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International Rectifier Corp/DE – ‘10-K/A’ for 6/29/14

On:  Friday, 10/24/14, at 5:27pm ET   ·   For:  6/29/14   ·   Accession #:  1047469-14-8538   ·   File #:  1-07935

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
(Amendment No. 1)

Commission file number 1-7935

INTERNATIONAL RECTIFIER CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

101 N. Sepulveda Blvd
El Segundo, CA 90245
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: (310) 726-8000

          Securities registered pursuant to Section 12(b) of the Act:

          Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

          Indicate by checkmark whether the registrants submitted electronically and posted on its corporate Website, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

          The aggregate market value of the registrant's voting common stock, par value $1.00 per share, held by non-affiliates as of the last business day of the registrant's most recently completed second fiscal quarter was $1,803,600,677 (computed using the closing price of a share of Common Stock on December 29, 2013, reported by the New York Stock Exchange).

          There were 71,639,017 shares of the registrant's common stock, par value $1.00 per share, outstanding on October 24, 2014.

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EXPLANATORY NOTE

        This Amendment No. 1 on Form 10-K/A (the "Amendment") amends our Annual Report on Form 10-K for the fiscal year ended June 29, 2014, originally filed with the Securities and Exchange Commission ("SEC") on August 20, 2014 (the "Original Filing"). We are filing this Amendment to amend Part III of the Original Filing to include the information required by and not included in Part III of the Original Filing because we no longer intend to file our definitive proxy statement within 120 days of the end of our fiscal year ended June 29, 2014 as a result of the pending acquisition of our company by Infineon Technologies AG. Part IV is being amended solely to add as exhibits certain new certifications in accordance with Rule 13a-14(a) promulgated by the SEC under the Securities Exchange Act of 1934.

        Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing other than as expressly indicated in this Amendment. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings made with the SEC on or subsequent to August 20, 2014.

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PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information Concerning Members of the Board of Directors ("Board")

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        None of the directors or executive officers of the Company were selected pursuant to any arrangement or understanding, other than with the directors and executive officers of the Company acting within their capacity as such. There are no family relationships among directors or executive officers of the Company and other than as set forth above, as of the date hereof, no directorships are held by any director in a company which has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, or the "Exchange Act," or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Officers of the Company serve at the discretion of the Board.

        Board Committees.    Both the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and the New York Stock Exchange ("NYSE") rules require the Company to have an audit committee comprised solely of directors who are independent under the enhanced independent standards applicable to audit committee members. The Company is in compliance with these requirements.

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        Audit Committee Financial Experts.    The Audit Committee of the Board is comprised of Mr. Attiyeh, Mr. Hirsch and Mr. Lacey, and the Board has determined that each qualifies as an "audit committee financial expert," as defined by the SEC.

        Code of Ethics for Directors, Officers and Employees.    The Board has adopted a Code of Ethics that applies to all directors, officers and employees, including the Company's principal executive officer, principal financial officer and principal accounting officer, as contemplated by the SEC's regulations. The Company's Code of Ethics can be found on the Corporate Governance portion of the Investor Relations section of our website, http://www.irf.com and are also available at no charge upon written request to the Corporate Secretary, International Rectifier Corporation, 101 North Sepulveda Boulevard, El Segundo, CA 90245. The Company intends to post on its website any amendments to its Code of Ethics or any waiver from a provision of the Code of Ethics not applicable to a director or executive officers of the Company.

        Section 16(a) Beneficial Ownership Reporting Compliance.    Under Section 16(a) of the Exchange Act, the Company's directors, executive officers and any person holding ten percent or more of the Common Stock are required to report their ownership of Common Stock and any changes in that ownership to the SEC and to furnish the Company with copies of such reports. Specific due dates for these reports have been established and the Company is required to report any failure to file on a timely basis by such persons. Based solely upon a review of copies of reports filed with the SEC, each person subject to the reporting requirements of Section 16(a) has filed timely all reports required to be filed in fiscal year 2014.

        Executive Officers.    The names and ages of the executive officers of the Company and a brief description of the business experience for each such executive officer is incorporated by reference from Part I of this report entitled "Executive Officers of the Registrant."

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ITEM 11.    EXECUTIVE COMPENSATION.

Processes and Procedures for Determination of Executive and Director Compensation

        The Compensation Committee is responsible for discharging the Board's responsibilities relating to the compensation of the Company's executive officers and directors. The Compensation Committee reviews and approves the compensation arrangements, plans, policies and programs that apply to our executive officers. Pursuant to the Compensation Committee's Charter, its principal compensation related responsibilities, duties and areas of authority include, among other things:

•

To review the Company's compensation strategy from time to time to ensure that management is rewarded appropriately for its contributions to Company growth and profitability and that the executive compensation strategy supports Company objectives and stockholder interests.



•

To determine all elements of compensation for executive officers.



•

To annually establish the criteria for and review the performance of our Chief Executive Officer ("CEO") and our executive officers for compensation purposes, and report on the Compensation Committee's review to the Board and the CEO.



•

To review from time to time and approve the Company's incentive compensation strategy with respect to the total number of incentive awards to be granted, the relative participation of senior management and other employees, and the types of awards to be granted.



•

To approve annual retainer and meeting fees for directors and members of Board committees, including expense reimbursement limits and per diem allowances, as well as fix the terms and awards of stock compensation for members of the Board, all subject to ratification by the Board.



•

To retain or obtain advice from internal or external legal, compensation or other advisors to assist in the performance of its functions, including in the evaluation of director, CEO or senior executive compensation.

        The Compensation Committee's Charter permits it to consult with members of management when performing its duties. The Compensation Committee takes into account our CEO's recommendations regarding the corporate goals and objectives, performance evaluations and compensatory arrangements for our executive officers other than the CEO. The Compensation Committee also may review with management (but does not set) the salaries of other senior level employees who are not executive officers of the Company. The Compensation Committee has delegated to a Stock Award Committee the authority to grant stock options and restricted stock unit awards to employees of the Company who are not officers or directors. However, the Stock Award Committee may not grant awards covering more than 100,000 shares of our common stock in the aggregate during the period between any two meetings of the Compensation Committee and may not grant awards covering more than 15,000 shares of our common stock to any one individual in a calendar year. Mr. Khaykin is currently the sole member of the Stock Award Committee. The Compensation Committee may also form and delegate authority to subcommittees, or delegate authority to members, when appropriate, provided that such subcommittees will be composed exclusively of members of the Compensation Committee and will operate pursuant to a published charter. Other than the authority delegated to the Stock Award Committee, the Compensation Committee has no current intention to delegate any of its authority to any other committee or subcommittee.

        As indicated above, pursuant to its Charter, the Compensation Committee is authorized to retain compensation consultants to assist it in carrying out its duties. The Compensation Committee has the authority to approve any compensation consultant's fees and other retention terms. Consistent with the Compensation Committee's past practice, for fiscal year 2014, the Compensation Committee retained the services of Frederic W. Cook & Co., Inc. ("FW Cook"), an independent compensation consulting firm, to assist it in assembling and analyzing compensation among peer companies and to prepare compensation analysis and summaries with respect to the Company's executive officers and its non-employee directors. During fiscal year 2014, except for the consulting services provided to the Compensation Committee, FW Cook did not perform any other services for the Company or its management.

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DIRECTOR COMPENSATION

        The following table presents information regarding the compensation paid for services rendered during fiscal year 2014 to individuals who were members of our Board at any time during fiscal year 2014 and who were not also our employees or employees of any of our subsidiaries (referred to herein as "Non-Employee Directors"). The compensation paid to any director who was also one of our employees during fiscal year 2014 is presented below in the "Summary Compensation Table" and the related explanatory tables. Such employee directors do not receive separate compensation for service on the Board.

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Director Compensation—Overview

        Compensation for Non-Employee Directors during fiscal year 2014 consisted of an annual cash retainer, supplemental annual retainers for service on a committee of the Board, supplemental annual retainers for service as the Chairman of the Board or the Chair of a committee of the Board, and an annual award of restricted stock units. During fiscal 2014, compensation did not include any separate meeting attendance fees.

Non-Employee Director Annual Retainers and Expenses

        For fiscal year 2014, cash compensation for Non-Employee Directors was comprised of the following:

1.

An annual cash retainer fee in the amount of $70,000; and



2.

As applicable, supplemental annual retainer fees in the following amounts for the respective Non-Employee Director:

        The annual retainer fees (and any applicable supplemental retainer fees) are paid quarterly and pro-rated for the period of a Non-Employee Director's service. Non-Employee Directors do not earn any separate meeting fees based on meeting attendance or the number of meetings held.

        All Non-Employee Directors are also reimbursed for reasonable out-of-pocket expenses they incur serving as directors, including the cost of transportation and other expenses incurred to attend meetings at the Company or otherwise in connection with the Non-Employee Director's service to the Company.

        Each of our Non-Employee Directors is permitted to elect to defer up to 100% of his or her retainer fees under the Company's Deferred Compensation Plan ("DCP"), as more fully described below under "Compensation Discussion and Analysis—Fiscal Year 2014 Executive Compensation Program Elements—Non-Qualified Deferred Compensation Plan." None of our Non-Employee Directors has elected to participate in the DCP.

Non-Employee Director Equity Awards

        Amount and Timing of Director Equity Awards.    The equity award program for Non-Employee Directors for the Company's 2014 fiscal year provides for an annual grant of restricted stock units ("RSU's") issued under the Company's applicable stock incentive plan. The number of RSUs is established using a fixed value of $120,000 and the per share closing price of the Company's common stock on the NYSE on the day of grant, rounded to the nearest whole RSU. The date of grant for such award is the third business day following the filing of the Company's annual report on Form 10-K due during the applicable year. All Non-Employee Directors in office at time of the granting of the award receive the award.

        Separately, each Non-Employee Director who is newly appointed or elected to the Board is granted an award of 20,000 stock options under the Plan on the date that he or she is first appointed or elected. In such case, the stock options are granted with an exercise price equal to the closing price per share of the Company's common stock on the NYSE on the applicable grant date. In addition, the newly appointed or elected Non-Employee Director is granted a prorated amount of the annual award of RSUs otherwise granted to Non-Employee Directors for the fiscal year based on the remaining portion of the fiscal year to be served by such new member. In fiscal year 2014, there were no newly appointed members of the Board and therefore no such awards were made.

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        Award Terms.    Each RSU award granted to our Non-Employee Directors will vest 100% on the first anniversary of the grant date, subject to the Non-Employee Director's continued service through the applicable vesting date. If a Non-Employee Director's service terminates as a result of his or her death or disability, or a Non-Employee Director retires with the consent of the Board (or upon written notice if the sum of the Non-Employee Director's years of service to the Board and age is seventy-five years or more), then the RSUs subject to the award shall become vested upon the date of such event. In addition, unless the Board determines otherwise, if the Company undergoes a "change in control event" (as defined in the RSU award agreement entered into in connection with the RSU award), all of a Non-Employee Director's RSUs will become fully vested. Vested RSUs are settled in shares of the Company's common stock on a one-for-one basis.

        Each stock option award granted to a newly appointed or elected Non-Employee Director has a term of five years and, subject to the Non-Employee Director's continued service, one-third of his or her stock option award will vest and become exercisable on each of the first three anniversaries of the grant date. If a Non-Employee Director's service terminates for any reason other than his or her voluntary resignation or voluntary failure to stand for reelection (or his or her death or disability), all of the unvested portion of the stock options held by the Non-Employee Director will immediately vest and remain exercisable until the earlier of (i) three years from the date of his or her termination or (ii) the scheduled expiration date of the stock option. The same vesting and exercise rules shall apply if a Non-Employee Director's service terminates as a result of his or her voluntary resignation or decision not to stand for re-election after five consecutive years of service on the Board, in respect of stock options that the director has held for more than six months. Otherwise, vested options will remain outstanding and exercisable for three years (or three months, if the Non-Employee Director has not served at least five years) after a director's service terminates or his or her death. Unvested options would terminate upon voluntary resignation or voluntary decision not to stand for re-election if the Non-Employee Director has served less than five years. Also, any vested options that are not exercised within the applicable post-termination of service exercise window would terminate. In addition, unless the Board determines otherwise, if the Company undergoes a "change in control event" (as defined in the Plan), all of the Non-Employee Director's stock options will become fully vested and exercisable.

        Each RSU granted in fiscal year 2014 to Non-Employee Directors was granted under, and is subject to the terms of, the 2011 Performance Incentive Plan (the "2011 Plan"), approved by shareholders at the Company's 2011 annual meeting of shareholders. For RSUs granted in fiscal year 2014, Non-Employee Directors are not entitled to dividend equivalent rights.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS ("CD&A")

Introduction

        This section discusses each of the material elements of compensation awarded to, earned by or paid to our principal executive officer, our principal financial officer, and the other three most highly compensated individuals who served as executive officers of the Company during fiscal year 2014. These individuals are referred to as the "Named Officers" in this report. This section also provides information about the fiscal year 2014 compensation objectives, policies, and decisions applicable to those Named Officers. The Named Officers for fiscal year 2014 were:

Executive Summary

        Our executive compensation program for fiscal year 2014 is based in substantial part on Company performance. As set out in this report, Company performance for fiscal year 2014 showed improvement as compared to fiscal year 2013 performance. Accordingly, a number of the performance goals for funding the Company's performance-based compensation were met, as compared with fiscal year 2013 in which the performance targets were not achieved. Therefore, the cash compensation earned by Named Officers for our 2014 fiscal year was higher than that for our 2013 fiscal year, demonstrating a clear linkage between Company performance and Named Officer compensation. Equity compensation provided to Named Officers was increased from that provided in fiscal year 2013, but more than half of the shares representing each Named Officer's equity compensation for fiscal year 2014 was provided in the form of performance restricted stock units with vesting targets requiring significant increases in total shareholder return (TSR) to align Named Officer compensation with the creation of value for shareholders and continuing the Company's emphasis on performance requirements for equity compensation.

        Our executive compensation program for fiscal 2014 had three key components, which are designed to be consistent with our overall compensation philosophy and to reward executives based on Company and individual performance: (1) base salary; (2) annual incentive cash bonus opportunities; and (3) long-term stock awards. These components are explained in more detail below in this Compensation Discussion and Analysis section. The highlights of our executive compensation program for fiscal year 2014 are as follows:

•

Base Salaries.  The base salaries of the Named Officers for fiscal year 2014 remained at the same levels as their base salaries for fiscal year 2013, except the base salary for Mr. Daskal was increased from $350,000 to $368,000 to be more aligned with peer company levels for his position. For Messrs. Khaykin and Barrow, this was the fourth consecutive year with no salary increase, and for Mr. White there has been no salary increase since he became an executive officer in July 2011. Mr. Tanner joined the Company in fiscal year 2013 and had no increase for fiscal year 2014.



•

Short-Term Annual Cash Incentives.  The Named Officers participated in a short term cash incentive program based on target bonus opportunities set as a percentage of salary. The earning of bonuses under the program depended on the satisfaction for each Named Officer of a mix of Company and/or individual performance goals as described in more detail below. Consistent with our pay-for-performance policy, cash bonuses were paid for fiscal year 2014 to our Named Officers at less than the target levels as the Company generally achieved the threshold performance levels for short term cash incentives, but did not achieve the target performance levels.

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•

Long-Term Equity Awards.  The Named Officers were granted a mixture of time-based and performance-based restricted stock unit ("RSU") awards during fiscal year 2014, with the vesting of a majority of the shares subject to these awards for each executive being contingent on Company stock price performance conditions being met. We believe these awards help further align the Named Officers' interests with those of our stockholders over the approximately three-year vesting period of the awards because their value, and the Named Officers' opportunity, is directly linked to the Company's stock price. In addition, the performance-based RSU awards vest only if our stock price achieves certain specified higher stock price levels during the applicable measurement period. As has been the practice for the Company in recent years, equity awards for fiscal year 2014 were granted to the Named Officers at the end of fiscal year 2014 in order to take into account Company performance during the fiscal year in considering the overall compensation for Named Officers, as well as the results of the previous year's advisory vote on executive compensation.



•

Recoupment Policy.  We have adopted a recoupment policy that allows the Company, in the event the Company restates all or a portion of its financial statements, to recoup any bonus or incentive compensation paid to a Named Officer or take other actions in respect of the Named Officer's compensation.



•

CEO Stock Ownership Guideline.  We have adopted stock ownership guidelines requiring the CEO to hold the lesser of (i) shares with value equal to three times annualized base salary or (ii) a fixed number of shares (namely, 90,000 shares), by the later of July 1, 2016 or the fifth anniversary of his or her appointment as CEO. As of the date of adoption of that policy, the fixed number of shares represented a value of more than three times the annualized base salary of our CEO. Our CEO currently holds shares of the Company's common stock that satisfies the stock ownership guideline.



•

Officer Anti-Pledging/Hedging Policy.  We have adopted a policy, as part of the Company's insider trading policy, of prohibiting executive officers from engaging in puts, calls, derivative transactions, pledges, hedging and related transactions in the Company's stock.

The Role of the Compensation Committee

        Our executive compensation programs are determined and approved by the Compensation Committee. None of the Named Officers were or are members of the Compensation Committee, which is comprised solely of independent directors. The Compensation Committee takes into account the recommendations of the CEO regarding the corporate goals and objectives, performance evaluations and compensatory arrangements for Named Officers other than the CEO. For example, in fiscal year 2014, the Compensation Committee considered the CEO's recommendations regarding the appropriate base salaries and annual cash incentive program payouts for the Named Officers other than himself for fiscal year 2014. The other Named Officers besides the CEO did not and currently do not have any role in determining or recommending the form or amount of compensation paid to the Named Officers. The Compensation Committee regularly apprises the Board of its actions and periodically seeks the input of the Board and other committees of the Board as to items it is considering. As described below, the Compensation Committee has engaged an independent compensation consultant. (See also, Processes and Procedures for Determination of Executive and the Director Compensation, above.)

        Fiscal Year 2014 Compensation Advisor.    For fiscal year 2014, the Compensation Committee retained Frederic W. Cook & Co., Inc. ("FW Cook") to assist in assembling and analyzing compensation and performance levels among the peer companies identified below, prepare compensation analysis and summaries with respect to the Company's Named Officers, perform compensation reviews and make recommendations to the Compensation Committee regarding compensation programs and levels. During fiscal year 2014, except for the consulting services provided to the Compensation Committee, FW Cook did not perform any other services for the Company or its management. The Compensation Committee determined FW Cook to be independent for the purposes of the NYSE rules for independence, and concluded that its engagement of FW Cook does not raise any conflict of interest with the Company or any of its directors or executive officers.

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The Role of Stockholder Say-on-Pay Vote

        At our last annual stockholders meeting held in November 2013, approximately 95% of our stockholders voting on the proposal to approve our executive compensation program supported our program. Based on this high level of support for our executive compensation program, the Compensation Committee did not change its general approach for fiscal year 2014. As noted above, we emphasized long-term stock awards in fiscal year 2014, with the vesting of a majority of the shares subject to the stock awards granted to the Named Officers in fiscal year 2014 being contingent on achieving target levels of appreciation of the Company's share price. We believe this emphasis on equity and performance-based vesting aligns with shareholder interests and particularly focuses the Named Officers on the goal of stock price appreciation. We believe our executive compensation program includes a number of features that further our compensation philosophy and reflect best practices in the market. The Compensation Committee will continue to consider the outcome of our say-on-pay proposals when making future compensation decisions for the Named Officers.

Executive Compensation Program Objectives and Overview

        Principles of Executive Compensation.    Our executive compensation programs are intended to achieve four fundamental objectives: (1) attract, motivate and retain high caliber talent; (2) create a direct relationship between pay and performance; (3) create proper incentives for the executives to maximize stockholder value over time; and (4) be in form and substance reasonable in terms of the risks to the Company and its shareholders. In structuring our current executive compensation programs, we are guided by the following basic philosophies:

•

"At Risk" Compensation.  A significant portion of each executive's compensation should be "at risk" and tied to the Company's attainment of annual and long-term business objectives and shareholder value.



•

Competitive Compensation.  The executive compensation program should provide a fair and competitive compensation opportunity that enables us to attract and retain superior executive talent.



•

Alignment with Stockholder Interests.  Executive compensation should be structured to include variable elements that link executives' financial reward to achievement of operational goals and stockholder return, and long-term ongoing executive stock ownership should be encouraged.

        As described in more detail below, the material elements of the executive compensation programs for our Named Officers are a base salary, a short-term incentive compensation opportunity and a long-term equity incentive opportunity. We also provide the Named Officers a non-qualified deferred compensation plan, 401(k) retirement benefits, certain perquisites and severance benefits.

        Each element of our executive compensation program is intended to help us to achieve one or more of our compensation objectives. Base salaries, the non-qualified deferred compensation plan, the 401(k) plan and perquisites are all primarily designed to attract and retain high caliber talent. These are elements where the value of the benefit in any given year is not variable. In order to attract and retain top-caliber executives, we provide executives with a level of predictable benefit amounts that reward the executive's continued service and with severance protections. The predictable benefits that we provide executives include a mix of fixed short-term elements (like base salaries) and longer-term elements (like the non-qualified deferred compensation plan and 401(k) retirement benefits). This mix helps us to achieve our dual goals of attracting executives and retaining them. In addition to helping attract and retain executives, severance benefits also help ensure executives' objectivity during challenging times for the industry or our Company and can be used to secure releases from potential claims in certain situations.

        Our short-term incentive compensation opportunity and our long-term equity incentive opportunities are designed to reward performance and the creation of stockholder value; accordingly, the value of these benefits is dependent on performance. Our short-term cash incentive opportunity is primarily intended to hold executives accountable for achievement of Company performance goals and individual performance goals related to the executive's primary areas of responsibility. The principle is that short term goal achievement can lead to long term value creation. It also aligns our executive officers' interests with those of our stockholders and helps us attract,

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motivate and retain executives. Our long-term equity incentives are intended to align our executive officers' interests with those of our stockholders, by incentivizing and rewarding executives for longer term performance achievement. As well, they help us attract, motivate and retain executives.

        The individual compensation elements are intended to create a competitive total compensation package for each executive officer relative to companies in our comparative peer group.

        In connection with the establishment and implementation of the overall executive compensation program, including the establishment of cash compensation structure at the beginning of the fiscal year and the structure of the equity award elements at the end of the fiscal year, the Compensation Committee considers the impacts of risk to the Company and its shareholders (See "Compensation Policies and Practices as They relate to the Company's Risk Management," below).

        Fiscal Year 2014 Executive Compensation.    Consistent with our compensation philosophies described above, our goal for fiscal year 2014 was to provide each Named Officer with an executive compensation program that was competitive in light of the compensation paid to comparable executives at our peer group companies, reward performance and to take account of conditions in our industry.

        The Company's general approach for fiscal year 2014 was to provide the CEO and other Named Officers with target total cash compensation⁽¹⁾ at about the median level of similarly situated executives with the peer group companies identified below, but to provide the opportunity for higher levels of equity compensation, a majority of it being performance-contingent based on the share levels of these awards, to incentivize long term performance and shareholder value. For fiscal year 2014, target total cash compensation was at about or below median for all Named Officers as compared to the peer group, except that Mr. Barrow's target total cash compensation was slightly above the median for his position. Mr. Barrow's compensation is at about the same level as the Named Officers other than the CEO due to the importance of Mr. Barrow's role as the Company's principal officer for its strategic GaN program and in order to provide consistent levels of incentive and rewards for the Company's key officers. As a group, Named Officer aggregate target total cash compensation was at approximately the median as compared to the aggregate target total cash compensation provided by our peers to their named executive officers.

        The Compensation Committee determined the level of fiscal year 2014 equity awards for Named Officers at the end of the fiscal year. The equity awards granted by the Compensation Committee resulted in the CEO's total target compensation being slightly above the 75^th percentile and at or below median for the other Named Officers when compared to the compensation levels provided by our peers for similar positions. In determining the equity award for the CEO, the Compensation Committee considered the better operating results of the Company for fiscal year 2014 as compared to fiscal year 2013, that the total target cash compensation has remained unchanged for the CEO for several years and the fact that greater than half of the shares subject to the equity awards granted to our executives for fiscal year 2014 were based on stock price appreciation performance conditions believed by the Compensation Committee to be challenging and aligned with shareholder interests.

        As described below, the performance conditions for vesting of substantial portions of the Named Officers' equity compensation requires a significant increase in the performance of the Company as measured by appreciation in the Company's share price. Therefore, this equity compensation continues to be at risk and will have value only if significant value is created for the Company's shareholders in the form of share price appreciation over time. The Compensation Committee believed that the pay positioning of the Named Officers relative to the peer group for fiscal year 2014 was appropriate given this focus on equity awards and performance-based vesting—the Named Officers have an opportunity to realize significant value from their equity awards if the applicable performance-based and other vesting conditions are satisfied, and the Named Officers have downside risk in that cash incentives and performance-based equity awards will not have value if the applicable performance goals are not attained.

(1)

For the purposes of this discussion, "target total compensation" refers to the executive's base salary, target cash incentive bonus and grant date value of equity awards granted to the executive during the fiscal year based on valuation assumptions similar to those used by the Company for its financial reporting, with "target total cash compensation" referring only to base salary and target cash incentive bonus.

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        Company Peer Group.    For the establishment of cash compensation at the beginning of fiscal year 2014, the Compensation Committee reviewed compensation information for a peer group of companies that was the same group as used by the Compensation Committee in establishing equity award levels for the Named Officers at the close of fiscal year 2013. This same group was used at the end of fiscal year 2014 in establishing the Named Officers' equity award levels, with the exception that Volterra Semiconductor Corp having been acquired by another member of the peer group earlier during the Company's 2014 fiscal year was not used for the establishment of Named Officer equity compensation at the end of the fiscal year.

        Set out below is a summary of the peer group used for setting cash compensation at the start of the fiscal year and long term equity incentive awards at the end of the fiscal year:

*

Acquired by another peer group member during the Company's 2014 fiscal year before the commencement of the Compensation Committee's review of long term equity awards for the fiscal year and therefore not used for consideration of the awards

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Fiscal Year 2014 Executive Compensation Program Elements

Base Salaries

        Each of our Named Officers is party to an employment agreement or letter agreement that provides for a fixed base salary, subject to annual review by the Company, but with no contractual requirement to increase the Named Officer's base salary. The Compensation Committee generally reviews base salaries for each executive officer by the first quarter of each fiscal year. In fiscal year 2014, the Compensation Committee considered the need to attract and retain key executives in light of the continuing challenging business and economic environment, our Company's performance, a subjective determination of each Named Officer's past performance and expected future contributions, and the base salaries and total cash compensation and equity awards earned by comparable executives at our peer group companies (based on their published data).

        Based on this review, Mr. Daskal's annual base salary for fiscal year 2014 was increased to $368,000 from $350,000 (which was the first increase in base salary for Mr. Daskal since he joined the Company in 2008), but no adjustments were made for fiscal year 2014 to the base salary levels in effect for Messrs. Khaykin, Tanner, Barrow and White. Accordingly, the base salary levels for Named Officers for fiscal year 2014 were as follows:

        Except for the increase to Mr. Daskal mentioned above, the base salary levels of Named Officers have been in effect since the executive first became an executive officer of the Company, which for Messrs. Khaykin and Barrow was in 2008, for Mr. White was in July 2011 and for Mr. Tanner was January 2013. The Compensation Committee determined that these salary levels were appropriate in light of the Named Officers' respective duties and responsibilities, the continuing challenging global economic environment and to successfully retain the Named Officers in the competitive market. The base salary level for Mr. Khaykin, the Company's CEO, is significantly higher than the base salary levels for the other Named Officers reflecting his responsibility as CEO for the overall operations, management and leadership of the Company. The "Summary Compensation Table—Fiscal Year 2014" below sets forth the base salary paid to each Named Officer for fiscal year 2014.

        As noted below in "Actions of the Compensation Committee for Fiscal Year 2015," no base salary increases were provided to Mr. Khaykin or Mr. Tanner for fiscal year 2015, but the base salaries of Messrs. Daskal, Barrow and White were increased by $7,000 compared to fiscal year 2014.

Short-Term Incentive Compensation Opportunity

        Basic Incentive Program.    For fiscal year 2014, the Compensation Committee established (with the recommendations of the CEO), a short-term cash incentive bonus program for Named Officers based on the achievement of performance goals aligned to the Company's strategic business plan for the fiscal year and the achievement of certain individual goals.

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        Each officer's individual bonus target was expressed as a percentage of the officer's annualized base salary, as follows:

        When combined with salary, these target bonuses generally position total target cash compensation at a level that is at or below the median level of similar positions within the peer group, with Mr. Barrow's total target cash compensation being slightly above median for the reasons described above (See "Fiscal Year 2014 Executive Compensation," above). The target bonus percentage established for each Named Officer was the same as established for each Named Officer for fiscal year 2013. The target bonus level for Mr. Khaykin, the Company's CEO, is significantly higher than the target bonus levels for the other Named Officers reflecting his responsibility as CEO for the overall operations and performance of the Company.

        Any actual bonus payouts were subject to the Compensation Committee's review of each Named Officer's performance against the performance goals for that Named Officer, with the goals being established by the Compensation Committee for the CEO, and being recommended by the CEO and approved by the Compensation Committee for each of the other Named Officers. Individual goals were used in certain circumstances to help ensure that Named Officers focus on the areas where they have operational or policy making control. In any event, the Compensation Committee has the discretion to adjust the amount of the bonus payable based on its assessment of individual performance. In no event will any bonus exceed 200% of the Named Officer's applicable target bonus.

        The bonus program was divided into two measurement periods, comprised of the first two fiscal quarters of fiscal year 2014 ("First Half Period") and the last two fiscal quarters of fiscal year 2014 ("Second Half Period").

        First Half Period.    For the First Half Period, the Named Officer's bonus opportunity was based on a mix of corporate and individual goals for the Named Officers established by the Compensation Committee for that period.

        The corporate goals established for each Named Officer included targets for Company revenues and gross margin, with individual performance goals established by the Compensation Committee based on the particular Named Officer's functions and areas of responsibility. Set forth below is a summary of the performance elements

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established for each Named Officer and the applicable portion of the Named Officer's bonus opportunity for each element for the First Half Period:

Notes:

(1)

The Compensation Committee determined that no bonus would be paid under this element if the Company's revenue for the First Half Period was less than $530 million. For revenue greater than $530 million, the bonus amount was based on a sliding scale, with 40% of the portion of the executive's target bonus allocated to this element to be awarded for threshold achievement at a revenue level of $530 million, 100% of such portion to be awarded for target achievement at a revenue level of $615 million, and 200% of such portion to be awarded for maximum achievement at a revenue level of $680 million or more. For the First Half Period, the Company reported revenue of $539.7 million, which was determined to be an achievement level of 47.8% for this element, and accordingly, the Compensation Committee awarded bonuses of $71,700, $24,580, $23,422, $11,711 and $28,307 to Messrs. Khaykin, Daskal, Tanner, Barrow and White, respectively.

(2)

The Compensation Committee determined that no bonus would be paid under this element if the Company's gross margin for the First Half Period was less than $180 million. For gross margin greater than $180 million, the bonus amount was based on a sliding scale, with 40% of the portion of the executive's target bonus allocated to this element to be awarded for threshold achievement at a gross margin level of $180 million, 100% of such portion to be awarded for target achievement at a gross margin level of $245 million, and 200% of such portion to be awarded for maximum achievement at a gross margin level of $285 million or more. For the First Half Period, the Company reported gross margin of $193.3 million, which was determined to be an achievement level of 53.3% for this element, and accordingly, the Compensation Committee awarded bonuses of $79,950, $27,409, $26,117, $13,058 and $18,938 to Messrs. Khaykin, Daskal, Tanner, Barrow and White, respectively.

(3)

The Compensation Committee determined that no bonus would be paid under this element if the Company's operating expenses were greater than 29% of revenue. For operating expenses less than 29% of revenue, the bonus amount was based on a sliding scale, with 40% of the portion of the executive's target bonus allocated to this element to be awarded for threshold achievement at an operating expense level of 29% of revenue, 100% of such portion to be awarded for target achievement at an operating expense level of 25% of revenue, and 200% of such portion to be awarded for maximum achievement at an operating expense level of 23% or less of revenue. For the First Half Period, the Company's operating expenses were 28.4% of revenue, which was determined to be an achievement level of 51.4% for this element, and accordingly, the Compensation Committee awarded a bonus of $38,550 to Mr. Khaykin.

(4)

The Compensation Committee determined that no bonus would be paid under this element if the Company's Selling, General and Administrative ("SG&A") expense was greater than 18% of revenue. For SG&A expense less than 18% of revenue, the bonus amount was based on a sliding scale, with 40% of the portion of the executive's target bonus allocated to this element to be awarded for threshold achievement at a SG&A expense level of 18% of revenue, 100% of such portion to be awarded for target achievement at a level of SG&A expense of 16% of revenue, and 200% of such portion to be awarded for maximum achievement at a SG&A expense level of 13% or less of revenue. For the First Half Period, the Company's SG&A expense was 16.4% of revenue, which was determined to be an achievement level of 92.1% for this element, and accordingly, the Compensation Committee awarded bonuses of $23,680 and $21,816 to Messrs. Daskal and White, respectively.

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(5)

For Mr. Tanner, the Compensation Committee established goals in the area of operational effectiveness focusing on manufacturing on-time delivery, cycle time improvement and cost control. For Mr. Barrow, the Compensation Committee established operational project goals related to product qualification, manufacturing line establishment and customer support for certain of the Company's GaN products. For the performance goals and assessments for non-reported financial metrics, such as the achievement of operational effectiveness or operational projects, the Company does not disclose the goals, plans or components thereof because the Company believes they constitute confidential business information and their disclosure could impair the ability of the Company to compete effectively. However, the Company believes the performance goals were challenging but reasonably attainable under the Company's circumstances at the time the goals were established, and the evaluation of the merits of each goal was based on the Compensation Committee's assessment of performance. Additionally, the Compensation Committee established that a condition to the achievement of any such performance goals and assessments would be that the Company's threshold level of performance for either or both of its First Half Period revenue or gross margin goals as disclosed above shall have been achieved, which for the First Half Period had in fact been achieved (see Notes 1 and 2, respectively, above). For the First Half Period, the Compensation Committee determined a level of achievement of 29% for operational effectiveness for Mr. Tanner and of 87% for operational projects for Mr. Barrow, and accordingly, the Compensation Committee awarded bonuses of $7,105 and $63,945 to Messrs. Tanner and Barrow, respectively.

        Based on the performance achievements set forth above, for the First Half Period, the Compensation Committee awarded aggregate bonuses of $190,200, $75,669, $56,644, $88,714 and $69,061 to Messrs. Khaykin, Daskal, Tanner, Barrow and White, respectively, representing aggregate performance achievement of 50.7%, 58.9%, 46.2%, 72.4% and 58.3% of target, respectively, for the Named Officers.

        Second Half Period.    For the Second Half Period, consistent with the First Half Period, the Compensation Committee established a mix of corporate and individual goals for the Named Officers. Set forth below is a summary of the performance elements established for each Named Officer and the applicable portion of the Named Officer's bonus opportunity for the Second Half Period for each element:

Notes:

(1)

The revenue goal established by the Compensation Committee for the Second Half Period was the same as that established for the First Half Period. See note (1) to the table on First Half Period bonuses above for a description of the goal. For the Second Half Period, the Company reported revenue of $566.9 million, which was determined to be an achievement level of 69.5% for this element, and accordingly, the Compensation Committee awarded bonuses of $104,227, $35,799, $34,048, $17,024 and $41,148 to Messrs. Khaykin, Daskal, Tanner, Barrow and White, respectively.

(2)

The gross margin goal established by the Compensation Committee for the Second Half Period was the same as that established for the First Half Period. See note (2) to the table on First Half Period bonuses above for a description of the goal. For the Second Half Period, the Company reported gross margin of $203.1 million, which was determined to be an achievement level of 63.1% for this element, and

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accordingly, the Compensation Committee awarded bonuses of $94,714, $32,531, $30,940, $15,470 and $22,435 to Messrs. Khaykin, Daskal, Tanner, Barrow and White, respectively.

(3)

The operating expenses goal established by the Compensation Committee for the Second Half Period was the same as that established for the First Half Period. See note (3) to the table on First Half Period bonuses above for a description of the goal. For the Second Half Period, the Company's operating expenses were 28.2% of revenue, which was determined to be an achievement level of 55.7% for this element, and accordingly, the Compensation Committee awarded a bonus of $41,773 to Mr. Khaykin.

(4)

The SG&A expense goal established by the Compensation Committee for the Second Half Period was the same as that established for the First Half Period. See note (4) to the table on First Half Period bonuses above for a description of the goal. For the Second Half Period, the Company's SG&A expense was 16.6% of revenue, which was determined to be an achievement level of 88.2% for this element, and accordingly, the Compensation Committee awarded bonuses of $22,712 and $20,885 to Messrs. Daskal and White, respectively.

(5)

See note (5) to the table on First Half Period bonuses to see a brief description of the types of goals established for Mr. Tanner and Mr. Barrow. For the performance goals and assessments for non-reported financial metrics, such as the achievement of operational effectiveness or operational projects, the Company does not disclose the goals, plans or components thereof for these same reasons as set forth in note (5) to the table on First Half Period bonuses. However, the Company believes the performance goals were challenging but reasonably attainable under the Company's circumstances at the time the goals were established, and the evaluation of the merits of each goal was based on the Compensation Committee's assessment of performance. Moreover, it was a condition of each of these goals for the Second Half Period that either or both of the threshold levels of Company revenue and gross margin be achieved, and which in fact were achieved (See notes (1) and (2), above). For the Second Half Period, the Compensation Committee determined a level of achievement of 133.3% for operational effectiveness for Mr. Tanner and of 70% for operational projects for Mr. Barrow, and accordingly, the Compensation Committee awarded bonuses of $32,667 and $51,450 to Messrs. Tanner and Barrow, respectively.

        Based on the performance achievements set forth above, for the Second Half Period, the Compensation Committee awarded aggregate bonuses of $240,714, $91,042, $97,654, $83,944 and $84,469 to Messrs. Khaykin, Daskal, Tanner, Barrow and White, respectively, representing aggregate performance achievement of 64.2%, 70.7%, 79.7%, 68.5% and 71.3% of target, respectively, for the Named Officers.

Equity Incentive Awards

        Fiscal Year 2014 Annual Equity Awards.    The Company's view is that the executive officers' long-term compensation should be linked directly to the value provided to our stockholders and that the incentives should be forward-looking. In fiscal year 2014, in order to retain key employees and align their potential rewards with the Company's stock price performance, Compensation Committee established a restricted stock unit ("RSU") award program ("RSU Program") for certain key employees, including the Named Officers. The program consisted of two types of RSU awards: (i) RSU awards that vest based on the employee's continued service with the Company ("Time-Based RSUs"), and (ii) RSU awards that vest on the satisfaction of specified stock appreciation performance conditions ("Performance RSUs"). The Company's view is that Time-Based RSU awards help to reward and retain its executives over an extended period of time, and that Performance RSUs provide further incentives for executives to help the Company achieve specific performance goals over the medium to long term that are intended to create value for the Company's stockholders.

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        Annual equity awards are generally granted to Named Officers at the close of the fiscal year in order to take into account Company performance during the fiscal year in considering the overall compensation for Named Officers. The Compensation Committee made awards of Time-Based RSUs and Performance RSUs to Named Officers on June 26, 2014 as follows:

Number of Shares Subject to Fiscal Year 2014 RSU Awards for Named Officers

•

If the Final Average Share Price for the Target Vesting Quarter is equal to 125% of the Base Price, the Vesting Percentage shall be 100%.



•

If the Final Average Share Price for the Target Vesting Quarter is greater than 125% of the Base Price, the Vesting Percentage shall be increased above 100% proportionately by 4% for each percentage point by which the percentage appreciation of the Final Average Share Price over the Base Price is greater than 25% (including fractional percentages). In no event, however, shall the Vesting Percentage exceed 120%.



•

If the Final Average Share Price for the Target Vesting Quarter is less than 125% of the Base Price, the Vesting Percentage shall be reduced below 100% proportionately by 4% for each percentage point by which the percentage appreciation of the Final Average Share Price over the Base Price is less than 25% (including fractional percentages).



•

If the Final Average Share Price for the Target Vesting Quarter is less than or equal to 100% of the Base Price, the Vesting Percentage shall be zero.

In addition, if the Final Average Share Price for either the fourth fiscal quarter of the Company's fiscal year that ends in June 2017 or the second fiscal quarter of the Company's fiscal year that ends in June 2018 exceeds the Base Price, the award will vest on the last day of such fiscal quarter as to the number of RSUs determined under the formula described above (with the number of RSUs that vest in any fiscal quarter being reduced by the number of any RSUs that vested in a prior fiscal quarter). For the purposes of the award, "Final Average Share Price" means the unweighted average of the daily closing prices of the Company's shares of common stock on the New York Stock Exchange for all trading days in the applicable fiscal quarter, adding back any ordinary or extraordinary cash dividends (without interest) paid by the Company on its common stock since the grant date of the award.

        In reviewing the levels of awards, the Compensation Committee considered the awards in the context of the overall potential compensation level for each Named Officer as compared to the Company's peer group, and the performance of the Company in fiscal year 2014. The Compensation Committee determined that it would be appropriate for the majority of shares attributed to each Named Officer's annual equity award to consist of Performance RSUs to provide a greater incentive to achieve Company performance (and thereby achieve the stock price appreciation goals established for the awards). The Compensation Committee believed that the structure of the fiscal year 2014 annual grants would encourage the Named Officers to focus on the long-term growth of the

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Company, provide an additional retention incentive for these executives over the three-year period of the award, and provide a reward to executives should key shareholder return targets be achieved.

        Determination as to 2011 Performance Awards.    As described in the Company's proxy statement for its 2011 annual meeting, Messrs. Khaykin, Daskal and Barrow were each granted an award of restricted stock units in June 2011 that were eligible to vest if the Company's average stock price for all trading days in fiscal year 2014 exceeded the stock price on the grant date of the award. At the end of fiscal year 2014, the Compensation Committee determined that the performance goal had not been met and, accordingly, each of these awards terminated without vesting at the end of the 2014 fiscal year.

        Timing of Award Grants.    The Company has not historically had any program, plan or practice to time the grant of equity-based awards to our executives in coordination with the release of material non-public information; however, the Company has adopted a practice for grants of option awards to generally be made on the third trading day following the filing of the Company's next periodic report with the SEC (with option awards to new directors being made at the day of appointment), with RSU awards granted at the time deemed appropriate for the business needs of the Company. All equity grants are made under the Company's stock plans approved by the stockholders. The per share exercise price of options cannot be less than the closing price of the Company's common stock on the date of grant.

Non-Qualified Deferred Compensation Plan

        The Company maintains the DCP which became effective July 5, 2004, for the benefit of its executives and other key employees and its directors. Under the DCP, select employees who satisfy certain eligibility requirements, including each of the Named Officers, and members of the Board, may make annual irrevocable elections to defer their compensation to be earned during the following calendar year. In addition, the Company may make discretionary contributions, although it did not do so for fiscal year 2014. The Company believes that providing executive officers with deferred compensation opportunities is a cost-effective way to permit officers to receive potential tax benefits associated with delaying the income tax event on the deferred compensation (and investing the pre-tax compensation), even though the related deduction for the Company is also deferred. Information with respect to the Named Officers' participation in the DCP is presented in the "Non-Qualified Deferred Compensation Plan Table-Fiscal Year 2014" and the material terms of the DCP are described following that table.

401(k) Retirement Benefits

        The Company provides retirement benefits to its executive officers under the terms of its tax-qualified 401(k) plan. The Named Officers participate in the plan on substantially the same terms as the other participating employees.

Perquisites

        The Company provides certain perquisites and personal benefits to the executive officers. The nature and amount of these perquisites vary among the executive officers and generally consist of one or more of the following: automobile allowance and housing allowance benefits. While the Company does not provide many perquisites or personal benefits, we believe that perquisites and personal benefits are often a tax-advantaged way to provide the executive officers with additional annual compensation that supplements their other compensation opportunities, and therefore we treat perquisites as another component of annual compensation that is merely paid in a different form. In the case of housing allowance benefits, they also provide an important element in the Company's ability to recruit key talent. The perquisites and personal benefits paid to each Named Officer in fiscal year 2014 are reported in the "Summary Compensation Table—Fiscal Year 2014" below, and are explained in more detail in footnotes (3) through (7) thereto.

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Severance and Other Benefits

        Severance Benefits Generally.    The Company believes that providing severance protection to its executives helps attract and retain executive talent. Severance protections for our executive officers were negotiated on an individual by individual basis in connection with the negotiation of other employment terms, typically in connection with the entering into of employment agreements or employment offer letters or separation agreements with each executive officer.

        Severance Benefits for Named Officers.    As described in more detail below under "Potential Payments Upon a Termination or Change in Control," the employment arrangements for Mr. Khaykin and Mr. Daskal provide that the executive may be provided severance and other benefits upon an actual or constructive termination of employment, with enhanced benefits if such termination occurs in connection with a change in control of the Company. Each of the other Named Officers would be entitled to severance and other benefits upon an actual or constructive termination of employment under the terms of their respective severance agreements with the Company if such termination occurs in connection with a change in control of the Company. Under their respective agreements which were entered into several years ago, the Named Officers (other than Mr. Tanner, as mentioned below) may also be entitled in certain circumstances to a tax "gross-up" payment in the event that the benefits they are entitled to receive are subject to the imposition of excise taxes under Section 4999 of the Internal Revenue Code in connection with a change in control of the Company. These gross-up benefits were negotiated in connection with entering into their respective agreements and the Compensation Committee determined that providing these Named Officers with this benefit was necessary and appropriate to attract and retain these executive officers during a challenging period for the Company. However, the Company has made a determination as a matter of policy that such provisions will not be included in future agreements or amended agreements with executive officers. Accordingly, Mr. Tanner would not be entitled to a tax gross-up payment under his change in control severance agreement with the Company entered into in December 2012 in connection with his hiring.

        The Compensation Committee has also adopted non-binding severance guidelines that are applicable to officers of the Company in the event that their employment is terminated by the Company for reasons other than for cause. However, the guidelines would not apply to any Named Officer who already has a negotiated severance agreement in place to the extent the conditions set forth in their respective severance agreements are applicable to the given event. The Compensation Committee adopted these guidelines in an effort to try to standardize severance compensation for terminating employees. While these are guidelines, they are not contractual commitments on behalf of the Company, and the Compensation Committee retains the discretion and the authority to review, approve, modify or alter any such arrangement.

        We generally do not believe that executive officers should be entitled to severance benefits merely because a change in control transaction occurs and require a termination event to take place in order to pay cash severance. However, under the terms of our stock incentive plans, if the Company undergoes a change in control or similar event, each outstanding award under the plan (including awards held by the Named Officers) will generally become fully vested and, in the case of options, exercisable, unless the Compensation Committee provides for the substitution, assumption, exchange or other continuation of the outstanding awards. Although this vesting will occur whether or not a Named Officer's employment terminates, we believe it is appropriate to fully vest equity awards that will terminate in these change in control situations because such a transaction would effectively end the Named Officers' ability to realize any further value with respect to the equity awards. However, for the Time-Based RSU awards granted to Named Officers, the Compensation Committee also provided that the awards would vest in the event of a change in control if there is an actual or constructive termination of the executive's employment within two years after the change in control. In addition, the Performance RSU awards granted to Named Officers would generally terminate on a change in control, with the vesting of the award being determined by the Compensation Committee based on achievement of the applicable stock price performance condition as of the date of the change in control transaction. Vesting of these performance based RSU awards would not automatically accelerate on a change in control (even if the awards are to be terminated on a change in control) unless the applicable performance condition has been satisfied. The High Performance RSUs (as described in the Company's proxy statement for fiscal year 2013) held by the Named Officers also provide for the possible acceleration of the

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award in the event of a change in control combined with an actual or constructive termination of the executive's employment within two years after the change in control or termination of the award as part of the change in control.

        Please see the "Potential Payments Upon Termination or Change in Control" section below for a description of the potential payments that may be made to the Named Officers in connection with their termination of employment or a change in control.

        Also see "Actions of the Compensation Committee for Fiscal Year 2015", below, for a summary of changes to potential severance benefits for Named Officers related to the pending Merger (as described below).

Actions of the Compensation Committee for Fiscal Year 2015

        The Compensation Committee has adopted its fiscal year 2015 compensation arrangements for the Named Officers. No base salary increases were provided to Mr. Khaykin or Mr. Tanner for fiscal year 2015, but the base salaries of Messrs. Daskal, Barrow and White were increased by $7,000 compared to fiscal year 2014 in connection with the elimination of a car allowance provided in each executive's offer letter with the Company.

        The Compensation Committee also adopted a cash incentive compensation program for Named Officers, substantially similar to that in effect for fiscal year 2014. Under the cash incentive bonus program, each Named Officer is eligible to receive a cash bonus for fiscal year 2015, expressed as a target bonus percentage of the Named Officer's annualized base salary. For Named Officers, the Compensation Committee established a mix of (i) corporate goals based upon the Company's level of achievement of certain revenue and gross margin targets, and (ii) expense levels or functional achievements based on the particular Named Officer's functions and areas of responsibility, in each case excluding extraordinary and one-time items. Each goal under the fiscal year 2015 program requires a threshold level of performance in order for a bonus to be awarded as to that particular performance goal, with functional goals that are not based on reported financial metrics requiring that a threshold level of Company revenue and/or gross margin be achieved. The target bonus percentages for all Named Officers were unchanged from fiscal year 2014. Specific goals and assessments for the program are made on a semiannual basis. In no event will any bonus under the program, including any supplemental bonus, exceed 200% of the Named Officer's applicable target bonus.

        At the request of the Compensation Committee and the Board of Directors of the Company, in connection with the Company's execution of its August 20, 2014 merger agreement ("Merger Agreement") with Infineon Technologies AG ("Infineon"), each of the Named Officers entered into a letter agreement with the Company pursuant to which he agreed, in the case of Mr. Khaykin, for the purposes of his employment agreement, and in the case of the other Named Officers, for purposes of his severance agreement, that a "change in control" would not be deemed to have occurred until the consummation of the merger contemplated by the merger agreement (the "Merger"), notwithstanding that the employment agreement and the severance agreements provide that a "change in control" would occur at the time that the Company's stockholders approve the merger agreement, prior to the consummation of the Merger.

        In addition, in connection with the Merger Agreement, each of the Named Officers (other than Mr. Khaykin) entered into a letter agreement pursuant to which the Named Officer agreed to amend his severance agreement to provide for (i) the severance benefits described in "Severance and Other Benefits" above (with the value determined as of the closing date of the Merger) to be paid upon the earlier of (A) six months following the closing of the Merger and (B) a qualifying termination of employment (which, for these purposes, includes the death or disability of the Named Officer) during the six-month period immediately following the closing of the Merger and (ii) the application of the 280G excise tax gross up provision (other than for Mr. Tanner) to payments received by the Named Officers in connection with the Merger regardless of whether the Named Officer's employment is terminated on or after the closing of the Merger. The Named Officers (other than Mr. Daskal and Mr. Khaykin) also agreed to waive certain rights to resign for "good reason" under the severance agreement during the six-month period immediately following the closing of the Merger. By waiving the right to resign for "good reason" under certain circumstances, the Named Officers who agreed to such waiver agreed that certain of their duties and responsibilities may be changed during the six month period following the closing of the Merger and such Named

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Officer will not have the right to resign and receive the severance benefits under the severance agreement during the first six months following the closing of the Merger as a result of such changes to their duties and responsibilities.

        The Compensation Committee and the Board of Directors approved the amendments to the severance agreements described above at the request of Infineon. These amendments are intended to increase the likelihood of certain executive officers who maintain key customer relationships and certain executive officers who are critical to the transition remaining with Company during the period immediately following the closing of the Merger. As such, these amendments were considered integral to Infineon's willingness to execute the merger agreement. The amendments (i) only apply to the extent that the Merger is consummated, and (ii) were entered into after the purchase price (and thus, the value to the Company's stockholders) was established under the merger agreement. Accordingly, the Compensation Committee and the Board of Directors determined that these amendments were in the best interests of the Company's stockholders.

Section 162(m) Policy

        Under current Internal Revenue Service guidance, Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any year to the corporation's CEO and certain of its other executive officers. However, Section 162(m) exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. As one of the factors in its consideration of compensation matters, the Compensation Committee considers the anticipated tax treatment to the Company and to the executives of various payments and benefits, including the Company's ability to deduct these amounts as compensation under Section 162(m). However, the Compensation Committee retains the flexibility to provide total compensation as it deems appropriate in line with competitive practice, the Company's compensation philosophy, and the interests of stockholders. Accordingly, the Company may pay compensation to the Named Officers that may not be deductible for federal income tax purposes.

COMPENSATION COMMITTEE REPORT(1)

        The Compensation Committee has certain duties and powers as described in its Charter. As of the end of our 2014 fiscal year, the Compensation Committee was comprised of the four Non-Employee Directors named at the end of this report, each of whom is independent as defined by the NYSE listing standards.

        The Compensation Committee for our 2014 fiscal year has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this report. Based upon this review and our discussions, the Compensation Committee for our 2014 fiscal year has recommended to the Board of Directors that the Compensation Discussion and Analysis ("CD&A") section be included in this report. The CD&A section includes information for the Company's 2014 fiscal year based on the date of the filing of this report.

The Compensation Committee of the Board of Directors

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COMPENSATION POLICIES AND PRACTICES AS THEY RELATE
TO THE COMPANY'S RISK MANAGEMENT

        The Company believes that its compensation policies and practices for all employees, including executive officers, do not create risks that are reasonably likely to have a material adverse effect on the Company. We further believe that the Company has appropriate safeguards in place with respect to compensation programs that assist in mitigating excessive risk-taking that could harm our value or reward poor judgment by our executives and employees. These safeguards include: managing pay opportunities to market levels through peer benchmarking; balancing performance focus between near-term objectives and long-term shareholder value creation; issuing equity awards that vest over multi-year time horizons; focusing equity on full value shares and performance shares (rather than stock options) and capping cash incentive plan payments. Furthermore, the Compensation Committee retains its own independent compensation advisor to provide input on executive pay matters, meets regularly, and approves all performance goals, award vehicles, and pay opportunity levels.

COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION

        Dwight W. Decker, James D. Plummer, Barbara L. Rambo and Rochus E. Vogt served as members of the Compensation Committee during all of our 2014 fiscal year. No current member of the Compensation Committee, and no member of our Compensation Committee during our 2014 fiscal year, is a current or former executive officer or employee of the Company, or had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of the Company's executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee during our 2014 fiscal year.

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SUMMARY COMPENSATION TABLE—FISCAL YEAR 2014

        The following table presents information regarding compensation of our Named Officers for services rendered during fiscal years 2014, 2013 and 2012:

Grant Date Fair Value of Fiscal Year 2014 Performance Based RSUs Using Probable Outcome Monte Carlo Analysis (and disclosed in above table):

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Fiscal Year 2014 Performance Based RSUs Assuming Maximum Performance Without Probability of Outcome Analysis and Computed Using the Value of Company Shares as of the Grant Date:

Compensation of Named Officers

        The "Summary Compensation Table—Fiscal Year 2014" above quantifies the value of the different forms of compensation earned by or awarded to our Named Officers during our 2014 fiscal year. The primary elements of each Named Officer's total compensation reported in the table are base salary, an annual incentive compensation opportunity and other bonuses, and long-term equity incentives in the form of restricted stock units. Named Officers also received the other benefits listed in Column (i) of the "Summary Compensation Table—Fiscal Year 2014," as further described in footnotes (3) through (7) to the table.

        The "Summary Compensation Table—Fiscal Year 2014" should be read in conjunction with the tables and narrative descriptions that follow. A description of the material terms of each Named Officer's base salary and the bonuses received by each Named Officer, if any, is provided immediately following this paragraph. The Grants of Plan-Based Awards in Fiscal Year 2014 table, and the description of the Named Officers' annual incentive compensation opportunity that follows it, provides information regarding the equity awards and incentive bonus opportunities awarded to Named Officers during our 2014 fiscal year. The Outstanding Equity Awards at Fiscal Year Ended June 29, 2014 and Option Exercises and Stock Vested in Fiscal Year 2014 tables provide further information on the Named Officers' potential realizable value and actual value realized with respect to their equity awards. The discussion of the potential payments due upon a termination of employment or change in control that follows is intended to further explain the potential future payments that are, or may become, payable to our Named Officers under certain circumstances.

Description of Employment Agreements, Salary and Bonus Amounts of Named Officers

        The Company has entered into an employment agreement with Mr. Khaykin, and has entered into employment letter agreements with each of Messrs. Daskal, Tanner, Barrow and White.

        Mr. Khaykin.    The Company and Mr. Khaykin, the Company's CEO, are parties to an employment agreement dated February 6, 2008. Mr. Khaykin's agreement generally provides for a three-year term, with annual renewals for up to four additional years unless either party provides a timely written notice of non-renewal. Neither party has

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given notice of non-renewal and so Mr. Khaykin's employment agreement is currently in effect in the renewal periods. Mr. Khaykin's agreement provides that his base salary will be $750,000 annually and his target annual incentive bonus opportunity will equal 100% of his base salary. In connection with any expiration of the term of Mr. Khaykin's Board seat during his period of employment with the Company, the Company has agreed to re-nominate Mr. Khaykin to the Board at the related annual meeting of the Company's stockholders. Mr. Khaykin's agreement also provides Mr. Khaykin with severance payments and benefits upon his termination of employment. See "Potential Payments upon Termination or Change in Control" below for a description of the material terms of these benefits.

        Mr. Daskal.    The Company and Mr. Daskal entered into an offer letter agreement dated September 20, 2008 ("Daskal Offer Letter") and a Severance Agreement dated September 20, 2008 ("Daskal Severance Agreement"). Under the Daskal Offer Letter, Mr. Daskal is entitled to an annual base salary of $350,000 and a target annual incentive bonus opportunity equal to 70% of his base salary. Effective beginning with the Company's 2014 fiscal year, the Compensation Committee approved an increase in Mr. Daskal's annual base salary to $368,000. Included as part of Mr. Daskal's benefits under the Daskal Offer Letter (as subsequently amended in 2009) were certain relocation, home sale assistance and temporary living assistance benefits for a period of three years following his employment start date with the Company. Such relocation benefits included a gross-up for taxes. Because Mr. Daskal's residence was not located near the Company's corporate headquarters, providing relocation benefits was an important inducement to securing the hiring of Mr. Daskal. In August 2011, the Compensation Committee approved an annual allowance of $65,000 for Mr. Daskal, without tax gross-up, effective as of the commencement of the Company's 2012 fiscal year in lieu of any further relocation and temporary living benefits. Mr. Daskal's agreement also provides for a monthly car allowance. On August 14, 2014, the Company and Mr. Daskal entered into an amendment to the Daskal Offer Letter to memorialize an increase in Mr. Daskal's annual base pay to $375,000 and the elimination of Mr. Daskal's car allowance, in each case effective as of the commencement of the Company's 2015 fiscal year.

        The Daskal Offer Letter and the Daskal Severance Agreement also provide Mr. Daskal with severance payments and benefits upon his termination of employment. See "Potential Payments upon Termination or Change in Control" below for a description of the material terms of these benefits.

        Mr. Tanner.    On December 7, 2012, the Company entered into an offer letter agreement providing for Mr. Tanner to become the Company's Executive Vice President and Chief Operations Officer. From January 16, 2012 until Mr. Tanner became an employee of the Company, GWT Consulting and Investments LLC, a consulting company of which Mr. Tanner is the principal, provided consulting services to the Company. Mr. Tanner joined the Company on January 2, 2013. Mr. Tanner's agreement provides for a base salary of $350,000 annually and for a target annual incentive bonus opportunity equal to 70% of his base salary. Under the offer letter agreement, Company management agreed to recommend to the Compensation Committee that Mr. Tanner be granted equity awards of (i) an option to purchase 100,000 shares of the Company's common stock, and (ii) restricted stock units covering 15,000 shares of the Company's common stock. Both such awards were made by the Compensation Committee on February 1, 2013.

        Additionally, under his letter agreement, Mr. Tanner was also entitled to relocation benefits in accordance with the Company's standard executive relocation program for up to twenty four months following his employment commencement date and will receive additional benefits under that program of, among under things, (i) up to four months temporary living assistance not to exceed $3,000 per month, (ii) assistance and benefits with respect to the sale of his current residence, and assistance with the closing costs on the purchase of a new residence up to $30,000, and (iii) an increase in relocation benefits to compensate for certain tax liabilities associated therewith. On December 7, 2012, the Company and Mr. Tanner also signed an agreement that provides Mr. Tanner with severance payments and benefits upon his termination of employment under certain conditions. See "Potential Payments upon Termination or Change in Control" below for a description of the material terms of these benefits.

        Mr. Barrow.    On March 28, 2008, the Company entered into an offer letter agreement ("Barrow Offer Letter") providing for Mr. Barrow to become the Company's Executive Vice President and Chief Operations

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Officer effective April 1, 2008. Mr. Barrow's agreement provides that Mr. Barrow's base salary shall be $350,000 annually and Mr. Barrow will have a target annual incentive bonus opportunity equal to 70% of his base salary. Mr. Barrow is also entitled to a car allowance and relocation benefits. On August 21, 2008, the Company and Mr. Barrow signed an agreement that provides Mr. Barrow with severance payments and benefits upon his termination of employment under certain conditions. See "Potential Payments upon Termination or Change in Control" below for a description of the material terms of these benefits. On January 2, 2013, upon Mr. Tanner becoming Chief Operations Officer, Mr. Barrow's position and title changed to that of Executive Vice President, GaN Technologies. On August 14, 2014, the Company and Mr. Barrow entered into an amendment to the Barrow Offer Letter to memorialize an increase in Mr. Barrow's annual base pay to $357,000 and the elimination of Mr. Barrow's car allowance, in each case effective as of the commencement of the Company's 2015 fiscal year.

        Mr. White.    On July 22, 2011, the Company entered into an offer letter agreement ("White Offer Letter") providing for Mr. White to become the Company's Senior Vice President, Global Sales. Mr. White's agreement provides that Mr. White's base salary shall be $338,400 annually and Mr. White will have a target annual incentive bonus opportunity equal to 70% of his base salary. Mr. White's agreement also provides for a monthly car allowance. Pursuant to the letter agreement and a prior agreement entered into by Mr. White in September 2008, the Company has agreed to provide Mr. White with severance payments and benefits upon his termination of employment under certain conditions. See "Potential Payments upon Termination or Change in Control" below for a description of the material terms of these benefits. On August 14, 2014, the Company and Mr. White entered into an amendment to the White Offer Letter to memorialize an increase in Mr. White's annual base pay to $345,400 and the elimination of Mr. White's car allowance, in each case effective as of the commencement of the Company's 2015 fiscal year.

GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2014

        The following table presents information regarding the equity awards granted to the Named Officers during fiscal year 2014 and the short-term incentive opportunities under the fiscal year 2014 cash incentive program. The material terms of each grant are described below under "Description of Plan-Based Awards" and the granting of the awards is described under the heading "Equity Incentive Awards" at page            .

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DESCRIPTION OF PLAN-BASED AWARDS

        Non-Equity Incentive Plan Awards.    Please see the "Compensation Discussion and Analysis" above for a description of the material terms of these awards.

        Equity Awards.    Each of the awards reported in column (g) of the table above represents an award of performance based RSUs. The performance based RSUs granted in June 2014 are eligible to vest based on the Company's stock price achieving certain pre-established levels. See the "Equity Incentive Awards" section of the "Compensation Discussion and Analysis" above for more information on the vesting of these awards. Each of the awards reported in column (i) of the table above represents an award of Time-Based RSUs that are scheduled to vest in annual installments over the three-year period after the grant date. Each RSU granted during fiscal year 2014 represents the right to receive one share of our common stock payable upon vesting subject to applicable withholding taxes. Each of these RSU awards is evidenced by an award agreement that sets forth the specific terms and conditions of the award, not inconsistent with the terms of the applicable stock incentive plan under which it was awarded.

        Under the terms of our stock incentive plans, if the Company undergoes a change in control or similar event, each outstanding award will generally become fully vested and, in the case of options, exercisable, unless the Compensation Committee provides for the substitution, assumption, exchange or other continuation of the outstanding awards. The time-based awards reported in column (i) of the table above, to the extent they are assumed or continue after the transaction would vest if there is an actual or constructive termination of the Named Officer's employment within two years after the change in control. Also, the Performance RSU awards reported in column (g) of the table above would generally terminate on a change in control, with the vesting of the award being determined by the Compensation Committee based on achievement of the applicable performance condition as of the date of the transaction. Vesting of these performance based RSU awards would not automatically accelerate on a change in control (even if the awards are to be terminated on a change in control) unless the applicable performance condition has been satisfied.

        Each Named Officer's RSU awards reported in the table above were granted under, and are subject to the terms of, the 2011 Plan. The 2011 Plan is administered by the Compensation Committee, and the Compensation Committee has the ability to interpret and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding restricted stock unit awards to reflect the corporate transactions described above, and making provision to ensure that participants satisfy any required withholding taxes. The Named Officers are not entitled to any dividend equivalent rights on the RSUs awarded to them in fiscal year 2014. RSU awards are generally only transferable to a beneficiary of a Named Officer upon his death or as approved by the Compensation Committee.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR ENDED JUNE 29, 2014

        The following table presents information regarding the outstanding equity awards held by each Named Officer as of the end of our 2014 fiscal year. Please see the notes to the table below for a description of the vesting requirements for these awards: