Notice of Grant of Stock Option and Terms and Conditions of Richard J. Thompson Stock Option

Exhibit 10.3

Notice of Grant of Stock Option and
Terms and Conditions of Richard J. Thompson Stock Option

Grantee:                Richard J. Thompson                                         Plan:      2004

Effective February 18, 2008 (the “Award Date”), you (the “Grantee”) have been granted a nonqualified stock option (the “Option”) to buy 500,000 shares of Common Stock of Power-One, Inc. (the “Corporation”) at a price of $2.38 per share (the “Exercise Price”).  Your Option is intended to be a Qualifying Option.

The aggregate Exercise Price of the shares subject to the Option is $1,190,000.

The Option will become vested as to 100% of the total number of shares of Common Stock subject to the Option on February 18, 2012.  The Option will vest earlier in the following circumstances: (i) 50% of the shares of Common Stock subject to the Option shall become vested on March 1, 2010 if (A) the closing price per share of the Corporation’s Common Stock on the principal exchange on which such stock is traded on any 20 out of 30 consecutive trading days in the period beginning October 1, 2009 and ending March 1, 2010  exceeds 150% of the Exercise Price (as appropriately adjusted for stock splits and similar transactions) and (B) the Corporation’s consolidated net income for the 2009 calendar year as determined under generally accepted accounting principles (“GAAP”) equals or exceeds 5% of the Corporation’s consolidated net sales revenue for such period determined under GAAP; and (ii) 25% of the shares of Common Stock subject to the Option shall become vested on March 1, 2011 if (X) the closing price per share of the Corporation’s Common Stock on the principal exchange on which such stock is traded on any 20 out of 30 consecutive trading days beginning October 1, 2010 and ending March 1, 2011 exceeds 160% of the Exercise Price (as appropriately adjusted for stock splits and similar transactions) and (Y) the Corporation’s consolidated net income for the 2010 calendar year as determined under GAAP equals or exceeds 7.5% of the Corporation’s consolidated net sales revenue for such period determined under GAAP.  In all cases in which the Corporation’s consolidated net income and consolidated net sales revenue is a vesting measurement, extraordinary charges as defined in the Grantee’s Employment Agreement with the Corporation entered into on the date hereof (as it may be amended from time to time, the “Employment Agreement”) shall be excluded.  Pursuant to the provisions of the Employment Agreement, a portion of the shares of Common Stock subject to the Option will also become vested  in connection with the Grantee’s termination of employment due to death, disability, by the Corporation without Cause (as defined in the Employment Agreement), due to a Substantial Breach (as defined in the Employment Agreement) by the Corporation, or due to a non-renewal of the Employment Agreement by the Corporation.  The Grantee is also a party to the Corporation’s Senior Executive Change in Control Agreement, which provides for accelerated vesting of the shares of Common Stock subject to the Option under the circumstances provided therein.

The Option will expire on the tenth anniversary of the Award Date (the “Expiration Date”).

In all cases, the Option is subject to early termination under Section 5 of the Terms (as defined below) and Section 7.4 of the Plan (as defined below).  The Option and applicable performance targets are subject to adjustment pursuant to Section 7.1 of the Plan.

By your signature and the Corporation’s signature below, you and the Corporation agree that the Option is granted under and governed by the terms and conditions of the Corporation’s 2004 Stock Incentive Plan (the “Plan”) and the Terms and Conditions of Richard J. Thompson Nonqualified Stock Option (the “Terms”), which are attached and incorporated herein by this reference.  This Notice of Grant of Stock Option, together with the Terms, will be referred to as your Option Agreement.  The Option has been granted to you in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to you.  Capitalized terms are defined in the Plan if not defined herein or in the Terms.  You acknowledge receipt of a copy of the Terms, the Plan and the Prospectus for the Plan.

POWER-ONE, INC.
2004 STOCK INCENTIVE PLAN

TERMS AND CONDITIONS OF RICHARD J. THOMPSON NONQUALIFIED STOCK OPTION

1.                                       General .

These Terms and Conditions of Richard J. Thompson Nonqualified Stock Option (these “ Terms ”) apply to a particular stock option (the “ Option ”) if incorporated by reference in the Notice of Grant of Stock Option (the “ Grant Notice ”) corresponding to that particular grant.  The recipient of the Option identified in the Grant Notice is referred to as the “ Grantee .”  The per share exercise price of the Option as set forth in the Grant Notice is referred to as the “ Exercise Price .”  The effective date of grant of the Option as set forth in the Grant Notice is referred to as the “ Award Date .”  The exercise price and the number of shares covered by the Option are subject to adjustment under Section 7.1 of the Plan.

The Option was granted under and subject to the Power-One, Inc. 2004 Stock Incentive Plan (the “ Plan ”).  Capitalized terms are defined in the Plan if not defined herein.  The Option has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee.  The Grant Notice and these Terms are collectively referred to as the “Option Agreement” applicable to the Option.

2.                                       Vesting; Limits on Exercise; Incentive Stock Option Status .

The Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the Grant Notice.  The Option may be exercised only to the extent the Option is vested and exercisable.

·                   Cumulative Exercisability .  To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the extent not previously exercised), and such right shall continue, until the expiration or earlier termination of the Option.

·                   No Fractional Shares .  Fractional share interests shall be disregarded, but may be cumulated.

·                   Minimum Exercise .  No fewer than 100 shares of Common Stock (subject to adjustment under Section 7.1 of the Plan) may be purchased at any one time, unless the number purchased is the total number at the time exercisable under the Option.

·                   Nonqualified Stock Option .  The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning of Section 422 of the Code.

3.                                       Continuance of Employment Required; No Employment/Service Commitment .

                Except for any vesting in connection with the Grantee’s termination of employment or other vesting event pursuant to the terms of the Grantee’s Empl