Document:

Executive Officer Benefits Agreement - Sandeep Nayyar

 Exhibit 10.3 

POWER INTEGRATIONS, INC. 

EXECUTIVE OFFICER BENEFITS AGREEMENT 

THIS EXECUTIVE OFFICER BENEFITS AGREEMENT (the
“Agreement”) is made and entered into as of July 22, 2010 (the “Effective Date”), by and between POWER INTEGRATIONS, INC., a Delaware
corporation, (the “Company”) and SANDEEP NAYYAR (“Executive”). 

RECITALS 

A. Executive is an executive officer of the Company and possesses valuable knowledge of the Company, its business and operations, and the
markets in which the Company competes. 
 B. The Company draws upon the knowledge, experience and advice of Executive in order
to manage its business for the benefit of the Company’s stockholders. 
 C. The Board of Directors desires to supplement
Executive’s employment arrangements so as to provide additional compensation and benefits to the Executive to encourage Executive to continue to devote his attention and dedication to the Company and to create additional incentives to continue
his employment with the Company. 
 AGREEMENT 

THEREFORE, in consideration of the mutual agreements, covenants and considerations contained herein, the
undersigned hereby agree and acknowledge as follows: 
 1. The parties hereby agree to the terms hereof, including the
terms set forth on Exhibit A hereto. Pursuant to Section 1(f) of Exhibit A hereto, Executive shall first be eligible for the benefits under this Agreement upon the completion of one year of continuous service as an executive officer of the
Company, unless the Board of Directors or Compensation Committee determines otherwise. 
 2. This Agreement may only be
modified or amended by a supplemental written agreement signed by Executive and the Company. 
  

 1. 

 IN WITNESS WHEREOF, the undersigned have
executed this EXECUTIVE OFFICER BENEFITS AGREEMENT, intending to be legally bound as of the Effective Date. 

 

							
	COMPANY:	 		 	POWER INTEGRATIONS, INC.
				
		 		 	By:	 	 /s/ Balu Balakrishnan

		 		 	Name:	 	Balu Balakrishnan
		 		 	Title:	 	President and CEO
			
		 		 	 Date: July 22, 2010

			
	EXECUTIVE:	 		 	 /s/ Sandeep Nayyar

		 		 	Sandeep Nayyar
			
		 		 	 Date: July 22, 2010

			
		 		 	 Address for Notice: Executive’s home address

as reflected in the records of the Company

  

 2. 

 EXHIBIT A 

TERMS OF EXECUTIVE OFFICER BENEFITS AGREEMENT 

Effective: July 22, 2010 

1. Definitions. As used in this Agreement, unless the context requires a different meaning, the following terms shall have the
meanings set forth herein: 
 (a) “Cause” means: 

(i) A material act of theft, dishonesty, fraud, intentional falsification of any employment or Company records or the commission
of any criminal act which impairs Executive’s ability to perform his/her duties under this Agreement; 
 (ii) A
material improper disclosure of the Company’s confidential, business or proprietary information by Executive; 
 (iii)
Any action by Executive intentionally causing or expected to cause material harm to the reputation and standing of the Company, or gross negligence or willful misconduct in the performance of Executive’s assigned duties (but not mere
unsatisfactory performance); or 
 (iv) The Executive’s conviction (including any plea of guilty or nolo
contendere) for a felony causing material harm to the reputation and standing of the Company, as determined by the Company in good faith. 

(b) “Change of Control” means: 

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of (A) the outstanding shares of common stock of the Company or (B) the combined voting power of the Company’s then-outstanding
securities; 
 (ii) The Company is party to a merger or consolidation which results in the holders of voting securities
of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; 
 (iii)
There occurs a change in the Board of Directors of the Company within a two-year period, as a result of which fewer than a majority of the Directors are 

 
Incumbent Directors. For purposes of this Agreement, an “Incumbent Director” is any director who is either: 

(A) A director of the Company as of January 1, 2007; or 

(B) A director who is elected or nominated for election to the Board of Directors of the Company with the affirmative votes of at
least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of
directors to the Company). 
 (iv) The sale or disposition of 50% or more of the Company’s assets (or consummation
of any transaction having similar effect); or 
 (v) The dissolution or liquidation of the Company. 

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

(d) “Competition” shall mean rendering services for any organization or engaging in any business directly
competitive with the Company or materially contrary or harmful to the interests of the Company, including, but not limited to (i) accepting employment with, or serving as a consultant, advisor or in any other capacity to, the division or other
portion of the business of any employer which competes directly with the Company; (ii) materially acting against the interest of the Company or (iii) personally recruiting, directly or indirectly, any person who is then an employee of the
Company. 
 (e) “Good Reason” means the occurrence of any of the following conditions, without
Executive’s written consent, which condition(s) remain(s) in effect 20 days after written notice to the Board from Executive of such condition(s), if such notice is given within one year of the occurrence of such condition(s): 

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

(iii) The relocation of Executive’s work place for the Company to a location more than fifty (50) miles from the
current location of Executive’s work place or a 
  

 2. 

 
material adverse change in the working conditions or established working hours which persist for a period of six continuous months; or 

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

(f) “New Executive” means an Executive who has served as an executive of the Company for fewer than five
years. Executive’s service to the Company as an executive will be deemed to begin upon the date of commencement of employment as an executive officer or upon the date of promotion to an executive officer position. A New Executive will be first
eligible for the benefits under this Agreement upon the completion of one year of continuous service as an executive officer of the Company, unless the Board of Directors or Compensation Committee determines otherwise. 

(g) “Permanent Disability” means that: 

(i) The Executive has been incapacitated by bodily injury or disease so as to be prevented thereby from engaging in the
performance of the Executive’s duties; 
 (ii) Such total incapacity shall have continued for a period of six
consecutive months; and 
 (iii) Such incapacity will, in the opinion of a qualified physician, be permanent and
continuous during the remainder of the Executive’s life. 
 (h) “Senior Executive” means an
Executive who has served continuously as an executive of the Company for at least five years. Executive’s service to the Company as an executive will be deemed to begin upon the date of commencement of employment as an executive officer or upon
the date of promotion to an executive officer position. 
 (i) “Termination of Employment” means:

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

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

(j) “Termination of Employment” shall not include any termination of the employment of the Executive
(a) by the Company for Cause; (b) as a result of Permanent Disability of the Executive; (c) as a result of the death of the Executive; (d) as a result of the voluntary termination of employment by the Executive for reasons other
than Good Reason; or (e) a Termination Upon Change of Control. 
 (k) “Termination Upon Change of
Control” means: 
 (i) Any termination of the employment of the Executive by the Company without Cause on
or within eighteen (18) months after (i) the occurrence of a Change of Control; or (ii) the date that the person serving as of the Effective Date as Chief Executive Officer of the company ceases to serve in such office. 

 

 3. 

 (ii) Any resignation by the Executive for Good Reason within eighteen
(18) months after (i) the occurrence of a Change of Control or (ii) the date that the person serving as of the Effective Date as Chief Executive Officer of the Company ceases to serve in such office. 

(l) “Termination Upon Change of Control” shall not include any termination of the employment of the
Executive (a) by the Company for Cause; (b) as a result of the Permanent Disability of the Executive; (c) as a result of the death of the Executive; or (d) as a result of the voluntary termination of employment by the Executive
for reasons other than Good Reason. 
 2. Position and Duties. Executive shall continue to be an at-will employee of the
Company employed in his/her current position at his/her then current salary rate. Executive shall also be entitled to continue to participate in and to receive benefits on the same basis as other executive or senior staff members under any of the
Company’s employee benefit plans as in effect from time to time. In addition, Executive shall be entitled to the benefits afforded to other employees similarly situated under the Company’s vacation, holiday and business expense
reimbursement policies. Executive agrees to devote the business time, energy and skill necessary to execute his/her duties at the Company. These duties shall include, but not be limited to, any duties consistent with his/her position which may be
assigned to Executive from time to time. 
 3. Acceleration of Vesting of Stock Options Upon a Change of Control. In the
event of a Change of Control, and provided that Executive’s employment with the Company has not terminated prior to such date, all stock options granted by the Company to the Executive prior to the Change of Control shall have their vesting
accelerated, such that 25% of the then unvested shares will be deemed vested and exercisable as of the consummation of the Change of Control. Notwithstanding the foregoing, if the Change of Control does not require the assumption or substitution by
the acquiring entity (or parent thereof) of all of the Company’s obligations of the then outstanding stock options, then (i) if Executive is a New Executive, 50% of the then unvested shares will be accelerated and deemed vested and
exercisable ten (10) days prior to the consummation of the Change of Control; or (ii) if Executive is a Senior Executive, 100% of the then unvested shares will be accelerated and deemed vested and exercisable ten (10) days prior to
the consummation of the Change of Control. In the event of a Change of Control, the Company undertakes to facilitate Executive’s receipt of the benefits set forth in this section by providing written notice to Executive, at least ten
(10) days in advance of the closing of such transaction, which (i) indicates the anticipated timing and material economic terms of the anticipated transaction and (ii) references the Executive’s rights under this Section 3.
The Company shall also provide appropriate option exercise forms and instructions to assist Executive in exercising his or her rights to acquire securities of the Company on or prior to the consummation of the Change of Control. Executive is
strongly encouraged to consult with his or her tax and financial advisor prior to electing to exercise any option pursuant to this Agreement. 

4. Termination Upon Change of Control. 

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

 4. 

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

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

(iii)(i) if Executive is a New Executive, payment of an amount equal to six (6) months of Executive’s highest annual
salary from the Company and 50% of the Executive’s targeted annual incentive bonus as in effect as of the date of such termination; or 

(ii) if Executive is a Senior Executive, payment of an amount equal to (a) six (6) months of Executive’s highest annual
salary from the Company and 50% of the Executive’s targeted annual incentive bonus as in effect as of the date of such termination and (b) up to an additional six (6) months of such salary and 50% of such bonus until Executive secures
new employment 
 all less applicable withholding, paid in a lump sum within thirty (30) days of termination of employment; provided
that, in the case of Section 4(a)(iii)(ii)(b) above, the amounts of additional salary and bonus shall be paid in ratable monthly installments for six months or until Executive secures new employment, whichever occurs earlier; 

(iv) The ability to exercise any and all vested options granted after August 8, 2007 (and any options granted prior to
August 8, 2007 only to the extent that such extension of exercisability would not require the Company to incur a compensation expense for financial statement purposes) for twelve (12) months from the date of termination of employment; and

 (v) The vesting of all stock options granted by the Company to the Executive and outstanding immediately prior to
such Termination Upon Change of Control shall have their vesting accelerated, such that (i) if Executive is a New Executive, 50% of the then unvested shares will be deemed vested and exercisable as of the date of termination of employment; or
(ii) if Executive is a Senior Executive, 100% of the then unvested shares will be deemed vested and exercisable as of the date of termination of employment. 

(b) Benefits Continuation. 

(i) In the event of Executive’s Termination Upon Change of Control, Executive shall be entitled to elect continued medical
and dental insurance coverage in accordance with the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, (“COBRA”) and the Company shall pay such COBRA premiums for (i) six (6) months
from the date of termination of employment, if Executive is a New Executive; or (ii) twelve (12) months from the date of termination of employment, if Executive is a Senior Executive. Notwithstanding the above, in the event Executive
becomes eligible to be covered under another employer’s group health plan (other than a plan which imposes a preexisting condition exclusion unless the preexisting 

 

 5. 

 
condition exclusion does not apply) during the period provided for herein, the Company shall cease payment of the COBRA premiums; and 

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

(a) Severance Benefits. In the event of the Executive’s Termination of Employment, Executive shall be entitled to all
separation benefits provided in Section 4(a)(i) and 4(a)(ii) above. In addition, Executive shall be entitled to six (6) months of Executive’s highest annual salary (with the Company) and 50% of the Executive’s targeted annual
incentive bonus as in effect as of the date of such termination, all less applicable withholding, paid in a lump sum within thirty (30) days of termination of employment. 

(b) Benefits Continuation. 

(i) In the event of Executive’s Termination of Employment, Executive shall be entitled to elect continued medical and dental
insurance coverage in accordance with the applicable provisions of COBRA and the Company shall pay such COBRA premiums for six (6) months from the date of termination of employment. Notwithstanding the above, in the event Executive becomes
eligible to be covered under another employer’s group health plan (other than a plan which imposes a preexisting condition exclusion unless the preexisting condition exclusion does not apply) during the period provided for herein, the Company
shall cease payment of the COBRA premiums; and 
 (ii) Executive shall receive the benefits, if any, under the
Company’s 401(k) Plan and other Company benefit plans to which he may be entitled pursuant to the terms of such plans. 

6. Retirement Benefits. 

(a) In order to be eligible for the “Retirement Benefits” described in Section 6(b) below, the Executive must meet
both of the following criteria: 
 (i) At the time of Executive’s voluntary termination of employment with the
Company (other than in circumstances in which such termination constitutes a Termination of Employment), the Executive has (1) achieved the age of 50 and served the Company for at least 15 years; or (2) achieved the age of 55 and served
the Company for at least 10 years; and 
 (ii) At any time during which the Executive is receiving Retirement Benefits,
the Executive shall not (1) be employed or on contract full time by a third party (excluding a non-profit organization described in Section 501(c)(3) of the Code) or (2) engage in Competition. If the Executive engages in either
(1) or (2), then all Retirement Benefits shall terminate immediately and permanently. 
  

 6. 

 (b) If both conditions in Sections 6(a)(i) and 6(a)(ii) above are satisfied, the
Executive shall be entitled to receive the following “Retirement Benefits:” 
 (i) The ability to exercise any
and all options granted after August 8, 2007 (and any options granted prior to August 8, 2007 only to the extent that such extension of exercisability would not require the Company to incur a compensation expense for financial statement
purposes) to the extent such options are vested as of the date of termination of employment for the earlier of: (i) the term of the option or (ii) five years; and 

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

(A) COBRA Continuation Coverage. Upon the termination of Executive’s active employment with the Company, Executive shall be
entitled to elect continued medical and dental insurance coverage in accordance with the applicable provisions of COBRA and the Company shall pay such COBRA premiums. Notwithstanding the above, in the event Executive becomes eligible to be covered
under another employer’s group health plan (other than a plan which imposes a preexisting condition exclusion unless the preexisting condition exclusion does not apply) during the period provided for herein, the Company shall cease payment of
the COBRA premiums; and 
 (B) Coverage After COBRA & Prior to Medicare Eligibility. In the event the Executive
is not eligible for Medicare coverage at end of his maximum applicable COBRA coverage period, then, the Executive shall identify and locate either or both an individual conversion policy through the insurer providing insurance coverage in connection
with the Company sponsored medical and dental plans available to active employees (the “Conversion Policy”), and/or a supplemental individual policy or an individual policy on the open market (the “Individual Policy”) to be
effective upon the termination of his COBRA continuation coverage so that, when the coverages for Executive provided by the Conversion Policy and/or the Individual Policy are combined, such coverages provide substantially similar medical and dental
benefits in the aggregate as those provided under the medical and dental plans sponsored by the Company at such time, or at any time after the termination of Executive’s employment, for active employees (the “Comparable Coverage”).
The Company shall be responsible for the payment of any Conversion Policy premiums and/or Individual Policy premiums for the Comparable Coverage which payment shall not exceed the cost of premiums for medical and dental coverage for then active
employees. Notwithstanding the above, in the event Executive becomes eligible to be covered under another employer’s group health plan (other than a plan which imposes a preexisting condition exclusion unless the preexisting condition exclusion
does not apply) during the period provided for herein, the Company shall cease payment of such premiums; and 
 (C) Coverage
After COBRA & Upon Medicare Eligibility. In the event the Executive is eligible for Medicare coverage at the end of his maximum applicable COBRA coverage period, the Executive may identify and locate a Medicare supplemental policy,
which may include, to the extent permitted, the medical and dental plans 
  

 7. 

 
sponsored by the Company at such time for active employees (the “Company Plans”), that, when combined with the coverage provided by Medicare (both Parts A and B), provides Comparable
Coverage. If Executive is at such time eligible to participate under the Company Plans, Executive will be entitled to so participate; provided that Executive shall be solely responsible for the payment of any Medicare premiums and/or Medical
supplemental policy premiums for the Comparable Coverage (including, if applicable, any premiums under the Company Plans). The Company will use commercially reasonable efforts to provide that Executive will continue to be eligible for coverage under
the Company Plans, unless the Board of Directors or Compensation Committee determines that such coverage would create an undue burden on the Company. 

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

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

(a) In the event of (i) the Executive’s death during his employment with the Company and the Executive having satisfied
the criteria provided at Section 6(a)(i) as of or prior to the date of his death or (ii) the Executive’s death during the period while Executive was receiving Retirement Benefits as a result of compliance with the criteria provided at
Section 6(a)(i) and 6(a)(ii), (1) the Executive’s legal representative or any person empowered to act on his behalf under his will or under the then applicable laws of descent and distribution shall be entitled to the extension of the
term of stock option exercisability pursuant to Section 6(b)(i) and (2) the Executive’s dependents, to the extent applicable, shall be entitled to the medical and dental benefits pursuant to Section 6(b)(ii)(A)-(D) for that
period of time until the Executive would have achieved the age of 65 if the Executive had lived. 
 (b) In the event of
the Executive’s Permanent Disability during his employment with the Company and the Executive having satisfied the criteria provided at Section 6(a)(i), the Executive, and to the extent applicable, his dependents, shall be entitled to the
benefits provided in Section 6(b)(i) and 6(b)(ii)(A)-(D). 
 8. Payment of Taxes. All payments made to Executive
under this Agreement shall be subject to all applicable federal and state income, employment and payroll taxes. 
 9.
Parachute Payment. In the event that any of the payments and benefits provided for in this Agreement or otherwise payable to the Executive in connection with the Change of Control (collectively, the “Payments”) would result in a
“parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the amount of such Payments shall be either: (i) the full amount of the Payments, or (ii) a
reduced amount which would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code (the “Excise Tax”), whichever of the foregoing amounts, taking into account the applicable
federal, stated and local income tax and the Excise Tax, results in the receipt by the Executive, on an after-tax basis, of the greatest amount of benefit. Unless the Company and the Executive otherwise agree in writing, any determination required
under 
  

 8. 

 
this Section 9 shall be made in writing by independent public accountants appointed by the Company and reasonably acceptable to the Executive (the “Accountants”), whose
determination shall be conclusive and binding upon the Executive and the Company for all purposes. The Company shall bear all costs the Accountants may reasonably incur in connection with such determination, and the Company and the Executive shall
furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 9. 

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

11. Proprietary and Confidential Information. The Executive agrees to continue to abide by the terms and conditions of any
Company’s confidentiality and/or proprietary rights agreement between the Executive and the Company. 
 12.
Arbitration. Any claim, dispute or controversy arising out of this Agreement, the interpretation, validity or enforceability of this Agreement or the alleged breach thereof shall be submitted by the parties to binding arbitration by the American
Arbitration Association in San Jose, California or elsewhere by mutual agreement. The selection of the arbitrator and the arbitration procedure shall be governed by the Commercial Arbitration Rules of the American Arbitration Association. All costs
and expenses of arbitration or litigation, including but not limited to reasonable attorneys fees and other costs reasonably incurred by the Executive, shall be paid by the Company. Judgment may be entered on the award of the arbitration in any
court having jurisdiction. 
 13. Interpretation. Executive and the Company agree that this Agreement shall be
interpreted in accordance with and governed by the laws of the State of California, without regard to such state’s conflict of laws rules. 

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

 

 9. 

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

(a) Successors of the Company. The Company will require any successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession or assignment had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession transaction shall be a breach of this Agreement and shall entitle
the Executive to terminate his or her employment with the Company within three (3) months thereafter and to receive the benefits provided under Section 4 of this Agreement in the event of Termination Upon Change of Control. As used in this
Agreement, “Company” shall mean the Company as defined above and any successor or assign to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 16 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law. 
 (b) Heirs of Executive. This Agreement
shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 

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

if to the Company: 
  

			
		  	 Power Integrations, Inc.

5245 Hellyer Avenue
 San Jose, California 95138

 Attn: Chief Executive Officer or Chief Financial Officer

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

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

 10. 

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

20. Consultation with Legal and Financial Advisors. Executive acknowledges that his Agreement confers significant legal rights,
and may also involve the waiver of rights under other agreements; that the Company has encouraged Executive to consult with Executive’s personal legal and financial advisers; and that Executive has had adequate time to consult with
Executive’s advisers before signing this Agreement. 
 21. Application of Section 409A and Other Limitations. 

 (a) Extension of Stock Option Exercise Period. Notwithstanding anything to the contrary in this Agreement, in the event
any extended exercise period provided for in this Agreement shall result in a portion of a stock option becoming subject to the provisions of Section 409A of the Code, the extended exercise period of such portion of such stock option shall be
automatically shortened to the minimum extent necessary to prevent such portion of such option from becoming subject to Section 409A of the Code. In further limitation of any provisions providing for an extended exercise period, the following
provisions shall apply: 
 (i) If the stock option was granted pursuant to the 1997 Stock Option Plan, as amended (the
“1997 Plan”) and pursuant to a Change in Control (as defined in the 1997 Plan) substantially all of the stock options outstanding pursuant to the 1997 Plan will be terminated at the effective date of such Change in Control, any provisions
in this Agreement providing for an extended exercise period shall not apply to such stock option. 
 (ii) If the stock
option was granted pursuant to the 1998 Nonstatutory Stock Option Plan (the “1998 Plan”) and pursuant to a Change in Control (as defined in the 1998 Plan) substantially all of the stock options outstanding pursuant to the 1998 Plan will be
terminated at the effective date of such Change in Control, any provisions in this Agreement providing for an extended exercise period shall not apply to such stock option. 

(iii) If the stock option was granted pursuant to an equity incentive plan adopted after the date hereof (a “Future
Plan”) and, pursuant to the provisions of the Future Plan, substantially all of the stock options outstanding pursuant to the Future Plan will be terminated at the effective date of an event or transaction, any provisions in this Agreement
providing for an extended exercise period shall not apply to such stock option. 
 (b) Other Benefits. In the event that
any benefit provided for under this Agreement, including but not limited to severance, medical, dental and retirement benefits, shall fail to satisfy the distribution requirement of Section 409A(a)(2)(A) of the Code as a result of the
application of Section 409A(a)(2)(B)(i) of the Code, the payment of such benefit shall be accelerated to the minimum extent necessary so that the benefit is not subject to the provisions of Section 409A(a)(1) of the Code. (The payment
schedule as revised after the application of the preceding sentence shall be referred to as the “Revised Payment Schedule.”) In the event the payment of such benefits pursuant to the Revised Payment Schedule would be subject to

  

 11. 

 
Section 409A(a)(1) of the Code, the payment of such benefits shall not be paid pursuant to the Revised Payment Schedule and instead the payment of such benefits shall be delayed to the minimum
extent necessary so that such benefits are not subject to the provisions of Section 409A(a)(1) of the Code. The Board of Directors or the Compensation Committee may attach conditions to or adjust the amounts paid pursuant to this
Section 21(b) to preserve, as closely as possible, the economic consequences that would have applied in the absence of this Section 21(b); provided, however, that no such condition or adjustment shall result in the payments being subject
to Section 409A(a)(1) of the Code. 
  

 12.Form of Restricted Stock Unit Grant Notice for executive officers

 Exhibit 10.6 

POWER INTEGRATIONS, INC. 

2007 EQUITY INCENTIVE PLAN 

RESTRICTED STOCK UNIT GRANT NOTICE 

Power Integrations, Inc. (the “Company”), pursuant to its 2007 Equity Incentive Plan (the “Plan”), hereby
awards to Participant a Restricted Stock Unit Award for the number of shares of the Company’s Common Stock set forth below (the “Award”). The Award is subject to all of the terms and conditions as set forth herein and in
the Plan and the Restricted Stock Unit Award Agreement, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan or the Restricted Stock
Unit Award Agreement. In the event of any conflict between the terms in the Award and the Plan, the terms of the Plan shall control. 
  

					
	Participant:	  	  
	  	
	Date of Grant:	  	  
	  	
	Vesting Commencement Date:	  	  
	  	
	Number of Units/Shares Subject to Award:	  	  
	  	
	Consideration:	  	Participant’s services	  	

  

			
	Vesting Schedule:	  	25% of the Shares subject to the Award vest on the one year anniversary of the Vesting Commencement Date; the balance of the Shares vest in three equal annual installments
measured from the one year anniversary of the Vesting Commencement Date. Notwithstanding the foregoing, vesting shall terminate upon the Participant’s termination of Continuous Service.
		
	Issuance Schedule:	  	Any shares that vest will be issued and delivered in accordance with the issuance and delivery schedule set forth in Section 6 of the Restricted Stock Unit Award
Agreement.

 Additional Terms/Acknowledgements: The undersigned Participant acknowledges receipt of, and understands and
agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan. Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award
Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) awards
previously granted and delivered to Participant under the Plan, and (ii) the following agreements only: 
 Other
Agreements: [Chief Executive Officer Benefits Agreement dated [                    ]]/[Executive Officer Benefits
Agreement dated [                    ], after Participant becomes eligible to receive benefits under such agreement upon his completion of one
full year of continuous service as an executive officer of the Company]. For purposes of [Sections 3 and 4(a)(v) of the Executive Officer Benefits Agreement]/[Sections 3, 4(a)(v) and 5(a)(ii) of the Chief Executive Officer
Benefits Agreement], the term “stock option” shall be deemed to include the restricted stock units awarded pursuant to this Restricted Stock Unit Grant Notice. 

									
	  
 POWER INTEGRATIONS,
INC.
	 		 	PARTICIPANT:
				
	By:	 	  
	 		 	  

	Signature	 		 	Signature
	Title:	 	  
	 		 	Date:	 	  

	Date:	 	  
	 		 		 	

 ATTACHMENTS:     Restricted Stock Unit Award Agreement,
2007 Equity Incentive Plan 

 ATTACHMENT I 

POWER INTEGRATIONS, INC. 

2007 EQUITY INCENTIVE PLAN 

RESTRICTED STOCK UNIT AWARD AGREEMENT 

Pursuant to the Restricted Stock Unit Grant Notice (“Grant Notice”) and this Restricted Stock Unit Award
Agreement and in consideration of your services, Power Integrations, Inc. (the “Company”) has awarded you a Restricted Stock Unit Award (the “Award”) under its 2007 Equity Incentive Plan (the
“Plan”). Your Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award. This Restricted Stock Unit Award Agreement shall be deemed to be agreed to by the Company and you upon the
signing by you of the Restricted Stock Unit Grant Notice to which it is attached. Defined terms not explicitly defined in this Restricted Stock Unit Award Agreement shall have the same meanings given to them in the Plan. In the event of any conflict
between the terms in this Restricted Stock Unit Award Agreement and the Plan, the terms of the Plan shall control. The details of your Award, in addition to those set forth in the Grant Notice and the Plan, are as follows. 

1. GRANT OF THE AWARD. This Award represents the right to be issued on
a future date the number of shares of the Company’s Common Stock as indicated in the Grant Notice. As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the
“Account”) the number of shares of Common Stock subject to the Award. This Award 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 and future services to the Company) with respect to your receipt of the Award, the vesting of the shares or the delivery of the underlying Common Stock. 

2. VESTING. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the
vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. Upon such termination of your Continuous Service, the shares credited to the Account that were not vested on the date of
such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such underlying shares of Common Stock. 

3. NUMBER OF SHARES. 

(a) The number of units/shares subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided
in the Plan. 
 (b) Any shares, cash or other property that becomes subject to the Award pursuant to this Section 3,
if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other shares covered by your Award. 

 

 1. 

 (c) Notwithstanding the provisions of this Section 3, no fractional shares or
rights for fractional shares of Common Stock shall be created pursuant to this Section 3. The Board shall, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the
adjustments referred to in this Section 3. 
 4. SECURITIES LAW
COMPLIANCE. You may not be issued any shares under your Award unless either (a) the shares are registered under the Securities Act; or (b) the Company has determined that such issuance would be exempt from the
registration requirements of the Securities Act. Your Award also must comply with other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material
compliance with such laws and regulations. 
 5. LIMITATIONS ON TRANSFER.
Your Award 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 subject to the Award until the shares are issued to you in accordance with Section 6 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 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, shall 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. 
 6. DATE OF ISSUANCE AND
DELIVERY. Subject to Section 10 below, the Company will issue and deliver to you a number of shares of the Company’s Common Stock equal to the number of vested shares subject to your Award, including any additional
shares received pursuant to Section 3 above that relate to those vested shares on the applicable vesting date(s). However, if a scheduled delivery date falls on a date that is not a trading day for the principal exchange on which the
Company’s common stock is listed, such delivery date shall instead fall on the next following day that is such a trading day. The form of such delivery (e.g., a stock certificate or electronic entry evidencing such shares) shall be
determined by the Company. In all cases, the delivery of shares under this Award is intended to comply with Treasury Regulation 1.409A-1(b)(4) and shall be construed and administered in such a manner. 

7. DIVIDENDS. You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock
dividend or other distribution that does not result from a Capitalization Adjustment; provided, however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection with your Award
after such shares have been delivered to you. 
 8. RESTRICTIVE LEGENDS. The shares issued
under your Award shall be endorsed with appropriate legends determined by the Company. 
 9. AWARD
NOT A SERVICE CONTRACT. Your Award is not an employment or service contract, and nothing in your Award will be deemed to create in any way whatsoever any obligation on your part to
continue in the employ or service of the Company or an Affiliate, or of 
  

 2. 

 
the Company or an Affiliate to continue your employment or service. In addition, nothing in your Award 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. On or before the time you receive a distribution of the shares in
respect of your Award, 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 Award with a
Fair Market Value (measured as of the date shares of Common Stock are issued to you pursuant to Section 6) 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 Award; 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. 

11. UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you shall 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 shall 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 6 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, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person. 

12. OTHER DOCUMENTS. You hereby acknowledge receipt or the right to receive a document providing the
information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain
“window” periods and the Company’s insider trading policy, in effect from time to time. 
 13.
NOTICES. Any notices provided for in your Award or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) 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 Award 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. 
  

 3. 

 14. MISCELLANEOUS. 

(a) The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and
all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under your Award may only be assigned with the prior written consent of the Company.

 (b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole
determination of the Company to carry out the purposes or intent of your Award. 
 (c) You acknowledge and agree that you
have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award. 

(d) This Agreement shall 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. 
 (e) All obligations of the Company under the Plan and
this Agreement shall 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 DOCUMENT. Your Award is subject to all
the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan.
Except as expressly provided herein, in the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan shall 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 shall 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 shall, 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 Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating the Employee’s 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. 

 

 4. 

 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 Board 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, except as otherwise expressly provided in the Plan, no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board
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 laws or regulations or any future
law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein. 

20. COMPLIANCE WITH SECTION 409A OF THE
CODE. This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4). Notwithstanding the foregoing, if it is
determined that the Award fails to satisfy the requirements of the short-term deferral rule and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth
Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the
separation from service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the
separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition
of taxation on you in respect of the shares under Section 409A of the Code. Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).

 21. TAX CONSEQUENCES. The Company has no duty or obligation to minimize the tax
consequences to you of this Award and shall not be liable to you for any adverse tax consequences to you arising in connection with this Award. You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding
the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so. You understand that you (and not the Company) shall be responsible for your own tax liability
that may arise as a result of your Award. 
  

 5. 

 ATTACHMENT II 

POWER INTEGRATIONS, INC. 

2007 EQUITY INCENTIVE PLAN 

 

 6.

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