Proxy Statement (definitive) (def 14a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

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 Pursuant to Section 240.14a-12

HUTCHINSON TECHNOLOGY INCORPORATED

(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:

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	(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.:

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(4)

Date Filed:

HUTCHINSON TECHNOLOGY INCORPORATED

40 West Highland Park Drive NE

Hutchinson, Minnesota 55350

(320) 587-3797

August 9, 2016

Dear Shareholder:

You are cordially invited to attend the annual meeting of shareholders to be held at the offices of Faegre Baker Daniels LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402 commencing at 11:00 a.m., central time, on Wednesday, September 21, 2016. The Secretary’s notice of annual meeting and the proxy statement that follow describe the matters to come before the meeting.

Whether or not you plan to attend the meeting, your vote is important, and we encourage you to vote promptly. You may vote your shares over the Internet, by telephone or by mail. If you choose to vote by mail, please mark, sign and date the proxy card you receive and return it in the envelope provided. Instructions regarding all three methods of voting are contained on the following page and on the proxy card.

	Sincerely,



	Richard J. Penn
	Chief Executive Officer

VOTING METHOD

If your shares are registered directly in your name: If you are a shareholder of record, you may vote your shares through the Internet, by telephone or by mail as described below. Please help us save time and postage costs by voting through the Internet or by telephone. Each method is available 24 hours a day and will ensure that your vote is confirmed and posted immediately. To vote:

BY INTERNET (www.proxyvote.com)

Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

BY TELEPHONE (1-800-690-6903)

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.

BY MAIL (if you vote by Internet or telephone, please do not mail your proxy card)

Mark, sign and date your proxy card and return it in the postage-paid envelope that accompanied it or return it to Vote Processing, c/o Broadridge, 51, Mercedes Way, Edgewood, NY 11717.

If your shares are held in a brokerage, bank or similar account: If you hold your shares in street name, you will receive voting instructions from the organization holding your account and you must follow those instructions to vote your shares.

Your vote is important. Thank you for voting.

HUTCHINSON TECHNOLOGY INCORPORATED

Notice of Annual Meeting of Shareholders

to be held on September 21, 2016

The annual meeting of shareholders of Hutchinson Technology Incorporated will be held at the offices of Faegre Baker Daniels LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402, commencing at 11:00 a.m., central time, on Wednesday, September 21, 2016, for the following purposes:

To elect a board of seven directors to serve until the next annual meeting of shareholders or until their successors have been duly elected and qualified.

To hold a non-binding, advisory vote to approve the compensation of our named executive officers.

To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 25, 2016.

To transact other business that may properly be brought before the meeting.

The record date for the meeting has been fixed as August 2, 2016, and only shareholders of record at the close of business on that date are entitled to receive notice of and vote at the meeting.

Your proxy is important to ensure a quorum at the meeting. Even if you own only a few shares, and whether or not you expect to be present, we urge you to vote your shares through the Internet or by telephone in accordance with the voting instructions provided to you. You may also mark, sign and date the paper proxy card you received to vote your shares and return it in the envelope provided.


	By Order of the Board of Directors,



	Peggy Steif Abram
	Secretary

Hutchinson, Minnesota

August 9, 2016

Important notice regarding the availability of proxy materials for the Annual Meeting of Shareholders to be held on September 21, 2016: the proxy statement and Annual Report on Form 10-K, as amended, are available at www.htch.com/proxymaterials.

TABLE OF CONTENTS

	Page

GENERAL INFORMATION	1
PROPOSAL NO. 1 – ELECTION OF DIRECTORS	4
CORPORATE GOVERNANCE	10
PROPOSAL NO. 2 – ADVISORY VOTE ON EXECUTIVE COMPENSATION	13
PROPOSAL NO. 3 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	14
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT	15
COMPENSATION OF EXECUTIVE OFFICERS	17
EQUITY COMPENSATION PLAN INFORMATION	31
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	31
AUDIT COMMITTEE REPORT	31
ADDITIONAL INFORMATION	32

PROXY STATEMENT

GENERAL INFORMATION

Our board of directors is soliciting proxies from our shareholders to vote their shares of our common stock at the annual meeting of shareholders to be held on Wednesday, September 21, 2016, at the offices of Faegre Baker Daniels LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402, commencing at 11:00 a.m., central time and at any adjournments thereof. Our principal executive offices are located at 40 West Highland Park Drive NE, Hutchinson, Minnesota, 55350. Our telephone number is (320) 587-3797.

Pending Transaction

As previously announced, on November 1, 2015, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Headway Technologies, Inc., a California corporation (“Parent”), and Hydra Merger Sub, Inc., a Minnesota corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”). Pursuant to the Merger Agreement, Merger Subsidiary will merge with and into our company, and our company will continue as the surviving corporation and as a wholly owned subsidiary of Parent (the “Merger”). Parent and Merger Subsidiary are each beneficially owned by TDK Corporation, a Japanese electronics company (“TDK”). The consummation of the Merger remains subject to the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction or waiver of the other closing conditions specified in the Merger Agreement. The Merger Agreement was approved by our shareholders at a Special Meeting of Shareholders on January 28, 2016.

NASDAQ Stock Market Rules require all companies listed on the exchange to hold an annual meeting of shareholders within 12 months of the end of a company’s fiscal year, and, in compliance with these rules, the company will hold its annual meeting on September 21, 2016 while the Merger remains subject to completion of regulatory review.

Availability of Proxy Material

On or about August 9, 2016, we will begin mailing to the registered holders of our common stock at the close of business on August 2, 2016 our proxy material, including the form of proxy solicited by our board of directors. We will send the proxy material directly to any shareholder whose shares are registered in the shareholder’s name with our transfer agent, Wells Fargo Bank, N.A. Shareholders who hold their shares in street name, meaning that their shares are held in a brokerage, bank or similar account, will receive our proxy materials and voting instructions from the relevant broker, bank or nominee.

Record Date and Quorum

Only shareholders of record at the close of business on August 2, 2016 will be entitled to vote at the annual meeting or adjournment. At the close of business on the record date, we had 33,922,004 shares of our common stock outstanding and entitled to vote. A majority of the shares outstanding on the record date, present in person or represented by proxy, will constitute a quorum for the transaction of business at the meeting.

Voting of Proxies

Proxies that are voted through the Internet or by telephone in accordance with the voting instructions provided, and proxy cards that are properly signed, dated and returned to us, will be voted in the manner specified. A proxy card that is signed and returned without voting instructions will be voted FOR the seven director nominees, FOR ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 25, 2016, and FOR the approval of the non-binding, advisory vote to approve the compensation of our named executive officers. A shareholder submitting a proxy may revoke it at any time before it is exercised by sending a written revocation to one of our officers, by delivering a signed proxy card bearing a later date, by submitting a subsequent proxy through the Internet or by telephone or by voting in person at the annual meeting. A shareholder’s most current proxy card or Internet or telephone proxy will be the one that is voted.

Effect of Abstentions and “Broker Non-Votes”

If shareholders indicate on their proxies that they wish to abstain from voting, including brokers holding their customers’ shares of record who cause abstentions to be recorded, these shares are considered present and entitled to vote at the annual meeting. These shares will count toward determining whether or not a quorum is present. However, these shares will not be taken into account in determining the outcome of any of the proposals and these shareholders are in effect casting a negative vote. A shareholder (including a broker) who does not give authority to a proxy to vote, or withholds authority to vote, on a certain proposal will not be considered present and entitled to vote on that proposal.

If a shareholder does not give instructions to its broker as to how to vote the shares, the broker has authority under New York Stock Exchange rules to vote those shares for or against “routine” proposals, such as the ratification of Deloitte & Touche LLP as our independent registered public accounting firm. Brokers cannot vote on their customers’ behalf on “non-routine” proposals, such as the election of directors or approval of the compensation of our named executive officers. These rules apply to us even though the shares of our common stock are traded on the NASDAQ Global Select Market. If a broker votes shares that are unvoted by its customers for or against a “routine” proposal, these shares are counted for the purpose of establishing a quorum and also will be counted for the purpose of determining the outcome of “routine” proposals. If a broker does not receive voting instructions as to a non-routine proposal, or chooses to leave shares unvoted on a routine proposal, a “broker non-vote” occurs and those shares will be counted for the purpose of establishing a quorum, but not for determining the outcome of those proposals. Shares that are subject to broker non-votes are considered not entitled to vote on the particular proposal, and effectively reduce the number of shares needed to approve that proposal.

Required Vote

Shareholders are entitled to one vote for each share of our common stock held as of the record date. Directors are elected by a plurality of the voting power of the outstanding shares of our common stock present and entitled to vote. Shareholders do not have the right to cumulate their votes in the election of directors. Negative votes will not affect the outcome of the election of directors. The affirmative vote of the holders of at least a majority of the voting power of the outstanding shares of our common stock present and entitled to vote is required for approval of the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 25, 2016 and the non-binding, advisory vote to approve the compensation of our named executive officers.

Access to the Meeting

Proof of stock ownership and government-issued photo identification (such as a valid driver’s license or passport) will be required for admission to the meeting. Only shareholders who owned our common stock as of the close of business on August 2, 2016 are entitled to attend the meeting.

If you are a “shareholder of record” as of August 2, 2016, you must bring government-issued photo identification to be admitted to the meeting. You may vote your shares in person at the meeting by completing a ballot at the meeting.

If your shares are held in “street name,” you must bring government-issued photo identification and must request a written legal proxy from your broker, bank, trustee or other nominee that holds your shares in order to vote your shares at the meeting. If you do not obtain a written legal proxy from your broker, bank, trustee or other nominee and bring it to the meeting, then you will not be entitled to vote your shares at the meeting, but you can still attend the meeting if you bring a recent bank or brokerage statement showing that you owned shares of common stock on August 2, 2016 and provide government-issued photo identification.

Adjournment of Meeting

If a quorum is not present to transact business at the meeting or if we do not receive sufficient votes in favor of the proposals by the date of the meeting, the persons named as proxies may propose one or more adjournments of the meeting to permit solicitation of proxies. Any adjournment would require the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting.

Expenses of Soliciting Proxies

We will pay the cost of soliciting proxies in the accompanying form. Our directors, officers and regular employees may solicit proxies personally or by e-mail, telephone, fax or special letter, and may request brokerage firms and custodians, nominees and other record holders to forward soliciting materials to the beneficial owners of our stock, and we will reimburse them for their reasonable out-of-pocket expenses in forwarding these materials.

Shareholder Proposals

Under the rules of the Securities and Exchange Commission (the “SEC”), if a shareholder wants us to include a proposal in our proxy statement and form of proxy for presentation at our annual meeting of shareholders, if any, to be held in 2017, the proposal must be received by us at our principal executive offices no later than April 11, 2017. The proposal must include proof of ownership of our stock and satisfy the other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated thereunder.

Our restated bylaws provide certain procedures that a shareholder must follow to nominate persons for election as directors or to introduce an item of business at an annual meeting of shareholders other than for inclusion in our proxy statement in compliance with Exchange Act Rule 14a-8. These procedures provide that nominations for director nominees and/or an item of business to be introduced at an annual meeting of shareholders must be submitted in writing on a timely basis, together with certain specified information relating to such shareholder’s identity, stock and derivative ownership, the identity and background of the director nominees and other matters. We must receive the notice of a shareholder’s intention to introduce a nomination or to propose an item of business at our annual meeting of shareholders, if any, to be held in 2017 no later than June 23, 2017.

Proposal No. 1 – ELECTION OF DIRECTORS

Composition of Our Board of Directors

Our restated bylaws provide that our business will be managed by or under the direction of a board of directors of not less than three nor more than twelve directors, which number will be determined by the shareholders at their annual meeting. Each director will be elected at the annual meeting for a term of one year or until a successor has been elected and qualified. Our board of directors has recommended that the number of directors to be elected for the ensuing year be set at seven and has nominated the seven persons named below for election as directors. Proxies solicited by our board of directors will, unless otherwise directed, be voted to elect the seven nominees named below to constitute the entire board of directors.

Directors and Director Nominees

All of the nominees named below are current directors of our company. Each nominee has indicated a willingness to serve as a director for the ensuing year, but in case any nominee is not a candidate at the meeting for any reason, the proxies named in our form of proxy may vote for a substitute nominee in their discretion or our board of directors may recommend that the number of directors to be elected be reduced. The following table sets forth certain information regarding each director nominee:

Name	Age	Position	Director Since
Wayne M. Fortun	67	Chairman of the Board of Directors	1983
Martha Goldberg Aronson	48	Director	2010
Russell Huffer	67	Lead Director	1999
Richard J. Penn	60	President, Chief Executive Officer and Director	2012
Frank P. Russomanno	68	Director	2011
Philip E. Soran	60	Director	2011
Thomas R. VerHage	63	Director	2006

Wayne M. Fortun joined our company in 1975, and has been Chairman of our board of directors since October 1, 2012. He was elected President and Chief Operating Officer in 1983 and Chief Executive Officer in May 1996, and served as President and Chief Executive Officer until September 30, 2012. He is also a director of G&K Services, Inc. and C.H. Robinson Worldwide, Inc.

During Mr. Fortun’s more than 40 years with our company, he has developed extensive experience and critical knowledge of our company and the disk drive and other industries in which we operate. His intense familiarity with our operations and technologies enable him to be uniquely qualified to serve on our board of directors. His service on the boards of two other public companies provides him with additional valuable operational and managerial perspectives.

Martha Goldberg Aronson served as Executive Vice President of Strategic Planning at Ecolab, Inc., a global leader in water, hygiene and energy technologies and services, from November 2015 to April 2016, and previously served as Ecolab’s Executive Vice President and President-Global Healthcare, from September 2012 to November 2015. She joined Ecolab in June 2012 as Ecolab’s Executive Vice President of Strategic Planning. Prior to joining Ecolab, Ms. Goldberg Aronson had been Senior Vice President and President, North America, of Hill-Rom Holdings, Inc., a leading worldwide manufacturer and provider of medical technologies and related services for the health-care industry, since August 2010. Before joining Hill-Rom, she served as Senior Vice President at Medtronic, Inc., a leading manufacturer of medical devices, from March 2008 to November 2009, and in various other domestic and international management positions with Medtronic, since 1991. She is also a director of Methode Electronics, Inc. and CONMED Corporation.

Ms. Goldberg Aronson’s years of executive experience in the medical technology and health-care industry provide her with knowledge and expertise in the development and communication of effective business strategies and the pursuit of technological innovation. She provides important perspective on international business matters, drawing upon her tenure in international executive roles. Her prior executive positions and current service on two other public company boards provides our board of directors with valuable business insight and strategic input.

Russell Huffer retired from his positions with Apogee Enterprises, Inc., a manufacturer of glass products, services and systems, in August 2011. From 1999 until January 2011, Mr. Huffer served as Chairman of Apogee’s board of directors. He also served as President, Chief Executive Officer and a director of Apogee from 1998 until his retirement, and had served in various senior management positions with Apogee and its subsidiaries since 1986. In October 2009, Mr. Huffer was appointed to serve as lead director of our board of directors.

Mr. Huffer’s experience as the chief executive officer and in other senior management positions at Apogee provides extensive operational and management insight to our company. His many years at Apogee provide a deep familiarity with the issues associated with technology excellence and operations in a manufacturing company. As a retired chief executive officer of a public company and a current director of NCCI Holdings, Inc., a national workers compensation data management and services provider, he also has a keen understanding of the management and operational requirements needed in a business environment.

Richard J. Penn has been with our company since 1981, and has been our President and Chief Executive Officer since October 1, 2012. Mr. Penn served as our Senior Vice President and President of our Disk Drive Components Division from March 2011 until September 30, 2012. He was Senior Vice President and President of our BioMeasurement Division from April 2007 to March 2011. Prior to that, he was Vice President of Operations from October 2003 to November 2005, and was Senior Vice President and President of our Disk Drive Components Division from November 2005 to April 2007.

During his 35 years with our company, Mr. Penn has developed broad knowledge of our company’s operations, processes and products. His deep familiarity with our customers and with the industries in which our businesses operate, together with the division leadership positions he has held at our company, provide him with the unique capabilities and experience to develop, implement and communicate our business strategies and, as our chief executive officer, lead our business efforts.

Frank P. Russomanno retired from his positions with Imation Corp., a developer, manufacturer and marketer of data storage and imaging products and services, in May 2010. He served as Chief Executive Officer and a director of Imation from April 2007 until his retirement and as Vice Chairman from March 2009 until his retirement. He also had served in various senior management positions, including as President and as Chief Operating Officer, at Imation since 1996, when 3M Company (where Mr. Russomanno began his career in 1973) spun off several business units that became Imation. Mr. Russomanno is also Executive Director of Emrise Corporation.

Mr. Russomanno has extensive executive experience leading a global technology company, with specific expertise in the challenges and opportunities facing the data storage industry. His leadership roles at a publicly traded company have provided him an understanding of corporate governance and investor relations issues. Mr. Russomanno also provides our board of directors with valuable insights on marketing technology products globally and experience overseeing mergers and acquisitions.

Philip E. Soran is the founder/Executive Chairman of Vidku, Inc., a developer of a video-based discussion platform. He co-founded Compellent Technologies, Inc., a publicly traded company that provided highly virtualized storage solutions with automated data management features for enterprise and cloud-computing environments, in 2002. He served as its President and Chief Executive Officer until February 2011, when it was acquired by Dell Inc. Mr. Soran served as the President of Dell Compellent from February 2011 until March 2012. Prior to co-founding Compellent Technologies, Mr. Soran served as Chief Executive Officer and President of XIOtech Corp., a network storage vendor that he co-founded in 1995. Mr. Soran is also a director and serves on the audit committees of SPS Commerce, Inc. and Piper Jaffray Companies. Mr. Soran was also a director of Stellent, Inc., from 2003 to 2006 when the company was acquired by Oracle Corporation.

Mr. Soran’s experience in founding and building software and data management companies provides strategic and operational insight to our board of directors, particularly with respect to emerging technology business opportunities. Our board also benefits from the management and leadership experience he gained as the chief executive officer of a publicly traded company and his experience as a director of other public companies.

Thomas R. VerHage retired from his positions with Donaldson Company, Inc., a worldwide provider of filtration systems and replacement parts, in October 2011. From 2004 until his retirement, Mr. VerHage served as Vice President and Chief Financial Officer of Donaldson. Prior to joining Donaldson, he was a partner at Deloitte & Touche LLP, an independent registered public accounting firm, from 2002 to 2004, and a partner at Arthur Andersen LLP from 1987 to 2002. He is also a director of Franklin Electric Co., Inc.

Mr. VerHage has extensive public company finance, accounting and audit experience from his experience as chief financial officer of a publicly traded global manufacturing company and his positions in the public accounting industry. Mr. VerHage’s financial and public accounting experience provides him with broad knowledge related to financial oversight and management of financial resources. As a chief financial officer of a public company, he also has relevant and valuable expertise in providing guidance on financial and risk management processes and in communicating with investors. In addition, Mr. VerHage has valuable insights into the end markets and customers for our disk drive industry products through his work with Donaldson Company’s disk drive filter business.

None of the above-identified nominees is related to each other or to any of our executive officers.

Board of Directors Meetings and Attendance

Our board of directors held twelve meetings during the fiscal year ended September 27, 2015, which we refer to as “fiscal 2015.” During fiscal 2015, all of our directors attended 75% or greater of the meetings of our board of directors and committees on which he or she served, except for Ms. Aronson, whose absences related to a medical issue.

Committees of Our Board of Directors

The following table summarizes the composition of each of the committees of our board of directors:

Directors	Audit Committee	Compensation Committee	Governance and Nominating Committee	Competitive Excellence Committee
Martha Goldberg Aronson ^*	—	Member	Member	—
Russell Huffer*	Member	Member	Chair	—
Frank P. Russomanno*	Member	—	Member	—
Philip E. Soran*	—	Chair	—	Member
Thomas R. VerHage*	Chair	—	—	Member
Wayne M. Fortun, Chairman	—	—	—	Chair
Richard J. Penn, President and Chief Executive Officer	—	—	—	—

* Independent Director

Audit Committee

Our board of directors has determined that all members of our audit committee are “independent” as that term is used in Section 10A(m) of the Exchange Act and as that term is defined in the NASDAQ Stock Market Rules. Our audit committee held eight meetings in fiscal 2015. Our audit committee’s function is one of oversight and, in that regard, our audit committee meets with our management and internal auditor, and our independent registered public accounting firm, to review and discuss our financial reporting and our controls respecting accounting and risk of material loss. The responsibilities of our audit committee are set forth in the Audit Committee Charter, which is regularly reviewed in light of SEC regulations and NASDAQ Stock Market Rules and is available on our website at www.htch.com .

Our audit committee received information from management and pre-approved all auditing services and non-audit services provided by our independent registered public accounting firm, and considered, prior to engagement, whether the provision of the non-audit services was compatible with maintaining the independent registered public accounting firm’s independence. Our board of directors has determined that Mr. VerHage has been designated as our “audit committee financial expert” as defined in the SEC regulations.

Compensation Committee

Our board of directors has determined that all members of our compensation committee are “independent” and meet the further requirements for compensation committee members contained in the NASDAQ Stock Market Rules; are “non-employee directors” as that term is defined in Rule 16b-3 under the Exchange Act; and are “outside directors” as that term is used in Section 162(m) of the Internal Revenue Code (the “Code”). Our compensation committee held four meetings in fiscal 2015. As described more fully in the following paragraphs, our compensation committee is responsible for (i) reviewing and approving a program regarding all forms of compensation for executive officers, (ii) reviewing and approving policies and processes for carrying out executive officer evaluations and compensation reviews, (iii) approving the grant of equity-based incentive awards to each of our executive officers and non-employee directors, and (iv) reviewing and recommending for approval by the board of directors or our independent directors, as appropriate, compensation actions involving our executive officers and our non-employee directors. The responsibilities of our compensation committee are set forth in the Compensation Committee Charter, which is regularly reviewed in light of SEC regulations and NASDAQ Stock Market Rules and is available on our website at www.htch.com .

At the beginning of each fiscal year, our compensation committee reviews and recommends to our board of directors certain compensation actions involving our executive officers, other than the chief executive officer, including any merit increases to base salary, the payout of annual cash incentive awards for performance in the prior fiscal year and performance targets for the annual cash incentive plan for the current fiscal year, and approves the grant of equity awards to all of our executive officers. The compensation committee bases these recommendations on its review of competitive market data

provided by its compensation consultant, financial and operational performance data for the prior fiscal year, projections for the current fiscal year, and the recommendations of our chief executive officer with respect to compensation actions involving executive officers other than himself. Recommendations regarding the compensation of our chief executive officer are made by the compensation committee in executive session without the chief executive officer present and are based on the committee’s evaluation of the chief executive officer’s performance in the prior fiscal year, considering feedback from each of the chief executive officer’s direct reports and all members of the board of directors. The compensation committee’s recommendations on base salary, annual cash incentive award payout for performance in the prior fiscal year and performance targets for the current fiscal year’s annual cash incentive plan for the chief executive officer are presented to the independent directors for approval, and the compensation committee’s recommendations for the remaining executive officers are presented to the full board of directors for approval. In conjunction with the committee’s compensation consultant, our human resources department provides the compensation committee with regular updates at its scheduled meetings and various tools and resources to keep the committee informed about current trends in executive compensation and market information on pay philosophies, compensation elements separately and in total, and incentive mix. In accordance with the restrictions on changes to executive compensation contained in the Merger Agreement, no new adjustments were made to the company’s executive compensation plan for the fiscal year ending September 25, 2016.

Our compensation committee also reviews compensation provided to our non-employee directors and, at the beginning of each fiscal year, recommends to our independent directors any changes the committee considers appropriate in the amount or form of such compensation. The compensation committee bases these recommendations primarily on its review of competitive market data, while also considering our cost-containment efforts.

The compensation committee delegates to the chief executive officer authority to approve equity awards involving a limited number of shares per year to employees who are not executive officers of our company. No delegation of the compensation committee’s authority is permitted with regard to compensation actions involving executive officers or non-employee directors of our company.

Governance and Nominating Committee

All members of our governance and nominating committee are “independent” as that term is defined in the NASDAQ Stock Market Rules. Our governance and nominating committee held three meetings in fiscal 2015. Our governance and nominating committee assists our board of directors in developing and implementing our Principles of Corporate Governance, identifying candidates for director positions, determining the composition of our board of directors and our board committees, and maintaining a high standard of governance, care and due diligence in carrying out its responsibilities. The responsibilities of our governance and nominating committee are set forth in the Governance and Nominating Committee Charter, which is regularly reviewed in light of SEC regulations and NASDAQ Stock Market Rules and is available on our website at www.htch.com .

Competitive Excellence Committee

Our competitive excellence committee assesses the value to our customers of our products and services in each market we serve. The committee bases its assessment on our competitive standing in those competencies that are central to sustaining better value in a target market. The committee evaluates management’s identification of areas that afford opportunities for increasing our competitive standing, management’s effectiveness in achieving such increases, and management’s effectiveness in increasing the value proposition of our products and services in our markets. Our competitive excellence committee held three meetings in fiscal 2015. The responsibilities of our competitive excellence committee are set forth in the Competitive Excellence Committee Charter, which is available on our website at www.htch.com .

Director Independence

Our board of directors has determined that Ms. Goldberg Aronson and Messrs. Huffer, Russomanno, Soran and VerHage are “independent” as that term is defined in the NASDAQ Stock Market Rules.

Director Compensation

Directors who are employees receive no additional compensation for serving on our board of directors. Non-employee directors receive annual cash retainers, cash fees for attendance at board and committee meetings (except for the chairman), and annual equity awards in the form of stock options. Cash retainers and attendance fees were unchanged for 2015, but annual stock option awards were increased to 10,000 shares. The following table describes the compensation arrangements with our non-employee directors for the one-year period commencing with our annual shareholder meeting held January 29, 2015.

Compensation Element	Amount Payable
Annual cash retainers
· Board chairman	$125,000
· Board member (other than chairman)	$30,048
· Audit committee chair	$15,000
· Compensation committee and governance and nominating committee chairs	$5,000
· Audit committee member (other than the chair)	$5,000
Meeting fee (not payable to chairman) ^( 1 )	$1,188
Stock option award ⁽²⁾	10,000	shares
Shares in lieu of cash retainer	Unrestricted shares equal in value to 100% of cash retainer elected to be paid in equity.

⁽¹⁾ We pay a meeting fee for each board of directors and committee meeting attended by a non-employee director (other than the chairman) in person or by telephone. We also reimburse directors for travel and lodging expenses incurred in connection with their attendance at board of directors and committee meetings and shareholder meetings, and for traveling to visit company operations.

⁽²⁾ We provide a stock option award to each non-employee director on the date he or she is first elected or appointed to the board and on the date of each annual meeting of shareholders if the director’s service will continue beyond that annual meeting of shareholders. In accordance with the restrictions on grants of equity awards contained in the Merger Agreement, no new equity awards have been granted since November 1, 2015.

The following table summarizes compensation provided to each non-employee director for services provided during fiscal 2015.

Director Compensation for Fiscal 2015

Name	Fees Earned or Paid in Cash ⁽¹⁾ ($)		Option Awards ⁽²⁾ ($)		All Other Compensation ($)		Total ($)
Wayne M. Fortun		125,000		24,451		—		149,451
Martha Goldberg Aronson		46,678		24,451		—		71,129
Russell Huffer		72,119		24,451		—		96,570
Frank P. Russomanno		62,368		24,451		—		86,819
Philip E. Soran		55,240		24,451		—		79,691
Thomas R. VerHage		72,368		24,451		—		96,819

⁽¹⁾

For fiscal 2015, each non-employee director could elect to receive some or all of the retainer payments to which he or she was entitled in the form of shares of our common stock, with the number of shares determined by dividing the amount of the retainer payment to be received in shares by the fair market value of a share of our common stock on the date the cash retainer payment would have been made, rounded down to the nearest whole share. The following directors made such elections and received the number of shares indicated during fiscal 2015:

Name	Shares Received (#)		Cash Retainer Foregone ($)
Frank P. Russomanno		11,318		26,286
Philip E. Soran		8,621		20,024

⁽²⁾

Each non-employee director who was a member of our board on January 29, 2015, the date of our 2015 Annual Meeting of Shareholders, received a non-statutory stock option award with an exercise price of $3.50 per share on that date. The amounts shown in the “Option Awards” column represent the aggregate grant date fair value of these awards computed in accordance with FASB ASC Topic 718. For additional information regarding our calculation of the grant date fair value of options granted in fiscal 2015, see Note 5, “Employee Benefits – Stock Options,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for fiscal 2015, as amended.

The aggregate number of shares subject to exercisable and non-exercisable options held by each non-employee director as of September 27, 2015 was as follows:

Name	Number of Shares Underlying Exercisable Options at 9/ 27/15		Number of Shares Underlying Unexercisable Options at 9/ 27/15
Wayne M. Fortun		566,481		20,740
Martha Goldberg Aronson		20,001		14,999
Russell Huffer		38,001		14,999
Frank P. Russomanno		15,001		14,999
Philip E. Soran		7,500		14,999
Thomas R. VerHage		38,001		14,999

Stock Option Grants

We grant each non-employee director a non-statutory stock option award on the date he or she is first elected or appointed to our board of directors and grant an award to each non-employee director whose service will continue beyond the annual meeting of shareholders on the date of each annual meeting. Until our 2011 Annual Meeting of Shareholders, these grants were made under our 1996 Incentive Plan, as amended and restated on October 10, 2008 (the “1996 Incentive Plan”). Starting with the 2011 Annual Meeting of Shareholders, these grants have been made under our 2011 Equity Incentive Plan (the “2011 Incentive Plan”), which was approved by our shareholders at that meeting. Each option has an exercise price equal to the fair market value per share of the common stock on the day the option was granted. Each option granted in fiscal 2015 becomes exercisable as to one-third of the shares subject to the option on each of the first, second and third anniversaries of the date of grant. Exercisability of an option will be accelerated if a director dies or becomes disabled or upon a change in control of our company. The normal term of a stock option is 10 years from the date of grant. If a director’s service on our board of directors ends prior to that time, vested options will remain exercisable for three months, unless the director’s service ended due to death or disability or after at least five years of service as a director, in which case vested options will remain exercisable for three years after service ends (but not beyond the end of their original 10-year term). If a director has reached age 65 and has completed at least five years of service when his or her service as a director ends, each vested option will remain exercisable until the end of its originally scheduled term. Our compensation committee retains discretion to accelerate the exercisability of any option, and to cancel any option in connection with certain mergers, sales of corporate assets or statutory share exchanges, or any dissolution or liquidation involving our company.

Required Vote

Election to our board of directors of each of the seven nominees named above requires a plurality of the voting power of the outstanding shares of our common stock present and entitled to vote on the election of directors.

Our board of directors recommends that our shareholders vote FOR the election of each of the seven nominees listed above to constitute our board of directors.

CORPORATE GOVERNANCE

Principles of Corporate Governance

Our board of directors has adopted Principles of Corporate Governance, available on our website at www.htch.com, to assist in the performance of its responsibilities. In addition to corporate governance policies and practices discussed elsewhere in this proxy statement, our Principles of Corporate Governance and related board of directors and board committee actions provide that:

All Directors Elected Annually. Our entire board of directors will stand for election at each annual meeting of shareholders.

Executive Sessions of Independent Directors. The independent directors will have the opportunity to meet in executive session without inside directors or management present at each regularly scheduled board of directors meeting.

Lead Director . If the chairman of our board of directors is our company’s chief executive officer or is not an independent director, the independent directors will select from among themselves a lead director.

Evaluating Board and Committee Performance . Annual evaluations of the performance of the board of directors, each of its committees and the individual members of each will be conducted.

Share Ownership by Directors. Non-employee directors are expected to accumulate and hold common stock of our company whose value, measured as the greater of current value or original value, is at least five times the amount of the annual cash retainer for a director.

Limitations on Other Board Memberships. None of our non-employee directors should serve on the board of directors of more than five other public companies, our chief executive officer should not serve on the board of directors of more than two other public companies, and no member of our audit committee should serve on the audit committee of more than two other public companies.

Change in Status. Any independent director whose affiliation or position of principal employment changes materially will offer his or her resignation as a director, and any inside director will offer his or her resignation as a director upon termination of service as an employee of our company.

Access to Outside Advisors. Our board of directors and each of its committees may retain independent outside financial, legal or other advisors or consultants as they deem necessary or advisable.

Succession Planning. Our board of directors will regularly review succession planning involving the chief executive officer and other senior management positions.

Director Orientation and Continuing Education . Each new director will participate in an orientation program, which will include briefings by senior management and each board committee chair on the company’s strategic plans, significant operations, and accounting, financial and risk management issues. In addition, our company will provide all directors with continuing education relevant to their duties as directors.

Code of Ethics and Conduct. Our board of directors has adopted a Code of Ethics and Conduct applicable to all of our officers, directors and employees, which also serves as our company’s Code of Ethics for Senior Financial Management. A copy of this code can be found as Appendix 2 to our Principles of Corporate Governance, which is available on our website at www.htch.com .

Board’s Leadership Structure

Our company does not have a policy with respect to separation of the roles of chief executive officer and chairman of the board of directors, because our board of directors believes it is in the best interests of our company to make that determination based on the circumstances. Our chief executive officer does not currently serve as chairman of the board of directors. In addition to other customary duties as chairman of the board of directors, Mr. Fortun consults regularly with our chief executive officer regarding the strategic direction of the company and provides input on the schedules and agendas for meetings of our board of directors. Because Mr. Fortun is not an independent director, our independent directors have selected Mr. Huffer from among themselves to serve as lead director.

As lead director, Mr. Huffer (i) presides as chair of meetings of our board of directors when the chairman of the board of directors is absent, (ii) organizes, convenes and presides over executive sessions of the independent directors, (iii) serves as the principal liaison between the independent directors and the chairman of the board of directors and chief executive officer, (iv) consults with the chairman of the board of directors in establishing schedules and agendas for meetings of our board of directors, and (v) serves in such other capacities with such other duties as the independent directors may determine from time to time.

Our company’s current leadership structure recognizes the day-to-day management role of the chief executive officer, the depth of company and industry experience of our current chairman of the board of directors, and the benefits of having a leader among independent directors to facilitate communication among our independent directors and the chairman of the board of directors and chief executive officer. Our board of directors has determined that this leadership structure is appropriate given the specific characteristics and circumstances of our company because it strengthens the board of directors’ role in fulfilling its risk oversight and general oversight responsibilities and its fiduciary duties to our company’s shareholders.

Board’s Role in Risk Oversight

Management is responsible for day-to-day risk assessment and mitigation activities, and our board of directors is responsible for risk oversight. The board of directors has delegated to the audit committee primary responsibility for reviewing and discussing with management our company’s policies and procedures with respect to risk assessment and management. Management has established a Risk Management Team, which consists of company personnel representing multiple functional areas and is led by the company’s internal auditor, to actively assess the company’s risks and to create and implement strategies to mitigate those risks. The Risk Management Team reports its activities and current assessments at every audit committee meeting. The audit committee periodically reports to our board of directors on risk oversight issues and concerns.

The board of directors may delegate specific areas of risk oversight to other committees as well. The compensation committee currently is responsible for reviewing management’s assessment of the relationship of the company’s compensation policies and practices to risk.

Director Qualifications

Candidates for director nominees are reviewed in the context of the current composition of our board of directors, our operating requirements and the long-term interests of our shareholders. Our governance and nominating committee will consider, at a minimum, the following factors in recommending potential new members to our board of directors, or the continued service of existing members, in addition to other factors it deems appropriate based on the current needs and desires of our board of directors:

demonstrated character and integrity, an inquiring mind, experience at a strategy/policy-setting level, sufficient time to devote to our affairs and high-level managerial experience;

experience in one or more fields of business, professional, governmental, communal, scientific or educational endeavor;

whether the member/potential member is subject to a disqualifying factor, such as relationships with our competitors, customers, suppliers, contractors, counselors or consultants, or recent previous employment with us;

the member’s/potential member’s independence;

whether the member/potential member assists in achieving a mix of members that represents a diversity of background and experience, including with respect to age, gender, international background, race and specialized experience;

whether the member/potential member, by virtue of particular experience, technical expertise or specialized skills, will add specific value as a member;

any factors related to the ability and willingness of a new member to serve, or an existing member to continue his or her service; and

whether the member/potential member has a general appreciation regarding major issues facing public companies of a size and scope similar to ours.

Our governance and nominating committee will reassess the qualifications of a director, including the director’s attendance and contributions at board of directors and board committee meetings, prior to recommending a director for re-election to another term.

Director Candidates Recommended by Shareholders

Our governance and nominating committee will consider director candidates recommended by shareholders. Shareholders who wish to recommend individuals for consideration by our governance and nominating committee to become nominees for election to our board of directors may do so by submitting a written recommendation to our Governance and Nominating Committee, c/o Chief Financial Officer, 40 West Highland Park Drive NE, Hutchinson, Minnesota 55350. Submissions must include a written recommendation and the reason for the recommendation, biographical information concerning the recommended individual, including age, a description of the recommended individual’s past five years of employment history and any past and current board memberships. The submission also must include certain information regarding the shareholder making the submission, including a description of all securities or contracts with a value derived in whole or in part from the value of any shares of our company’s common stock held by the shareholder or to which the shareholder is a party and a description of any material relationships between the shareholder and the recommended individual. The submission must be accompanied by a written consent of the individual to stand for election if nominated by our governance and nominating committee and to serve if elected by our board of directors or our shareholders, as applicable. Alternatively, shareholders may directly nominate a person for election to our board of directors by complying with the procedures set forth in our restated bylaws, any applicable rules and regulations of the SEC and any applicable laws.

Attendance at Annual Meeting

Our board of directors encourages each of its members to attend all annual meetings of shareholders that occur during a member’s service on our board of directors. All of the members of our board of directors who were standing for re-election attended the 2015 Annual Meeting of Shareholders.

Compensation Committee Interlocks and Insider Participation

No member of the compensation committee has ever been an officer or employee of our company or of any of our subsidiaries or affiliates, or has had any relationship with our company requiring disclosure in our proxy statement other than service as a director. None of our executive officers has served on the board of directors or on the compensation committee of any other entity, any officers of which served either on our board of directors or on our compensation committee.

Communication with Our Board of Directors

You may contact our board of directors or any member of our board of directors by mail addressed to the attention of our board of directors or the specific director identified by name or title, at Hutchinson Technology Incorporated, 40 West Highland Park Drive NE, Hutchinson, Minnesota 55350. All communications will be submitted to our board of directors or the specified board member on a periodic basis.

Related Person Transactions

Our audit committee must approve any related person transaction in which our company is a participant before commencement of the transaction, provided, however, that if a related person transaction is identified after it commences, it will be brought to the audit committee for review and possible ratification. The audit committee will approve or ratify a transaction only if it determines that the transaction is beneficial to our company and that the terms of the transaction are fair to our company.

For these purposes, a “related person” includes our directors, nominees for director, executive officers, any holder of more than 5% of our common stock, and any immediate family member of any of the foregoing persons. A “related person transaction” means any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which our company is a participant and in which a related person has a direct or indirect interest, other than the following:

payment of compensation by us to a related person for service as a director or executive officer;

transactions available to all employees or all shareholders on the same terms; and

transactions that, when aggregated with the amount of all other transactions between the related person and us, involve less than $120,000 in a fiscal year.

In determining whether to approve a related person transaction, our audit committee will analyze factors such as whether the transaction is material to our company, the role the related person has played in arranging the transaction, the structure of the transaction and the interests of all related persons in the transaction.

Our audit committee may, in its sole discretion, approve or disapprove any related person transaction. Approval of a related person transaction may be conditioned upon our company and the related person following certain procedures designated by the audit committee. With regard to any transaction for which ratification is sought, the audit committee may require amendment or termination of the transaction.

No related person transactions were subject to review or approval in fiscal 2015.

PROPOSAL NO. 2 – ADVISORY VOTE ON EXECUTIVE COMPENSATION

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, our shareholders are entitled to cast an advisory vote to approve the compensation of our named executive officers. While this vote is not binding on the company, the compensation committee will consider the outcome of the vote when making future compensation decisions for our executive officers.

We believe that our compensation program is strongly aligned with the long-term interests of our shareholders and that there is a strong relationship between pay actually received and corporate performance. Our named executive officers are compensated in a manner consistent with the company’s strategy, competitive practice, sound corporate governance principles and shareholders’ interests and concerns. We urge you to read the Compensation Discussion and Analysis, the compensation tables and the related narrative discussion included in this proxy statement for additional details on our company’s compensation program.

We are asking that our shareholders vote on the following resolution:

RESOLVED, that the shareholders approve on an advisory basis the compensation of Hutchinson Technology Incorporated’s named executive officers, as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules, including the Compensation Discussion and Analysis, the compensation tables and the related narrative discussion.

Our board of directors has decided that the company will hold an advisory vote on executive compensation annually until the next vote is held regarding the frequency of shareholder votes on executive compensation. The next advisory vote on executive compensation will be held at our next annual meeting of shareholders, if any, in 2017.

Our board of directors recommends that our shareholders vote FOR the approval of the advisory resolution on executive compensation.

PROPOSAL NO. 3 – RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

The firm of Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Ltd. and their respective affiliates, known collectively as Deloitte & Touche, have been our independent registered public accounting firm since June 13, 2002. Our audit committee has selected Deloitte & Touche to serve as our independent registered public accounting firm for the fiscal year ending September 25, 2016. While it is not required to do so, our audit committee is submitting the selection of that firm for ratification in order to ascertain the view of our shareholders. If the selection is not ratified, our audit committee will reconsider its selection.

A representative of Deloitte & Touche will be present at the annual meeting and will be afforded an opportunity to make a statement if the representative so desires and will be available to respond to appropriate questions during the meeting.

Fees

The following table presents the aggregate fees paid or accrued by us for professional services provided by Deloitte & Touche for fiscal 2015 and the fiscal year ended September 28, 2014, which we refer to as “fiscal 2014”.

Description of Fees	Fiscal 2015 Amount		Fiscal 2014 Amount
Audit Fees	$	517,000	$	506,000
Audit-Related Fees		97,000		—
Total Audit and Audit-Related Fees		614,000		506,000
Tax Fees:
Tax Compliance Fees		135,000		131,000
Tax Consultation and Advice Fees		32,000		17,000
Total Tax Fees		167,000		148,000
All Other Fees		2,000		2,000
Total	$	783,000	$	656,000

Audit Fees

The audit fees set forth above consist of fees paid or accrued by us for professional services provided by Deloitte & Touche for audit services during each fiscal year in connection with the audit of our annual financial statements, reviews of our interim financial statements, audit services that are normally provided by an independent registered public accounting firm in connection with statutory and regulatory audits and/or filings, or consultations on financial accounting and reporting matters arising during the course of the audit, and audit of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002.

Audit-Related Fees

The audit-related fees set forth above consist of fees paid or accrued by us for professional services provided by Deloitte & Touche related to registration statements, other SEC-required correspondence and filings, consultation on financial accounting standards and other services in connection with the pending Merger.

Tax Fees

The tax fees set forth above consist of fees paid or accrued by us for professional services provided by Deloitte & Touche for tax compliance, consisting of preparation of tax returns, tax consultation and tax advice, consisting primarily of international tax planning.

All Other Fees

The amounts shown for fiscal 2015 and 2014 consist of fees for research services.

Approval of Independent Registered Public Accounting Firm Services and Fees

The Audit Committee Charter requires that our audit committee approve the retention of our independent registered public accounting firm for any audit and non-audit service and consider whether the provision of any non-audit services by our independent registered public accounting firm is compatible with maintaining our independent registered public accounting firm’s independence, prior to engagement for these services. Our audit committee actively monitors the relationship between audit and non-audit services provided. In fiscal 2015 and 2014, all of the services listed under the headings Audit-Related Fees, Tax Fees and All Other Fees were pre-approved by our audit committee.

Our board of directors recommends that our shareholders vote FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending September 25, 2016.

SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT

The following table sets forth, as of August 2, 2016, the ownership of common stock by each shareholder who we know beneficially owns more than 5% of our outstanding common stock, each director and director nominee, each named executive officer listed in the Summary Compensation Table, and all executive officers and directors as a group. At August 2, 2016, there were 33,922,004 shares of common stock issued and outstanding, each of which is entitled to one vote.

Name of Beneficial Owner or Identity of Group	Amount and Nature of Beneficial Ownership ⁽¹⁾			Percentage of Outstanding Shares ⁽²⁾
Directors, director nominees and executive officers:
Wayne M. Fortun		876,108	⁽³⁾		2.5	%
Martha Goldberg Aronson		76,668	⁽⁴⁾		*
Russell Huffer		89,361	⁽⁵⁾		*
Frank P. Russomanno		88,471	⁽⁶⁾		*
Philip E. Soran		89,364	⁽⁷⁾		*
Thomas R. VerHage		248,067	⁽⁸⁾		*
Richard J. Penn		591,459	⁽⁹⁾		1.7	%
David P. Radloff		243,008	⁽¹⁰⁾		*
D. Mark Jelkin		77,854	⁽¹¹⁾		*
Connie L. Pautz		183,773	⁽¹²⁾		*
Dale M. Ruzicka		138,904	⁽¹³⁾		*
Executive officers and directors as a group (11 persons)		2,703,037	⁽¹⁴⁾		7.6	%

Other beneficial owners:
Whitebox Advisors LLC 3033 Excelsior Boulevard, Suite 300 Minneapolis, MN 55416		3,762,776	⁽¹⁵⁾		10.0	%
Renaissance Technologies LLC 800 Third Avenue New York, NY 10022		2,366,616	⁽¹⁶⁾		7.0	%
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, Texas 78746		2,066,239	⁽¹⁷⁾		6.1	%

*	Less than 1%.
(1)	Unless otherwise indicated in the footnotes to this table, (a) the listed beneficial owner has sole voting power and investment power with respect to the number of shares shown, and (b) no director or executive officer has pledged as security any shares shown as beneficially owned. Includes shares subject to options or issuable upon conversion of convertible debt that is currently exercisable/convertible or will be exercisable/convertible within 60 days of August 2, 2016. Excludes fractional shares held by any listed beneficial owner.
(2)	For purposes of computing percentage ownership of each listed beneficial owner or group, shares subject to options or issuable upon conversion of convertible debt held by that person or members of the group that are currently exercisable/convertible or exercisable/convertible within 60 days of August 2, 2016 are deemed to be outstanding and beneficially owned by that person or group. These shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person.
(3)	Of these shares, Mr. Fortun holds 177,038 in joint tenancy with his wife. Includes 538,889 shares covered by options granted to Mr. Fortun.
(4)	Includes 26,668 shares covered by options granted to Ms. Goldberg Aronson and 50,000 held in a trust of which Ms. Goldberg Aronson is the trustee.
(5)	Includes 41,668 shares covered by options granted to Mr. Huffer.
(6)	Includes 21,668 shares covered by options granted to Mr. Russomanno.
(7)	Includes 14,167 shares covered by options granted to Mr. Soran.

(8)	Of these shares, Mr. VerHage holds 196,975 in joint tenancy with his wife. Includes 41,668 shares covered by options granted to Mr. VerHage.
(9)	Includes 493,001 shares covered by options granted to Mr. Penn.
(10)	Includes 220,000 shares covered by options granted to Mr. Radloff.
(11)	Includes 49,667 shares covered by options granted to Mr. Jelkin.
(12)	Includes 178,001 shares covered by options granted to Ms. Pautz.
(13)	Includes 131,501 shares covered by options granted to Mr. Ruzicka.
(14)	Includes 1,759,898 shares covered by options granted to our executive officers and directors.
(15)	Based on information contained in a Schedule 13G/A filed with the SEC on February 10, 2016, reflecting the shareholder’s beneficial ownership as of December 31, 2015. Whitebox Advisors LLC reported shared voting and dispositive power for all 3,762,776 shares as a result of its ownership of the 8.50% Convertible Senior Notes due 2019. All of the shares are beneficially owned by Whitebox General Partner LLC as a result of its ownership of such convertible notes.
(16)	Based on information contained in a Schedule 13G/A filed with the SEC on February 11, 2016, reflecting the shareholder’s beneficial ownership as of December 31, 2015. Renaissance Technologies LLC reported sole voting power over 2,148,599 shares, sole dispositive power over 2,259,011 shares and shared dispositive power over 107,305 shares. Renaissance Technologies Holdings Corporation is also considered to be a beneficial owner of the same securities because of its majority ownership of Renaissance Technologies LLC.
(17)	Based on information contained in a Schedule 13G/A filed with the SEC on February 9, 2016, reflecting the shareholder’s beneficial ownership as of December 31, 2015. Dimensional Fund Advisors LP had sole voting power for 1,994,301 shares and sole dispositive power for all 2,066,239 shares. Dimensional Fund Advisors LP furnishes investment advice to four investment companies and serves as investment manager or sub-advisor to certain other commingled funds, group trust and separate accounts (such investment companies, trusts and accounts, collectively referred to as “funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an advisor or sub-advisor to certain funds. In its roles as an investment advisor, sub-advisor, or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting or investment power over our securities that are owned by the funds, and may be deemed to be the beneficial owner of the shares held by the funds. However, all of the securities reported are owned by the funds. Dimensional disclaims beneficial ownership of such securities.

Treatment of Equity Awards

In connection with the anticipated Merger, the Merger Agreement provides for the following treatment of equity and equity-based awards relating to our common stock:

Stock Options

We will take all action necessary to cause each then-outstanding option to purchase shares of our common stock to become vested and exercisable at least 10 business days prior to the closing date of the Merger. The holders of the options may exercise those options on or before the second business day prior to the closing date of the Merger. Each share of our common stock issued upon exercise of such options will be an outstanding share of our common stock for purposes of the Merger Agreement that will entitle the holder to receive an amount in cash equal to the per-share Merger consideration (less any applicable withholding taxes) in accordance with the same terms and conditions as applied to holders of our common stock generally.

Each option to purchase shares of our common stock that remains unexercised prior to the effective time of the Merger will be cancelled as of the effective time. In consideration of such cancelation, the holder of each such option will receive an amount in cash equal to the product of (i) the total number of shares of our common stock subject to the option, and (ii) the amount, if any, by which the per-share Merger consideration exceeds the exercise price per share of our common stock underlying the stock option (less any applicable withholding taxes).

Restricted Stock

Effective as of the effective time of the Merger, each then-outstanding share of restricted our common stock, which we refer to as restricted stock, including shares of restricted stock subject to time-based or performance-based vesting, will become fully vested and will be considered to be an outstanding share of our common stock for purposes of the Merger Agreement that will entitle the holder to receive an amount in cash equal to the per-share merger consideration (less any applicable withholding taxes) in accordance with the same terms and conditions as applied to holders of our common stock generally.

Restricted Stock Units

Immediately prior to the effective time of the Merger, each then-outstanding restricted stock units (“RSUs”) will be vested and settled by issuance of shares of our common stock. Each share of our common stock issued upon settlement of such RSUs will be considered to be an outstanding share of our common stock for purposes of the Merger Agreement that will entitle the holder to receive an amount in cash equal to the per-share Merger consideration (less any applicable withholding taxes) in accordance with the same terms and conditions as applied to holders of our common stock generally.

The accelerated vesting, settlement, and cash-out of the equity awards are conditioned upon and subject to the closing of the Merger.

Voting Agreement

In connection with the Merger Agreement, each of our directors and executive officers entered into a voting agreement with Parent, pursuant to which each of them agreed to, among other things, vote his or her shares of our common stock (i) in favor of certain actions that were approved at the special meeting of shareholders held in January 2016; (ii) in favor of any actions related to approval of the Merger Agreement, the plan of merger, all agreements related to the merger, and an increase in the conversion rate for our 8.50% Convertible Senior Notes due 2019; and (iii) against any alternative proposal, any other extraordinary transaction involving our company other than the Merger, any corporate action that could frustrate the purposes or prevent or delay the consummation of the transactions contemplated by the Merger Agreement, or any other proposal relating to any such action. The voting agreements will terminate upon the earliest of (a) the effective time of the Merger; (b) the date on which the Merger Agreement is terminated in accordance with its terms; (c) the date that Parent notifies us that it is not willing or able to proceed with the Merger on substantially the terms set forth in the Merger Agreement; and (d) November 1, 2016.

COMPENSATION OF EXECUTIVE OFFICERS

Compensation Discussion and Analysis

Named Executive Officers

This Compensation Discussion and Analysis provides information about the fiscal 2015 compensation program for our named executive officers, who are:

Richard J. Penn, President and Chief Executive Officer,

David P. Radloff, Vice President and Chief Financial Officer,

D. Mark Jelkin, Vice President of Engineering,

Connie L. Pautz, Vice President of Human Resources, and

Dale M. Ruzicka, Vice President of Operations.

Compensation Philosophy

A key principle we follow in evaluating our overall executive compensation program is that the total compensation an executive receives must be aligned with the value created for our shareholders and the executive’s impact on our company’s performance. Our program is intended to attract, motivate and retain talented executives, and to reward our company’s executives for achieving the financial and strategic goals essential to our company’s long-term success.

Our executive compensation program is designed to:

align the financial interests of our executives with those of our shareholders by allocating a significant portion of their compensation opportunity to long-term equity-based incentives;

make a significant portion of an executive’s total compensation variable and performance-based, and place greater emphasis on the variable and performance-based elements as the responsibilities of a position increase;

provide an annual cash incentive opportunity that rewards executives’ achievement of financial and strategic business goals;

make our total compensation program competitive with the compensation practices of comparable companies in the technology hardware and equipment industry; and

avoid encouraging unnecessary or excessive risk taking.

We hold an advisory shareholder vote to approve the compensation of our named executive officers as disclosed in our proxy statement on an annual basis. While these votes are not binding, the compensation committee considers the outcome of each vote when making future compensation decisions for our named executive officers. Approximately 93% of the votes were cast in favor of our executive compensation at our annual shareholders meeting in January 2015, and 94% were cast in

favor at our annual shareholders meetings held in January 2014 and January 2013. The compensation committee considered these favorable outcomes in deciding not to make any significant changes in the design of our executive compensation program for or during fiscal 2015.

Compensation Elements

Total direct compensation (“TDC”) for executives consists of three primary components: (a) base salary; (b) annual cash incentive; and (c) long-term equity incentive.

Base Salary – Our base salary component is designed to recognize an executive’s knowledge, skills, abilities and on-going performance. We target base salary for all executives to be at a level consistent with our assessment of their value relative to their peers in the labor market, while also taking into account our need to reduce and control costs in response to challenging business conditions.

Annual Cash Incentive – Our annual cash incentive plan is designed to place a substantial portion of an executive’s annual cash compensation at risk based on achievement of financial and operational goals. The annual incentive target amounts are set to be reflective of the market information for each executive position and, as the level of responsibility increases, represent a larger portion of an executive’s total cash compensation opportunity.

Long-Term Equity Incentive – The long-term incentive program for our named executive officers has historically been focused on stock options because they deliver value to the employee only if our shareholders have realized appreciation in the value of their shares held over the same period, which we believe is true “pay for performance.”

In addition to these elements of TDC, our executive compensation program includes severance arrangements for senior executives as discussed below, minimal perquisites, and participation in the same programs involving health and welfare benefits, 401(k) retirement benefits and length of service awards as are made available to our U.S. employees generally.

Pay for Performance

We believe that there should be a strong relationship between pay actually received and corporate performance (as reflected in both financial results and stock price), and our executive compensation program reflects this belief. Specifically, it has been our practice to provide a significant portion of each executive officer’s TDC opportunity in the form of an annual cash incentive opportunity and equity grants. An increasing emphasis is generally placed on these variable components of the TDC opportunity as the level of responsibility of the executive officer’s position increases.

We do not, however, have specific policies governing the allocation of the target TDC opportunity among its fixed and variable components. For example, in recent years the depressed level of our company’s stock price, coupled with the compensation committee’s desire to avoid unacceptable levels of shareholder dilution and share usage under our equity incentive plan, has caused the grant date fair value of equity awards for our named executive officers to be the smallest component of their TDC.

Given the nature of the variable compensation components, the actual compensation paid out under the annual cash incentive plan or realized through the exercise of vested stock options or the settlement of vested RSUs can and does vary significantly from targeted compensation levels. Whether and to what degree our company achieves its pre-established financial and operational performance goals under the annual cash incentive plan, and the degree to which our company’s stock price increases or decreases, together determine the degree to which compensation that is actually realized corresponds to targeted compensation amounts. When we surpass performance objectives, our executives are rewarded accordingly through the operation of these variable components, but when we fall short of our objectives, compensation actually realized decreases correspondingly.

Management Involvement in Compensation Process

Management presents to the compensation committee the compensation history for each executive officer, recommendations for performance measures to be used in the annual cash incentive plan and recommendations from the chief executive officer as to appropriate levels of compensation for each executive officer other than himself. The chief executive officer provides an assessment of the performance of all executive officers, their capabilities relative to their current positions and their future potential in order to give the compensation committee a basis for his compensation recommendations. For the chief executive officer, the compensation committee reviews performance feedback from each of the chief executive officer’s direct reports and from all members of the board of directors to determine the recommended level of compensation.

The compensation committee reviews all the executive officer total compensation packages to assure that they are appropriate as a whole and are equitable relative to each other. All long-term equity grants are approved by the compensation committee. The compensation committee’s recommendations on base salary and annual cash incentives are presented to the board for approval, and the chief executive officer is not present during the voting and deliberations on his compensation.

Use of Consultants

The compensation committee has engaged Compensia, Inc. as its independent compensation consultant to review the design and operation of our executive compensation program, to identify potential changes in or enhancements to our compensation policies and practices and to provide ongoing advice and information regarding executive compensation policies and practices. As part of this process, Compensia has assisted the compensation committee in identifying a peer group of companies to serve as a source of comparative compensation market data, and has advised the compensation committee on the competitiveness of our director and executive compensation programs, the design of incentive awards and proposed performance metrics for incentive plans, and regulatory developments relating to compensation practices. Compensia representatives meet with the compensation committee during its regular meetings, including in executive sessions from time to time without members of management present, and also communicate with the compensation committee chair and the vice president of human resources between committee meetings. Aside from advising the compensation committee on executive and director compensation issues, Compensia performs no other services for us.

Based in part on policies and procedures implemented by Compensia to ensure the objectivity of its executive compensation consultants, and on the compensation committee’s assessment of Compensia’s independence pursuant to the SEC and stock exchange rules, the compensation committee concluded that the consulting advice it receives from Compensia is objective and that no conflict of interest exists that will prevent Compensia from being an independent consultant to the compensation committee.

Market Competitiveness Review

As an aid in establishing competitive ranges of base salary, incentive compensation opportunities and target direct compensation, we consider peer company compensation data compiled by Compensia from peer company proxy statement filings as well as survey data from the Radford High-Tech Industry Executive Compensation Survey (annual revenue between $200 and $500 million). For purposes of setting executive compensation for fiscal 2015, the compensation committee, as advised by Compensia, felt that the peer company and industry survey data utilized by Compensia for purposes of setting fiscal 2013 executive compensation, updated to reflect the average increase in base salaries in the market generally during 2013 and 2014, continued to provide a useful understanding of the market. In taking this approach, the peer group continued to include the same 17 companies identified for purposes of setting fiscal 2013 compensation, without a reassessment of selection factors such as comparability of industry (technology and hardware equipment), size (primarily from a revenue but also from market capitalization standpoint) and operating model (large internal manufacturing operations). The 17 companies included in the peer group for purposes of setting compensation for fiscal 2013, 2014 and 2015 consisted of the following:

Axcelis Technologies, Inc.	Key Tronic Corporation	Powerwave Technologies, Inc.
Bel Fuse, Inc.	Measurement Specialties, Inc.	Pulse Electronics Corporation
Cray, Inc.	Methode Electronics, Inc.	SigmaTron International, Inc.
Datalink Corporation	NeoPhotonics Corporation	SL Industries, Inc.
EMCORE Corporation	Oclaro, Inc.	STEC, Inc.
GSI Group, Inc.	Oplink Communications, Inc.

The compensation data derived from these sources, which show percentile compensation levels for various executive positions with comparable job responsibilities, has been used to inform the compensation committee’s decisions on base salary, annual cash incentives, long-term equity incentives and allocations between these three components of TDC. The compensation committee does not, however, establish specific percentile compensation parameters for each position based on the market data. Instead, the market data is one of many factors that the compensation committee considers in the determination of executive compensation levels. Other factors considered include the responsibilities of the position, the individual’s experience, individual performance in areas such as leadership, strategic contributions and execution of responsibilities, our company’s performance and financial position, succession planning and retention strategies, and restructuring and cost reduction efforts.

Base Salary

Annual base salaries are set early in each fiscal year after the compensation committee gives consideration to both market data for comparable positions and an assessment of each executive officer’s value to our company relative to peers in the labor market. In making these assessments, the compensation committee (in setting the chief executive officer’s salary) and the chief executive officer (in making recommendations to the compensation committee for other executive officers) consider factors such as those outlined above in the market competitiveness discussion.

In December 2014, our compensation committee approved increasing the base salary of each named executive officer to bring each officer’s annual salary to at least the market 25 ^th percentile. Base salaries for 2014 and 2015 were as follows:

Name	2014 Annual Base Salary ($)		2015 Annual Base Salary ($)
Richard J. Penn		425,000		450,000
David P. Radloff		287,000		305,000
D. Mark Jelkin		210,000		220,000
Connie L. Pautz		190,000		210,000
Dale M. Ruzicka		211,000		217,000

Annual Cash Incentive

In structuring the annual cash incentive plan for executives for fiscal 2015, the compensation committee again decided to include both company-wide financial and operational goals. The company financial measures utilized for fiscal 2015 were corporate revenue and the level of our company’s profitability (measured by operating income ) The company financial goals approved for fiscal 2015 are summarized as follows:

Performance Measure	Performance Level
Performance Measure	Threshold	Target	Maximum
Corporate Revenue	$285 million	$300 million	$315 million
Profitability (annual operating income)	Positive operating income in 2 ^nd half of FY2015	$4 million	$10 million

The first operational measure selected by the compensation committee for fiscal 2015 involved achieving a reduction in the average variable production cost per unit for dual-stage actuated (“DSA”) suspension assemblies during the fourth quarter of fiscal 2015 as compared to the year earlier quarter. We expected DSA suspensions to represent an increasing portion of the overall product mix during fiscal 2015, and that reducing per unit cost would be critical to our longer term goal of becoming the industry’s lowest cost producer of suspension assemblies. The second operational measure involved expanding the adoption of our shape memory alloy (“SMA”) optical image stabilization (“OIS”) actuator, as measured by the number of smartphones in the market that incorporated our SMA OIS actuator.

Each named executive officer’s annual cash incentive opportunity for fiscal 2015 was allocated among the performance measures described above as follows: 40% to profitability, 30% to corporate revenue and 15% to each of the operational goals. The compensation committee also determined a recommended annual cash incentive target amount, expressed as a percentage of base salary, for each named executive officer in the first quarter of fiscal 2015 as summarized in the following table:

Name	Incentive Target Amount as % of Base Salary
Richard J. Penn		100	%
David P. Radloff		60	%
D. Mark Jelkin		50	%
Connie L. Pautz		50	%
Dale M. Ruzicka		50	%

The 2015 incentive target percentages for Messrs. Penn, Radloff and Jelkin and for Ms. Pautz were unchanged from fiscal 2014. Mr. Ruzicka’s incentive target was increased from 40% to 50% of base salary to reflect the scope of his global responsibilities and potential contributions toward achievement of our goals.

Achievement of threshold performance with respect to any performance measure ordinarily would result in a payout of 50% of the target payout allocated to that performance measure, while meeting or exceeding the specified maximum level of performance ordinarily would result in a payout of 200% of the target payout allocated to that performance measure. Performance between the specified threshold, target and maximum levels ordinarily would result in a proportionate payout between the indicated payout levels. The annual cash incentive program for fiscal 2015 also provided that total payouts would be capped at target level if our earnings before interest and taxes was not positive for the fiscal year.

For fiscal 2015, we achieved performance at slightly above target level for the DSA suspension assembly average variable production cost per unit, but did not achieve threshold level performance for any of the other goals. This equated to a payout of 18% of the respective annual incentive amounts for each executive officer. The amounts paid to our named executive officers are summarized as follows:

Name	Incentive Amount Paid ($)		Incentive Amount Paid as % of 2015 Base Salary
Richard J. Penn		81,000		18	%
David P. Radloff		32,940		18	%
D. Mark Jelkin		19,800		18	%
Connie L. Pautz		18,900		18	%
Dale M. Ruzicka		19,530		18	%

Long-Term Equity Incentive

For fiscal 2015, the compensation committee decided that equity awards to our executive officers again would consist solely of stock options, reflecting the perceived greater turnaround incentive value of stock options for our most senior employees. RSUs continue to be utilized for awards to other employees.

Consistent with previous years, our annual equity granting process for fiscal 2015 began with the compensation committee providing direction to management on the total number of shares available to grant for the year, considering current and projected overhang as well as comparative run rates determined by reference to practices within the technology industry and guidelines published by institutional investors and proxy advisory services. For these purposes, a share multiplier of 1.5:1 was applied to any projected “full value” RSU awards. Calculated on this basis, the compensation committee decided that the pool of shares available for equity awards to all employees and directors in fiscal 2015 should reflect a run rate of approximately 3.2% of the shares outstanding at the beginning of the fiscal year, which was consistent with the fiscal 2014 run rate. The targeted run rate for fiscal 2015 awards was well within guidelines published by proxy advisory services.

Once the size of the available share award pool was determined based on the targeted run rate, management then developed recommended percentage allocations of the total shares available for the annual grants to each of four employee groups (executive officers, director-level employees, middle managers and non-management key contributors) in a manner intended to be consistent, to the greatest degree possible, with market practices for distributing long-term equity incentives among those employee groups and with our other objectives in providing equity-based compensation, such as retention and alignment with shareholder interests. Recommended equity grants to individuals within the executive officer group were based on a consideration of the factors outlined earlier in the market competitiveness discussion, including the experience of the individuals in their positions and their TDC relative to market. The chief executive officer makes this assessment for each executive officer other than himself.

The chief executive officer then provided these equity grant recommendations to the compensation committee for review and approval. The chief executive officer’s fiscal 2015 equity grants were determined by the compensation committee. All annual equity grants for executive officers for fiscal 2015 were approved by the compensation committee at its last regularly-scheduled meeting during calendar year 2014, consistent with past practice. The annual equity grants for fiscal 2015 to the named executive officers as approved by the compensation committee are summarized as follows:

Name	Options Awarded (# shares)		Grant Date Fair Value ($)
Richard J. Penn		100,000		241,450
David P. Radloff		60,000		144,870
D. Mark Jelkin		50,000		120,725
Connie L. Pautz		50,000		120,725
Dale M. Ruzicka		50,000		120,725

Equity Award Grant Policy

Under our policy governing the grant of equity awards, the compensation committee must approve awards to any officer or director of the company, and our chief executive officer may approve awards to other employees pursuant to authority delegated to him. Annual equity awards generally will be approved by the compensation committee at its regularly-scheduled meeting in late November/early December of each year. Other awards may be approved at times when a “blackout period” under our insider trading policy is not in effect, or during a blackout period if the effective date of the award does not occur until after the blackout period ends. The grant date of any award will be the date the award is approved by the compensation committee or the chief executive officer, unless the approving authority specifies a later grant date.

Severance and Change in Control Arrangements

We have entered into severance and change in control agreements with the named executive officers. These agreements generally provide for payments of severance benefits and health insurance premiums to an executive if the executive’s employment with the company is terminated by the company without cause or by the executive for “good reason,” in either case within 24 months of a change in control of the company or a division of the company. Payments and benefits available under these agreements and the company’s severance pay plan are described more fully below under the heading “Potential Payments Upon Termination or Change in Control.” The compensation committee believes these severance and change in control agreements are important as a recruitment and retention device, are an important part of a competitive overall compensation program for the executives involved, and will mitigate concerns that the executives may have regarding their continued employment prior to or following a change in control, thereby allowing the executives to focus their undivided attention on advancing the interests of the company and its shareholders.

Stock option and any other equity-based awards granted under our plans provide for “double trigger” treatment in the event of a change in control, meaning that if the award continues in place after the change in control, vesting and exercisability of that award will not be accelerated unless the executive’s employment is terminated involuntarily (other than for cause) within 24 months following the change in control transaction, in the case of awards made under the 1996 Incentive Plan, or one year following the change in control transaction, in the case of awards made under the 2011 Incentive Plan. The compensation committee believes this structure effectively creates incentives for our executive team to obtain the highest value possible should we be acquired and provides a powerful retention device during the uncertain times preceding a change in control transaction, without providing accelerated benefits to executives who continue to enjoy employment after such a transaction. The compensation committee also believes this structure is more attractive to potential acquiring companies than a “single trigger” structure, because these companies may place significant value on retaining members of our executive team.

The severance and change in control agreements described above are, however, limited to the degree necessary to avoid causing such payments and benefits to be subject to the excise tax on “parachute payments” under the Code.

Ownership Guidelines

Our board of directors believes that directors and executive officers of the company should have a significant equity interest in the company, and has established stock ownership guidelines to encourage share ownership. The guidelines specify that each covered individual should hold shares of our common stock equal in value to at least the amount specified in the following table:

Leadership Position		Value of Shares
Non-employee director		5 × annual cash retainer as board member
Chief executive officer		5 × annual base salary
Chief financial officer, chief technology officer and senior vice presidents		2 × annual base salary
Vice presidents		1 × annual base salary

Individuals subject to the guidelines are expected to hold a minimum of 50% of net profit shares from option exercises and 100% of the net profit shares from any other equity-based awards until they satisfy the ownership guidelines. Shareholdings are valued for these purposes based on the greater of (i) the closing price of our common stock as of the most recent fiscal year end, or (ii) the acquisition value of the shares (the purchase price of shares that have been purchased or the taxable value of shares received through an equity-based compensation award). As of September 27, 2015, only Messrs. Fortun, Huffer, Russomanno, Soran and VerHage among our directors and executive officers had stock holdings with a value equal to or greater than that specified by the guidelines. Our company also has an insider trading policy which, among other

things, prohibits executive officers from hedging the economic risk of their company stock ownership and from pledging the company shares they own.

Compensation Actions Taken for Fiscal 2016

As required by the Merger Agreement, no changes were made to any executive compensation for the fiscal year ending September 25, 2016.

Compensation Committee Report

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on its review, the compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

	Compensation Committee:

	Philip E. Soran, Chair
	Martha Goldberg Aronson
	Russell Huffer

Compensation Risk Assessment

The company engaged Compensia to prepare an update of Compensia’s June 2014 risk assessment report for consideration by the compensation committee at its June 2015 meeting. The company provided Compensia with current information on its pay policies and practices applicable to its employees generally, including the named executive officers, and on the basis of that information Compensia prepared the update to its detailed risk assessment, which considered multiple aspects of pay mix and base salary, annual bonus programs, equity incentives, ownership guidelines and trading policies, severance and benefits, and leadership.

Based on the compensation committee’s review of Compensia’s updated risk assessment report, the committee concluded that the company’s compensation policies and practices do not encourage excessive risk taking and that any risks arising from the compensation policies and practices are not reasonably likely to have a material adverse effect on the company. Compensia’s summary conclusions included the following observations, which were key factors in the committee’s risk determination:

compensation is reasonable in comparison with market levels;

variable compensation programs are designed with risk-limiting characteristics, including:

appropriately limited potential payouts for short-term programs,

performance goals that are sufficiently difficult and in alignment with the company’s strategic objectives, and

internal controls that minimize the likelihood of excessive risk taking;

the program is balanced in terms of its significant components:

short- and long-term variable compensation are properly mixed, and

cash and equity compensation are properly mixed; and

an independent compensation committee effectively oversees the company’s compensation programs.

Summary Compensation Table

The table and footnotes below describe the total compensation earned in fiscal 2015, 2014 and 2013 by our named executive officers.


Name and Principal Position	Year	Salary ⁽¹⁾ ($)		Stock Awards ⁽²⁾ ($)		Option Awards ⁽²⁾ ($)		Non-Equity Incentive Plan Compensation ⁽³⁾ ($)		All Other Compensation ⁽⁴⁾ ($)		Total ($)
Richard J. Penn	2015		438,277		—		241,450		81,000		10,582		771,309
President and Chief	2014		420,198		—		228,030		113,390		7,700		769,318
Executive Officer	2013		385,005		—		172,050		—		11,194		568,249

David P. Radloff	2015		296,859				144,870		32,940		5,383		480,052
Vice President and	2014		282,979		—		136,818		45,943		5,566		471,306
Chief Financial Officer	2013		256,857		—		69,258		—		5,395		331,510

D. Mark Jelkin ⁽⁵⁾	2015		214,697				120,725		19,800		4,749		359,971
Vice President of
Engineering	2014		187,519		47,680		—		22,763		4,735		262,697

Connie L. Pautz	2015		202,939				120,725		18,900		5,106		347,670
Vice President	2014		187,268		—		114,015		25,346		5,351		331,980
of Human Resources	2013		169,712		—		69,258		—		4,313		243,283

Dale M. Ruzicka ⁽⁶⁾	2015		212,516				120,725		19,530		5,076		357,847
Vice President of	2014		209,860		—		114,015		22,518		4,572		350,965
Operations	2013		163,614		—		46,172		—		3,807		213,593

(1)

The “Salary” column presents the base salary earned during each of the applicable fiscal years. All of the named executive officers were required to take 10 days off without pay during the first two quarters of fiscal 2013, and the resulting reduction in base salary is reflected in the amounts shown here.

(2)

The amounts shown in the “Stock Awards” and “Option Awards” columns represent the aggregate grant date fair value of the RSU and option awards, respectively, granted during each of the applicable fiscal years computed in accordance with FASB ASC Topic 718. For additional information regarding our calculation of the grant date fair value of equity awards granted in fiscal 2015, see Note 5 to the Consolidated Financial Statements included in our Annual Report on Form 10-K.

(3)

The “Non-Equity Incentive Plan Compensation” column presents cash bonuses earned during each of the applicable fiscal years under our annual cash incentive plan.

(4)

At least two-thirds of the amounts shown in the “All Other Compensation” column for each named executive officer for fiscal 2015 represent company contributions to that officer’s 401(k) Plan account, with the remainder composed of payments for tax and financial planning assistance and/or certain recognition awards.

(5)

Mr. Jelkin was promoted to Vice President of Engineering effective April 6, 2014. Amounts shown include compensation earned by Mr. Jelkin during fiscal 2014 prior to his promotion to this executive officer position.

(6)

Mr. Ruzicka was promoted to Vice President of Operations effective December 5, 2012. Amounts shown include compensation earned by Mr. Ruzicka during fiscal 2013 prior to his promotion to this executive officer position.

Grants of Plan-Based Awards

For their service during fiscal 2015, the named executive officers received two types of plan-based awards: a stock option award granted on December 2, 2014 under the 2011 Incentive Plan, and an award under our annual cash incentive plan that was paid in the first quarter of fiscal 2015.

Option Awards Under the 2011 Incentive Plan

Option awards granted under the 2011 Incentive Plan during fiscal 2015 to employees of our company, including the named executive officers, have an exercise price equal to 100% of the fair market value of a share of our common stock on the date of grant. Each stock option vests and becomes exercisable as to one-third of the shares subject to the option on each of the first, second and third anniversaries of the date of grant and has a 10-year term. The vested portion of each option may be exercised while the participant is employed by us, and ordinarily for three months after employment ends (unless employment is terminated for cause). If, however, employment ends after the participant has been employed by us for at least 10 years and has reached age 55, the vested portion of an option will remain exercisable for three years after the date employment ends. If a participant’s employment ends because of death or disability, the vested portion of an option will remain exercisable for one year after the date employment ends. In no case will an option be exercisable beyond the end of its original term.

In the event of a merger or consolidation involving our company, an option award can be assumed by the surviving or successor corporation or replaced by an equity-based award with the same value. If no such assumption or replacement is made, the compensation committee may accelerate the vesting of the option or cancel the option and pay to the holder an amount in cash equal to the spread between the fair market value of the shares subject to the option immediately prior to the change in control and the aggregate exercise price of those option shares. In addition, if a surviving or successor corporation assumes or replaces an option award following a change in control and subsequently terminates the employment of the holder without cause within one year of the change in control, the vesting of such award will be accelerated. See “Potential Payments Upon Termination or Change in Control” below for more information.

Annual Cash Incentive Plan

Under the annual cash incentive plan, executive officers can receive cash payouts after the completion of each fiscal year if specified performance objectives established at the beginning of the fiscal year are attained. An annual incentive target amount, expressed as a percentage of base salary, is approved for each executive officer. The plan for fiscal 2015 was structured so that the actual cash incentive paid to an executive officer could range from 0 to 200% of that officer’s annual incentive target, depending on the performance of our company against the relevant financial and operational business goals.

For each executive officer, 40% of the total cash incentive opportunity was dependent on the degree to which our company achieved a corporate operating income goal, 30% was dependent on the degree to which a corporate revenue goal was achieved, and 15% was dependent on the degree to which each of two operational goals (production cost reductions per unit of DSA suspension assemblies and expanding market adoption of our SMA OIS actuator) was achieved. The company achieved slightly above target performance on the DSA suspension assemblies goal, but did not achieve threshold level performance for any of the other goals, resulting in the payouts reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. Please see the “Compensation Discussion and Analysis” section above for more information regarding the plan’s goals and the company’s performance against those goals.

The following table summarizes the stock option and annual cash incentive plan awards made to the named executive officers during fiscal 2015:

Grants of Plan-Based Awards in Fiscal 2015

							All Other
							Option Awards:
							Number of		Exercise or		Grant Date Fair
		Estimated Future Possible Payouts Under					Securities		Base Price of		Value of Stock
		Non-Equity Incentive Plan Awards					Underlying		Option		and Option
Name	Grant Date	Threshold ⁽³⁾ ($)	Target ⁽⁴⁾ ($)		Maximum ⁽⁵⁾ ($)		Options (#)		Awards ⁽¹⁾ ($/Sh)		Awards ⁽²⁾ ($)
Richard J. Penn		33,750		450,000		900,000		—		—		—
	12-02-14							100,000		3.43		241,450
David P. Radloff		13,725		183,000		366,000		—		—		—
	12-02-14	—		—		—		60,000		3.43		144,870
D. Mark Jelkin		8,250		110,000		220,000		—		—		—
	12-02-14	—		—		—		50,000		3.43		120,725
Connie L. Pautz		7,875		105,000		210,000		—		—		—
	12-02-14	—		—		—		50,000		3.43		120,725
Dale M. Ruzicka		8,138		108,500		217,000		—		—		—
	12-02-14	—		—		—		50,000		3.43		120,725

(1)

Threshold amounts can be calculated for each individual performance measure, and in each case are equal to 50% of the target amount payable with respect to that measure. The amounts reported as threshold amounts in the table represent the payout that would have been made if threshold performance was achieved for the performance measure assigned the lowest weight in the plan, assuming that threshold performance was not achieved for any other performance measure.

(2)

Target amounts represent a percentage of each named executive officer’s base salary at the time of grant: 100% for Mr. Penn, 60% for Mr. Radloff, 50% for Mr. Jelkin, Ms. Pautz and Mr. Ruzicka.

(3)

Maximum amounts represent 200% of each named executive officer’s target amount.

(4)

The exercise price of options awarded during fiscal 2015 was the closing sale price of a share of our company’s common stock on the NASDAQ Global Select Market on the date of grant.

(5)

Represents the grant date fair value of options awarded during fiscal 2015 computed in accordance with FASB ASC Topic 718. For additional information regarding our calculation of the grant date fair value of equity awards granted in fiscal 2015, see Note 5 to the Consolidated Financial Statements included in our Annual Report on Form 10-K.

Outstanding Equity Awards

The table below provides information on each named executive officer’s outstanding equity awards as of September 27, 2015. The equity awards consist of stock options granted under the 1996 Incentive Plan and 2011 Incentive Plan and RSUs granted under the 2011 Incentive Plan.

Outstanding Equity Awards at Fiscal 2015 Year-End

Name	Grant Date	Number of Securities Underlying Unexercised Options Exercisable (#)		Number of Securities Underlying Unexercised Options Unexercisable ⁽¹⁾ ($)		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested ⁽²⁾ (#)		Market Value of Shares or Units of Stock That Have Not Vested ⁽³⁾ ($)
Richard J. Penn	11-30-05		15,500		—		27.46	11-30-15
	11-29-06		30,000		—		23.05	11-29-16
	11-28-07		30,000		—		26.21	11-28-17
	12-03-08		40,000		—		3.03	12-03-18
	12-02-09		55,000		—		7.35	12-02-19
	12-01-10		55,000		—		3.03	12-01-20
	11-29-11		33,000		—		1.70	11-29-21
	10-11-12		33,334		16,666		1.59	10-11-22
	12-04-12		75,000		25,000		1.53	12-04-22
	12-03-13		33,334		66,666		2.98	12-03-23
	12-02-14		—		100,000		3.43	12-02-24

David P. Radloff	11-30-05		6,000		—		27.46	11-30-15
	11-29-06		10,000		—		23.05	11-29-16
	11-28-07		10,000		—		26.21	11-28-17
	12-03-08		10,000		—		3.03	12-03-18
	12-02-09		16,000		—		7.35	12-02-19
	12-01-10		30,000		—		3.03	12-01-20
	11-29-11		24,000		—		1.70	11-29-21
	12-04-12		45,000		15,000		1.53	12-04-22
	12-03-13		20,000		40,000		2.98	12-03-23
	12-02-14		—		60,000		3.43	12-02-24

D. Mark Jelkin	11-30-05		1,600		—		27.46	11-30-15
	11-29-06		4,000		—		23.05	11-29-16
	11-28-07		5,000		—		26.21	11-28-17
	12-02-09		12,000		—		7.35	12-02-19
	12-01-10		12,000		—		3.03	12-01-20
	11-12-12									4,750		6,697
	12-03-13									10,666		15,039
	12-02-14		—		50,000		3.43	12-02-24

Connie L. Pautz	11-30-05		3,500		—		27.46	11-30-15
	11-29-06		3,500		—		23.05	11-29-16
	11-28-07		4,000		—		26.21	11-28-17
	12-03-08		5,500		—		3.03	12-03-18
	12-02-09		20,000		—		7.35	12-02-19
	12-01-10		20,000		—		3.03	12-01-20
	11-29-11		15,000		—		1.70	11-29-21
	12-04-12		45,000		15,000		1.53	12-04-22
	12-03-13		16,667		33,333		2.98	12-03-23
	12-02-14		—		50,000		3.43	12-02-24

Dale M. Ruzicka	11-30-05		6,000		—		27.46	11-30-15
	11-29-06		5,000		—		23.05	11-29-16
	11-28-07		5,000		—		26.21	11-28-17
	12-03-08		7,500		—		3.03	12-03-18
	12-02-09		12,000		—		7.35	12-02-19
	12-01-10		12,000		—		3.03	12-01-20
	12-04-12		30,000		10,000		1.53	12-04-22
	12-03-13		16,667		33,333		2.98	12-03-23
	12-02-14		—		50,000		3.43	12-02-24

(1)

Each stock option granted on December 2, 2014 and on December 3, 2013 vests and becomes exercisable as to one-third of the shares subject to the option on each of the first, second and third anniversaries of the date of grant. Each stock option granted on December 4, 2012 vests and becomes

exercisable as to 50% of the shares subject to the option on the first anniversary of the date of grant and as to 25% of the shares subject to the option on each of the second and third anniversaries of the date of grant.

(2)

The RSU award granted to Mr. Jelkin on December 3, 2013 vests as to one-third of the units subject to the award on each of the first, second and third anniversaries of the date of grant. The RSU award granted to Mr. Jelkin on November 12, 2012 vests as to 50% of the units subject to the award on the first anniversary of the date of grant and as to 25% of the units subject to the award on each of the second and third anniversaries of the date of grant.

(3)

Equals the number of unvested units multiplied by the fair market value of a share of our common stock on September 27, 2015 (using the $1.41 closing sale price of a share of our common stock on the NASDAQ Global Select Market on September 25, 2015, the last trading day of the fiscal year).

Option Exercises and Stock Vested

None of the named executive officers exercised stock options during fiscal 2015. During fiscal 2015, one-third of the units subject to Mr. Jelkin’s RSU awards granted in fiscal 2014 and 2012 vested, and 25% of the units subject to Mr. Jelkin’s RSU award granted in fiscal 2013 vested.

Option Exercises and Stock Vested During Fiscal 2015

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Richard J. Penn		—		—		—		—
David P. Radloff		—		—		—		—
D. Mark Jelkin		—		—		12,750		45,681	⁽¹⁾
Connie L. Pautz		—		—		—		—
Dale M. Ruzicka		—		—		—		—

(1)

Equals the number of vested units (4,750, 2,666 and 5,334) multiplied by the fair market value of our stock on the vesting dates of November 12, 2014, November 29, 2014 and December 3, 2014, respectively (using the closing sale price of a share of our common stock on the NASDAQ Global Select Market on those dates).

Potential Payments Upon Termination or Change in Control

The information below describes the compensation that would become payable under existing plans and arrangements if the employment of the five named executive officers were to terminate under certain circumstances or if a change in control of our company were to occur.

Severance Pay Plan

We maintain a severance pay plan that is applicable generally to all U.S.-based full-time employees, including the named executive officers. Benefits under the severance pay plan are available to qualifying employees whose employment ends due to a “severance event” as determined by company management. Examples of a severance event include the closure of the facility at which an employee works or elimination of the employee’s position as a result of a permanent reduction in our workforce or an organizational change.

The severance pay plan provides that each of our chief executive officer and chief financial officer (and our chief technology officer, if any) will receive a lump sum severance payment equal to (a) 1.5 times his or her annual base salary in effect immediately prior to termination of employment, (b) an amount equal to the officer’s average annual cash incentive plan payout received for the most recent three fiscal years, and (c) premiums for 12 months of coverage under our group health and dental plans, calculated by reference to the officer’s coverage and enrollment level in effect as of the termination of his or her employment. Each such officer will also receive outplacement services for 12 months.

The severance pay plan provides that each vice president will receive a lump sum severance payment equal to (a) one times his or her annual base salary in effect immediately prior to termination of employment, (b) an amount equal to the officer’s average annual cash incentive plan payout received for the most recent three fiscal years, and (c) premiums for six months of coverage under our group health and dental plans, calculated by reference to the officer’s coverage and enrollment in effect as of the termination of his or her employment. Each such officer will also receive outplacement services for six months.

Different tiers of benefits are provided to director-level employees and plant managers, and to all other qualifying employees. Receipt of severance benefits is conditioned upon the execution of a release agreement.

Severance and Change in Control Agreements

Each of our named executive officers is party to a severance and change in control agreement pursuant to which he or she will be eligible to receive specified payments and benefits if our company terminates such officer’s employment other than for cause, or such officer terminates his or her employment with our company for good reason, within 24 months following a “change in control event.” Under the agreement, a “change in control event” generally means the occurrence of any of the following:

any person becomes the beneficial owner of 50% or more of the voting power of our equity securities;

a majority of our board of directors no longer consists of individuals who were directors on the effective date of the agreement or who, since that time, were nominated for election or elected by our board of directors;

a reorganization, merger or consolidation involving our company, or a sale of all or substantially all of our company’s assets, is consummated;

our shareholders approve a complete liquidation or dissolution of our company; or

the sale, discontinuation or disposition of all or substantially all, or a material portion of, the business or assets of a division to which such key employee was assigned.

A change in control event will not, however, occur in connection with a transaction described if 50% or more of the voting power of the buyer or surviving party in the transaction is beneficially owned in substantially the same proportions by persons who were beneficial owners of our voting securities before the transaction.

The payments and benefits provided under the severance and change in control agreements will be in lieu of any payments and benefits to which the officer would otherwise be entitled under our severance pay plan in connection with such a termination of employment.

The severance and change in control agreements entered into with the chief executive officer and chief financial officer provide for a lump sum payment in the event of such a termination of employment equal to (a) two times the greater of the officer’s annual base salary immediately prior to the termination of employment or such annual base salary immediately prior to the change in control event, (b) an amount equal to the greater of the officer’s target bonus for the bonus period in which the termination occurs or for the bonus period in which the change in control event occurs, and (c) premiums for 24 months of coverage under our group health and dental plans, calculated by reference to the officer’s coverage and enrollment level in effect as of the termination of his or her employment or, if it results in a greater benefit, as of the date immediately prior to the change in control event.

The severance and change in control agreements entered into with each vice president provide for a lump sum payment in the event of such a termination of employment equal to (a) 1.5 times the greater of the officer’s annual base salary immediately prior to the termination of employment or such annual base salary immediately prior to the change in control event, (b) an amount equal to the greater of the officer’s target bonus for the bonus period in which the termination occurs or for the bonus period in which the change in control event occurs, and (c) premiums for 18 months of coverage under our group health and dental plans, calculated by reference to the officer’s coverage and enrollment level in effect as of the termination of his or her employment or, if it results in a greater benefit, as of the date immediately prior to the change in control event.

Equity Incentives

All outstanding stock options granted under the 1996 Incentive Plan are fully vested and exercisable, and if a plan participant’s employment ends because of death or disability, all outstanding stock options remain exercisable for three years after the date employment ends. If employment ends for a reason other than death or disability or cause, the 1996 Incentive Plan provides that a stock option will remain exercisable for the following periods of time after the date employment ends: for participants who have been employed by our company for at least 10 years and who have reached the age of 55, the stock option will remain exercisable for three years after the date employment ends; for all other participants, the stock option will remain exercisable for three months after the date employment ends. In no case will an option be exercisable beyond the end of its original term. If employment ends for cause, no stock options may be exercised after the date employment ends.

If a change in control occurs, the 1996 Incentive Plan provides that our compensation committee may cancel outstanding stock options and pay to the holders an amount in cash equal to the spread, if any, between the fair market value of the shares subject to the option immediately prior to the change in control and the aggregate exercise price of those option shares, or, in

connection a change in control involving a merger or consolidation, substitute for any existing stock options new options or voting common stock issued by the corporation surviving any merger or consolidation or, if appropriate, its parent corporation.

Under the 1996 Incentive Plan, a “change in control” generally occurs if (i) any person becomes the beneficial owner of 30% or more of the voting power of our equity securities; (ii) a majority of our board of directors no longer consists of individuals who were directors at the time the plan was adopted or who, since that time, were nominated for election or elected by our board of directors; (iii) a reorganization, merger or consolidation involving our company, or a sale of all or substantially all of our company’s assets, is consummated (unless 70% or more of the voting power of the buyer or surviving party in the transaction is beneficially owned in substantially the same proportions by persons who were beneficial owners of our voting securities before the transaction); or (iv) our shareholders approve a complete liquidation or dissolution of our company.

Under our 2011 Incentive Plan, the definition of “change in control” is substantially the same as the definition in the 1996 Incentive Plan. The termination and change in control provisions applicable to stock option and RSU awards granted under the 2011 Incentive Plan can generally be summarized as follows:

If a plan participant’s employment ends because of termination for cause, all awards are immediately forfeited. If employment ends for any other reason, the unvested portion of any award is immediately forfeited, and the vested portion of any option remains exercisable after termination for one year if termination is due to death or disability, or three months if termination is for any reason other than cause, death or disability (unless, in such case, the participant has reached the age of 55 and has completed 10 years of service with our company, in which case the post-termination exercise period is three years).

If a change in control involving a reorganization, merger or consolidation, or asset sale occurs, the vesting of awards can be accelerated or the awards cancelled in exchange for payment only if the awards are not continued, assumed or replaced by the surviving or successor entity. If a change in control involving a change in shareholder ownership or a turnover in the majority of the board, however, the 2011 Incentive Plan provides that the compensation committee has discretion in deciding whether to accelerate the vesting of awards or cancel them in exchange for payment.

The 2011 Incentive Plan provides that if a surviving or successor entity continues, assumes or replaces an award following a change in control and subsequently terminates the employment of the holder without cause, the vesting of such award will be accelerated if the termination occurs within one year of the change in control.

In the event our shareholders approve the complete liquidation or dissolution of our company, all outstanding awards under the 2011 Incentive Plan will vest and will terminate immediately prior to the consummation of any such proposed action.

Annual Incentive Payouts

An executive officer must be employed on the last day of a fiscal year to be entitled to receive annual cash incentive compensation pursuant to our annual cash incentive plan. If employment ends due to death or disability before the last day of a fiscal year, our compensation committee has discretion to pay a prorated amount of the cash incentive the executive officer would have received under the annual cash incentive plan had the death or disability not occurred.

Estimated Payments That Would Have Been Made to the Named Executive Officers

The compensation amounts shown below are estimates of the amounts that would have become payable to each of the named executive officers if his or her employment had terminated on September 27, 2015, the last day of our most recent fiscal year. The calculations for severance in connection with a change in control assume that the change in control and severance both occurred on that date and that equity awards were not continued, assumed or replaced by a surviving or successor entity in connection with the change in control. Vesting of equity awards granted under the 2011 Incentive Plan does not accelerate upon death or disability or any other termination of employment not related to a change in control, and all outstanding options granted under the 1996 Incentive Plan are already fully vested.

Name	Severance Without a Change in Control ($)		Severance in Connection With a Change in Control ($)
Richard J. Penn
Severance Pay Plan ⁽¹⁾		756,503		—
Severance and Change in Control Agreement ⁽²⁾		—		1,383,404
Acceleration of unvested stock options ⁽³⁾		—		—
Acceleration of unvested RSUs ⁽⁴⁾		—		—
Total		756,503		1,383,404
David P. Radloff
Severance Pay Plan ⁽¹⁾		500,505		—
Severance and Change in Control Agreement ⁽²⁾		—		826,410
Acceleration of unvested stock options ⁽³⁾		—		—
Acceleration of unvested RSUs ⁽⁴⁾		—		—
Total		500,505		826,410
D. Mark Jelkin
Severance Pay Plan ⁽⁵⁾		242,536
Severance and Change in Control Agreement ⁽⁶⁾		—		465,043
Acceleration of unvested stock options ⁽³⁾		—		—
Acceleration of unvested RSUs ⁽⁴⁾		—		45,681
Total		242,536		510,724
Connie L. Pautz
Severance Pay Plan ⁽⁵⁾		233,114		—
Severance and Change in Control Agreement ⁽⁶⁾		—		445,067
Acceleration of unvested stock options ⁽³⁾		—		—
Acceleration of unvested RSUs ⁽⁴⁾		—		—
Total		233,114		445,067
Dale M. Ruzicka
Severance Pay Plan ⁽⁵⁾		236,671		—
Severance and Change in Control Agreement ⁽⁶⁾		—		450,954
Acceleration of unvested stock options ⁽³⁾		—		—
Acceleration of unvested RSUs ⁽⁴⁾		—		—
Total		236,671		450,954

(1)

Lump sum payment equal to 1.5 times annual base salary; average annual cash incentive payout for fiscal 2015, 2014 and 2013; and 12 months of medical and dental insurance premiums.

(2)

Lump sum payment equal to two times annual base salary, target annual cash incentive amount for fiscal 2015, and 24 months of medical and dental insurance premiums.

(3)

The value of the accelerated vesting is equal to the difference, if any, between the fair market value of our stock on September 27, 2015 (using the $1.41 closing sale price of a share of our common stock on the NASDAQ Global Select Market on September 25, 2015, the last trading day of the fiscal year) and the exercise price of each unvested option. As of September 27, 2015, all outstanding options had exercise prices greater than $1.41.

(4)

The value of the acceleration is equal to the fair market value of our stock on September 27, 2015 (using the closing sale price of a share of our common stock on the NASDAQ Global Select Market on September 25, 2015, the last trading day of the fiscal year) for each unvested RSU.

(5)

Lump sum payment equal to one times annual base salary; average annual cash incentive payout for fiscal 2015, 2014 and 2013; and six months of medical and dental insurance premiums.

(6)

Lump sum payment equal to 1.5 times annual base salary, target annual cash incentive amount for fiscal 2015, and 18 months of medical and dental insurance premiums.

EQUITY COMPENSATION PLAN INFORMATION

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of September 27, 2015 for compensation plans under which securities may be issued:

Plan Category	Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#)			Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($)			Securities Remaining Available for Future Issuance Under Equity Compensation Plans (#)
Equity Compensation Plans Approved by Securityholders		4,045,316	⁽¹⁾		8.175	⁽²⁾		923,396	⁽³⁾
Equity Compensation Plans Not Approved by Securityholders		—			—			49,481	⁽⁴⁾
Total		4,045,316						972,877

(1)

Reflects securities to be issued under the 1996 Incentive Plan and 2011 Incentive Plan, and includes 3,335,417 shares issuable upon the exercise of outstanding stock options, and 691,899 shares issuable upon the settlement of outstanding RSUs.

(2)

Reflects the weighted average exercise price of outstanding options. There is no exercise price for outstanding RSUs.

(3)

Includes securities available for future issuance under the 2011 Incentive Plan, other than upon the exercise of an outstanding option or the vesting of an outstanding RSU.

(4)

Includes securities available for future issuance under the Hutchinson Technology Incorporated Non-Employee Directors Equity Plan, through which our non-employee directors can elect to receive some or all of the cash retainer payments to which they are entitled in the form of shares of our common stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act and the regulations promulgated thereunder require directors and certain officers and persons who own more than 10% of our common stock to file reports of their ownership of our common stock and changes in their ownership with the SEC. None of our officers or directors failed to file any required report on a timely basis during fiscal 2015.

AUDIT COMMITTEE REPORT

The role of our committee, which is composed of three independent non-employee directors, is one of oversight of our company’s management and independent registered public accounting firm in regard to our company’s financial reporting and controls respecting accounting and risk of material loss. In performing our oversight function, we relied upon advice and information received in our discussions with management and the independent registered public accounting firm.

We have (a) reviewed and discussed with management and our company’s independent registered public accounting firm our company’s audited financial statements for the fiscal year ended September 27, 2015, management’s assessment of the effectiveness of our company’s internal control over financial reporting and our company’s independent registered public accounting firm’s evaluation of our company’s internal control over financial reporting; (b) discussed with our independent registered public accounting firm the matters required to be discussed by the applicable Public Company Accounting Oversight Board standards; and (c) received the written disclosures and the letter from our company’s independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and discussed with our company’s independent registered public accounting firm their independence.

Based on the review and discussions with management and our company’s independent registered public accounting firm referred to above, we recommended to our company’s board of directors that the audited financial statements be included in our company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2015, as amended, for filing with the SEC.

	Audit Committee:

	Thomas R. VerHage, Chair Russell Huffer Frank P. Russomanno

ADDITIONAL INFORMATION

Our Annual Report on Form 10-K for fiscal 2015, as amended, including financial statements is being mailed with this proxy statement directly to our shareholders of record. Shareholders whose shares are held in a brokerage, bank or similar account will receive these materials from the organization holding the account. The proxy materials also can be found on the Internet at www.htch.com/proxymaterials. Shareholders who wish to obtain an additional copy of our Annual Report on Form 10-K for fiscal 2015, as amended, may do so without charge by writing to David P. Radloff, Vice President and Chief Financial Officer, 40 West Highland Park Drive NE, Hutchinson, Minnesota 55350.

We have adopted a procedure approved by the SEC called “householding,” by which certain shareholders who do not participate in electronic delivery of proxy materials but who have the same address and appear to be members of the same family receive only one copy of our annual report and proxy statement. Each shareholder participating in householding continues to receive a separate proxy card. Householding reduces both the environmental impact of our annual meetings and our mailing and printing expenses.

If you or another shareholder with whom you share an address currently receive multiple copies of our annual report and/or proxy statement or if you hold stock in more than one account, but would like to receive only a single copy of the annual report or proxy statement for your household, please contact our mailing agent, Broadridge Financial Solutions, Inc., by mail at 51 Mercedes Way, Edgewood, New York, 11717, attention: Householding Department, by telephone at +1 (866) 540-7095 or by email at sendmaterial@proxyvote.com. If you currently participate in householding and would prefer to receive separate copies of our Annual Report on Form 10 - K for fiscal 2015, as amended, and this proxy statement, please contact our mailing agent in the same manner described above and you will receive additional copies, free of charge and promptly upon receipt of your request.

As of the date of this proxy statement, management knows of no matters that will be presented for determination at the meeting other than those referred to herein. If any other matters properly come before the meeting calling for a vote of shareholders, it is intended that the persons named in the proxies solicited by our board of directors, in accordance with their best judgment, will vote the shares represented by these proxies.

	By Order of the Board of Directors,



	Peggy Steif Abram Secretary

Dated: August 9, 2016

HUTCHINSON TECHNOLOGY INCORPORATED
40W. HIGHLAND PARK DRIVE NE
HUTCHINSON, MN 55350-9784

VOTE BY INTERNET - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
	KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

For

Withhold

For All

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

All

Except

The Board of Directors recommends you vote FOR

the following:

☐

Election of Directors

Nominees

01 Wayne M. Fortun 02 Martha Goldberg Aronson 03 Russell Huffer 04 Richard J. Penn 05 Frank P. Russomanno

06 Philip E. Soran 07 Thomas R. VerHage

The Board of Directors recommends you vote FOR proposals 2 and 3.

For

Against

Abstain

Advisory vote to approve executive compensation

☐

Ratification of appointment of Deloitte & Touche LLP as independent registered public accountants for 2016 fiscal year

☐

NOTE: Such other business as may properly come before the meeting or any adjournment thereof.

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

0000297421_1 R1.0.1.25

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K and all amendments thereto is/are available at www.htch.com/proxymaterials



HUTCHINSON TECHNOLOGY INCORPORATED
Annual Meeting of Shareholders
September 21, 2016 11:00 AM
This proxy is solicited by the Board of Directors

	The shareholder(s) hereby appoint(s) Wayne M. Fortun, Richard J. Penn, and Russell Huffer, or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of HUTCHINSON TECHNOLOGY INCORPORATED that the shareholder(s) is/are entitled to vote at the Annual Meeting of shareholder(s) to be held at 11:00 AM, CDT on September 21, 2016, at the the offices of Faegre Beker Daniels LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Mineapolis, Minnesota, and any adjournment or postponement thereof.

	This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.









		Continued and to be signed on reverse side