Intermolecular, Inc.
INTERMOLECULAR INC (Form: DEF 14A, Received: 04/10/2015 16:06:24)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.          )

 

 

 

 

 

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

 

 

 

 

 

INTERMOLECULAR, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)  Title of each class of securities to which transaction applies:

 

(2)  Aggregate number of securities to which transaction applies:

 

(3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the  amount on which the filing fee is calculated and state how it was determined):

 

(4)  Proposed maximum aggregate value of transaction:

 

(5)  Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)  Amount Previously Paid:

 

(2)  Form, Schedule or Registration Statement No.:

 

(3)  Filing Party:

 

(4)  Date Filed:

 

 

 

 


 

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April 10, 2015

 

Dear Fellow Stockholders:

 

We are pleased to invite you to our 2015 Annual Meeting of Stockholders, which will take place on Wednesday, May 27, 2015 at 9:00 a.m., Pacific Time, at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California 94025. Annual meetings play an important role in maintaining communications and understanding among our management, board of directors and stockholders, and we hope you will join us.

 

On the pages following this letter you will find the Notice of Annual Meeting of Stockholders, which lists the items of business to be considered at the Annual Meeting, and the proxy statement, which describes the items of business listed in the notice and provides other information you may find useful in deciding how to vote.

 

For our Annual Meeting, we have elected to use the Internet as our primary means of providing our proxy materials to stockholders. Consequently, most stockholders will not receive paper copies of our proxy materials. We will instead send to our stockholders a Notice of Internet Availability of Proxy Materials. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy statement and our 2014 Annual Report to Stockholders, which contains, among other things, our 2014 audited consolidated financial statements, and instructions on how you can vote using the Internet. The Notice of Internet Availability of Proxy Materials also includes instructions on how you can request and receive, free of charge, a printed copy of our proxy materials, including our 2014 Annual Report, notice of our Annual Meeting, our proxy statement and a proxy card. All stockholders who do not receive a Notice of Internet Availability of Proxy Materials will receive a paper copy of the proxy materials, including our 2014 Annual Report, by mail. The electronic delivery of our proxy materials will reduce our printing and mailing costs and minimize the environmental impact of the proxy materials.

 

If you are a stockholder of record, please follow the instructions on the Notice of Internet Availability of Proxy Materials to vote on the matters to be considered at the Annual Meeting if you do not plan to attend in person. If you received a printed copy of our proxy materials, to vote, simply complete, sign and date your proxy card and mail it in the enclosed postage-paid envelope. If your shares are held in "street name" — that is, held for your account by a bank, brokerage firm or other intermediary — you should obtain instructions from the bank, brokerage firm or other intermediary that you must follow for your shares to be voted.

 

The ability to have your vote counted at the Annual Meeting is an important stockholder right. Regardless of the number of shares you hold, and whether or not you plan to attend the Annual Meeting, we hope that you will promptly cast your vote.

 

Thank you for your ongoing support and continued interest in Intermolecular.

 

Sincerely,

 

/s/ Bruce M. McWilliams

BRUCE M. MCWILLIAMS

 

President and Chief Executive Officer

 


 

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INTERMOLECULAR, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be Held on Wednesday, May 27, 2015

Notice is hereby given that the 2015 Annual Meeting of Stockholders will be held at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California 94025, on Wednesday, May 27, 2015 at 9:00 a.m., Pacific Time, for the following purposes:

1.

To elect the two nominees identified in the attached proxy statement as members of our board of directors to serve as Class I directors for a term of three years;

2.

To approve, on a non-binding, advisory basis, the compensation of our named executive officers as described in the attached proxy statement;

3.

To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2015; and

4.

To transact other business, if any, that may properly come before the Annual Meeting or any adjournment of the Annual Meeting.

Stockholders of record at the close of business on Tuesday, March 31, 2015 are entitled to receive this notice of our Annual Meeting and to vote at the Annual Meeting and at any adjournments of the meeting.

The foregoing items of business are more fully described in the proxy statement accompanying this Notice. This Notice of Annual Meeting, our 2014 Annual Report and our proxy statement and form of proxy are first being made available to stockholders on or about April 10, 2015.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote by telephone or Internet by following the voting procedures described in the Notice of Internet Availability of Proxy Materials or, if you received printed proxy materials and wish to vote by mail, by promptly completing, dating and signing the enclosed proxy card and returning it in the accompanying envelope. If you mail the proxy card in the United States, postage is prepaid. You may revoke your proxy if you decide to attend the Annual Meeting and wish to vote your shares in person.

 

By Order of the Board of Directors

/s/ Scot A. Griffin

SCOT A. GRIFFIN

 

Corporate Secretary

 


 

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TABLE OF CONTENTS

 

 

 

 

 

    

Page

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING  

 

BOARD OF DIRECTORS, CORPORATE GOVERNANCE AND RELATED MATTERS  

 

Our Board of Directors  

 

Director Independence  

 

10 

Board Leadership Structure and Risk Oversight  

 

10 

Committees of our Board of Directors  

 

11 

Board Meetings and Attendance  

 

12 

Director Attendance at Annual Meeting  

 

12 

Director Compensation  

 

13 

Director Nomination Process  

 

14 

Communicating with our Board of Directors  

 

15 

Other Corporate Governance Matters  

 

15 

Compensation Committee Interlocks and Insider Participation  

 

15 

Compensation Risk Assessment  

 

16 

Executive Compensation Process  

 

16 

Transactions with Related Persons  

 

16 

Related Person Transaction Policy  

 

17 

AUDIT-RELATED MATTERS  

 

18 

Audit Committee Report  

 

19 

Auditor Fees and Services  

 

19 

MATTERS TO BE VOTED ON AT THE ANNUAL MEETING  

 

20 

PROPOSAL 1—ELECTION OF DIRECTORS  

 

20 

PROPOSAL 2—NON-BINDING, ADVISORY VOTE ON THE COMPENSATION OF NAMED EXECUTIVE OFFICERS  

 

20 

PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF KMPG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2015  

 

21 

EXECUTIVE OFFICERS  

 

22 

EXECUTIVE COMPENSATION  

 

23 

Compensation Committee Report  

 

23 

Compensation Discussion and Analysis  

 

23 

Summary Compensation Table  

 

34 

Grants of Plan-Based Awards  

 

35 

Outstanding Equity Awards at Fiscal Year End  

 

37 

201 4 Option Award Exercises and Stock Awards Vested  

 

39 

Potential Payments upon Termination or Change in Control  

 

39 

Limitation of Liability and Indemnification  

 

42 

Rule 10b5-1 Sales Plans  

 

43 

Equity Compensation Plan Information  

 

43 

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS  

 

44 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE  

 

47 

 

 

 

 


 

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INTERMOLECULAR, INC.

3011 N. First Street

San Jose, California 95134

PROXY STATEMENT

For our Annual Meeting of Stockholders to be held on May 27, 2015

Intermolecular, Inc., a Delaware corporation (which is referred to as "we," "us," "the company" or "Intermolecular" in this proxy statement), is sending you this proxy statement and proxy card in connection with the solicitation of proxies by our company's board of directors for use at our 2015 Annual Meeting of Stockholders, which will be held on Wednesday, May 27, 2015 at 9:00 a.m., Pacific Time, at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California 94025. If the Annual Meeting is adjourned for any reason, then the proxies may be used at any adjournments of the Annual Meeting. You may obtain directions to the location of the Annual Meeting by viewing them on our website, ir.intermolecular.com, or by contacting Investor Relations at the contact information listed below.

This Notice of Annual Meeting, this proxy statement, the enclosed proxy card and our 2014 Annual Report to Stockholders are first being made available to our stockholders on or about April 10, 2015.

Important Notice Regarding the Availability of Proxy Materials for the 2015 Annual

Meeting of Stockholders to be Held on May 27, 2015:

This proxy statement and the 2014 Annual Report are available for viewing, printing and downloading at www.proxyvote.com.

Our 2014 Annual Report is available on the "Investors" section of our website at www.intermolecular.com. Alternatively, if you would like us to send you a copy of our Annual Report, without charge, please contact:

Intermolecular, Inc.

3011 N. First Street

San Jose, California 95134

Attention: Investor Relations

If you would like us to send you a copy of the exhibits listed on the exhibit index of the 2014 Annual Report, we will do so upon your payment of our reasonable expenses for furnishing a requested exhibit.

Certain documents referenced in this proxy statement are available on our website at www.intermolecular.com. We are not including the information contained on our website, or any information that may be accessed by links on our website, as part of, or incorporating it by reference into, this proxy statement.

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTIN G

What is the purpose of the Annual Meeting?

At the 2015 Annual Meeting of Stockholders, stockholders will consider and vote on the following matters:

·

The election of the two nominees identified in this proxy statement as members of our board of directors to serve as Class I directors for a term of three years;

·

The approval, on a non-binding, advisory basis, of the compensation of our named executive officers as described in this proxy statement (a "say-on-pay" vote);

·

The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2015; and

·

The transaction of other business, if any, that may properly come before the Annual Meeting or any adjournment of the meeting.

Who is entitled to vote?

To be able to vote on the above matters, you must have been a stockholder of record at the close of business on March 31, 2015, the record date for the Annual Meeting. The aggregate number of shares entitled to vote at this meeting is 48,421,935 shares of our common stock, which is the number of shares that were issued and outstanding as of the record date.

How many votes do I have?

Each share of our common stock that you owned on the record date entitles you to one vote on each matter that is voted on at the Annual Meeting.

Is my vote important?

Your vote is important regardless of how many shares you own. Please take the time to read the instructions below and vote. Choose the method of voting that is easiest and most convenient for you and, if you vote by mail, please cast your vote as soon as possible.

How may I vote?

Stockholder of Record (Shares Registered in Your Name) :    If you are a stockholder of record, which means that your shares are registered in your own name, not in "street name" by a bank, brokerage firm or other intermediary, then you can vote in one of the following four ways:

·

You may vote via the Internet or by phone.   To vote via the Internet or by phone, follow the instructions provided in the Notice of Internet Availability of Proxy Materials. If you vote by telephone or via the Internet, you do not need to return a proxy card by mail. Internet and telephone voting are available 24 hours a day. Votes submitted by telephone or through the Internet must be received by 11:59 p.m. Eastern Time on May 26, 2015.

 

·

You may vote by mail.   If you have received printed proxy materials by mail and would like to vote by mail, you need to complete, date and sign the proxy card that accompanies this proxy statement and promptly mail it to Broadridge Financial Solutions, Inc. in the enclosed postage-paid envelope so that it is received prior to the Annual Meeting. You do not need to put a stamp on the enclosed envelope if you mail it from within the United States. The persons named in the proxy card will vote the shares you own in

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accordance with your instructions on the proxy card you mail. If you return the proxy card, but do not give any instructions on a particular matter to be voted on at the Annual Meeting, the persons named in the proxy card will vote the shares you own in accordance with the recommendations of our board of directors. Our board of directors recommends that you vote FOR each of proposals 1, 2 and 3. Broadridge Financial Solutions, Inc. must receive your proxy card no later than May 26, 2015, the day before the Annual Meeting, for your proxy and your vote to be counted.

 

·

You may vote in person.   If you plan to attend the Annual Meeting, you may vote by delivering your completed proxy card in person or by completing and submitting a ballot, which will be provided at the meeting.

Beneficial Owner (Shares Held in "Street Name") :    If the shares you own are held in "street name" by a bank, brokerage firm or other intermediary, then your bank, brokerage firm or other intermediary, as the record holder of your shares, is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the instructions your bank, brokerage firm or other intermediary provides you. Many banks, brokerage firms and other intermediaries also offer the option of voting over the Internet or by telephone, instructions for which would be provided by your bank, brokerage firm or other intermediary.

Brokers are subject to New York Stock Exchange, or NYSE, rules. NYSE rules direct that, if you are the beneficial owner of shares held in "street name" by a broker, the broker, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If you do not give instructions to your broker, the broker will be able to vote your shares with respect to certain "discretionary" items, but will not be allowed to vote your shares with respect to certain "non-discretionary" items and your shares will be treated as "broker non-votes." "Broker non-votes" are shares that are held in "street name" by a bank, brokerage firm or other intermediary that indicates on its proxy that it does not have discretionary authority to vote on a particular matter.

Under the NYSE rules, which affect us because they apply to brokers who hold shares of our common stock, the proposal to elect the two nominees to serve as Class I directors and the say-on-pay vote are non-discretionary items, which means that if you do not give instructions to your broker, your broker will not be able to vote your shares in its discretion on these proposals and your shares will be treated as "broker non-votes." We urge you to provide voting instructions to your broker so that your votes may be counted.

The proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2015 is a discretionary item under NYSE rules. Accordingly, your bank, brokerage firm or other intermediary may exercise its discretionary authority with respect to this proposal if you do not provide voting instructions.

If you wish to attend the Annual Meeting to personally vote your shares held in "street name," you will need to obtain a proxy card from the holder of record (i.e., your bank, brokerage firm or other intermediary).

May I change my vote after I have mailed my proxy card?

Yes. If you are a stockholder of record, you may change your vote and revoke your earlier proxy at any time before it is exercised by taking one of the following actions:

·

signing and returning another proxy card with a later date;

·

giving our corporate secretary a written notice that you want to revoke your proxy; or

·

attending the meeting, notifying our corporate secretary that you are present and then voting in person.

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Your attendance at the meeting alone will not revoke your proxy.

If you own shares in "street name," your bank, brokerage firm or other intermediary should provide you with appropriate instructions for changing your vote.

What constitutes a quorum?

In order for business to be conducted at the Annual Meeting, our bylaws require that a quorum must be present. A quorum consists of the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the meeting, that is, at least 24,210,968 shares.

Shares of our common stock present in person or represented by proxy (including shares that reflect abstentions, "broker non-votes" and votes withheld for director nominees) will be counted for the purpose of determining whether a quorum exists.

If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.

What vote is required for each item?

Election of Directors (Proposal 1) :    The two director nominees identified in this proxy statement receiving a plurality, or the highest number, of votes cast at the Annual Meeting, regardless of whether that number represents a majority of the votes cast, will be elected. Neither abstentions nor broker non-votes will be counted in determining which nominees have received a plurality of votes cast since neither represents votes cast for or against a candidate.

Advisory Say-on-Pay Vote (Proposal 2) :    The affirmative vote of a majority of the votes cast by the holders of all of the shares of our common stock present or represented at the Annual Meeting and voting affirmatively or negatively on this proposal is needed to approve, on an advisory basis, the compensation of our named executive officers, as set forth in this proxy statement. Neither abstentions nor broker non-votes will have an effect on the outcome of this proposal because approval of this proposal is based solely on the number of votes cast affirmatively or negatively. Although the outcome of this say-on-pay vote is non-binding and advisory, the compensation committee of the board of directors will review and consider the outcome of this vote when making future compensation decisions for our named executive officers.

Ratification of the Appointment of KPMG LLP (Proposal 3) :    The affirmative vote of a majority of the votes cast by the holders of all of the shares of our common stock present or represented at the Annual Meeting and voting affirmatively or negatively on the proposal is needed to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015. Neither abstentions nor broker non-votes will have an effect on the outcome of this proposal because approval of this proposal is based solely on the number of votes cast affirmatively or negatively.

How will votes be counted?

Each share of common stock voted at the Annual Meeting will be counted as one vote. Shares will not be voted in favor of a matter, and will not be counted as voting on a particular matter, if either (1) the holder of the shares withholds authority in the proxy card to vote for a particular director nominee or nominees or abstains from voting on a particular matter, or (2) the shares constitute "broker non-votes."

Who will count the votes?

Broadridge Financial Solutions, Inc. will count, tabulate and certify the votes. A representative of Broadridge will serve as the inspector of elections at the Annual Meeting.

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How does the board of directors recommend that I vote on the proposals?

Our board of directors recommends that you vote:

·

FOR Proposal 1—to elect the two nominees identified in this proxy statement as Class I directors;

·

FOR Proposal 2—to approve, on a non-binding, advisory basis, the compensation of our named executive officers as described in this proxy statement; and

·

FOR Proposal 3—to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2015.

Will any other business be conducted at the Annual Meeting or will other matters be voted on?

We are not aware of any other business to be conducted or matters to be voted on at the Annual Meeting. If any other matter properly comes before the meeting, the persons named in the proxy card that accompanies this proxy statement will exercise their judgment in deciding how to vote, or otherwise act, at the meeting with respect to that matter or proposal with respect to the shares they have authority to vote.

Where can I find the voting results?

We will report the voting results from the Annual Meeting in a Current Report on Form 8-K, which we expect to file with the Securities and Exchange Commission, or the SEC, within four business days after the Annual Meeting.

May I recommend a candidate for Intermolecular's board of directors?

Yes. Stockholders may recommend director candidates for consideration by the nominating and corporate governance committee of our board of directors by sending a written notice to our corporate secretary at the address under "How and when may I submit a stockholder proposal for the 2016 annual meeting?" below. If a stockholder would like a candidate to be considered for inclusion in the proxy statement for our 2016 annual meeting, the stockholder must follow the procedures for stockholder proposals outlined immediately below under "How and when may I submit a stockholder proposal for the 2016 annual meeting?" You can find more detailed information on our process for selecting board members and our criteria for board nominees in "BOARD OF DIRECTORS, CORPORATE GOVERNANCE AND RELATED MATTERS—Director Nomination Process" below and in the Corporate Governance Guidelines posted on the "Investors" section of our website, www.intermolecular.com.

Alternatively, our bylaws provide that stockholders may nominate director candidates for consideration at the 2016 annual meeting directly without approval of the nominating and corporate governance committee. In order to nominate candidates directly, stockholders must follow the procedures outlined in "How and when may I submit a stockholder proposal for the 2016 annual meeting?" immediately below.

How and when may I submit a stockholder proposal for the 2016 annual meeting?

If you are interested in submitting a proposal or information about a proposed director candidate for inclusion in the proxy statement for our 2016 annual meeting, you must follow the procedures outlined in Rule 14a-8 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. To be eligible for inclusion in the proxy statement, we must receive your stockholder proposal or information about your proposed director candidate at the address noted below no later than December 12, 2015.

If you wish to present a proposal or a proposed director candidate at the 2016 annual meeting, but do not wish to have the proposal or director candidate considered for inclusion in the proxy statement and proxy card, you must also give written notice to our corporate secretary at the address noted below. We must receive this required notice by

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February 27, 2016, but no sooner than January 28, 2016. However, if the 2016 annual meeting is held before April 27, 2016 or after July 26, 2016, then we must receive the required notice of a proposal or proposed director candidate no earlier than the 120th day prior to the 2016 annual meeting and no later than the close of business on the later of (1) the 90th day prior to the 2016 annual meeting, or (2) the 10th day following the date on which notice of the date of the 2016 annual meeting was mailed or public disclosure was made, whichever occurs first.

Any proposals, notices or information about proposed director candidates should be sent to:

Intermolecular, Inc.

3011 N. First Street

San Jose, California 95134

Attention: Corporate Secretary

Who bears the costs of soliciting these proxies?

We will bear the costs of soliciting proxies. We are soliciting proxies for the Annual Meeting by mailing this proxy statement and accompanying materials to our stockholders. We are also soliciting proxies in the following ways:

·

Our directors, officers and employees may, without additional pay, solicit proxies by telephone, facsimile, email and personal interviews.

·

We will request brokerage houses, custodians, nominees and fiduciaries to forward copies of the proxy materials to the persons for whom they hold shares and request instructions for voting the proxies. We will reimburse the brokerage houses and other persons for their reasonable expenses in connection with this distribution.

Who should I contact if I have any questions?

If you have any questions about the Annual Meeting or your ownership of our common stock, please contact Investor Relations at the contact information identified on page 1 of this proxy statement.

What is "householding" and how may I receive my own separate copy of the proxy statement or annual report?

The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as "householding," potentially means extra convenience for stockholders and cost savings for companies.

At the present time, Intermolecular does not "household" for any of our stockholders of record. However, if you hold shares of common stock in street name, your bank, broker or other nominee may be householding our proxy materials this year. Once you have received notice from your bank, broker or other nominee that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. If you only received a single set of proxy materials and would like to receive a separate set of materials, direct your written request to Broadridge Financial Solutions, at Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York, 11717, or by telephone at 1-800-542-1061 and an additional set of materials will promptly be delivered to you. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report in the future, please notify your bank, broker or other nominee. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications in the future should contact their bank or broker.

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BOARD OF DIRECTORS, CORPORATE GOVERNANCE AND RELATED MATTER S

Our Board of Director s

In accordance with the terms of our certificate of incorporation and bylaws, our board of directors is divided into three classes, each of which consists, as nearly as possible, of one-third of the total number of directors constituting our entire board of directors and each of whose members serve for staggered three year terms. As a result, only one class of our board of directors is elected each year. The members of the classes are divided as follows:

·

the current Class I directors are Marvin D. Burkett and John L. Walecka, and their terms expire at the conclusion of this annual meeting;

·

the Class II director is Irwin Federman, and his term expires at the conclusion of the annual meeting of stockholders to be held in 2016; and

·

the Class III directors are Thomas R. Baruch, Bruce M. McWilliams and George M. Scalise, and their terms expire at the conclusion of the annual meeting of stockholders to be held in 2017.

Upon the expiration of the term of a class of directors, directors in that class are eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires.  The board of directors has nominated Marvin D. Burkett and Wilbert van den Hoek to stand for election as Class I directors at this annual meeting.  Mr. Walecka, who currently serves as a Class I director, was not nominated to stand for re-election at this annual meeting.

Below is information about each member of our board of directors, including nominees for election as Class I directors. This information includes each director's age as of March 31, 2015 and length of service as a director of Intermolecular, his principal occupation and business experience for at least the past five years, and the names of other publicly held companies of which he has served as a director during at least the past five years.

In addition to the information presented below regarding each director's specific experience, qualifications, attributes and skills that led our board of directors to the conclusion that he should serve as a director, we also believe that each of our directors has a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment to service.

There are no family relationships among any of our directors, nominees for director and executive officers.

Director Nominees for Terms Expiring in 2018 (Class I Directors)

Marvin D. Burkett , age 72, has served as a member of our board of directors since June 2011. A 40-year veteran of the semiconductor industry, Mr. Burkett brings to our board of directors years of experience with global semiconductor and personal computing companies, as well as in-depth knowledge of public company financial and accounting principles. Mr. Burkett served as Senior Adviser to NVIDIA Corporation (NVIDIA) from February 2009 until January 2011. Previously, he began at NVIDIA in August 2002 and served as its Chief Financial Officer and Chief Accounting Officer from September 2002 to February 2009. Prior to NVIDIA, Mr. Burkett served as the Chief Financial Officer of Arcot Systems, Inc., and also as its Financial Consultant from February 2000 to September 2002. Mr. Burkett also served as an Executive Vice President and Chief Financial Officer of Packard Bell NEC, Inc. (PBNEC) from 1998 to 1999. Prior to PBNEC, he spent 26 years at Advanced Micro Devices, Inc. from 1972 to 1998, where he served in a variety of positions, including Chief Financial Officer, Senior Vice President, Chief Administrative Officer and Corporate Controller. Mr. Burkett also worked in the Semiconductor Division of Raytheon Company. Mr. Burkett has also served as a member of the board of directors of Entegris, Inc. since May 2010 and Audience, Inc. since September 2010, serving as the chairman of the audit committee and a member of the compensation committee for each company.

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Mr. Burkett previously served as a member of the board of directors and chairman of the audit committee of NetLogic Microsystems, Inc. Mr. Burkett holds an MBA and a B.S. in applied mathematics and business administration from the University of Arizona.

Wilbert van den Hoek ,   age 58,   retired from Novellus Systems, Inc., a semiconductor equipment manufacturer, in 2008, where he was executive vice president and chief technology officer. Mr. van den Hoek will bring to our board extensive experience as a senior executive, consultant and director in the semiconductor industry and other high technology companies.  Mr. van den Hoek also served as president and chief executive officer of Novellus Development Company, LLC, a wholly-owned subsidiary of Novellus Systems, Inc. from 2005 until 2008. He joined Novellus Systems, Inc. in 1990 and served in various senior executive positions until his retirement in 2008. From 1980 to 1990, he held various positions at Philips Research Laboratories, a global organization that helps introduce meaningful innovation to improve people’s lives. Mr. van den Hoek currently serves on the board of directors of Cypress Semiconductor Corporation.  From 2004 until 2006 when the company went public, he served on the board of directors of Neah Power Systems, Inc., a developer of innovative, long-lasting, efficient and safe power solutions for military, transportation and portable electronics applications. Since 2005, he has served on the technical advisory boards of various organizations, including Cavendish Kinetics, Inc., a fabless supplier of tunable components for RF circuits, Innopad, Inc., a manufacturer of polishing pads for use in semiconductor manufacturing, Innovent Technologies, LLC, a manufacturer of customized substrate handling products for the semiconductor, LED and solar panel industries, and Process Relations, an independent software vendor and consulting company specializing in supporting customers develop and transfer high-tech manufacturing processes in various markets including the semiconductor market. Mr. van den Hoek received a doctorandus degree cum laude in Chemistry from the Rijks Universiteit Utrecht, The Netherlands. He is the author of more than 30 technical papers and holds 18 United States patents.

 

Director Whose Term Expires in 2016 (Class II Director)

Irwin Federman , age 79, has served as a member of our board of directors since June 2005. Mr. Federman brings to our board of directors an extensive knowledge of the semiconductor industry, as well as public company governance experience. Mr. Federman has been a managing member at U.S. Venture Partners, a venture capital firm, since April 1990. Mr. Federman was President and Chief Executive Officer of Monolithic Memories, Inc., a semiconductor company, from 1979 to 1987. Mr. Federman also serves on the board of directors for each of SanDisk Corporation, a supplier of flash memory integrated circuits and systems, Check Point Software Technologies Ltd., a security software company, Mellanox Technologies, Ltd., a supplier of interconnect integrated circuits and systems, Neoconix, Inc., a supplier of miniaturized, high-performance electrical connectors, ON24, Inc., a cloud-based webcasting communications platform company, Silego Technology, Inc., a fabless semiconductor company, SupplyFrame, Inc., a provider of sales and marketing solutions for the electronics industry, and LivingSocial, Inc., a deal-of-the-day website company offering discounted gift certificates usable at local or national companies. Mr. Federman holds a B.S. in Economics from Brooklyn College and was awarded an Honorary Doctorate of Engineering from Santa Clara University.

Directors Whose Terms Expire in 2017 (Class III Directors)

Thomas R. Baruch , age 76, has served as a member of our board of directors since November 2004. Mr. Baruch is the founder of CMEA Ventures, a venture capital firm that was established in 1989 as an affiliated fund of New Enterprise Associates. Mr. Baruch was also a general partner of CMEA Ventures from 1989 through 2010, and is presently a partner emeritus of Formation 8, a venture capital firm that provides financial and strategic capital to early growth smart enterprise and energy technology companies. Mr. Baruch brings to our board of directors an extensive

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knowledge of the resource technologies industries and experience he has gained working closely with entrepreneurs to build leading companies in these industries, as well as years of public company governance experience. Mr. Baruch currently serves as a member of the board of directors for each of FORO Energy, a company developing a new hybrid thermal mechanical drilling technology for geothermal energy wells, Calysta Energy, Inc., a developer of high-value sustainable fuels and chemicals, LaunchPad Central, Inc., a software-based entrepreneur qualification consultancy, Grabit, Inc., an industrial automation and materials handling solutions provider, Urban Electric Power, LLC, a company commercializing advanced zinc anode rechargeable battery technologies, and Exela Pharma Sciences, LLC, a provider of regulatory compliance solutions for the pharmaceutical industry. In addition, Mr. Baruch is currently Chairman of the Board for Codexis, Inc., where he also serves on the board's compensation committee. Before starting CMEA Ventures, Mr. Baruch was a founder and Chief Executive Officer of Microwave Technology, Inc. (Microwave), a supplier of gallium arsenide integrated circuits. Prior to his employment with Microwave, Mr. Baruch managed a dedicated venture fund at Exxon Corporation, and was president of the Exxon Materials Division. Earlier in his career, Mr. Baruch worked as a patent attorney and remains a registered patent attorney. He is also both a member of the Executive Committee of the Council of Competitiveness, and a member of the Steering Committee of the ESIS Initiative (Energy, Security, Innovation and Sustainability) of the Council of Competitiveness. Mr. Baruch is also a member of the board of trustees of Rensselaer Polytechnic Institute, the National Advisory Council on Innovation and Entrepreneurship, and the Sierra Club Climate Recovery Cabinet. Mr. Baruch holds a B.S. in engineering from Rensselaer Polytechnic Institute and a J.D. from Capital University.

Bruce M. McWilliams , age 58, has served as our President and Chief Executive Officer since October 2014 and as a member of our board of directors since March 2005. Dr. McWilliams brings to our board of directors broad experience in the electronics manufacturing and clean technology sectors, as well as extensive management experience. Dr. McWilliams served as Chief Executive Officer of SuVolta, Inc., a developer of low-power, high-performance integrated circuit technology, from June 2009 to October 2014. Dr. McWilliams also served as a director of Tessera Technologies, Inc. from 1999 to January 2011, where he previously served as its Chief Executive Officer from June 1999 to September 2008 and Chief Strategic Officer from September 2008 to March 2009. Dr. McWilliams also founded and served as Chief Executive Officer of SVision LLC, a silicon chip-based display company, from 1996 to 1999. His management experience also includes serving as Senior Vice President at Flextronics International Ltd. (Flextronics) from 1995 to 1996, a position he assumed upon Flextronics' acquisition of nCHIP, Inc., a multi-chip module packaging company that he co-founded and led as Chief Executive Officer from 1989 to 1995. He currently serves as a member of the board of directors and audit committee for Inphi Corporation, a semiconductor packaging company, and as a member of the board of directors of NovaTorque, Inc., a magnet motor design company. Dr. McWilliams is also a trustee of Carnegie Mellon University and a member of its advisory boards for Physics and Human and Computer Interaction. He previously served on the board of directors of REEL Solar, Inc., a solar heating technology company, from 2009 through December 2011. He holds B.S., M.S. and Ph.D. degrees in physics from Carnegie Mellon University.

George M. Scalise , age 80, has served as a member of our board of directors since December 2004. Mr. Scalise brings to our board of directors extensive knowledge of the semiconductor industry and market analysis. Mr. Scalise served as President of the Semiconductor Industry Association, or SIA, an association of semiconductor manufacturers and suppliers, from June 1997 to December 2010. Mr. Scalise previously worked at Apple Computer, Inc., where he served as Executive Vice President and Chief Administrative Officer from March 1996 to June 1997, and has also held executive management positions at National Semiconductor Corporation, Maxtor Corporation, Advanced Micro Devices, Inc., Fairchild Semiconductor Corporation and Motorola Semiconductor. Mr. Scalise was Chairman of the Board of the Federal Reserve Bank of San Francisco from May 2003 to December 2005 and served on the Federal Reserve Bank of San Francisco board of directors from January 2000 to December 2005 and also served on President George W. Bush's Council of Advisors on Science and Technology from 2001 to 2008. He currently serves on the board of directors of

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Cadence Design Systems, Inc. (Cadence), and also serves as a member of the compensation committee for Cadence.  From 2010 to 2014, Mr. Scalise served on the board of directors of ATMI, Inc. From 2006 to 2012, Mr. Scalise served on the board of directors of MindTree, Ltd.  Mr. Scalise served on the California Council on Science and Technology and was a member of the Joint High-Level Advisory Panel of the United States-Israel Science and Technology Commission, and chaired the Secretary of Energy Advisory Board at the U.S. Department of Energy. Mr. Scalise holds a B.S. in mechanical engineering from Purdue University, and is also a graduate of the Stanford Law School's Directors' College.

Director Independenc e

As required under the Nasdaq Marketplace Rules, independent directors must comprise a majority of a listed company's board of directors, as affirmatively determined by the board of directors. In addition, Nasdaq Marketplace Rules require that, subject to specified exceptions, each member of a listed company's audit, compensation and nominating and governance committees be independent. Our board of directors consults with our counsel to ensure that the board of directors’ determinations are consistent with all relevant securities and other laws and regulations regarding the definition of "independent" in each circumstance, including those set forth in pertinent listing standards of the Nasdaq Marketplace Rules, as in effect from time to time.

Consistent with these considerations, in April of 2015, our board of directors undertook a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that none of Messrs. Baruch, Burkett, Federman, Scalise, van den Hoek or Walecka, representing five of our six existing directors and our nominee for a new board member, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each of these persons is "independent" as that term is defined under the Nasdaq Marketplace Rules. Our board of directors also determined that Messrs. Burkett, Federman and Scalise, who comprise our audit committee, Messrs. Baruch, Federman and Walecka, who comprise our compensation committee, and Messrs. Baruch, Burkett and Scalise, who comprise our nominating and corporate governance committee, satisfy the independence standards for those committees established by applicable SEC rules and the Nasdaq Marketplace Rules. In making this determination, our board of directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director and any relationships summarized below under the heading "Transactions with Related Persons" that may pertain to each such director. Dr. McWilliams is not considered independent because he is an employee of Intermolecular.

As required under the Nasdaq Marketplace Rules, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.

Board Leadership Structure and Risk Oversigh t

Our board of directors has recently consolidated the positions of chairman of the board and chief executive officer. Our bylaws and corporate governance guidelines do not require that our chairman and chief executive officer positions be separate. At present, we have determined that the leadership structure of having a combined Chairman of the Board and Chief Executive Officer is appropriate and that having a combined role ensures efficient and centralized decision-making, focuses the Board’s discussions and facilitates the presentation of the Company’s strategy with a unified voice.

Our Board acknowledges that no single leadership model is right for all companies at all times. As such, our Board periodically reviews its leadership structure and may, depending on the circumstances, including our size, resources and operations, choose a different leadership structure in the future.

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While our board is ultimately responsible for risk oversight, our board committees assist the board in fulfilling its oversight responsibilities in certain areas of risk. In particular, our audit committee focuses on financial risk, including internal controls. Our nominating and corporate governance committee focuses on the management of risks associated with independence of the board, potential conflicts of interest and corporate governance. Finally, our compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs.

Committees of our Board of Director s

Our board of directors has an audit committee, a compensation committee and a nominating and corporate governance committee. Each of these standing committees operates under a charter that has been approved by our board of directors. Current copies of each committee's charter are posted on the "Investors" section of our website, www.intermolecular.com. The composition and functioning of all of our committees comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, the Nasdaq Marketplace Rules, and SEC rules and regulations. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee: appoints the independent registered public accounting firm; evaluates the independent registered public accounting firm's qualifications, independence and performance; determines the engagement of the independent registered public accounting firm; reviews and approves the scope of the annual audit and the audit fee; discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly consolidated financial statements; approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent registered public accounting firm on our engagement team as required by law; reviews our consolidated financial statements and our management's discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC; reviews our critical accounting policies and estimates; and annually reviews the audit committee charter and the committee's performance, which is included below under "AUDIT-RELATED MATTERS-Audit Committee Report."

The current members of our audit committee are Messrs. Burkett, Federman and Scalise. Mr. Burkett serves as the chairman of the committee. Dr. McWilliams served on the audit committee until June 2014.  All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Stock Market. Our board of directors has determined that Mr. Burkett is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of The Nasdaq Stock Market. Each of the members of our audit committee qualifies as an independent director under the applicable rules and regulations of the SEC and The Nasdaq Stock Market relating to audit committee independence. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and The Nasdaq Stock Market.

Our audit committee met five times during 2014.

All audit and non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee. For more information regarding our audit committee, see "AUDIT-RELATED MATTERS" below.

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Compensation Committee

Our compensation committee reviews and recommends policies relating to the compensation and benefits of our officers and employees. The compensation committee reviews and approves corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and sets the compensation of these officers based on such evaluations. The compensation committee also approves grants of stock options and other equity awards under our equity compensation plans. The compensation committee reviews and evaluates, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter, which is included below under "EXECUTIVE COMPENSATION-Compensation Committee Report."

The current members of our compensation committee are Messrs. Baruch, Federman and Walecka. Mr. Baruch serves as the chairman of the committee. Each of the members of our compensation committee is a non-employee, independent and outside director under the applicable rules and regulations of the SEC, The Nasdaq Stock Market and the Internal Revenue Code of 1986, as amended, respectively, relating to compensation committee independence. The compensation committee operates under a written charter.

Our compensation committee met six times during 2014.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships, and the size and composition of our board of directors and standing committees. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters.

The current members of our nominating and corporate governance committee are Messrs. Baruch, Burkett and Scalise. Mr. Baruch serves as the chairman of the committee.  Dr. McWilliams served on the nominating and corporate governance committee until June 2014.  Each of the members of our nominating and corporate governance committee is an independent director under the applicable rules and regulations of the SEC and The Nasdaq Stock Market relating to nominating and corporate governance committee independence. The nominating and corporate governance committee operates under a written charter.

Our nominating and corporate governance committee met five times during 2014.

The processes and procedures followed by our nominating and corporate governance committee in identifying and evaluating director candidates are described below under the heading "Director Nomination Process."

Board Meetings and Attendanc e

Our board met nine times during 2014. During 2014, each incumbent director, other than Mr. Walecka, attended at least 75% of the aggregate of the number of board meetings and the number of meetings held by all committees on which he then served.

Director Attendance at Annual Meetin g

Members of our board, and nominees for director, are encouraged to attend our annual meetings of stockholders.  Messrs. Lazovsky and Scalise attended our 2014 annual meeting of stockholders.

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Director Compensatio n

We maintain a non-employee director compensation program that is intended to fairly compensate our non-employee directors for the time and effort necessary to serve on our board of directors. In structuring compensation arrangements for non-employee directors, the compensation committee took into account our need to attract and retain high-quality directors by offering compensation packages competitive with those of companies of similar size, in similar industries or markets and at the same stage of maturity as our company.

In accordance with this program, our non-employee directors are entitled to receive annual cash retainers of $35,000. In addition, (i) non-employee directors who serve as chairs of the audit, compensation and nominating and corporate governance committees are entitled to receive additional annual cash retainers of $20,000, $10,000 and $7,500, respectively, (ii) non-employee directors who serve as non-chair members of the audit, compensation and nominating and corporate governance committees are entitled to receive additional annual cash retainers of $7,500, $5,000 and $2,500, respectively, and (iii) the independent chairman of our board of directors was entitled to receive an additional annual cash retainer of $20,000. When Dr. McWilliams was appointed Non-Executive Chair in June 2014, the board determined that he would receive a retainer of $10,000 per month for fulfilling that role.  All cash retainers are paid quarterly in arrears.

Historically and in 2014, in accordance with this program, a non-employee director received an initial option to purchase 20,000 shares of our common stock when he or she joined our board of directors. Thereafter, a non-employee director received an option to purchase 10,000 shares of our common stock on the date of each annual meeting of our stockholders (provided that the non-employee director has served on our board of directors for at least six months prior to the date of the annual meeting). Each initial stock option grant vested as to 25% of the underlying shares on each of the first four anniversaries of the grant date, subject to the non-employee director's continued service through the applicable vesting date. Each annual stock option grant vested in full on the earlier to occur of the first anniversary of the applicable grant date or the date of the annual meeting of our stockholders immediately following the applicable grant date, in each case, subject to the non-employee director's continued service with the company through the applicable vesting date. Each initial stock option grant and annual stock option grant automatically vest in full and become exercisable immediately prior to a "change in control" of the company (as defined in our 2011 Incentive Award Plan).  In connection with Dr. McWilliams appointment as Non-Executive Chair in June 2014, the Board granted him an additional equity award consisting of 40,000 shares of restricted stock and a stock option to purchase 75,000 shares, each of which vests in full one year from the date of grant.

The board reviewed our non-employee director compensation program in March 2015 and determined that, effective May 27, 2015, the initial stock option award will be increased to an option to purchase 75,000 shares and the annual stock option grant will be increased to an option to purchase 25,000 shares.  The vesting schedules of the initial and annual stock option awards will remain the same.

In 2014, we also reimbursed each of our non-employee directors for reasonable travel expenses incurred in connection with attendance at board of directors and committee meetings.

The following table sets forth information regarding compensation earned by our non-employee directors during the year ended December 31, 2014.  Dr. McWilliams compensation as an independent director before becoming President and Chief Executive Officer is reported in the Summary Compensation Table, below.  Dr. McWilliams did not receive any separate compensation for his service as a director after he began his employment with us in October 2014; however, equity awards granted to Dr. McWilliams as a non-employee director continue to vest based on his continued

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service to us as President and Chief Executive Officer.

 

 

 

 

 

 

 

 

 

 

    

Fees Paid or Earned

    

Option

    

Total

 

Name

 

in Cash ($)

 

Awards ($) (1)

 

($)

 

Thomas R. Baruch  

 

60,833 

 

12,781 

 

73,614 

 

Marvin D. Burkett  

 

56,250 

 

12,781 

 

69,031 

 

Irwin Federman  

 

43,750 

 

12,781 

 

56,531 

 

George M. Scalise  

 

45,000 

 

12,781 

 

57,781 

 

John L. Walecka  

 

40,000 

 

12,781 

 

52,781 

 

 


(1)

Amounts reported reflect the grant date fair value of stock options granted in 2014, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, rather than the amounts paid to or realized by the non-employee director. The assumptions used to calculate the value of all stock options granted to non-employee directors are set forth in Note 7 to our consolidated financial statements included in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015. As of December 31, 2014, Messrs. Baruch, Burkett, Federman, Scalise and Walecka held options to purchase 155,000, 42,500, 30,000, 30,000, and 30,000 shares, res pectively, of our common stock.

Director Nomination Proces s

Our nominating and corporate governance committee is responsible for reviewing with the board of directors, on at least an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, takes into account many factors, including: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today's business environment; experience relevant to our industry and with relevant social policy concerns; experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of our operations; practical and mature business judgment, including ability to make independent analytical inquiries; diversity of personal background, perspective and experience; promotion of a diversity of business or career experience relevant to the success of the company; and any other relevant qualifications, attributes or skills. The board evaluates each individual in the context of the board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas. In determining whether to recommend a director for re-election, the nominating and corporate governance committee may consider the director's past attendance at meetings and participation in and contributions to the activities of the board. The nominating and corporate governance committee may decide to retain an executive search firm to identify director candidates, and if so, will identify the search firm and approve the search firm's fees and other retention terms and will specify for the search firm the criteria to use in identifying potential candidates, consistent with the director qualification criteria described above.

The nominating and corporate governance committee will also consider director candidates recommended by stockholders. When recommending nominees for election as directors, our nominating and corporate governance committee shall consider candidates proposed by stockholders and shall apply the same criteria, and shall follow substantially the same process in considering them, as it does in considering other candidates. Stockholders nominating director candidates must follow the procedures set forth under "INFORMATION ABOUT THE ANNUAL MEETING AND VOTING—May I recommend a candidate for Intermolecular's board of directors?" and "—How and when may I

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submit a stockholder proposal for the 2015 annual meeting?"

You can find more detailed information on our process for selecting board members and our criteria for board nominees in the corporate governance guidelines posted on the "Investors" section of our website, www.intermolecular.com.

Communicating with our Board of Director s

Interested persons, including stockholders, may communicate with our board by sending a letter to: Board of Directors, c/o Corporate Secretary, Intermolecular, Inc., 3011 N. First Street, San Jose, California 95134. Our corporate secretary will submit all correspondence to the chairman of the board directors and to any specific director to whom the correspondence is directed.

Other Corporate Governance Matter s

We believe in sound corporate governance practices and have adopted formal corporate governance guidelines to enhance our effectiveness. Our board adopted these corporate governance guidelines in order to ensure that it has the necessary practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The corporate governance guidelines are also intended to align the interests of directors and management with those of our stockholders. The corporate governance guidelines set forth the practices our board follows with respect to board and committee composition and selection, board meetings, chief executive officer performance evaluation and management development and succession planning for senior management, including the chief executive officer position. A copy of our corporate governance guidelines is available on our website at ir.intermolecular.com.

We have also adopted a Code of Business Conduct and Ethics, which is applicable to all of our employees, officers and directors, including those officers responsible for financial reporting as required by applicable Nasdaq listing standards, which is a "code of ethics" as defined by applicable SEC rules. The Code of Business Conduct and Ethics is publicly available on our website at ir.intermolecular.com. The Code of Business Conduct and Ethics includes an enforcement mechanism, and if we make any amendments to the Code of Business Conduct and Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this Code of Business Conduct and Ethics for our directors, executive officers or other principal financial officers, we will disclose the nature of the amendment or waiver, its effective date, and to whom it applies, on our website at ir.intermolecular.com or in a current report on Form 8-K filed with the SEC. There were no waivers of the Code of Business Conduct and Ethics during 2014.

Complete copies of our corporate governance guidelines, Code of Business Conduct and Ethics and the charters for our audit, compensation and nominating and corporate governance committees are available on the "Investors" section of our website, www.intermolecular.com. Alternatively, you may request a copy of any of these documents free of charge by writing to:

Intermolecular, Inc.

3011 N. First Street

San Jose, California 95134

Attention: Investor Relations

Compensation Committee Interlocks and Insider Participatio n

None of the members of our compensation committee has at any time during the prior three years been an officer or employee of ours. None of our executive officers currently serves or in the prior three years has served as a

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member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Compensation Risk Assessmen t

The compensation committee has assessed our compensation policies and practices and concluded that they do not create risks that are reasonably likely to have a material adverse effect on the company.  In reaching this conclusion, the compensation committee considered various characteristics of our compensation plans and related policies, including but not limited to the following:

·

The mix of fixed (base salary) and variable (annual cash incentive and equity) compensation, including short-term (annual cash incentive) and long-term (equity) incentives, which reduces the significance of any one particular compensation component.

·

The mix of various stock options and restricted stock awards that vest over time (generally four years from grant), which discourages unnecessary short-term risk-taking while encouraging retention and focusing employees' attention on longer-term performance. 

·

Sales commission programs that are generally subject to annual caps (with the excess rolled forward), which decrease the incentive for an employee to take unnecessary risks to achieve an individual goal.

Executive Compensation Process

The processes and procedures followed by our compensation committee in considering and determining executive compensation are described under "EXECUTIVE COMPENSATION—Compensation Discussion and Analysis" below.

The compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation and determination of executive officer compensation. For further information, see "EXECUTIVE COMPENSATION—Compensation Discussion and Analysis" below. Additionally, the compensation committee may delegate its authority to one or more subcommittees as it deems appropriate.

Transactions with Related Person s

We describe below transactions, since January 1, 2014, to which we were a party or will be a party, in which:

·

The amounts involved exceeded or will exceed $120,000; and

·

A director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.

Agreements with Our Stockholders

We have entered into an amended and restated investor rights agreement with certain holders of warrants and common stock, including entities that hold 5% or more of our common stock and/or with which certain of our directors are affiliated. This agreement provides (i) that certain such holders have the right to demand that we file a registration statement, subject to certain limitations, and (ii) that all such holders have the right to request that their shares be covered by a registration statement that we are otherwise filing.

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Indemnification Agreements

Please see below under "EXECUTIVE COMPENSATION-Limitation of Liability and Indemnification" for information on our indemnification arrangements with our directors and executive officers.

Related Person Transaction Polic y

Our board of directors has adopted a written related party transaction policy. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Exchange Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, the amount involved exceeds $120,000, and a related party had or will have a direct or indirect material interest. Under the policy, the audit committee is required to review the relevant facts and circumstances of any such transaction, arrangement or relationship, including whether the transaction is on comparable terms to arm's length dealings with third parties, the extent of the related party's interest in the transaction, and the conflicts of interest and corporate opportunity provisions of our Code of Business Conduct and Ethics. Such transactions, arrangements or relationships may only be consummated or continue if the audit committee approves or ratifies such transaction, arrangement or relationship. If advance approval by the audit committee is not feasible, then management may preliminarily enter into the transaction, arrangement or relationship upon prior approval by the chairman of the audit committee, subject to ratification of the transaction, arrangement or relationship at the audit committee's next regularly scheduled meeting.  No director may participate in approval of a related party transaction for which he or she is a related party.

 

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AUDIT-RELATED MATTER S

Audit Committee Repor t

The material in this report is not "soliciting material," is not deemed "filed" with the SEC, and is not to be incorporated by reference into any filing of Intermolecular under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

The following is the report of the audit committee with respect to Intermolecular's audited consolidated balance sheets for the fiscal years ending December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive loss, and of stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2014 and the related notes thereto (together, the "financial statements").

Responsibilities.     The audit committee operates under a written charter adopted by the board of directors. The role of the audit committee is to oversee our financial reporting process on behalf of the board of directors. Our management has the primary responsibility for our financial statements as well as our financial reporting process and principles, internal controls and disclosure controls. The independent auditors, KPMG LLP (KPMG), are responsible for performing an audit of our financial statements and expressing an opinion as to the conformity of such financial statements with U.S. generally accepted accounting principles. KPMG is also responsible for expressing an opinion on the effectiveness of our internal controls over financial reporting.

Review with Management.     The audit committee has reviewed and discussed our audited financial statements (including the quality of our accounting principles) with management. Our management is responsible for the preparation, presentation and integrity of our financial statements. Management is also responsible for establishing and maintaining internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) and for evaluating the effectiveness of those internal controls and for evaluating any changes in those controls that will, or is reasonably likely to, affect internal controls over financial reporting. Management is also responsible for establishing and maintaining disclosure controls (as defined in Exchange Act Rule 13a-15(e)) and for evaluating the effectiveness of disclosure controls and procedures.

Review and Discussions with Independent Accountants.     The audit committee has reviewed and discussed our audited financial statements (including the quality of our accounting principles) with KPMG. The audit committee has discussed with KPMG the matters required to be discussed by the Public Company Accounting and Oversight Board (PCAOB) Auditing Standard No. 16, "Communications with Audit Committees; Related Amendments to PCAOB Standards; and Transitional Amendments to PCAOB AU Section 380," which includes, among other items, matters related to the conduct of the audit of our financial statements, and the matters required to be discussed by PCAOB Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. Further, the audit committee reviewed KPMG's Report of Independent Registered Public Accounting Firm included in our Annual Report on Form 10-K related to its audit of the consolidated financial statements.

The audit committee has also received and reviewed the written disclosures and the letter from KPMG required by the applicable requirements of the PCAOB regarding KPMG's communications with the audit committee concerning independence, and has discussed with KPMG its independence from us.

Conclusion.     Based on the review and discussions referred to above, the audit committee recommended to the board of directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Submitted by the Audit Committee of the Board of Directors:

Marvin D. Burkett ( C hair)

Irwin Federman

George M. Scalise

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Auditor Fees and Service s

The following table presents the aggregate fees billed (or expected to be billed) by KPMG LLP, our independent registered public accounting firm, for the years ended December 31, 2014 and December 31, 2013.

 

 

 

 

 

 

 

 

 

Type

    

2014

    

2013

 

Audit Fees (1):

 

$

1,038,000 

 

$

1,018,500 

 

Audit Related Fees (2):

 

 

 

 

 

Tax Fees (3):

 

 

 

 

 

All Other Fees (4):

 

 

 

 

 

Total Fees:

 

$

1,038,000 

 

$

1,018,500 

 

 


(1)

Audit Fees —This category includes the aggregate fees and expenses billed or accrued for each of the last two fiscal years for professional services rendered by the independent auditors for the audit of our annual financial statements and review of financial statements included in our Annual Reports and Quarterly Reports filed with the SEC or services that are normally provided by the accountant in connection with other statutory and regulatory filings or engagements for those fiscal years.

(2)

Audit Related Fees —This category includes the aggregate fees billed in each of the last two fiscal years for services by the independent auditors that are reasonably related to the performance of the audits of the financial statements and are not reported above under 'Audit Fees'.

(3)

Tax Fees —This category includes the aggregate fees billed in each of the last two years for professional services rendered by the independent auditors for tax compliance, tax planning and tax advice.

(4)

All Other Fees —This category includes the aggregate fees billed in each of the last two fiscal years for products and services by the independent auditors that are not reported under 'Audit Fees', 'Audit Related Fees', or 'Tax Fees.'

Pre-approval Policies and Procedures

Before an independent registered public accounting firm is engaged by Intermolecular or its subsidiaries to render audit or non-audit services, our audit committee must review the terms of the proposed engagement and pre-approve the engagement. Our audit committee may establish policies that allow the audit committee to delegate authority to a member of the audit committee to provide such pre-approvals for audit or non-audit services, provided that such person will be required to report all such pre-approvals to the full audit committee at its next scheduled meeting. In addition, if such policies are established for non-audit services, the audit committee must be informed of each non-audit service provided by the independent registered public accounting firm. Audit committee pre-approval of non-audit services (other than review and attest services) are not required if such services fall within available exceptions established by the SEC. All fees paid to KPMG LLP for audit and non-audit services provided during fiscal years 2014 and 2013 were pre-approved by the audit committee in accordance with the policy described above.

 

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MATTERS TO BE VOTED ON AT THE ANNUAL MEETIN G

PROPOSAL 1—ELECTION OF DIRECTOR S

Our board of directors is divided into three classes, with one class being elected each year and members of each class holding office for a three-year term. We have two Class I directors, whose terms expire at the conclusion of this 2015 annual meeting of stockholders; one Class II director, whose term expire s at the conclusion of our 2016 annual meeting of stockholders; and three Class III directors, whose terms expire at the conclusion of th e 201 7 Annual Meeting. Our board of directors currently consists of six members.

At this Annual Meeting, our stockholders will have an opportunity to vote for two nominees for Class I directors:  Marvin D. Burkett and Wilbert van den Hoek .   Mr. Burkett is currently a   director of Intermolecular and you can find more information about each of the nominees in "BOARD OF DIRECTORS, CORPORATE GOVERNANCE AND RELATED MATTERS—Our Board of Directors" above.

The persons named in the enclosed proxy card will vote to elect these two nominees as Class I directors, unless you withhold authority to vote for the election of one or more nominees by marking the proxy card to that effect. If elected, each of the nominees for Class I director will hold office until the 201 8 annual meeting of stockholders and until his or her successor is elected and qualified. Each of the nominees has indicated his willingness to serve if elected. However, if any nominee should be unable to serve, the persons named in the proxy card may vote the proxy for a substitute nominee nominated by our board of directors, or our board of directors may reduce the number of directors.

Our board of directors unanimously recommends a vote FOR each of the nominees.

PROPOSAL 2—NON-BINDING, ADVISORY VOTE ON THE COMPENSATION OF NAMED EXECUTIVE OFFICERS ("SAY-ON-PAY" VOTE )

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, we are asking our stockholders to approve, on a non-binding advisory basis, the compensation paid to our named executive officers as disclosed in "Compensation Discussion and Analysis," the Summary Compensation table and related compensation tables, notes and narrative in this proxy statement for our 201 5 Annual Meeting.  O ur next advisory say-on-pay vote (following the non-binding advisory vote at this 201 5 Annual Meeting) will occur at our 201 6 annual meeting of stockholders.

Summary

The compensation committee of our board of directors maintains an executive compensation program that aligns executive pay with the performance of the company and the individual executives on both short-term and long-term bases, links executive pay with business strategies focused on long-term growth and creating value for our stockholders and uses compensation as a tool to assist the company in attracting and retaining the high-caliber executives that we believe are critical to our success.

We encourage stockholders to review the "Compensation Discussion and Analysis" section of this proxy statement, which describes the material aspects of our executive compensation philosophy and the design of our executive compensation program .

At the Annual Meeting the stockholders will be asked to approve the following resolution:

"RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's named executive officers, as disclosed in the Compensation Discussion and Analysis, the

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compensation tables and the narrative disclosure set forth in the Company's proxy statement.”

The vote sought by this proposal is advisory and not binding on the company, our board of directors or the compensation committee. Although the vote is non-binding, the company, our board of directors and the compensation committee value the input of our stockholders, and the compensation committee will consider the outcome of the vote when making future compensation determinations for our named executive officers.

Our board of directors unanimously recommends a vote FOR this proposal.

PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 201 5

The audit committee of our board of directors has selected KPMG LLP as our independent registered public accounting firm for the year ending December 31, 201 5 .  KPMG LLP served as our independent registered public accounting firm for the year ended December 31, 201 4 .  Although stockholder approval of our audit committee's selection of KPMG LLP is not required by law, we believe that it is advisable to give stockholders an opportunity to ratify this selection. If our stockholders do not ratify this selection, our audit committee will reconsider the selection. We expect that representatives of KPMG LLP will be present at the Annual Meeting to respond to appropriate questions and to make a statement if they wish.

Our board of directors unanimously recommends a vote FOR this proposal.

 

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EXECUTIVE OFFICER S

Below is information about each of our current executive officers, other than Dr. McWilliams , our President and Chief Executive Officer, whose information is included above in "BOARD OF DIRECTORS, CORPORATE GOVERNANCE AND RELATED MATTERS—Our Board of Directors ." This information includes each officer's age as of March 31, 201 5 , his position with Intermolecular, the length of time he has held each position and his business experience for at least the past five years. Our board of directors elects our officers annually, and officers serve until they resign or the board of directors terminates their officer appointment . There are no family relationships among any of our executive officers, directors and nominees for director.

C. Richard Neely , age 60 ,   has served as our Chief Financial Officer and Principal Financial and Accounting Officer since October, 2013.  Prior to joining the Company, and from August 2012 to June 2013 , Mr. Neely was Executive Vice President and Chief Financial Officer at Tessera Technologies, Inc. (Tessera) a company that develops, invests in, licenses and delivers innovative miniaturization technologies and products for next-generation electronic devices. Prior to joining Tessera, and from February 2011 to August 2012, Mr. Neely served as Chief Financial Officer at Livescribe, Inc. (Livescribe), a developer of a paper-based computing platform consisting of a digital pen, digital paper, software applications and developer tools.  Prior to Livescibe, and from 2005 to January 2011, Mr. Neely was Senior Vice President, Chief Financial Officer at Monolithic Power Systems, Inc. , a leading fabless manufacturer of high-performance analog and mixed-signal semiconductors.  From 2002 to 2005, Mr. Neely was Chief Financial Officer at NuCORE Technology, Inc. , a company specializing in sales and marketing of quality telecommunications products.  From 1998 to 1999, Mr. Neely was Vice-President, Finance and Corporate Controller at Synopsys, Inc., an electronic automation design company.  From 1996 to 1998, Mr. Neely was Vice-President, Finance and Corporate Controller at Heartport, Inc. , a medical device maker, and from 1980 to 1996, Mr. Neely was D irector and Controller at Advanced Micro Devices, Inc.  Mr. Neely is currently a member of the board of directors, and chairman of the board’s audit committee, for Perceptron, Inc., a developer of and manufacturer of non-contact measurement, scanning and inspection solutions for industrial applications.    Mr. Neely was also previously a member of the board of directors and board audit committee for Aviza Technology, Inc. , a designer and manufacturer of semiconductor capital equipment and process technologies.  Mr. Neely holds a B.A. in economics from Whitman College, where he graduated summa cum laude , and was also elected to Phi Beta Kappa.  He also holds an MBA in finance and marketing from the University of Chicago , where he was also elected to the Dean’s List for scholastic achievement .

Scot A. Griffin , age 47, has served as our senior vice president business operations and corporate secretary since October 2014.  From September 1 to October 10, 2014, Mr. Griffin consulted with the Company in the area of licensing.  Prior to joining us, Mr. Griffin served as the Senior Vice President and General Counsel of Spansion Inc. from March 2011 to February 2014.  Prior to joining Spansion, Mr. Griffin operated a consulting firm specializing in assisting clients to identify and build technology and intellectual property assets since May 2009.   From November 2002 until 2009, Mr. Gri f fin held various senior executive positions at Tessera Technologies, Inc. (Tessera), most recently as Executive Vice President, Microelectronics.  He also served as Senior Vice President and General Counsel of Tessera from November 2006 to May 2008.   Before joining Tessera, Mr. Griffin was Group IP Counsel and IP Attorney at Intel Corporation from February 2000 to November 2002.  Mr. Griffin was in the private practice of law from 1993 to 2000.  Mr. Griffin holds a Bachelor of Science degree in Electrical Engineering from the Massachusetts Institute of Technology and a Juris Doctorate degree from the University of California, Hastings College of the Law.

 

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EXECUTIVE COMPENSATIO N

Compensation Committee Repor t

The compensation committee has reviewed and discussed with management the "Compensation Discussion and Analysis" contained in this proxy statement. Based on this review and discussion, the compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and in this proxy statement.

Submitted by the Compensation Committee of the Board of Directors:

Thomas R. Baruch (chair)

Irwin Federman

John L. Walecka

Compensation Discussion and Analysi s

Introduction

This section discusses the company’s policies and decisions with respect to the compensation of the individuals who were our named executive officers, or “NEOs,” during 2014 and what we consider to be the most important factors relevant to an analysis of these policies and decisions.

2014 was a year of transition in which three of our major collaborative development programs ended.  Specifically, our collaborative development programs with GLOBALFOUNDRIES, SanDisk /Toshiba and First Solar ended in February 2014, March 2014, and December 2014, respectively.  Both First Solar and GLOBALFOUNDRIES were 10% customers of the company in 2013.  Additionally, in 2014 we announced our expectations of lower revenues in 2015 from our collaborative development programs with Guardian and Micron, both of whom were 10% customers of the company in 2014.  As a result of the termination of the collaborative development programs with GLOBALFOUNDRIES and SanDisk/Toshiba, we initiated reductions in force in February and May of 2014 affecting 18 percent and 10 percent of our workforce, respectively.  These reductions were part of an overall plan to reduce our cost structure.  In addition, attrition in 2014 was significant, with a total of 39% of employees leaving the company during the first half of 2014.  In response to these changing business conditions, we undertook a strategic effort to explore new opportunities and to consider alternative business models to expand our offerings and our customer base to reduce the concentration of revenue in relatively few customers.  The company’s efforts ultimately led to a transition in the company’s leadership team, which is reflected below.

Our NEOs for 2014 were determined in accordance with SEC rules and include our principal executive officer, our principal financial officer, our only other executive officer as of December 31, 2014, two employees who were no longer serving as executive officers as of December 31, 2014 , and our former principal executive officer, as follows:

·

Bruce McWilliams, President, Chief Executive Officer and Chairman of the Board of Directors

·

C. Richard Neely, Jr., Senior Vice President and Chief Financial Officer

·

Scot A. Griffin, Senior Vice President, Business Operations and Corporate Secretary

·

Sandeep Nijhawan, Senior Vice President, Customer Collaborative Development Programs

·

Tony P. Chiang, Chief Technology Officer

·

David E. Lazovsky, Former President and Chief Executive Officer

Mr. Lazovsky resigned as our president and chief executive officer effective October 12, 2014, and Dr. McWilliams served as our president and chief executive officer from October 12, 2014 through December 31, 2014.  Dr. McWilliams

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has also served on the Board of Directors since 2005 and was appointed Non-Executive Chairman of the Board on June 13, 2014.  Mr. Griffin was appointed as our Senior Vice President ,   Business Operations and Corporate Secretary and began his employment with us   on October 12, 2014.  Drs. Nijhawan and Chiang ceased serving as executive officers of the Company in October 2014 but remain employees of the Company

Executive Summary

The following table sets forth the key elements of our NEOs’ compensation, along with the primary objective associated with each compensation element:

 

Compensation Element

    

Primary Objective

Base salary

 

To recognize ongoing performance of job responsibilities and provide a predictable source of income and to attract and retain employees.

 

 

 

Annual performance-based cash compensation

 

To emphasize annual corporate and individual objectives that contribute directly to the company’s success and to provide reward opportunities for our NEOs (and employees generally) when key business and individual objectives are met.

 

 

 

Long-term equity incentive compensation

 

To motivate and reward achievement of long-term performance objectives and increases in stockholder value; to emphasize and reinforce our focus on team success; and to attract and retain our NEOs.

 

 

 

Severance and change in control benefits

 

To encourage the continued attention and dedication of our NEOs and provide reasonable individual security to enable our NEOs to focus on the company’s best interests, particularly when considering strategic alternatives.

 

 

 

Retirement savings (401(k)) plan

 

To provide retirement savings in a tax-efficient manner.

 

 

 

Health and welfare benefits

 

To provide a basic level of financial protection from health, dental, disability and loss of life risks.

 

To serve the foregoing objectives, our overall compensation program is generally designed to be flexible, with the elements complementing each other, rather than being purely formulaic. In alignment with the objectives set forth above, our compensation committee has generally determined the overall compensation of our NEOs and its allocation among the elements described above, relying on the analyses and advice provided by its compensation consultant as well as on input from our management team.

Our compensation decisions for the NEOs in 2014, including each of the key elements of our executive compensation program, are discussed in more detail below. This discussion is intended to be read in conjunction with the executive compensation tables and related disclosures immediately following this Compensation Discussion and Analysis.

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Determination of Compensation

Roles of Our Compensation Committee and Chief Executive Officer in Compensation Decisions

Our compensation committee is responsible for overseeing our executive compensation program, as well as determining and approving the ongoing compensation arrangements for our NEOs other than our chief executive officer, for whom our compensation committee recommends compensation arrangements to the full board of directors (excluding the chief executive officer). The compensation committee meets periodically throughout the year to review and consider adjustments (or, with respect to our chief executive officer, recommend adjustments), if any, to our NEOs’ compensation, including base salary, annual performance-based cash compensation (bonuses) and long-term incentive compensation (in the form of equity awards). The full board of directors (excluding the chief executive officer) is responsible for establishing, reviewing and adjusting compensation for our chief executive officer, generally based on recommendations from our compensation committee.  Accordingly, for 2014, the board of directors determined each individual component of compensation for our chief executive officer  and the compensation committee determined each individual component of compensation for our other NEOs as part of our annual compensation review.

Our chief executive officer evaluates the individual performance and contributions of each other NEO and, at least annually, reports to the compensation committee his recommendations regarding each element of the other NEOs' compensation.  Our chief executive officer does not participate in any formal discussions with the compensation committee or the board of directors regarding his own compensation, and he recuses himself from meetings when his compensation is discussed.

We do not generally rely on formulaic guidelines for determining the mix or levels of cash and equity-based compensation, but rather maintain a flexible compensation program that allows us to adapt components and levels of compensation to motivate and reward individual NEOs within the context of our desire to attain financial and operational goals. Subjective factors considered by the board of directors and the compensation committee in compensation determinations include each NEO's skills and capabilities, contributions as a member of the executive management team, contributions to our overall performance and whether the total compensation potential and structure is sufficient to retain the NEO when considering the compensation potential that may be available elsewhere.

Competitive Market Data and Engagement of Compensation Consultants

The market for experienced management is highly competitive in our industry. Our goal is to attract and retain the most highly qualified executives to manage each of our business functions. In doing so, we draw upon a pool of talent that is highly sought after both by large and established technology companies in our geographic area and by other competitive companies in development or early stage phases. Established organizations in our industry seek to recruit top talent from emerging companies in the sector just as smaller organizations look to attract and retain the best talent from the industry as a whole. The competition for technical and non-technical skills is aggressive across the sector, and we expect it to remain aggressive for the foreseeable future.

Our compensation committee, in the case of our NEOs other than our chief executive officer, and the board of directors, in the case of our chief executive officer, make determinations regarding compensation in large part based upon our financial resources, but also consider competitive market data.

Our compensation committee directly engages Compensia, an independent compensation consultant, to assist the committee in the continuing analysis of our executive compensation program.  Services provided by Compensia during 2014 included: (i) providing compensation survey data from peer companies and assisting the compensation committee with the application of this data; (ii) advising on the reasonableness and effectiveness of our compensation components, levels and programs for our executives, including our NEOs; and (iii) advising as to any appropriate

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compensation changes, including any changes or additions to equity compensation.

The peer group we used for establishing 2014 compensation programs was selected by the compensation committee in November 2013,   following discussions among the compensation committee and Compensia. The following companies were included in the peer group for 2013 but were removed from the peer group for 2014:  Cavium, MIPS Technologies, Entropic and Volterra Semiconductor.  Volterra and MIPS were acquired during 2014 and Entropic and Cavium no longer met the desired financial criteria.  The following companies were added to the peer group for 2014:  Exar, MaxLinear, Acacia Research and Immersion.  The 2014 peer group members consist of semiconductor and electronics manufacturing, design and intellectual property-related companies with annual revenues ranging from approximately $50 to $250 million.  The peer group members also possessed market capitalizations, geographic locations and employee numbers comparable to those of our company at the end of 2013 .  Moreover, we believe the peer group selected below appropriately reflects the ongoing evolution of our company towards intellectual property licensing comprising a greater portion of our revenue. The following are the companies that comprise the peer group used for 2014 compensation programs:

Acacia Research

Inphi

Rubicon Technology

CEVA

MaxLinear

SuperTex

DTS

PDF Solutions

Tessera Technologies

Exar

Rambus

Universal Display

Immersion

RPX

 

After review and consultation with Compensia, the compensation committee determined that Compensia is independent and that there is no conflict of interest resulting from retaining Compensia currently or during 2014.

Executive Compensation Philosophy and Objectives

We operate in a highly competitive and dynamic technology industry, which is characterized by frequent technological advances and rapidly changing market requirements. To succeed in this environment, we must continuously develop and refine new and existing products and services, and to achieve these objectives, we need a highly talented and seasoned team of technical, sales, marketing, operations, financial and other business professionals. Our executive compensation philosophy recognizes that, given that the market for experienced management is highly competitive in our industry, key and core to our success is our ability to attract and retain the most highly-qualified executives to manage each of our business functions. We believe that executive officer compensation should be structured to provide competitive base salaries and benefits, as well as the opportunity to participate in our company’s continued growth as an option holder and/or stockholder,   to motivate our executives to attain established financial, operational and other goals that we believe will lead to an increase in stockholder value.

In determining the form and amount of compensation payable to the NEOs, we are guided by the following objectives and principles:

·

Compensation levels should be competitive to attract and retain key executives, and should reflect internal parity.   We aim to provide an executive compensation program that attracts, motivates and retains high performance individuals and rewards them for our achieving and maintaining a competitive position in our industry. Total compensation (i.e., maximum achievable compensation) should increase with position and responsibility.

·

Compensation should relate directly to performance, and incentive compensation should constitute a significant portion of total compensation.   We aim to foster a pay-for-performance culture, with a significant portion of total compensation being "at risk." Accordingly, a significant portion of total

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compensation should be tied to and vary with our financial, operational and strategic performance, as well as individual performance. Executives with greater roles and the ability to directly impact our strategic goals and long-term results should bear a greater proportion of the risk that these goals and results are not achieved. The amount of "at risk” pay is determined accordingly.

·

Long-term incentive compensation should align executives' interests with our stockholders' interests, and should reinforce a culture of ownership, excellence and responsiveness.   Awards of long-term incentives, including equity-based compensation, encourage executives to focus on our long-term growth and prospects and motivate executives to manage the company from the perspective of stockholders with a meaningful stake in our success, as well as to focus on a long-term career orientation.

·

Compensation should enable executives to share in the success that they help create.   We aim to motivate and reward our executive officers whose knowledge, skills and performance ensure our continued success. Our compensation programs are designed to recognize the impact of our executive officers on our company's achievements.

We view the components of our executive compensation program as related but distinct, and we regularly reassess the total compensation of our NEOs to ensure that our overall compensation objectives are met. We have considered, but not relied exclusively upon, the following factors in determining the appropriate level for each compensation component: (i) our understanding of the competitive market based on the collective experience of members of our compensation committee, their review of compensation surveys and their discussions with Compensia; (ii) our recruiting and retention goals; (iii) our view of internal parity and consistency; (iv) the length of service of our executive officers; and (v) our overall performance and other considerations that our compensation committee determines are relevant.

Each of the primary elements of our executive compensation program is discussed in more detail below. While we have identified particular compensation objectives that each element of executive compensation serves, our compensation programs are designed to be flexible and complementary and to collectively serve all of the executive compensation objectives described above. Accordingly, we believe that, as a part of our overall executive compensation policy, each individual element, to a greater or lesser extent, serves each of our compensation objectives and that, collectively, they are effective in achieving our overall objectives.

Elements of Executive Compensation Program

The following describes the primary components of our executive compensation program for each of our NEOs, the rationale for that component and how compensation amounts are determined.

Base Salary

Generally, we provided our executive officers, including our NEOs, with a base salary to compensate them for services rendered to our company during the fiscal year, which is intended to be generally aligned with competitive practices and targeted at the 50th percentile level of our peer group .  The base salary payable to each NEO is intended to provide a fixed and reliable component of compensation reflecting the executive's skill set, experience, role and responsibilities. Generally, initial base salary amounts were established at the time of hiring based on consideration of, among other factors, the scope of the NEO’s responsibilities, years of service and the compensation committee's general knowledge of the competitive market , including its experience with other companies and our industry and comparative market data provided by Compensia.

Thereafter, the base salaries of our NEOs are reviewed annually by the compensation committee and merit

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salary increases are made as deemed appropriate .  The compensation committee increased our NEOs’ base salaries in 2014 in February (other than the base salaries for Messrs. Lazovsky and Neely) based on the scope of the NEOs’ responsibilities, individual contributions to the company and sustained performance.  The base salaries for Mr. Neely and Drs. Nijhawan and Chiang were increased in June 2014 to encourage these NEOs to remain employed by us through a challenging business environment .  The base salaries for Dr. McWilliams and Mr. Griffin were established through arm’s length negotiations between the executives and the board of directors in October 2014, in connection with their commencement of employment with the company.  In setting Dr. McWilliams compensation, the board of directors took into account market data provided by Compensia relating to chief executive officer compensation in our peer group and considerations specific to our company.

The base salaries for our NEOs (both before and after the 2014 increases) are set forth in the table below and the total base salaries paid to our NEOs in 2014 are set forth below in the “Summary Compensation Table.”

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Base Salary as of

    

Base Salary Post-

    

Base Salary Post-

 

NEO

 

December 2013 

 

February 2014 Increase

 

June 2014 Increase

 

Bruce McWilliams

 

 

 

 

 

$

600,000 

(1)

C. Richard Neely, Jr.

 

$

285,000 

 

$

285,000 

 

$

300,000 

 

Scot Griffin

 

 

 

 

 

$

325,000 

(2)

Sandeep Nijhawan

 

$

285,000 

 

$

290,000 

 

$

320,000 

 

Tony P. Chiang

 

$

289,800 

 

$

294,200 

 

$

320,000 

 

David Lazovsky (3)

 

$

365,000 

 

$

365,000 

 

$

365,000 

 

 


(1)

D r. McWilliams base salary of $600,000 was established in October 2014, in connection with his appointment as our President and Chief Executive Officer.    

(2)

M r. Griffin’s base salary of $325,000, was established in October 2014, in connection with his appointment as our Senior Vice President, Business Operations and Corporate Secretary.

(3)

M r. Lazovsky’s base salary was not increased during 2014. 

Annual Performance-Based Cash Compensation

We use cash bonuses to motivate our NEOs to achieve financial and strategic objectives of immediate importance while making progress towards our longer-term growth and other goals , as well as to recognize superior work performance by our NEOs.  Historically , our annual performance-based cash compensation program has been based on the achievement of selected corporate objectives, individual performance and target bonus amounts assigned to each NEO under our bonus program.  In addition, the compensation committee has retained its discretion to award cash   bonuses to those   NEOs whose work performance was considered to be superior or of high importance to the long term achievement of our business objectives. 

However, given our unique circumstances in 2014, including the rapidly changing business environment for our company and the difficulty in establishing appropriate corporate objectives during our 2014 transition period, the compensation committee determined that the magnitude of 2014 bonuses would be established based on a discretionary evaluation of performance that accounted for the performance of the company as well as individual performance and contributions to the company in 2014.  This approach to performance measurement encouraged our executives (including our NEOs) who are critical to the future success of the company to remain employed by us through an uncertain economic climate and reward such executives for their performance during 2014 .  In order to enhance the retention aspect of these discretionary bonuses, the compensation committee determined that one-half of each executive’s bonus award would be paid in December 2014 and the remaining one-half of the executive’s bonus award would be paid in

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June 2015, subject to the executive ’s continued employed through the payment date .  

The discretionary bonuses awarded to our NEOs with respect to 2014 are set forth in the table below.

 

 

 

 

 

 

 

 

 

    

 

    

Amount Paid in

 

Executive

 

Total Bonus ($)

 

2014 ($)

 

C. Richard Neely, Jr.

 

80,000 

 

40,000 

 

Sandeep Nijhawan

 

85,000 

 

42,500 

 

Tony P. Chiang

 

85,000 

 

42,500 

 

 

Dr. McWilliams and Mr. Griffin were both hired in October 2014 and ,   accordingly, the compensation committee determined that neither executive would receive a discretionary bonus for 2014.

Long-Term Equity-Based Incentives

We grant long-term equity-based awards in order to reward and encourage long-term corporate performance based on the value of our common stock and, thereby align the interests of our executive officers, including our NEOs, with those of our stockholders. We maintain the 2011 Incentive Award Plan, or the 2011 Plan, to attract and retain the best available personnel for positions of substantial responsibility, to provide equity incentives to our employees, consultants and non-employee directors and to promote the success of our business.  We do not currently have any formal stock ownership requirements or guidelines for our NEOs, given the limited market for our securities. We expect to continue to periodically review best practices and re-evaluate our position with respect to such requirements or guidelines.

Equity Award Grant Practices

During 2014, we made annual grants of options to purchase shares of our common stock and restricted stock awards to our NEOs under the 2011 Plan .  Since our NEOs are able to benefit from stock options only if the market price of our common stock increases relative to the option's exercise price, we believe stock options provide meaningful incentives to our NEOs to achieve increases in the value of our stock over time and are an effective tool for meeting our compensation goal of increasing long-term stockholder value by tying the value of these stock options to our future performance. In contrast, restricted stock grants are generally made in exchange for nominal consideration, and therefore confer full value of the shares upon recipients and encourage recipients to maximize the value of our common stock. We also believe stock option and restricted stock awards encourage the retention of our NEOs because the vesting of such equity awards is contingent upon the applicable NEO’s continued employment through the vesting date .  Accordingly, we believe that providing a mix of restricted stock and stock options furthers our compensation objectives by motivating our NEOs to remain employed with us, to increase stockholder value and to hold their shares of our common stock for an extended duration.

Each year, the compensation committee, based on recommendations from our chief executive officer (other than with respect to his own equity awards) and its review of competitive market survey data, approves a pool of shares to be awarded to employees as annual equity awards and reserves a portion of the pool for equity awards to be granted to the executive management team. However, there is no set program for equity incentive awards, and our compensation committee retains discretion to grant equity awards to employees at any time, including in connection with the hiring or promotion of an employee, to reward an employee for exceptional performance or for retention purposes.

Stock options have a per share exercise price that is not less than the closing trading price of a share of our common stock on the grant date. Historically, stock options have vested over a four-year period as follows: 25% of the shares underlying an option vest on the first anniversary of the vesting commencement date, generally correlating to the grant date or an individual’s date of hire, and the remainder of the shares underlying an option vest in substantially equal

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monthly installments over the next 36 months .  Restricted stock grants have generally vested over a four year period with respect to 25% of the shares subject thereto on each of the first four anniversaries of the grant date. We believe the vesting schedules for our stock options and restricted stock awards appropriately encourage long-term employment with our company while allowing our executives to realize compensation in line with the value they have created for our stockholders.

2014 Equity Awards

In 2014, our NEOs received a combination of options to purchase shares of our common stock, as well as awards of restricted stock , under the 2011 Plan . In determining the size of the pool and the allocation to NEOs, the compensation committee, or with respect to our chief executive officer, the board of directors, based on peer group data provided by Compensia and, other than with respect to himself, input from our chief executive officer, considered the experience of its members with similar companies, the role and responsibility of each NEO and the perceived need to reward and retain the NEO.

February 2014 Equity Awards .  In February 2014, each NEO (other than Dr. McWilliams and Mr. Griffin, whose employment with us commenced in October 2014) was granted an option to purchase shares of our common stock and an award of restricted stock as part of our annual refresher ”   grant process.  These equity awards will vest and, as applicable, become exercisable in accordance with the vesting schedules described above under “Long-Term Equity-Based Incentives – Equity Award Grant Practices.”     The following table sets forth the equity awards made to our NEOs in February 2014:

 

 

 

 

 

 

 

 

 

 

 

February 2014

 

 

    

February 2014 Stock

    

Restricted Stock

 

Executive Officer

 

Option Award

 

Award

 

C. Richard Neely, Jr.

 

15,000 shares

 

10,000 shares

 

Sandeep Nijhawan

 

40,000 shares

 

20,000 shares

 

Tony P. Chiang

 

40,000 shares

 

20,000 shares

 

David Lazovsky*

 

82,000 shares

 

40,000 shares

 

 


* Mr. Lazovsky’s equity awards were approved by the board of directors.

June 2014 Equity Awards.  In June 2014, the compensation committee determined that special retention grants were appropriate for our executive officers (including our NEOs).  Mr. Lazovsky did not receive a special retention grant, and Dr. McWilliams and Mr. Griffin (whose employment with us commenced in October 2014) did not receive a special retention grant .   The compensation committee determined that the retention grants would consist of restricted stock awards and stock options, which the compensation committee believes were appropriate to align our executives’ interests with those of our stockholders

Because these June 2014 awards were specifically intended to retain our executives , the vesting schedules were modified from the annual “refresher” grants made in February 2014.  The retention-based stock options granted in June 2014 vest 50% on the first anniversary of the grant date with the remaining shares vesting in substantially equal monthly installments over the next year, such that all of the shares subject to the stock option will be vested and exercisable on the second anniversary of the grant date, subject to the applicable executive’s continuous service to the company through each vesting date.  The retention-based restricted stock awards granted in June 2014 vest in full on the first anniversary of the grant date, subject to the applicable executive’s continuous service to the company through the vesting date.  

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The following table sets forth the equity awards made to our NEOs in June 2014:

 

 

 

 

 

 

 

 

    

June 2014 Stock

    

June 2014 Restricted

 

Executive Officer

 

Option Award

 

Stock Award

 

C. Richard Neely, Jr.

 

110,000 shares

 

80,000 shares

 

Sandeep Nijhawan

 

250,000 shares

 

100,000 shares

 

Tony P. Chiang

 

150,000 shares

 

100,000 shares

 

 

New Hire 2014 Equity Awards.  When Dr. McWilliams was hired in October 2014, he was granted a stock option to purchase 2,880,000 shares of the company’s common stock at a per share exercise price equal to $2.25, which was the closing price of a share of common stock on the date of grant .  Dr. McWilliam’s option will vest in substantially equal monthly installments over the four year period commencing October 12, 2014, subject to Dr. McWilliams’ continued service with the company through each vesting date.  The board of directors determined the size of Dr. McWilliams stock option grant following its review of grants made by our peer group of companies to their chief executive officers and based upon the experience that he brings to the company. 

When Mr. Griffin was hired in October 2014, he received a stock option grant of 480,000 shares of the company’s common stock at a per share exercise price equal to $2.25, which was the closing price of a share of common stock on the date of grant .  Mr. Griffin’s option will vest as to 25% of the shares on October 12, 2015, with the remaining 75% to vest and become exercisable in substantially equal monthly installments over the next three years, subject to Mr. Griffin’s continued employment with the company through each vesting date.

Retirement Savings

We maintain a qualified retirement savings plan under section 401(k) of the Internal Revenue Code, or the Code, to provide retirement benefits to our eligible employees. Eligible employees may defer a portion of their compensation, within limits prescribed under the Code, on a pre-tax basis to the 401(k) plan. Historically (including during 2014) , the 401(k) plan has been funded entirely with employee contributions.

Employee Benefits and Perquisites

All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including:

·

medical, dental and vision benefits;

·

medical and dependent care flexible spending accounts;

·

short-term and long-term disability insurance; and

·

life insurance.

We believe that these benefits comprise key elements of a comprehensive compensation program. Our health and welfare benefits help ensure that the compensation packages of our NEOs are market competitive. Our employee benefit programs are designed to be affordable and competitive in relation to the market.  In 2014, none of our executive officers, including our NEOs, received any personal benefits or perquisites that were not made generally available to our other full-time employees.

Severance and Change in Control Benefits

As described more fully below in the section entitled "Potential Payments Upon Termination or Change in Control," we have entered into change in control severance agreements and/or employment agreements with our NEOs

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that provide for various severance and change in control benefits. We believe that the protections contained in these agreements will help to ensure the day-to-day stability necessary to enable our NEOs to properly focus their attention on their duties and responsibilities with our company and will provide security with regard to some of the most uncertain events relating to continued employment, thereby limiting concern and uncertainty and promoting productivity. For a description of the material terms of these agreements, see "Potential Payments Upon Termination or Change in Control" below.

Impact of Say-On-Pay Advisory Vote

At our 2014 annual meeting, holders of more than 92% of our common stock voted to approve the compensation of the NEOs.  Although this “say-on-pay” vote is advisory and non-binding, the compensation committee values the input of our stockholders and considered the outcome of the vote when determining our executive compensation program for 2014.  The compensation committee intends to continue to take into consideration the outcome of our stockholders’ future advisory say-on-pay votes when making future compensation decisions for the NEOs.  Our board of directors previously determined to hold a say-on-pay advisory vote on the compensation of our NEOs every year.  Accordingly, we expect that our next say-on-pay proposal (following our 2015 annual meeting) will be submitted to our stockholders for an advisory vote at the annual meeting of our stockholders in 2016.

Tax and Accounting Considerations

Internal Revenue Code Section 162(m).     Generally, Section 162(m) of the Code, or Section 162(m), disallows a tax deduction for any publicly-held corporation for individual compensation exceeding $1.0 million in any taxable year to its chief executive officer and each of its other NEOs, other than its chief financial officer, unless compensation qualifies as "performance-based compensation" within the meaning of the Code. Where reasonably practicable and to the extent that the Section 162(m) deduction disallowance becomes applicable to our company, our compensation committee may seek to qualify the variable compensation paid to our NEOs for an exemption from the deductibility limitations. As such, in approving the amount and form of compensation for our NEOs, our compensation committee considers all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m). However, our compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

Internal Revenue Code Section 409A.   Section 409A of the Code requires that "nonqualified deferred compensation" be deferred and paid under plans or arrangements that satisfy the requirements of the Code with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income tax liabilities, penalty taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, we design and administer our compensation and benefits plans and arrangements for all of our employees and other service providers, including our NEOs, so that they are either exempt from or comply with the requirements of Section 409A of the Code.

Internal Revenue Code Section 280G.   Section 280G of the Code, or Section 280G, disallows a tax deduction with respect to excess parachute payments to certain executives of companies that undergo a change in control. In addition, Section 4999 of the Code, or Section 4999, imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G based on the executive's prior compensation. In approving the compensation arrangements for our NEOs, our compensation committee considers all elements of the cost to the company of providing such compensation, including the potential

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impact of Section 280G. However, our compensation committee may, in its judgment, authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent.

Accounting for Stock-Based Compensation.   We follow ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date "fair value" of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of stock options, restricted stock, restricted stock units and other equity-based awards under our equity incentive award plans will be accounted for under ASC Topic 718. Our compensation committee regularly considers the accounting implications of significant compensation decisions, particularly in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.

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Summary Compensation Tabl e

The following table sets forth information concerning the compensation of our NEOs for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, as appropriate.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

Incentive Plan

 

All Other 

 

 

 

 

 

 

 

Salary

 

Bonus

 

Awards

 

Awards

 

Compensation

 

Compensation

 

Total

 

Name and Position

 

Year

 

($)(1)

 

($) (2)

 

($) (3)

 

($) (3)

 

($) 

 

($) (4)

 

($)

 

Bruce M. McWilliams (5)

    

2014 

    

131,923 

    

    

    

3,493,440 

    

    

250,334 

    

3,875,697 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C. Richard Neely, Jr.

 

2014 

 

293,125 

 

40,000 

 

221,700 

 

165,256 

 

 

 

720,081 

 

Senior Vice President and Chief Financial Officer

 

2013 

 

70,170 

 

3,514 

 

222,400 

 

648,228 

 

 

 

944,312 

 

Scot A. Griffin (6)

 

2014 

 

71,458 

 

 

 

588,240 

 

 

30,000 

 

689,698 

 

Senior Vice President Business Operations and Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sandeep Nijhawan

 

2014 

 

306,096 

 

42,500 

 

306,000 

 

388,248 

 

 

 

 

1,042,844 

 

Senior Vice President Customer CDPs

 

2013 

 

270,298 

 

30,113 

 

720,300 

 

363,650 

 

 

 

1,384,361 

 

Tony P. Chiang

 

2014 

 

307,789 

 

42,500 

 

306,000 

 

267,248 

 

 

 

923,537 

 

Chief Technology Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David E. Lazovsky

 

2014 

 

337,740 

 

 

209,211 

 

175,792 

 

 

368,800 

 

1,091,543 

 

Former President and Chief Executive Officer

 

2013 

 

363,750 

 

 

388,400 

 

439,504 

 

 

 

1,191,654 

 

 

 

2012 

 

350,000 

 

 

112,349 

 

271,172 

 

68,922 

 

 

802,443 

 

 


(1)

2014 amounts include for Mr. Lazovsky payment of $48,782 representing paid time off   accrued through the date of the termination of his employment.

(2)

2014 amounts reflect the payment of discretionary annual bonuses awarded to certain of our NEOs. Refer to the section entitled “Annual Performance-Based Cash Compensation” above for more information.

(3)

Amounts reflect the full grant date fair value of restricted stock awards and stock options, computed in accordance with ASC Topic 718. The assumptions used to calculate the value of all restricted stock and stock option awards made to NEOs are set forth in Note 7 to our consolidated financial statements included in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015. There can be no assurance that awards will vest or, with respect to stock options, will be exercised (and if the awards do not vest or are not exercised, as applicable, no value will be realized by the individual), or that the value of the stock options upon exercise will approximate the aggregate grant date fair value determined under ASC Topic 718.  For Mr. Lazovsky, also includes   the incremental fair value of the accelerat ed   vesting of equity awards that would have vested during the six months immediately following his termination had his employment not terminated, in the amount of $55,211 .

(4)

The amount s reported consist of the following: (i) for Dr. McWilliams ,   a cash retainer of $62,500 and an equity retainer valued at $187,834 paid with respect to his service as a non-employee director during the period from January 1, 2014 to October 12, 2014 ; (ii)   for Mr. Griffin, amounts he earned in 2014 as a consultant to the company before he was employed by us; and (iii) for   Mr. Lazovsky, a cash severance payment of $ 365,000 and $3,800 in company paid premiums for COBRA continuation coverage, in each case paid pursuant to his severance agreement.

(5)

Dr. McWilliams was appointed as our President and Chief Executive Officer on October 12, 2014.

(6)

Mr. Griffin was appointed as our Senior Vice President Business Operations and Corporate Secretary on October 12, 2014.

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Grants of Plan-Based Awards Tabl e

The following table sets forth information regarding grants of plan-based awards made to our NEOs for the year ended December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

All Other

    

 

    

 

 

 

 

 

 

 

 

Option

 

Exercise

 

 

 

 

 

 

 

All Other

 

Awards:

 

or

 

Grant Date

 

 

 

 

 

Stock

 

 Number of

 

Base

 

Fair Value

 

 

 

 

 

Awards:

 

Securities

 

Price

 

of Stock

 

 

 

 

 

Number of

 

Underlying

 

of Option

 

and Option

 

 

 

 

 

Shares of

 

Options(#)

 

Awards

 

Awards

 

Name

 

Grant Date

 

Stock (#) (1)

 

(2)

 

($/Sh)

 

($) (3)

 

Bruce M. McWilliams

 

May 28, 2014

(4)  

 

 

10,000 

 

2.59 

 

12,781 

 

 

 

June 13, 2014

(4)  

 

 

75,000 

 

2.29 

 

83,453 

 

 

 

June 13, 2014

(4)  

40,000 

 

 

 

91,600 

 

 

 

October 12, 2014

 

 

 

2,880,000 

 

2.25 

 

3,493,440 

 

C. Richard Neely, Jr.

 

February 26, 2014

 

 

15,000 

 

3.85 

 

32,156 

 

 

 

February 26, 2014

 

10,000 

 

 

 

38,500 

 

 

 

June 13, 2014

 

 

 

110,000 

 

2.29 

 

133,100 

 

 

 

June 13, 2014

 

80,000 

 

 

 

183,200 

 

Scot A. Griffin

 

October 12, 2014

 

 

480,000 

 

2.25 

 

588,240 

 

Sandeep Nijhawan

 

February 26, 2014

 

 

40,000 

 

3.85 

 

85,748 

 

 

 

February 26, 2014

 

20,000 

 

 

 

77,000 

 

 

 

June 13, 2014

 

 

250,000 

 

2.29 

 

302,500 

 

 

 

June 13, 2014

 

100,000 

 

 

 

229,000 

 

Tony P. Chiang

 

February 26, 2014

 

 

 

40,000 

 

3.85 

 

85,748 

 

 

 

February 26, 2014

 

20,000 

 

 

 

77,000 

 

 

 

June 13, 2014

 

 

150,000 

 

2.29 

 

181,500 

 

 

 

June 13, 2014

 

100,000 

 

 

 

229,000 

 

David E. Lazovsky

 

February 26, 2014

 

 

82,000 

 

3.85 

 

175,792 

 

 

 

February 26, 2014

 

40,000 

 

 

 

154,000 

 

 


(1)

The restricted stock awarded on February 26, 2014 to M r . Neely and Drs. Nijhawan and Chiang, vest in four substantially equal installments on each anniversary of the grant, subject to continued employment through the applicable vesting date and further subject to accelerated vesting under certain circumstances.  Vesting of a portion of the restricted stock awarded to Mr. Lazovsky on February 26, 2014 was accelerated to his termination date and the remainder of the award was cancelled.  The restricted stock awarded on June 13, 2014 to Dr. McWilliams (as a non-employee director), Mr. Neely and Drs. Nijawan and Ch i ang, vests in full on the first anniversary of the grant date, subject to continued service to the company through the vesting date.

(2)

Represents stock options granted during 2014, as follows:

·

The stock options granted on February 26, 2014 to Mr. Neely, and Drs. Nijhawan and Chiang, vest with respect to 25% of the shares , on the first anniversary of the grant date, and with respect to 1/48th of the shares, on each monthly anniversary of the grant date thereafter, subject to continued employment through the applicable vesting date and further subject to accelerated vesting under certain circumstances.  Vesting of a portion of the stock options granted to Mr. Lazovsky on February 26,2014 was accelerated to his termination date and the remainder of the award was cancelled.

·

The stock option grant ed to Dr. McWilliams on May 28, 2014, vests in full on the earlier to occur of the first anniversary of the applicable grant date or the date of the annual meeting of our stockholders immediately following the applicable grant date, in each case, subject to his continued service with the company through the vesting date.

·

The stock options granted on June 13, 2014 (other than to Dr. McWilliams) vest with respect to 50% of the shares on the first anniversary of the grant date , with the remaining shares vesting monthly over the next year, such that all of the stock option shares would vest and be exercisable on the second anniversary of the grant date, subject to continuous service to the company through each vesting date.

·

The stock option granted to Dr. McWilliams on June 13, 2014, vest s   in full on the first anniversary of the grant date,

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provided continuous service through the vesting date. 

·

The stock option granted to Dr. McWilliams on October 12, 2014 , vest s in equal monthly installments over the four years following October 12, 2014, subject to Dr. McWilliams’ continued service with the com pany through each vesting date.

·

The stock option granted to Mr. Griffin on October 12, 2014 , vest s as to 25% of the shares on October 12, 2015, with the remaining 75% vesting and becom ing exercisable in equal monthly installments over the next three years, subject to Mr. Griffin’s continued employment with the company through each vesting date.

(3)

Amounts reflect the full grant date fair value of restricted stock awards and stock options granted in 2014, computed in accordance with ASC Topic 718. The assumptions used to calculate the value of all restricted stock and stock option awards made to NEOs are set forth in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on February 27, 2015.

(4)

These stock options and restricted stock awards were granted to Dr. McWilliams as compensation for his service as a non-employee director during 2014. 

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Outstanding Equity Awards at Fiscal Year End  

The following table sets forth information regarding outstanding equity awards held as of December 31, 2014 by our NEOs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

Stock Awards 

 

 

 

 

 

 

Number of

 

Number of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities

 

Securities

 

Option

 

 

 

Number of

 

Market Value

 

 

 

 

 

 

Underlying

 

Underlying

 

 

 

 

 

Shares   or

 

of Shares or

 

 

 

 

 

 

Unexercised

 

Unexercised

 

Exercise

 

 

 

Units of Stock

 

 Units of   Stock 

 

 

 

 

Vesting

 

Options (#)

 

Options (#)

 

Price

 

Option

 

that Have Not

 

that Have Not

 

 

Name

  

Commencement Date

  

Exercisable

  

Unexercisable   (1)

  

($/Share)

  

Expiration Date

  

Vested (#) (2)

  

Vested ($) (3)

 

 

Bruce M. McWilliams

 

September 14, 2006

 

27,375 

 

 

 

1.50 

 

October 26, 2016

 

 

 

 

 

 

 

 

February 25, 2009

 

30,000 

 

 

 

2.00 

 

February 24, 2019

 

 

 

 

 

 

 

 

May 30, 2012

 

10,000 

 

 

 

6.62 

 

May 29, 2022

 

 

 

 

 

 

 

 

May 29, 2013

 

10,000 

 

 

 

8.21 

 

May 28, 2023

 

 

 

 

 

 

 

 

May 28, 2014

 

 

 

10,000 

 

2.59 

 

May 27, 2024

 

 

 

 

 

 

 

 

June 13, 2014

 

 

 

 

 

 

 

 

 

40,000 

 

77,200 

 

 

 

 

June 13, 2014

 

 

 

75,000 

 

2.29 

 

June 12, 2024

 

 

 

 

 

 

 

 

October 12, 2014

 

120,000 

 

2,760,000 

 

2.25 

 

October 11, 2024

 

 

 

 

 

 

C. Richard Neely, Jr.

 

October 2, 2013

 

61,250 

 

148,750 

 

5.56 

 

November 6, 2023

 

 

 

 

 

 

 

 

October 2, 2013

 

 

 

 

 

 

 

 

 

30,000 

 

57,900 

 

 

 

 

February 26, 2014

 

 

 

15,000 

 

3.85 

 

February 25, 2024

 

 

 

 

 

 

 

 

February 26, 2014

 

 

 

 

 

 

 

 

 

10,000 

 

19,300 

 

 

 

 

June 13, 2014

 

 

 

110,000 

 

2.29 

 

June 12, 2024

 

 

 

 

 

 

 

 

June 13, 2014

 

 

 

 

 

 

 

 

 

80,000 

 

154,400 

 

 

Scot A. Griffin

 

October 12, 2014

 

 

 

480,000 

 

2.25 

 

October 11, 2024

 

 

 

 

 

 

Sandeep Nijhawan

 

May 25, 2011

 

109,739 

 

12,760 

 

6.20 

 

June 5, 2021

 

 

 

 

 

 

 

 

February 1, 2012

 

12,383 

 

5,117 

 

8.84 

 

January 22, 2022

 

 

 

 

 

 

 

 

March 1, 2012

 

 

 

 

 

 

 

 

 

2,888 

 

5,574 

 

 

 

 

May 4, 2012

 

20,000 

 

10,000 

 

6.60 

 

May 3, 2022

 

 

 

 

 

 

 

 

January 25, 2013

 

19,166 

 

20,834 

 

9.46 

 

January 24, 2023

 

 

 

 

 

 

 

 

January 25, 2013

 

 

 

 

 

 

 

 

 

26,250 

 

50,663 

 

 

 

 

November 7, 2013

 

26,042 

 

23,958 

 

5.56 

 

November 6, 2023

 

 

 

 

 

 

 

 

November 7, 2013

 

 

 

 

 

 

 

 

 

52,500 

 

101,325 

 

 

 

 

February 26, 2014

 

 

 

40,000 

 

3.85 

 

February 25, 2024

 

 

 

 

 

 

 

 

February 26, 2014

 

 

 

 

 

 

 

 

 

20,000 

 

38,600 

 

 

 

 

June 13, 2014

 

 

 

250,000 

 

2.29 

 

June 12, 2024

 

 

 

 

 

 

 

 

June 13, 2014

 

 

 

 

 

 

 

 

 

100,000 

 

193,000 

 

 

Tony P. Chiang

 

May 9, 2005

 

397,916 

 

 

 

0.10 

 

June 14, 2015

 

 

 

 

 

 

 

 

July 9, 2007

 

39,760 

 

 

 

1.66 

 

September 4, 2017

 

 

 

 

 

 

 

 

January 20, 2009

 

75,000 

 

 

 

2.00 

 

January 19, 2019

 

 

 

 

 

 

 

 

February 1, 2010

 

187,500 

 

 

 

2.66 

 

February 3, 2020

 

 

 

 

 

 

 

 

February 2, 2011

 

37,500 

 

 

 

6.20 

 

March 30, 2021

 

 

 

 

 

 

 

 

February 1, 2012

 

28,326 

 

11,674 

 

8.84 

 

January 22, 2022

 

 

 

 

 

 

 

 

March 1, 2012

 

 

 

 

 

 

 

 

 

6,600 

 

12,738 

 

 

 

 

January 25, 2013

 

14,374 

 

15,626 

 

9.46 

 

January 24, 2023

 

 

 

 

 

 

 

 

January 25, 2013

 

 

 

 

 

 

 

 

 

11,250 

 

21,713 

 

 

 

 

February 26, 2014

 

 

 

40,000 

 

3.85 

 

February 25, 2024

 

 

 

 

 

 

 

 

February 26, 2014

 

 

 

 

 

 

 

 

 

20,000 

 

38,600 

 

 

 

 

June 13, 2014

 

 

 

150,000 

 

2.29 

 

June 12, 2024

 

 

 

 

 

 

 

 

June 13, 2014

 

 

 

 

 

 

 

 

 

100,000 

 

193,000 

 

 

David E. Lazovsky

 

September 5, 2007

 

300,000 

 

 

 

1.66 

 

September 4, 2017

 

 

 

 

 

 

 

 

January 20, 2009

 

200,000 

 

 

 

2.00 

 

January 19, 2019

 

 

 

 

 

 

 

 

February 4, 2010

 

187,500 

 

 

 

2.66 

 

February 3, 2020

 

 

 

 

 

 

 

 

March 31, 2011

 

52,500 

 

 

 

6.20 

 

March 30, 2021

 

 

 

 

 

 

 

 

February 1, 2012

 

36,650 

 

 

 

8.84 

 

January 22, 2022

 

 

 

 

 

 

 

 

February 4, 2013 

 

34,166 

 

 

 

9.71 

 

February 3, 2023

 

 

 

 

 

 

 

 

March 31, 2011

 

6,555 

 

 

 

6.20 

 

January 10, 2015

 

 

 

 

 

 

 

 

February 1, 2012

 

6,870 

 

 

 

8.84 

 

January 10, 2015

 

 

 

 

 

 

 

 

February 4, 2013

 

10,250 

 

 

 

9.71 

 

January 10, 2015

 

 

 

 

 

 

 

 

February 26, 2014

 

22,209 

 

 

 

3.85 

 

January 10, 2015

 

 

 

 

 

 

37


 

Table of Contents

 


(1) The stock options vest as follows:

·

The stock option granted to Dr. McWilliams on May 28, 2014, vests in full on the earlier to occur of the first anniversary of the applicable grant date or the date of the annual meeting of our stockholders immediately following the applicable grant date, in each case, subject to his continued service with the company through the vesting date. The stock option granted to Dr. McWilliams on June 13, 2014, vests in full on the first anniversary of the grant date, provided continuous service through the vesting date. The stock option granted to Dr. McWilliams on October 12, 2014, vests in equal monthly installments over the four years following October 12, 2014, subject to Dr. McWilliams’ continued service with the company through each vesting date.

·

The stock options granted to Mr. Neely and Drs. Nijhawan and Chiang, other than th e grant on June 13, 2014, vest with respect to 25% of the shares, on the first anniversary of the grant date, and with respect to 1/48th of the shares, on each monthly anniversary of the grant date thereafter, subject to continued employment through the applicable vesting date and further subject to accelerated vesting under certain circumstances. The stock options granted on June 13, 2014 to Mr. Neely and Drs. Nijhawan and Chiang vest with respect to 50% of the shares on the first anniversary of the grant date, with the remaining shares vesting monthly over the next year, such that all of the stock option shares vest and be exercisable on the second anniversary of the grant date, subject to continuous service to the company through each vesting date.

·

The stock option granted to Mr. Griffin on October 12, 2014, vests as to 25% of the shares on October 12, 2015, with the remaining 75% vesting and becoming exercisable in equal monthly installments over the next three years, subject to Mr. Griffin’s continued employment with the company through each vesting date.

(2) The restricted stock awarded to Mr. Neely and Drs. Nijhawan and Chiang, other than the award on June 13, 2014, vest in four substantially equal installments on each anniversary of the grant, subject to continued employment through the applicable vesting date and further subject to accelerated vesting under certain circumstances.  The restricted stock awarded on June 13, 2014 to Dr. McWilliams (as a non-employee director), Mr. Neely and Drs. Nijawan and Chiang, vests in full on the first anniversary of the grant date, subject to continued service to the company through the vesting date.

(3) Calculated based on the closing trading price of our common stock on December 31, 2014 ($1.93).

 

38


 

Table of Contents

2014 Option Award Exercises and Stock Awards Veste d

The table below sets forth the stock option awards exercised by and the stock awards vested to our NEOs during 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

Stock Awards

 

 

 

Number of Shares

 

Value Realized

 

Number of

 

 

 

 

 

Acquired Upon

 

Upon Exercise ($)

 

Shares Acquired

 

Value Realized on

 

Executive

 

Exercise (#)

 

(1)