delegate to one or more Officers the authority to do one or both of the following: (i) designate
Officers and Employees of the Company or any of its Subsidiaries to be recipients of Options (and, to the extent permitted by Delaware law, other Stock Awards) and the terms thereof, and (ii) determine the number of shares of Common Stock to be
subject to such Stock Awards granted to such Officers and Employees; provided, however, that the Board resolutions regarding 

  

 3. 

 
such delegation shall specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officers and that such
Officer may not grant a Stock Award to himself or herself. Notwithstanding the foregoing, the Board may not delegate to an Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section 13(u)(ii) below. 

(e) Cancellation and Re-Grant of Stock Awards. Neither the Board nor any Committee shall have the authority to: (i) reprice any
outstanding Stock Awards under the Plan, or (ii) cancel and re-grant any outstanding Stock Awards under the Plan, unless the stockholders of the Company have approved such an action within a twelve (12) month period preceding or following
such an event. 
 (f) Repurchase of Stock Awards. Notwithstanding anything to the contrary set forth herein, except in connection with
an Ownership Change Event, Capitalization Adjustment, extraordinary cash dividend, split-up or spin-off, outstanding Options or Stock Appreciation Rights may not be canceled in exchange for cash without stockholder approval. 
 (g) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to
review by any person and shall be final, binding and conclusive on all persons. 
  

	3.	SHARES SUBJECT TO THE PLAN. 

 (a) Share Reserve. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common
Stock that may be issued pursuant to Stock Awards under the Plan shall not exceed Eleven Million Nine Hundred Ninety-Six Thousand Nine Hundred Twenty-Nine (11,996,929) shares. Such share reserve consists solely of shares remaining available for
issuance under the Original Plan, including shares subject to outstanding options under the Original Plan. Subject to Section 3(b), the number of shares available for issuance under the Plan shall be reduced by: (i) one (1) share for
each share of stock issued pursuant to (A) an Option granted under Section 5, or (B) a Stock Appreciation Right granted under Section 6(c), and (ii) two (2) shares for each share of Common Stock issued pursuant to a
Restricted Stock Award, Restricted Stock Unit Award, or Other Stock Award granted under Section 6. Shares may be issued in connection with a merger or acquisition as permitted by Nasdaq Rule 4350(i)(1)(A)(iii) or, if applicable, NYSE Listed
Company Manual Section 303A.08, or AMEX Company Guide Section 711 and such issuance shall not reduce the number of shares available for issuance under the Plan. 
 (b) Reversion of Shares to the Share Reserve. If any (i) Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii) shares of
Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares, or (iii) a Stock Award is settled
in cash, then the shares of Common Stock not issued under such Stock Award, or forfeited to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. If any shares subject to a Stock Award are not
delivered to a Participant because such shares are withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”) or an appreciation distribution in

  

 4. 

 
respect of a Stock Appreciation Right is paid in shares of Common Stock, the number of shares subject to the Stock Award that are not delivered to the
Participant shall not remain available for subsequent issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the
number of shares so tendered shall not remain available for issuance under the Plan. To the extent there is issued a share of Common Stock pursuant to a Stock Award that counted as two (2) shares against the number of shares available for
issuance under the Plan pursuant to Section 3(a) and such share of Common Stock again becomes available for issuance under the Plan pursuant to this Section 3(b), then the number of shares of Common Stock available for issuance under the
Plan shall increase by two (2) shares. 
 (c) Incentive Stock Option Limit. Notwithstanding anything to the contrary in
Section 3, subject to the provisions of Section 9(a) relating to Capitalization Adjustments the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be Eleven
Million Nine Hundred Ninety-Six Thousand Nine Hundred Twenty-Nine (11,996,929) shares of Common Stock. 
 (d) Source of Shares.
The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market. 
  

	4.	ELIGIBILITY. 

 (a) Eligibility for
Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the
Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. 
 (b) Ten Percent
Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and
the Option is not exercisable after the expiration of five (5) years from the date of grant. 
 (c) Section 162(m)
Limitation. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, no Employee shall be eligible to be granted during any calendar year Stock Awards whose value is determined by reference to an increase over an
exercise or strike price of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the Stock Award is granted covering more than five hundred thousand (500,000) shares of Common Stock. 
 (d) Consultants. A Consultant shall be eligible for the grant of a Stock Award only if, at the time of grant, a Form S-8 Registration Statement
under the Securities Act (“Form S-8”) is available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or because of any other rule governing the availability of Form S-8. 
  

 5. 

	5.	OPTION PROVISIONS. 

 Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and,
if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, then the Option
shall be a Nonstatutory Stock Option. The provisions of separate Options need not be identical; provided, however, that each Option Agreement shall conform to (through incorporation of provisions hereof by reference in the Option Agreement or
otherwise) the substance of each of the following provisions: 
 (a) Term. Subject to the provisions of Section 4(b) regarding
Ten Percent Stockholders, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Option Agreement. 
 (b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise price of each Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the Option if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the
Code (whether or not such options are Incentive Stock Options). 
 (c) Consideration. The purchase price of Common Stock acquired
pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the authority to
grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The permitted
methods of payment are as follows: 
 (i) by cash, check, bank draft or money order payable to the Company; 
 (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock
subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds; 
 (iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock; 
 (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise
by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a cash or other payment from the Participant to the extent of any remaining
balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued; provided, further, 

  

 6. 

 
that shares of Common Stock will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) shares are used
to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or 
 (v) in any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

 (d) Transferability of Options. The Board may, in its sole discretion, impose such limitations on the transferability of Options as
the Board shall determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options shall apply: 
 (i) Restrictions on Transfer. An Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the
Optionholder; provided, however, that the Board may, in its sole discretion, permit transfer of the Option in a manner that is not prohibited by applicable tax and securities laws upon the Optionholder’s request. 
 (ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred pursuant to a domestic relations order, provided,
however, that an Incentive Stock Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer. 
 (iii)
Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect Option
exercises, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. In the absence of such a designation, the executor or administrator of the Optionholder’s estate shall
be entitled to exercise the Option. 
 (e) Vesting of Options Generally. The total number of shares of Common Stock subject to an
Option may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on
performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5(e) are subject to any Option provisions governing the minimum number of shares of Common
Stock as to which an Option may be exercised. 
 (f) Termination of Continuous Service. In the event that an Optionholder’s
Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of
Continuous Service) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her Option within the time specified herein or in
the Option Agreement (as applicable), the Option shall terminate. 
  

 7. 

 (g) Extension of Termination Date. In the event that exercise of an Option following the
termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option
would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. 
 (h) Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination
of Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder
does not exercise his or her Option within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate. 
 (i) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period (if any) specified in the
Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the
Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death, but only within the period ending on the earlier of
(i) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after the
Optionholder’s death, the Option is not exercised within the time specified herein or in the Option Agreement (as applicable), the Option shall terminate. 
 (j) Non-Exempt Employees. No Option granted to an Employee that is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable for any shares of Common
Stock until at least six months following the date of grant of the Option. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option will be exempt from
his or her regular rate of pay. 
  

	6.	PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 (a) Restricted Stock Awards. Each Restricted Stock Award Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s
instructions until any restrictions relating to the 

  

 8. 

 
Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate shall be held in such form and manner as determined by the Board. The
terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical, provided, however, that each Restricted Stock Award
Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 
 (i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company; (B) past or future services actually or to be
rendered to the Company or an Affiliate; or (C) any other form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law. 
 (ii) Vesting. Shares of Common Stock awarded under a Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance
with a vesting schedule to be determined by the Board. 
 (iii) Termination of Participant’s Continuous Service. In the event a
Participant’s Continuous Service terminates, the Company may receive via a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination of
Continuous Service under the terms of the Restricted Stock Award Agreement. 
 (iv) Transferability. Rights to acquire shares of
Common Stock under the Restricted Stock Award Agreement shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole discretion, so
long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement. 
 (b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Unit
Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical, provided, however, that each Restricted Stock Unit Award Agreement shall conform to (through
incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 
 (i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock
Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion
and permissible under applicable law. 
  

 9. 

 (ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such
restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate. 
 (iii)
Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the
Restricted Stock Unit Award Agreement. 
 (iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the
Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock
Unit Award. 
 (v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a
Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the
Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying
Restricted Stock Unit Award Agreement to which they relate. 
 (vi) Termination of Participant’s Continuous Service. Except as
otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service. 
 (vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award
granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the Code. Such
restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. 
 (c) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. Stock Appreciation Rights may be
granted as stand-alone Stock Awards or in tandem with other Stock Awards. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right Agreements need
not be identical; provided, however, that each Stock Appreciation Right Agreement shall conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 (i) Term. No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant
or such shorter period specified in the Stock Appreciation Right Agreement. 
  

 10. 

 (ii) Strike Price. Each Stock Appreciation Right will be denominated in shares of Common Stock
equivalents. The strike price of each Stock Appreciation Right shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant. 

(iii) Calculation of Appreciation. The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than
an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of shares of Common Stock equivalents in which the
Participant is vested under such Stock Appreciation Right, and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that is determined by the Board on the date of grant of the
Stock Appreciation Right. 
 (iv) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose such
restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole discretion, deems appropriate. 
 (v)
Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation
Right. 
 (vi) Payment. The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash,
in any combination of the two or in any other form of consideration, as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 
 (vii) Termination of Continuous Service. In the event that a Participant’s Continuous Service terminates, the Participant may exercise his or
her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination of Continuous Service) but only within such period of time ending on the earlier of (A) the
date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement), or (B) the expiration of the term of the Stock
Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Stock Appreciation Right within the time specified herein or in the Stock
Appreciation Right Agreement (as applicable), the Stock Appreciation Right shall terminate. 
 (viii) Compliance with Section 409A of
the Code. Notwithstanding anything to the contrary set forth herein, any Stock Appreciation Rights granted under the Plan that are not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Stock
Appreciation Right will comply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right.

  

 11. 

 (d) Performance Stock Awards. A Performance Stock Award is either a Restricted Stock Award or
Restricted Stock Unit Award that may be granted or may vest based upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous
Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained shall be conclusively determined by the
Committee in its sole discretion. The maximum benefit to be received by any Participant in a calendar year attributable to Performance Stock Awards described in this Section 6(d) shall not exceed the value of five hundred thousand
(500,000) shares of Common Stock. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards. 
 (e) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted
either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to
whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other
Stock Awards. 
  

	7.	COVENANTS OF THE COMPANY. 

 (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common
Stock required to satisfy such Stock Awards. 
 (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon
exercise of such Stock Awards unless and until such authority is obtained. A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be
in violation of any applicable securities laws. 
 (c) No Obligation to Notify. The Company shall have no duty or obligation to any
holder of a Stock Award to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company shall have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a
Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award. 
  

 12. 

	8.	MISCELLANEOUS. 

 (a) Use of
Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards shall constitute general funds of the Company. 
 (b) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise
determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant. 
 (c) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock pursuant to such exercise has
been entered into the books and records of the Company. 
 (d) No Employment or Other Service Rights. Nothing in the Plan, any Stock
Award Agreement or other instrument executed thereunder or in connection with any Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time
the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of
such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be. 
 (e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate
Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates)
exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the
applicable Option Agreement(s). 
 (f) Investment Assurances. The Company may require a Participant, as a condition of exercising or
acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the
Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and 

  

 13. 

 
not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (x) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or
(y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common
Stock. 
 (g) Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole
discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or
by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock
Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of the Stock Award as a
liability for financial accounting purposes); (iii) withholding cash from a Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth
in the Stock Award Agreement. 
 (h) Electronic Delivery. Any reference herein to a “written” agreement or document shall
include any agreement or document delivered electronically or posted on the Company’s intranet. 
 (i) Deferrals. To the extent
permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish
programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for
distributions while a Participant is still an employee. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the
Participant’s termination of employment or retirement, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law. 
 (j) Compliance with Section 409A. To the extent that the Board determines that any Stock Award granted hereunder is subject to
Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan
and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other
guidance that may be issued or 

  

 14. 

 
amended after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Board
determines that any Stock Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Board may adopt such
amendments to the Plan and the applicable Stock Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or
appropriate to (1) exempt the Stock Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (2) comply with the requirements of Section 409A of
the Code and related Department of Treasury guidance. 
  

	9.	ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE
EVENTS. 

 (a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board
shall appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities that may be issued pursuant to the
exercise of Incentive Stock Options pursuant to Section 3(c); (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 4(c) and 6(d); and (iv) the class(es) and number of
securities and price per share of stock subject to outstanding Stock Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. 
 (b) Dissolution or Liquidation. Except as otherwise provided in a Stock Award Agreement, in the event of a dissolution or liquidation of the
Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) shall terminate immediately prior to the
completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights may be repurchased by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous
Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not
previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion. 
 (c) Corporate
Transaction. The following provisions shall apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate
and the holder of the Stock Award or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, then, notwithstanding any
other provision of the Plan, the Board shall take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction: 
 (i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or
continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);

  

 15. 

 (ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in
respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company); 
 (iii) accelerate the vesting of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the
effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective date of the Corporate Transaction), with such Stock Award
terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; 
 (iv) arrange for the
lapse of any reacquisition or repurchase rights held by the Company with respect to the Stock Award; 
 (v) cancel or arrange for the
cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration as the Board, in its sole discretion, may consider appropriate; and

 (vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the
property the holder of the Stock Award would have received upon the exercise of the Stock Award, over (B) any exercise price payable by such holder in connection with such exercise. 
 The Board need not take the same action with respect to all Stock Awards, portions thereof, or with respect to all Participants. 
 (d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as
may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the shares subject to
the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the event a
Participant’s Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control. In the absence of such provisions, no such acceleration shall occur. 
  

	10.	TERMINATION OR SUSPENSION OF THE PLAN. 

 (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall automatically terminate on the day
before the tenth (10th) anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated. 
  

 16. 

 (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and
obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant. 
  

	11.	EFFECTIVE DATE OF PLAN. 

 The Plan shall become effective upon approval by the stockholders at the 2007 Annual Meeting. 
  

	12.	CHOICE OF LAW. 

 The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of the Plan, without regard to that state’s conflict of laws rules. 
  

	13.	DEFINITIONS. 

 As used in the Plan,
the following definitions shall apply to the capitalized terms indicated below: 
 (a) “Affiliate” means, at
the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act. The Board shall have the authority to determine the time or times at which
“parent” or “majority-owned subsidiary” status is determined within the foregoing definition. 
 (b)
“Board” means the Board of Directors of the Company. 
 (c) “Capitalization
Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the Company). Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction “without the receipt of
consideration” by the Company. 
 (d) “Cause” means with respect to a Participant, the occurrence of any
of the following events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted
commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty
owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the
Participant’s Continuous Service is either for Cause or without Cause shall be made by the Company in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for
the purposes of outstanding Stock Awards held by such Participant shall have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose. 
  

 17. 

 (e) “Change in Control” means the occurrence, in a single transaction or
in a series of related transactions, of any one or more of the following events: 
 (i) any Exchange Act Person becomes the Owner,
directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar
transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company
in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person (the
“Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change
in Control shall be deemed to occur; 
 (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting
securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined
outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such transaction; 
 (iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation; 
 (iv) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other
disposition; or 
  

 18. 

 (v) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was
approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan, be considered as a member of the Incumbent Board. 
 For avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose
of changing the domicile of the Company. 
 Notwithstanding the foregoing or any other provision of the Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however,
that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply. 
 (f) “Code” means the Internal Revenue Code of 1986, as amended. 
 (g)
“Committee” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c). 
 (h) “Common Stock” means the common stock of the Company. 
 (i) “Company” means Power Integrations, Inc., a Delaware corporation. 
 (j) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render
consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for
such service, shall not cause a Director to be considered a “Consultant” for purposes of the Plan.  
 (k)
“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the
Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the
Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided, however, if the Entity for which a Participant is rendering services ceases to qualify as an
“Affiliate,” as determined by the Board in its sole discretion, such Participant’s Continuous Service shall be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law,
the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of: (i) any leave of absence approved by the Board or the chief
executive officer of the Company, including sick leave, military leave or any other personal leave; or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence shall be treated as
Continuous Service for purposes of vesting in a Stock Award 

  

 19. 

 
only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy
applicable to the Participant, or as otherwise required by law. 
 (l) “Corporate Transaction” means an
Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the
Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be. For purposes
of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change
Events are related, and its determination shall be final, binding and conclusive. 
 (m) “Covered Employee”
means the chief executive officer and the three (3) other highest compensated officers of the Company (except the chief financial officer) for whom total compensation is required to be reported to stockholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code. 
 (n) “Director” means a member of the Board.

 (o) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any
substantially gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve
(12) months, as provided in Section 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances. 
 (p) “Effective Date” means the effective date of the Plan as specified in Section 11. 
 (q) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment
of a fee for such services, shall not cause a Director to be considered an “Employee” for purposes of the Plan. 
 (r)
“Entity” means a corporation, partnership, limited liability company or other entity. 
 (s)
“Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 (t) “Exchange Act
Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (i) the Company or any Subsidiary
of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an 

  

 20. 

 
employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group”
(within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power
of the Company’s then outstanding securities. 
 (u) “Fair Market Value” means, as of any date, the value
of the Common Stock determined as follows: 
 (i) If the Common Stock is listed on any established stock exchange or traded on any
market system, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the date in question, as reported in The Wall Street Journal or such other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price (or closing bid if no
sales were reported) for the Common Stock on the date in question, then the Fair Market Value shall be the closing sales price (or closing bid if no sales were reported) on the last preceding date for which such quotation exists. 
 (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good faith and in a manner
that complies with Section 409A of the Code. 
 (v) “Incentive Stock Option” means an Option that
qualifies as an “incentive stock option” within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 
 (w) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the
Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for
which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3. 
 (x) “Nonstatutory Stock Option” means an Option that does not qualify as an Incentive Stock Option. 
 (y) “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. 
  

 21. 

 (z) “Option” means an Incentive Stock Option or a Nonstatutory Stock
Option to purchase shares of Common Stock granted pursuant to the Plan. 
 (aa) “Option Agreement” means a
written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 
 (bb) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person
who holds an outstanding Option. 
 (cc) “Original Plan” means the Company’s 1997 Stock Option Plan as in
effect immediately prior to the Effective Date. 
 (dd) “Other Stock Award” means an award based in whole or
in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(d). 
 (ee)
“Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement shall be
subject to the terms and conditions of the Plan. 
 (ff) “Outside Director” means a Director who either
(i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive
remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m)
of the Code. 
 (gg) “Own,” “Owned,” “Owner,”
“Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly
or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. 
 (hh) “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which
the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. 
 (ii) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Stock Award. 
 (jj) “Performance Criteria” means the one or more criteria
that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may 

  

 22. 

 
be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) total stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin;
(viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax income; (xiv) pre-tax profit;
(xv) operating cash flow; (xvi) sales or revenue targets; (xvii) orders and revenue; (xviii) increases in revenue or product revenue; (xix) expenses and cost reduction goals; (xx) improvement in or attainment of expense
levels; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price
performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) customer satisfaction; (xxx) stockholders’ equity; (xxxi) quality measures; and (xxxii) to the extent that
a Stock Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of
achievement as specified in the Stock Award Agreement. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period. 
 (kk) “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the
Performance Period based upon the satisfaction of the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms
or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. At the time of the grant of any Stock Award, the Board is authorized to determine whether, when calculating the attainment of
Performance Goals for a Performance Period: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings;
(iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; and (v) to
exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of
Performance Goals. 
 (ll) “Performance Period” means one or more periods of time, which may be of varying and
overlapping duration, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Stock Award. 
 (mm) “Performance Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and
conditions of Section 6(d). 
 (nn) “Plan” means this Power Integrations, Inc. 2007 Equity Incentive
Plan. 
 (oo) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to
the terms and conditions of Section 6(a). 
  

 23. 

 (pp) “Restricted Stock Award Agreement” means a written agreement between
the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan. 
 (qq) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms
and conditions of Section 6(b). 
 (rr) “Restricted Stock Unit Award Agreement” means a written agreement
between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and conditions of the Plan.

 (ss) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in
effect from time to time. 
 (tt) “Securities Act” means the Securities Act of 1933, as amended. 

(uu) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to
the terms and conditions of Section 6(c). 
 (vv) “Stock Appreciation Right Agreement” means a written
agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan.

 (ww) “Stock Award” means any right to receive Common Stock granted under the Plan, including an Option, a
Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award, or an Other Stock Award. 
 (xx) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be subject to the terms
and conditions of the Plan. 
 (yy) “Subsidiary” means, with respect to the Company, (i) any corporation
of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the
Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) . 
 (zz) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Affiliate. 
  

 24.

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