MONOLITHIC POWER SYSTEMS INC (Form: DEF 14A, Received: 04/30/2013 17:24:27)

PROPOSAL FOUR

APPROVAL OF THE MONOLITHIC POWER SYSTEMS, INC. 2014 EQUITY INCENTIVE PLAN

Background Information

We currently maintain the Monolithic Power Systems, Inc. 2004 Equity Incentive Plan, or the 2004 Equity Plan, under which we may grant incentive awards relating to our common stock. The 2004 Equity Plan will expire on November 12, 2014. Once the 2004 Equity Plan expires, we will no longer be able to grant stock-based awards under the 2004 Equity Plan, and any shares otherwise remaining available for future grants under the 2004 Equity Plan will no longer be available for issuance.

So that we may continue to grant incentives relating to our common stock following expiration of the 2004 Equity Incentive Plan, in April of 2013, our Board approved and adopted a new equity incentive plan, the Monolithic Power Systems, Inc. 2014 Equity Incentive Plan subject to the approval of our stockholders. This proposal relates to approval of the 2014 Equity Plan by our stockholders.

If the 2014 Equity Plan is approved by stockholders at this year’s Annual Meeting, it will become effective on November 13, 2014, which is the day following the day the 2004 Equity Plan will expire. Under the 2014 Equity Plan, the Company will be able to grant awards until November 13, 2024, which is the 10 year anniversary of the date the 2014 Equity Plan will become effective. We will only be able to grant awards under the 2014 Equity Plan once it becomes effective. Consequently, at no time will we be able to grant awards under the 2014 Equity Plan while the 2004 Equity Plan is still in effect.

The 2014 Equity Plan provides for the issuance of up to 5,500,000 net shares of our common stock pursuant to awards granted under the 2014 Equity Plan. The Board approved this share reserve after reviewing our very low 3-year historical average net burn rate of 1.3% and share use practices and forecasting the number of shares that may remain available for future grant in the 2004 Equity Plan on its expiration (and therefore would otherwise cease to be available for grant). In considering our historical use, we note that the Company has generally granted awards broadly throughout the organization, without concentrating such awards at the executive levels. In addition, we considered continuing our practice of imposing a two year vesting cliff on new employees, a practice designed to minimize the cost and dilutive impact of awards in the case of short term employment relationships. The forecast of share use assumed that performance-vesting awards would be earned at the target award size for the 2012 and 2013 fiscal year awards and at 100% of the target award size for 2014 fiscal year awards. Given this historical use and our forecasts, we predict that more than 7,500,000 shares would remain available for future grant at the end of the 2014 fiscal year – that is, in the absence of the expiration of the 2004 Equity Plan in November 2014.

Therefore, we are seeking approval of only 5,500,000 shares, not the more than 7,500,000 shares that have previously been approved by stockholders and that we anticipate would be available immediately prior to the termination of the 2004 Equity Incentive Plan. If the 2014 Equity Plan is approved, our full dilution level on a pro forma basis on November 13, 2014 is anticipated to be approximately 17%. The full dilution level includes the total outstanding awards under the 2004 Equity Incentive Plan and the 5,500,000 shares available for grants under the 2014 Equity Plan as a function of the total common shares outstanding plus the total outstanding awards and the shares available for grants. Management, our Board and our Compensation Committee are cognizant of dilution levels and strive to maintain dilution at an appropriate level.

										Year 2013
	Year 2010			Year 2011			Year 2012			From 1/1/2013 to Record Date			From Record Date to 12/31/2013 (Forecast)			Year 2013 (Forecast)			Year 2014 (Forecast)
Total grants:
Options		370,500			152,500			178,484			-			-			-			-
Time-based RSUs		518,240			853,480			540,584			239,388			78,265			317,653			373,442
Performance share units ("PSUs") (1)		416,000			-			433,252			311,540			-			311,540			320,318
Total grants		1,304,740			1,005,980			1,152,320			550,928			78,265			629,193			693,760
Total grants excluding PSUs		888,740			1,005,980			719,068			239,388			78,265			317,653			373,442

Total awards outstanding:
Awards outstanding at start of year / as of Record Date		7,700,810			6,845,292			6,162,795			5,461,468			4,708,769			5,461,468			4,063,286
Total grants		1,304,740			1,005,980			1,152,320			550,928			78,265			629,193			693,760
Cancellations		(477,139	)		(589,959	)		(158,167	)		(263,074	)		(36,926	)		(300,000	)		(225,000	)
Shares issued on exercises / vesting		(1,683,119	)		(1,098,518	)		(1,695,480	)		(1,040,553	)		(686,822	)		(1,727,375	)		(1,739,507	)
Total awards outstanding at end of year / as of Record Date		6,845,292			6,162,795			5,461,468			4,708,769			4,063,286			4,063,286			2,792,539
Breakdown:
Options outstanding		5,885,118			4,863,239			3,813,361			2,973,198			2,618,765			2,618,765			1,472,818
Time-based RSUs and PSUs outstanding		960,174			1,299,556			1,648,107			1,735,571			1,444,521			1,444,521			1,319,721

Total shares available for grant:
Shares available for grant at start of year / as of Record Date		2,023,943			2,954,607			4,291,737			4,938,885			6,434,695			4,938,885			6,393,356
Shares added per evergreen provision		1,758,265			1,753,151			1,641,301			1,783,664			-			1,783,664			1,876,533
Total grants		(1,304,740	)		(1,005,980	)		(1,152,320	)		(550,928	)		(78,265	)		(629,193	)		(693,760	)
Cancellations		477,139			589,959			158,167			263,074			36,926			300,000			225,000
Total shares available for grant at end of year / as of Record Date		2,954,607			4,291,737			4,938,885			6,434,695			6,393,356			6,393,356			7,801,129

Shares issued under the employee stock purchase plan		114,387			149,981			151,770			65,247			64,753			130,000			130,000

Common shares outstanding at end of year / as of Record Date		35,063,033			33,826,032			35,673,282			36,773,730			37,530,657			37,530,657			39,400,164

	Year 2010			Year 2011			Year 2012			Three-Year Average
Gross burn rate (2)		2.48	%		2.95	%		2.06	%		2.50	%
Net burn rate (3)		1.15	%		1.22	%		1.61	%		1.33	%

(1) The amounts assume 100% of the target PSU awards.

(2) We define the gross burn rate as total awards granted, excluding PSUs granted, divided by the weighted-average common shares outstanding.

(3) We define the net burn rate as total awards granted, excluding PSUs granted and cancellations, divided by the weighted-average common shares outstanding.

As of the Record Date, the closing price of our common stock on the Nasdaq Global Market was $22.66. The weighted-average exercise price of outstanding stock options on such date was $15.74 and the weighted-average remaining term was 2.3 years.

Our compensation committee analyzes our compensation program and stock-based award practices at least annually so that we continually enhance the alignment of our executive compensation structure with our stockholders’ interests and current best practices. For example, in 2012, in response to discussions with our stockholders, we increased the percentage (by number of shares) of our executives’ target equity compensation that could be earned based on pre-established performance goals to 50%. In 2013, we further increased that percentage (by number of shares) to 75% so that only 25% of the target equity incentive awards granted in 2013 vest based solely on continued service. By allocating a larger percentage of total target equity incentive compensation to performance-based equity awards, we tie a greater portion of our executives’ compensation to the Company’s performance, which we believe further aligns our executive compensation structure with our stockholders’ interests. We believe these practices and changes evidence our commitment to the thoughtful and responsible use of our equity compensation plans.

Our Board believes that the adoption of the 2014 Equity Plan is essential to our ability to continue these positive practices and to remain competitive in our ability to attract, retain and incentivize highly qualified employees and other service providers in the future. Equity compensation is central to our recruiting philosophy, especially given our rapid growth and our need to attract talented employees from large companies that offer significant equity compensation. If the 2014 Equity Plan is not approved, we may be compelled to increase significantly the cash component of our employee compensation, which may not necessarily align employee interests with those of stockholders as effectively as with stock-based compensation. Replacing equity awards with cash will also increase our cash compensation expense and use cash that would be better utilized if reinvested in our businesses or returned to our stockholders.

Accordingly, our Board recommends that our stockholders approve the 2014 Equity Plan by approving this Proposal Four.

Note Regarding Forecasts and Forward-Looking Statements

We do not as a matter of course make public forecasts as to our total shares outstanding and utilization of various equity awards due to the unpredictability of the underlying assumptions and estimates. In particular, the summary of the forecasts set forth in this Proposal Four include embedded assumptions regarding award vesting and exercise, employee turnover and competitive grant guidelines, all of which are highly dependent on the public trading price of our common stock and other factors, which we do not control. These forecasts reflect numerous assumptions and estimates made by our management as to future events, industry performance, general business, economic, regulatory, market and financial conditions, and other factors specific to our business, which assumptions and estimates our management believed were reasonable at the time the forecasts were prepared. These assumptions and estimates are difficult to predict and many are beyond the control of our management. In addition, these forecasts do not take into account any circumstances or events occurring after the date that they were prepared and, accordingly, do not give effect to any changes to our operations or strategy that may be implemented in the future. Although presented with numerical specificity, the forecasts are not fact. Accordingly, actual outcomes may be, and likely will be, materially different than those reflected in the forecasts. In evaluating these forecasts, our Board recognized the high variability inherent in these assumptions. The inclusion of the forecasts should not be regarded as an indication that these forecasts will be predictive of actual future outcomes, and the forecasts should not be relied upon as such. Neither we nor any other person makes any representation to any of our stockholders regarding actual outcomes compared to the information contained in the forecasts set forth above. We have included above a summary of these forecasts to give our stockholders access to certain information that was considered by our Board for purposes of evaluating the approval of the 2014 Equity Plan.

We do not intend to update or otherwise revise the forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future events even if any or all of the assumptions underlying the forecasts are shown to be in error. The forecasts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21A of the Securities Exchange Act of 1934, as amended. These statements involve risks and uncertainties that could cause actual outcomes to differ materially from those in the forward-looking statements, including our ability to attract and retain talent, achievement of performance metrics, if any, with respect to certain equity awards, the extent of option exercise activity, and others described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

Stockholder Approval

Stockholder approval of the 2014 Equity Plan is required by NASDAQ’s listing standards. Stockholder approval is also required under Section 422 of the Internal Revenue Code of 1986, as amended, the Code , so that we may grant stock options that qualify as “incentive stock options.”

In addition, we are also seeking stockholder approval of the 2014 Equity Plan to satisfy the stockholder approval requirement under Section 162(m) of the Code, so that we may grant awards under the 2014 Equity Plan that may qualify for exclusion from the federal tax deduction limitation under Section 162(m). Section 162(m) places a limit of $1,000,000 on the amount we may deduct in any one year for compensation paid to our chief executive officer and each of our other three most highly-paid executive officers other than our chief financial officer. Compensation that qualifies as performance-based compensation for purposes of Section 162(m) is not subject to this deductibility limit. For awards under the 2014 Equity Plan to qualify for this exception, stockholders must approve the material terms of the 2014 Equity Plan under which the awards are paid. For this purposes, the material terms of the 2014 Equity Plan include (i) the individuals eligible to receive awards under the 2014 Equity Plan, (ii) a description of the business criteria on which the performance goals are based, and (iii) the maximum award limits under the 2014 Equity Plan. This information is provided in the summary of the 2014 Equity Plan below. Stockholder approval of this proposal is intended to satisfy the stockholder approval requirements under Section 162(m).

New Plan Benefits

The amounts that will be awarded to eligible participants under the 2014 Equity Plan are not currently determinable because the grant and payout of awards under the 2014 Equity Plan is discretionary and will be determined in the future in the discretion of the Committee. The 2014 Equity Plan does not mandate set benefits or amounts, and no awards have been granted under the 2014 Equity Plan that are contingent upon stockholder approval.

Summary of the 2014 Equity Plan

The following is a summary of the key provisions of the 2014 Equity Plan. This summary does not purport to be a complete description of all the provisions of the 2014 Equity Plan, and it is qualified in its entirety by reference to the full text of the 2014 Equity Plan, which is attached as Annexure B to this Proxy Statement. Any stockholder who desires to obtain a copy of the 2014 Equity Plan may do so by written request to the Secretary of the Company, at 79 Great Oaks Blvd., San Jose, CA 95119.

Purpose of the 2014 Equity Plan

The purpose of the 2014 Equity Plan is to attract and retain the best available personnel of substantial responsibility, to provide additional incentives to our employees, directors and consultants, and to promote the success or our business. The Board of Directors believes that the 2014 Equity Plan is necessary to ensure that the Company maintains the ability in the future to continue to attract and retain highly qualified service providers by providing adequate incentives through the issuance of stock-based incentive awards.

Amendment and Termination

The 2014 Equity Plan may be amended or terminated by our Board at any time, provided that no amendment of the 2014 Equity Plan may materially impair any rights of any participant with respect to an award under the 2014 Equity Plan without the written consent of the holder of the affected award. The Company will obtain stockholder approval of any plan amendment to the extent necessary and desirable to comply with applicable laws or stock exchange listing requirements.

Eligibility and Participation

All employees, directors and consultants of the Company and all employees and consultants of any parent or subsidiary of the Company are eligible to be selected to receive awards under the 2014 Equity Plan, provided that only employees may be selected to receive awards that are intended to qualify as incentive stock options under Section 422 of the Code. As of the Record Date, approximately 1,000 employees, directors and consultants of the Company and its affiliates would be eligible participants in the 2014 Equity Plan.

Shares Subject to the 2014 Equity Plan

The 2014 Equity Plan provides for the issuance of up to 5,500,000 shares of our common stock pursuant to awards granted under the 2014 Equity Plan. All of the shares available for issuance under the 2014 Equity Plan may be issued pursuant to awards intended to qualify as “incentive stock options.”

If the exercise price of an option, stock-settled stock appreciation right or similar award is paid by net exercise or by tender to the Company, or attestation to the ownership, of shares owned by the participant, the number of shares available for issuance under the 2014 Equity Plan will be reduced by the gross number of shares for which the award is exercised, rather than reducing the number of shares available by only the number of shares issued. Shares will not be deemed to have been issued to the extent an award is settled in cash.

If an award expires or becomes unexercisable without having been exercised in full or, with respect to awards other than options or stock-settled stock appreciation rights, is forfeited to or repurchased by the Company due to failure to vest, the unexercised, forfeited or repurchased shares which were subject thereto will become available for future grant or sale under the 2014 Equity Plan (unless the 2014 Equity Plan has terminated). Except as described in the prior sentence, shares that have actually been issued under the 2014 Equity Plan under any award will not be returned to the 2014 Equity Plan and will not become available for future distribution under the 2014 Equity Plan.

The 2014 Equity Plan contains an anti-dilution provision under which the aggregate number and, if applicable, kind of shares that may be issued under the 2014 Equity Plan, as well as the number of shares and, if applicable, kind of shares and exercise or purchase price of outstanding awards, as well as the limitations on the size of awards granted (such as limitations approved under Section 162(m) or the aggregate incentive stock option limitation) will be adjusted to reflect any equity restructuring (within the meaning of FASB Accounting Standards Codification (ASC) 718) that causes the per share value of shares to change, such as a stock dividend, stock split, spin-off, rights offering, or recapitalization through a large, nonrecurring cash dividend.

Section 162(m) Limits

Options. The maximum number of shares with respect to which options may be granted to any participant during any fiscal year is 1,000,000 shares, except that in connection with a participant’s initial service (that is, a new hire grant), a participant may be granted options with respect to an additional 1,250,000 shares in that same fiscal year.

Stock Appreciation Rights. The maximum number of shares with respect to which stock appreciation rights may be granted to any participant during any fiscal year is 1,000,000 shares, except that in connection with a participant’s initial service, a participant may be granted stock appreciation rights with respect to an additional 1,250,000 shares in that same fiscal year.

Restricted Stock . For awards of restricted stock that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum number of shares of restricted stock that may be granted to any participant during any fiscal year is 1,000,000 shares.

Restricted Stock Units . For awards of restricted stock units that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code (sometimes called performance-based RSUs or PRSUs), the maximum number of shares with respect to which PRSUs may be granted to any participant during any fiscal year is 1,000,000 shares.

Performance Units . For awards of performance units that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum amount that may be paid with respect to performance units granted to any participant during any fiscal year is $22,000,000.

Dividends and Dividend Equivalents . If a participant is granted a right to receive dividends or dividend equivalents in connection with any other award and such right is intended to qualify as “performance-based compensation” under Section 162(m), the maximum amount that may be paid to the participant during any one fiscal year in respect of the underlying other award is $10,000,00. For example, if a participant is granted an option covering 1,000,000 shares and performance units covering $2,000,000 in the same fiscal year, the maximum dividend equivalent payout on those two awards in a future fiscal year is $20,000,000 (that is, $10,000,000 for each of the option award and the performance unit award).

The Company reserves the right to grant discretionary or non-performance-based awards that are not intended to be “performance-based compensation” and therefore that are not subject to these limits.

Limitation on Grants to Outside Directors

No non-employee director may be granted in respect of his or her service as a non-employee director, in the aggregate in any fiscal year, awards under the 2014 Equity Plan having a fair market value in excess of $1,000,000. For the purpose of applying this limit to options and stock appreciation rights, the $1,000,000 limitation relate to the aggregate exercise price at the date of grant. Notwithstanding the foregoing, the Board or compensation committee of the Board may authorize the granting of dividend equivalents in respect of an award granted to the non-employee directors, provided that the maximum amount that may be paid to a non-employee director with respect to such dividend equivalents applicable to a given award during any one fiscal year shall be $500,000.

Administration

The 2014 Equity Plan may be administered by the Board, different committees of the Board, and, as permitted by law, a committee of one or more officers, depending on the recipient of the award and type of award intended to be granted. With respect to awards that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, to the extent required by Section 162(m) of the Code, the 2014 Equity Plan will be administered with respect to such awards by a committee consisting solely of two or more directors intended to qualify as “outside directors” for purposes of Section 162(m) of the Code. With respect to awards that are intended to qualify for the exemption under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, the 2014 Equity Plan will be administered with respect to such awards by the full Board or a committee intended to meet the requirements of Rule 16b-3 of the Securities Exchange Act of 1934. Otherwise, the 2014 Equity Plan will be administered by our Board or by a committee of directors or other individuals satisfying applicable laws selected.

The administrator of the 2014 Equity Plan has broad discretion and power to administer and interpret the 2014 Equity Plan. Specifically, subject to the terms of the 2014 Equity Plan, the administrator has the authority to

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determine the fair market value of our shares of common stock

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select the participants eligible to receive awards and the types of awards to be granted to such participants

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determine the number of shares of common stock subject to awards and the value of performance units

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determine terms and conditions of awards and to approve form of award agreements, including, how and when awards can be exercised, any vesting or forfeiture restrictions, any acceleration or waiver of forfeiture provisions, and any restrictions or limitations on awards

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construe and interpret the terms of the 2014 Equity Plan and awards granted under the 2014 Equity Plan

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establish, amend and rescind rules and regulations relating to the 2014 Equity Plan

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modify or amend awards

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defer or allow participants to defer the receipt of the payment of cash or the delivery of shares of common stock in connection with an award, and

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make all other determinations deemed necessary or advisable for administering the 2014 Equity Plan.

Types of Awards

Awards under the 2014 Equity Plan may consist of options (nonqualified options and incentive stock options), stock appreciation rights, restricted stock, restricted stock units, performance units, and dividend equivalent rights. The nature of each type of award is discussed below. Each award will be granted pursuant to an award agreement, the form and content of which will be determined by the 2014 Equity Plan’s administrator in its discretion, consistent with the provisions of the 2014 Equity Plan. The terms of award agreements for a particular type of award need not be uniform.

Type of Options

Two types of options may be granted under the 2014 Equity Plan: options intended to qualify as incentive stock options, or ISOs, under Section 422 of the Code, and nonqualified options, or NSOs , which are options that are not intended to qualify as ISOs. ISOs are subject to additional requirements and, to the extent these requirements are satisfied (including but not limited to the $100,000 limitation), receive special tax treatment under U.S. federal tax laws. If all or a part of an option that is intended to be treated as an ISO fails to satisfy these requirements, such option or part of the option will be treated as an NSO. Both ISOs and NSOs provide the holder the right to acquire shares, by exercising the option, at a specified price over a specified period. Options are generally only exercisable after vesting conditions have been satisfied.

Stock Appreciation Rights

The 2014 Equity Plan also provides for the granting of stock appreciation rights. A stock appreciation right is a right to receive a payment (in cash or shares) upon exercise of the award, where the payment is based on the increase in the fair market value of a share after the date of grant. Specifically, on the exercise of a stock appreciation right, the participant will receive an amount determined by multiplying the difference between the fair market value of a share on the date of exercise over the exercise price by the number of shares as to which the stock appreciation right is being exercised.

Restricted Stock

The 2014 Equity Plan also provides for the granting of awards of restricted stock. Restricted stock awards are shares of our common stock that are subject to forfeiture and transfer restrictions until applicable vesting conditions are satisfied. Vesting conditions may be based on service or satisfaction of performance goals. The administrator may decide that a holder of restricted stock will have the right to receive all dividends and other distributions paid with respect to such shares, and may condition such payment on the lapsing of the same forfeiture and transfer restrictions as the underlying shares.

Restricted Stock Units and Performance Units

The 2014 Equity Plan provides for the granting of restricted stock units and performance units, each of which are awards that will result in an issuance of shares or payment of cash if pre-established performance or other vesting conditions are satisfied. Each restricted stock unit has a value equal to one share of our common stock. Performance units have an initial dollar value established by the administrator on or before the grant date. Vesting conditions may be based on service or satisfaction of performance goals.

Dividend Equivalents

The 2014 Equity Plan permits the granting of dividend equivalent awards, which are the right to be paid in cash an amount equal to the regular cash dividends declared and paid on an equal number of outstanding shares. Dividend equivalent rights are typically granted in connection with another type of award as to which the holder would not be entitled to receive the dividends or distributions until the underlying shares are issued, such as options or restricted stock units. The administrator may condition the payouts under dividend equivalent rights on the lapsing of the same forfeiture and transfer restrictions as the underlying shares.

Code Section 162(m) Provisions; Performance Goals

The 2014 Equity Plan permits the granting of awards that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code. So that we may grant awards that may qualify as performance-based compensation, we are asking that our stockholders approve the following categories of performance criteria: (i) revenue, growth in revenue or product revenue; (ii) sales or bookings targets, including product or product family sales or bookings targets; (iii) billings; (iv) market share; (v) stock price performance, including but not limited to growth in the market price of stock, total stockholder return, and return on stockholder equity; (vi) margin, including gross margin, net margin or operating margin; (vii) income, including but not limited to net income, operating income, and operating income after taxes; (viii) profit, including but not limited to operating profit, net operating profit or pre-tax profit; (ix) earnings, including but not limited to earnings per share, net earnings, earnings before interest, taxes and/or depreciation and/or amortization; (x) income, before or after taxes (including net income); (xi) return on assets, capital, operating revenue and/or investments; (xii) expense control and/or cost reductions; (xiii) capital expenditures; (xiv) economic value added; (xv) cash flow, including but not limited to operating cash flow, cash flow per share and cash management; (xvi) improvement in or attainment of working capital levels; (xvii) debt reduction or debt levels; (xviii) contract win, renewal or extension; design win; (xix) delivery and/or design schedule; (xx) milestones in new generation of products or technologies; (xxi) completion of or milestones associated with mergers, acquisitions, strategic investments, restructurings, reorganizations (including entry into term sheets, signing of definitive agreements, closing transactions, funding of investments, and post-closing integration milestones); (xxii) litigation, including litigation outcomes, milestones or management; (xxiii) workforce diversity; (xxiv) customer satisfaction; (xv) other measures of performance selected by the committee to the extent consistent with Section 162(m); and (xvi) to the extent Section 162(m) compliance is not intended, such other measures of performance selected by the committee.

The 2014 Equity Plan provides that the administrator may use any of the foregoing and/or any additional or different performance goals for awards that are not intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code. The goals may be applied either to the Company as a whole or to a business group, subsidiary, or other division, either individually or in any combination, and measured on an absolute basis or relative to a pre-established target, to previous years’ or any other period’s results (including results during a prior or current performance period), or to a designated comparison group, in each case as specified by the administrator.

The 2014 Equity Plan provides that to the extent consistent with Section 162(m) of the Code, the Committee may adjust the evaluation of the achievement of the performance goals as follows: (1) to include or exclude restructuring and/or other nonrecurring charges; (2) to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated performance goals; (3) to include or exclude the effects of changes to GAAP required by the Financial Accounting Standards Board or to the International Financial Reporting Standard (IFRS); (4) to include or exclude the effects of any statutory adjustments to corporate tax rates; (5) to include or exclude the effects of any “extraordinary items” as determined under GAAP; (6) to include or exclude the effect of payment of bonuses under the master cash plan or any other bonus plans of the Company; (7) to include or exclude the effect of stock based compensation and/or deferred compensation; (8) to include or exclude any unusual, non-recurring gain or loss or other extraordinary item; (9) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (10) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (11) to include or exclude the effects of divestitures, acquisitions or joint ventures; (12) to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP; (13) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (14) to include or exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders including cash dividends; (15) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (16) to reflect any partial or complete corporate liquidation; (17) to reflect shippable backlog; and (18) to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.

Option Exercise Prices and Stock Appreciation Right Price

Except as permitted under the Code in connection with certain corporate transactions, the exercise price for shares covered by an option or stock appreciation right may not be less than 100% of the fair market value of such shares on the date of grant. If an ISO is granted to a 10% stockholder of the Company or its subsidiaries (measured by ownership of voting power), the exercise price of the ISO shall not be less than 110% of the fair market value of such shares on the date of grant.

Other Award Terms

The administrator determines when and under what conditions awards will be granted, become vested and/or become exercisable. The conditions may be based on continued service, satisfaction of performance-related goals or a combination of service and performance.

The administrator will determine the method of satisfying any exercise or purchase price and any tax obligations. Such payments may be made in cash (including electronic wire transfer) or by check, or, subject to the approval of the administrator and subject to applicable law, by the delivery of shares of our common stock already owned by the participant, through a “cashless” or a “broker-assisted” exercise involving the immediate sale or pledge of shares with a value sufficient to pay the exercise price, by net exercise (where a number of shares having a fair market value equal to the exercise price is withheld from the shares that would otherwise be issued upon exercise), or by any other method specified by the administrator and permitted by applicable law.

Maximum Term of Awards

No award granted under the 2014 Equity Plan will have a term of more than 10 years. Options intended to qualify as incentive stock options that are granted to 10% stockholders of the Company (measured by ownership of voting power) shall expire not later than five years from the date of grant.

No Repricings

Except in connection with an anti-dilution adjustment under the 2014 Equity Plan, we may not, without obtaining stockholder approval: (a) amend the terms of outstanding options or stock appreciation rights to reduce the exercise price of such outstanding options or stock appreciation rights; (b) cancel outstanding options or stock appreciation rights in exchange for options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights; or (c) cancel outstanding options or stock appreciation rights with an exercise price above the current stock price in exchange for cash or other securities.

Termination of Service

The treatment of each award on the termination of service shall be determined by the administrator in its discretion and shall be set forth in the applicable award agreement. If a participant ceases to provide services to the Company or any of its subsidiaries, the participant’s options and stock appreciation rights that were vested and exercisable will generally remain exercisable for a period of three months (12 months in the case of death or disability). The administrator may provide that awards will expire and revert to the Company immediately on a termination of service for cause.

Certain Corporate Transactions

The 2014 Equity Plan provides that in the event of a “change in control” of the Company, the successor corporation or its parent or subsidiary will assume or substitute an equivalent award for each outstanding award. If there is no assumption or substitution of outstanding awards, the outstanding awards will immediately vest and, as applicable, become exercisable, all service-based restrictions on restricted stock and other awards will lapse, and all performance goals or other vesting requirements for performance-based awards will be deemed achieved at maximum levels. With respect to awards that are assumed or substituted for, in the event the service of an outside director is terminated on or following the date of the assumption or substitution, other than pursuant to a voluntary resignation, his or her awards will fully vest and become immediately exercisable, all service-based restrictions on restricted stock and other awards will lapse, and all performance goals or other vesting requirements for performance-based awards will be deemed achieved at maximum levels. The administrator may also provide for one or more alternatives to this treatment in an award agreement.

Rights as a Stockholder

The holder of an option, stock appreciation right, restricted stock unit, performance unit and dividend equivalent right will have no rights as a stockholder with respect to shares of our common stock covered by the award until the date such holder becomes a holder of record of such shares. The recipient of restricted stock will generally have all the rights of a stockholder with respect to the shares of our common stock issued pursuant to such award, including the right to vote such shares, but any dividends and distributions with respect to such shares will generally be subject to the same vesting restrictions, if any, as the underlying shares.

Assignability of Options, Stock Appreciation Rights and Other Awards

An ISO granted under the 2014 Equity Plan will, by its terms, be non-transferable by the participant, either voluntarily or by operation of law, other than by will or the laws of descent and distribution, and shall be exercisable during the participant’s lifetime only by him or her. Any award issued under the 2014 Equity Plan other than an ISO shall be nontransferable by the participant, either voluntarily or by operation of law, other than by will or the laws of descent and distribution, except as the administrator may determine in its discretion.

Federal Income Tax Matters

The following discussion of federal income tax consequences does not purport to be a complete analysis of all of the potential tax effects of the 2014 Equity Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. No information is provided with respect to persons who are not citizens or residents of the United States, or foreign, state or local tax laws, or estate and gift tax considerations. In addition, the tax consequences to a particular participant may be affected by matters not discussed above. ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT HIS OR HER TAX ADVISOR CONCERNING THE TAX CONSEQUENCES TO HIM OR HER OF THE 2014 EQUITY PLAN, INCLUDING THE EFFECTS OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN THE TAX LAWS.

The 2014 Equity Plan is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, or ERISA , and is not qualified under Section 401(a) of the Code.

Non-Qualified Stock Options

Under current federal income tax law, the grant of an NSO has no immediate tax effect on the Company or the participant. If the shares of our common stock received on the exercise of an NSO are not subject to restrictions on transfer or substantial risk of forfeiture, the exercise of the NSO will result in ordinary income to the participant equal to the excess of the fair market value of the shares at the time of exercise over the option price. The participant’s tax basis in the shares will be equal to the option price plus the amount of ordinary income recognized upon the exercise of the option. Upon any subsequent disposition of the shares, any gain or loss recognized by the participant will be treated as capital gain or loss and will be long-term capital gain or loss if the shares are held for more than one year after exercise. At the time of recognition of ordinary income by the participant upon exercise, the Company will normally be allowed to take a deduction for federal income tax purposes in an amount equal to such recognized ordinary income.

If the shares received on the exercise of an NSO are subject to restrictions on transfer or substantial risk of forfeiture, such as a vesting condition, different rules will apply, and the tax consequences will depend on whether the participant makes an election under Section 83(b) of the Code within 30 days after exercise of the option.

If the participant does not make a Section 83(b) election, the participant will recognize ordinary income when the shares vest in an amount equal to the excess of the fair market value on the date of vesting over the exercise price. In that case, the participant’s basis in the shares will be the fair market value of the shares on the date of vesting, and the participant’s holding period will begin on the date of vesting. Upon any later disposition of the shares, any gain or loss that the participant recognizes will be capital gain or loss, and will be long-term capital gain or loss if the participant holds the shares more than one year after vesting. The Company will be allowed a deduction for federal income tax purposes when the shares vest equal to the amount of ordinary income the participant recognizes.

If the participant makes a Section 83(b) election, the participant will recognize ordinary income at the time of exercise equal to the excess of the fair market value on the date of exercise over the exercise price. The Company will be allowed a deduction for federal income tax purposes on the date of exercise equal to the amount of ordinary income he or she recognizes. The participant’s basis in the shares will generally begin on the date of exercise, and the participant’s basis in the shares will generally be the option price increased by the amount of ordinary income the participant recognized at the time of exercise. Upon any later disposition of the shares, any gain or loss that the participant recognizes will be capital gain or loss, and will be long-term capital gain or loss if the participant holds the shares more than one year after exercise. However, if the participant later forfeits the shares, the participant will recognize a capital loss equal to excess (if any) of the option price over any amount the participant receives from the Company on the forfeiture. In other words, if a participant makes the Section 83(b) election and thereby recognizes ordinary income on the date of exercise, the participant will receive no corresponding deduction or loss if the participant later forfeits the shares for the amount of ordinary income the participant recognized.

Incentive Stock Options

The federal income tax consequences associated with ISOs are generally more favorable to the participant and less favorable to the Company than those associated with NSOs. Under current federal income tax law, the grant of an ISO does not result in income to the participant or in a deduction for the Company at the time of the grant. Generally, the exercise of an ISO will not result in income for the participant if the participant does not dispose of the shares within two years after the date of grant or within one year after the date of exercise. If these requirements are met, the basis of the shares of our common stock upon a later disposition will be the option price, any gain on the later disposition will be taxed to the participant as long-term capital gain, and the Company will not be entitled to a deduction. The excess of the fair market value on the exercise date over the option price is an adjustment to regular taxable income in determining alternative minimum taxable income, which could cause the participant to be subject to the alternative minimum tax, thereby in effect depriving the participant of the tax benefits of ISO treatment. If the participant disposes of the shares before the expiration of either of the holding periods described above, referred to as a disqualifying disposition , the participant will have compensation taxable as ordinary income, and the Company will normally be entitled to a deduction, equal to the lesser of (a) the fair market value of the shares on the exercise date minus the option price, or (b) the amount realized on the disposition minus the option price. If the price realized in any such disqualifying disposition of the shares exceeds the fair market value of the shares on the exercise date, the excess will be treated as long-term or short-term capital gain, depending on the participant’s holding period for the shares.

Stock Appreciation Rights

A participant holding a stock appreciation right will recognize ordinary income on the exercise of the stock appreciation right equal to the amount of cash or the fair market value of the shares he or she receives on the exercise. The Company will receive a tax deduction in the same amount. Upon disposition of the shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of grant as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

Restricted Stock

In general, no taxable income will be recognized by a participant at the time restricted stock is granted. Generally, on the date the restricted stock becomes vested, the participant will recognize ordinary income in an amount equal to the difference between the fair market value of the shares on the date the shares vest and the purchase price (if any), and the Company will receive a tax deduction for the same amount. Upon disposition of the shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of vesting as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

Alternatively, a participant may elect to make an election under Section 83(b) of the Code with respect to unvested shares. If a participant makes a Section 83(b) election with the Internal Revenue Service within 30 days from the date of grant, the participant will recognize ordinary income in an amount equal to the difference between the fair market value of the shares on the date of grant and the purchase price, and the Company will receive a tax deduction for the same amount. If the participant makes a timely Section 83(b) election, the participant will not recognize ordinary income when the shares vest. Upon disposition of the shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of grant as either short-term or long-term capital gain or loss, depending on how long the shares have been held. If the participant forfeits unvested shares, the participant will recognize a capital loss equal to the excess (if any) of the purchase price over any amount the participant receives from the Company on the forfeiture. Generally, if the participant makes a Section 83(b) election, and thereby recognizes ordinary income on the date of grant, the participant will receive no corresponding deduction or loss for the amount of ordinary income the participant recognized if the participant later forfeits any unvested shares.

Restricted Stock Units and Performance Units

Restricted stock units and performance units result in ordinary income on the receipt of cash or shares equal to the amount of cash, or the excess of the fair market value of the shares over the amount (if any) that the participant pays for the shares. The Company will receive a tax deduction in the same amount. Upon disposition of any shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of grant as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

$1,000,000 Limit on Deductible Non-Performance Based Compensation

Section 162(m) of the Code provides that any publicly-held corporation will be denied a deduction for compensation paid to certain executive officers to the extent that the compensation exceeds $1,000,000 per officer per year. However, the deduction limit does not apply to compensation that qualifies as performance-based compensation under Section 162(m). Among other current requirements, compensation may be performance based compensation if (i) the compensation is payable on account of the attainment of one or more performance goals; (ii) the performance goals are established by a compensation committee of the Board of Directors of directors consisting solely of “outside directors”; (iii) the material terms of the compensation and the performance goals are disclosed to and approved by the stockholders in a separate vote; and (iv) before any payment of such compensation, the compensation committee certifies in writing that the performance goals have been satisfied. The rules and regulations promulgated under Section 162(m) are complicated and subject to change, potentially with retroactive effect. In addition, a number of requirements must be met in order for compensation to qualify as performance-based compensation under Section 162(m). As such, there can be no assurance that compensation awarded or paid under the 2014 Equity Plan will be deductible.

Section 409A Considerations

Section 409A of the Code imposes certain additional taxes on an employee or service provider who receives “deferred compensation” that does not comply with the requirements of Section 409A. Generally, if stock options and stock appreciation rights are granted under the 2014 Equity Plan on shares of the Company common stock and with exercise prices of not less than 100% of fair market value on the date of grant, such awards generally will not constitute deferred compensation within the meaning of Section 409A. The Company makes no representations that awards granted or paid under the 2014 Equity Plan will be exempt from or compliant with Section 409A.

Withholding of Taxes

The Company has retained the authority under the 2014 Equity Plan to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be deducted or withheld with respect to awards granted under the 2014 Equity Plan. The administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a participant to satisfy such tax withholding obligation, in whole or in part by, without limitation (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or shares having a fair market value equal to the minimum statutory amount required to be withheld, and/or (c) delivering to the Company already-owned shares having a fair market value equal to the minimum statutory amount required to be withheld.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE MONOLITHIC POWER SYSTEMS, INC. 2014 EQUITY INCENTIVE PLAN.

Annexure B

MONOLITHIC POWER SYSTEMS, INC.

2014 EQUITY INCENTIVE PLAN

1. Purposes of the Plan . The purposes of this Plan are:

to attract and retain the best available personnel for positions of substantial responsibility,

to provide additional incentive to Employees, Directors and Consultants, and

to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units, Restricted Stock Units and Dividend Equivalents.

2. Definitions . As used herein, the following definitions will apply:

(a) “ Administrator ” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 of the Plan.

(b) “ Affiliated SAR ” means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised.

(c) “ Applicable Laws ” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(d) “ Award ” means, individually or collectively, a grant under the Plan of Options, SARs, Restricted Stock, Performance Units, Restricted Stock Units or Dividend Equivalents.

(e) “ Award Agreement ” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

(f) “ Board ” means the Board of Directors of the Company.

(g) “ Change in Control ” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

(iii) A change in the composition of the Board occurring within a two year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the effective date of the Plan, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

Notwithstanding the foregoing, to the extent payment of any Award would be accelerated due to the Change in Control and such Award constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the event shall not be considered to be a Change in Control under the Plan for purposes of such Award unless such event is also a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.

(h) “ Code ” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(i) “ Committee ” means a committee of Directors (or a subcommittee appointed by the committee of Directors) or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 of the Plan.

(j) “ Common Stock ” means the common stock of the Company.

(k) “ Company ” means Monolithic Power Systems, Inc., a Delaware corporation, or any successor thereto.

(l) “ Consultant ” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.

(m) “ Director ” means a member of the Board.

(n) “ Disability ” means total and permanent disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

(o) “ Dividend Equivalent ” means, with respect to Shares subject to the Award, a right to be paid in cash an amount equal to the regular cash dividends declared and paid on an equal number of outstanding Shares.

(p) “ Employee ” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

(q) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

(r) “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.

(s) “ Fiscal Year ” means the fiscal year of the Company.

(t) “ Freestanding SAR ” means a SAR that is granted independently of any Option.

(u) “ GAAP ” means United States generally accepted accounting principles.

(v) “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(w) “ Inside Director ” means a Director who is an Employee.

(x) “ Nonstatutory Stock Option ” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(y) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(z) “ Option ” means a stock option granted pursuant to the Plan.

(aa) “ Optioned Stock ” means the Common Stock subject to an Option.

(bb) “ Outside Director ” means a Director who is not an Employee.

(cc) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(dd) “ Participant ” means the holder of an outstanding Award.

(ee) “ Performance Goals ” shall mean any one or more of the following performance goals, either individually or in any combination, applied either to the Company as a whole or to a business group, subsidiary, or other division, either individually or in any combination, and measured on an absolute basis or relative to a pre-established target, to previous years’ or any other period’s results (including results during a prior or current Performance Period), or to a designated comparison group, in each case as specified by the Administrator: (i) revenue, growth in revenue or product revenue; (ii) sales or bookings targets, including product or product family sales or bookings targets; (iii) billings; (iv) market share; (v) stock price performance, including but not limited to growth in the market price of stock, total stockholder return, and return on stockholder equity; (vi) margin, including gross margin, net margin or operating margin; (vii) income, including but not limited to net income, operating income, and operating income after taxes; (viii) profit, including but not limited to operating profit, net operating profit or pre-tax profit; (ix) earnings, including but not limited to earnings per share, net earnings, earnings before interest, taxes and/or depreciation and/or amortization; (x) income, before or after taxes (including net income); (xi) return on assets, capital, operating revenue and/or investments; (xii) expense control and/or cost reductions; (xiii) capital expenditures; (xiv) economic value added; (xv) cash flow, including but not limited to operating cash flow, cash flow per share and cash management; (xvi) improvement in or attainment of working capital levels; (xvii) debt reduction or debt levels; (xviii) contract win, renewal or extension; design win; (xix) delivery and/or design schedule; (xx) milestones in new generation of products or technologies; (xxi) completion of or milestones associated with mergers, acquisitions, strategic investments, restructurings, reorganizations (including entry into term sheets, signing of definitive agreements, closing transactions, funding of investments, and post-closing integration milestones); (xxii) litigation, including litigation outcomes, milestones or management; (xxiii) workforce diversity; (xxiv) customer satisfaction; (xv) other measures of performance selected by the Committee to the extent consistent with Section 162(m); and (xvi) to the extent section 162(m) compliance is not intended, such other measures of performance selected by the Committee.

The Committee may appropriately adjust any evaluation of performance with respect to Performance Goals to exclude certain events that occur during a Performance Period, including (1) to include or exclude restructuring and/or other nonrecurring charges; (2) to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated performance goals; (3) to include or exclude the effects of changes to GAAP required by the Financial Accounting Standards Board or to the International Financial Reporting Standard (IFRS); (4) to include or exclude the effects of any statutory adjustments to corporate tax rates; (5) to include or exclude the effects of any “extraordinary items” as determined under GAAP; (6) to include or exclude the effect of payment of bonuses under the bonus plans of the Company; (7) to include or exclude the effect of stock based compensation and/or deferred compensation; (8) to include or exclude any unusual, non-recurring gain or loss or other extraordinary item; (9) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (10) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (11) to include or exclude the effects of divestitures, acquisitions or joint ventures; (12) to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP; (13) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (14) to include or exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders including cash dividends; (15) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (16) to reflect any partial or complete corporate liquidation; (17) to reflect shippable backlog; and (18) to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.

For the avoidance of doubt, the Committee may use any of the foregoing and/or any additional or different performance goals and may make the foregoing or any other adjustments it chooses with respect to Awards that are not intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code.

(ff) “ Performance Period ” means the period determined by the Committee in its sole discretion during which performance or other vesting conditions are measured.

(gg) “ Performance Unit ” means an Award granted to a Participant pursuant to Section 9.

(hh) “ Period of Restriction ” means the period during which the transfer of Shares are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.

(ii) “ Plan ” means this 2014 Equity Incentive Plan, as amended from time to time.

(jj) “ Restricted Stock ” means Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan, or issued pursuant to the early exercise of an Option.

(kk) “ Restricted Stock Unit ” means an Award granted to a Participant pursuant to Section 10.

(ll) “ Rule 16b-3 ” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(mm) “ Section 16(b) “ means Section 16(b) of the Exchange Act.

(nn) “ Service Provider ” means an Employee, Director or Consultant.

(oo) “ Share ” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan.

(pp) “ Stock Appreciation Right ” or “ SAR ” means an Award, granted alone or in connection with an Option, that pursuant to Section 8 is designated as a SAR.

(qq) “ Subsidiary ” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

(rr) “ Tandem SAR ” means a SAR that is granted in connection with a related Option, the exercise of which will require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the same extent).

3. Stock Subject to the Plan .

(a) Stock Subject to the Plan . Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of Shares that may be issued pursuant to Awards under the Plan is 5,500,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. Shares will not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. All of the Shares available for issuance under the Plan may be issued pursuant to Incentive Stock Options. Upon payment in Shares pursuant to the exercise of an SAR, the number of Shares available for issuance under the Plan will be reduced by the gross number of Shares with respect to which the SAR is being exercised, rather than reducing the number of shares available by only the number of Shares issued. Similarly, if the exercise price of an Option is paid by net exercise or by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of Shares available for issuance under the Plan will be reduced by the gross number of Shares for which the Option is exercised.

(b) Lapsed Awards . If an Award expires or becomes unexercisable without having been exercised in full or, with respect to Restricted Stock, Performance Units, Restricted Stock Units or Dividend Equivalents, is forfeited to or repurchased by the Company due to failure to vest, the unexercised, forfeited or repurchased Shares (as applicable) will become available for future grant or sale under the Plan (unless the Plan has terminated). Shares tendered in payment of the exercise or purchase price of an Award, or in satisfaction of tax withholdings, will not be returned to the Plan and will not become available for future distribution under the Plan.

(c) Share Reserve . The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.

4. Administration of the Plan .

(a) Procedure .

(i) Multiple Administrative Bodies . Different Committees with respect to different groups of Service Providers may administer the Plan. The Board or a committee of the Board may delegate authority to grant awards to one or more Officers of the Company in a manner that complies with Applicable Laws.

(ii) Section 162(m) . To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, and to the extent required by Section 162(m) of the Code, the Plan will be administered with respect to such Awards by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code; provided, however, that if it is later determined that one or more members of the Committee did not so qualify, actions taken by the Committee shall be valid for all other purposes despite such failure to qualify under Section 162(m).

(iii) Rule 16b-3 . To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3; provided, however, that if it is later determined that such requirements were not satisfied, actions taken by the Administrator shall be valid for all other purposes despite such failure to satisfy Rule 16b-3.

(iv) Other Administration . Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator . Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee or by a Committee to another Committee, the Administrator will have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Awards may be granted hereunder and the type of Awards to be granted;

(iii) to determine the number of Shares to be covered by, or size of, each Award granted hereunder and the value of Performance Units granted hereunder;

(iv) to approve forms of Award Agreement for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), the right to receive dividends or Dividend Equivalents, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;

(vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

(viii) to modify or amend each Award (subject to the terms of the Plan), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards;

(ix) to determine the manner in which Participants can satisfy withholding tax obligations;

(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(xi) to defer, or to allow a Participant to defer, the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award; and

(xii) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision . The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.

5. Eligibility . Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units, Restricted Stock Units and Dividend Equivalents may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Stock Options .

(a) Limitations .

(i) Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, or such Option otherwise fails to satisfy the requirements to be Incentive Stock Options, such Option will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted (or modified, as applicable).

(ii) The following limitations will apply to grants of Options for compliance with Code Section 162(m):

(1) No Service Provider will be granted, in any Fiscal Year, Options to purchase more than 1,000,000 Shares.

(2) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,250,000 Shares, which will not count against the limit set forth in Section 6(a)(2)(ii)(1) above.

(3) The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 14 .

(4) If an Option is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 14 ), the cancelled Option will be counted against the limits set forth in subsections (1) and (2) above in the manner prescribed by Code Section 162(m).

(b) Term of Option . The term of each Option will be stated in the Award Agreement. The term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

(i) Exercise Price . The per share exercise price for the Shares to be issued pursuant to the exercise of an Option will be determined by the Administrator, subject to the following:

(1) In the case of an Incentive Stock Option

a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

b) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price will be no less than 100% of the Fair Market Value per Share on the date of grant.

(2) In the case of a Nonstatutory Stock Option, the per Share exercise price will be determined by the Administrator, but will not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

(3) Notwithstanding the foregoing, Options may be granted with (or adjusted to include) a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in Section 424(a) of the Code.

(ii) Waiting Period and Exercise Dates . At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

(iii) Form of Consideration . The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash (including electronic wire transfer); (2) check; (3) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (4) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (5) by net exercise; (6) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (7) any combination of the foregoing methods of payment.

(d) Exercise of Option .

(i) Procedure for Exercise; Rights as a Stockholder . Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.

An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes), with the exercise effective only if the exercise otherwise complies with applicable laws. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse or lawfully recognized domestic partner. Until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends (except as otherwise provided in Section 6(e) of the Plan) or any other rights as a stockholder will exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. Except as otherwise provided in Section 6(e) or Section 14 of the Plan, no adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued.

Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(ii) Termination of Relationship as a Service Provider . If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by the unexercised portion of such Option will revert to the Plan. The Administrator may provide in the Award Agreement that the Option will terminate immediately on a termination of the Participant’s service for cause.

(iii) Disability of Participant . If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by the unexercised portion of such Option will revert to the Plan.

(iv) Death of Participant . If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the Option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately reverts to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by the unexercised portion of such Option will revert to the Plan.

(e) Dividend Equivalents . At the discretion of the Administrator, an Award of Options may provide the Participant with the right to receive Dividend Equivalents, which may be subject to the same restrictions and vesting conditions applicable to such Award. Notwithstanding the foregoing, to the extent Dividend Equivalents are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum amount that may be paid to a Participant with respect to such Dividend Equivalents (that are granted in connection with a given Option Award ) during any one Fiscal Year shall be $10,000,000.

7. Restricted Stock .

(a) Grant of Restricted Stock . Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine. For Awards of Restricted Stock that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum number of Shares with respect to which such Awards may be granted to any Service Provider during any Fiscal Year shall be 1,000,000 Shares.

(b) Restricted Stock Agreement . Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until Period of Restriction expires and all restrictions on such Shares have lapsed.

(c) Transferability . Unless otherwise determined by the Administrator, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.

(d) Other Restrictions . The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.

(i) General Restrictions . The Administrator may set restrictions based upon continued employment or service with the Company and its affiliates, the achievement of Performance Goals or other performance objectives (Company-wide, departmental, or individual), or any other basis determined by the Administrator in its discretion.

(ii) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may make the grant of Restricted Stock, or the vesting of Restricted Stock, contingent upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Restricted Stock to qualify as “performance-based compensation” under Section 162(m) of the Code.

(e) Removal of Restrictions . Unless otherwise determined by the Administrator, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. After the grant of a Restricted Stock, the Administrator, in its sole discretion, may reduce or waive any restrictions or performance objectives or other vesting provisions for such Restricted Stock, subject to any applicable limitations imposed under Section 162(m) of the Code.

(f) Stockholder Rights . During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.

(g) Dividends . At the discretion of the Administrator, an Award of Restricted Stock may provide the Participant with the right to receive dividends, which may be subject to the same restrictions and vesting conditions applicable to such Award. Notwithstanding the foregoing, to the extent dividends are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum amount that may be paid to a Participant with respect to such dividends (that are granted in connection with a given Restricted Stock Award ) during any one Fiscal Year shall be $10,000,000.

(h) Return of Restricted Stock to Company . On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.

8. Stock Appreciation Rights .

(a) Grant of SARs . Subject to the terms and conditions of the Plan, a SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. The Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof.

(b) Number of Shares . Subject to the following limitations for compliance with Code Section 162(m), the Administrator will have complete discretion to determine the number of SARs granted to any Service Provider:

(i) No Service Provider will be granted, in any Fiscal Year, SARs to purchase more than 1,000,000 Shares.

(ii) In connection with his or her initial service, a Service Provider may be granted SARs to purchase up to an additional 1,250,000 Shares, which will not count against the limit set forth in Section 8(b)(i) above.

(iii) The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 14 .

(iv) If a SAR is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 14 ), the cancelled SAR will be counted against the limits set forth in subsections (i) and (ii) above as prescribed under Code Section 162(m).

(c) Exercise Price and Other Terms . The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of SARs granted under the Plan. However, the exercise price of Tandem or Affiliated SARs will equal the exercise price of the related Option. In addition, the exercise price of Freestanding SARs will not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant; provided, however that a SAR may be granted with (or adjusted to include) a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in Section 424(a) of the Code.

(d) Exercise of Tandem SARs . Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (i) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (ii) the value of the payout with respect to the Tandem SAR will be for no more than one hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (iii) the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option.

(e) Exercise of Affiliated SARs . An Affiliated SAR will be deemed to be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option.

(f) Exercise of Freestanding SARs . Freestanding SARs will be exercisable on such terms and conditions as the Administrator, in its sole discretion, will determine.

(g) SAR Agreement . Each SAR grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(h) Expiration of SARs . An SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will apply to SARs.

(i) Payment of SAR Amount . Upon exercise of an SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii) The number of Shares with respect to which the SAR is exercised.

At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

(j) Stockholder Rights . Unless and until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends (except as otherwise provided in Section 8(k)), or any other rights as a stockholder will exist with respect to the SARs, notwithstanding the exercise of the SARs. The Company will issue (or cause to be issued) such Shares promptly after the SAR is exercised, subject to the payment of applicable withholding taxes and compliance with applicable laws. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 8(k) or Section 14 of the Plan.

(k) Dividend Equivalents . At the discretion of the Administrator, an Award of SARs may provide the Participant with the right to receive Dividend Equivalents, which may be subject to the same restrictions and vesting conditions applicable to such Award. Notwithstanding the foregoing, to the extent Dividend Equivalents are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum amount that may be paid to a Participant with respect to such Dividend Equivalents (that are granted in connection with a given Stock Appreciation Right Award other than a Tandem SAR Award) during any one Fiscal Year shall be $10,000,000. No Dividend Equivalents will be granted or paid on a Tandem SAR Award.

9. Performance Units .

(a) Grant of Performance Units . Performance Units may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units granted to each Participant provided, however, that Awards of Performance Units that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum amount that may be paid with respect to such Awards granted to any Service Provider during any one Fiscal Year shall be $22,000,000.

(b) Value of Performance Units . Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant, denominated in U.S. dollars.

(c) Performance Objectives and Other Terms . Administrator, in its discretion, shall set performance objectives (including objectives based on Performance Goals) or other vesting criteria which, depending on the extent to which they are met, will determine the number or value of Performance Units that will be paid out to the Participants. Each Award of Performance Units shall be evidenced by an Award Agreement that shall specify the Performance Period, if applicable, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.

(i) General Restrictions . The Administrator may condition the granting of the Performance Units, or the vesting of the Performance Units, based on continued employment or service with the Company and its affiliates, the achievement of Performance Goals or other performance objectives (Company-wide, departmental, or individual), or any other basis determined by the Administrator in its discretion.

(ii) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Performance Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may condition the granting or vesting of Performance Units on the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Performance Units to qualify as “performance-based compensation” under Section 162(m) of the Code.

(d) Earning of Performance Units . After the applicable Performance Period has ended, the holder of Performance Units will be eligible to receive a payout of the number of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals, performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit, subject to any applicable limitations imposed under Section 162(m) of the Code.

(e) Form and Timing of Payment of Performance Units . Except as otherwise provided in an Award Agreement, payment of earned Performance Units will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units on the date set forth in the Award Agreement) or in a combination thereof.

(f) Cancellation of Performance Units . On the termination of the Participant’s status as a Service Provider and/or such other date set forth in the Award Agreement, all unearned or unvested Performance Units will be forfeited to the Company, and again will be available for grant under the Plan.

(g) Stockholder Rights . Unless and until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Performance Units. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, as applicable, except as provided in Section 14 of the Plan or as determined by the Administrator as applicable to the calculation of Performance Goals or other performance criteria.

10. Restricted Stock Units .

(a) Grant of Restricted Stock Units . Restricted Stock Units may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Restricted Stock Units granted to each Participant; provided, however, that for Awards of Restricted Stock Units that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum number of Shares with respect to which such Awards may be granted to any Service Provider during any Fiscal Year shall be 1,000,000 Shares.

(b) Value of Restricted Stock Units . Each Restricted Stock Unit will have a value equal to the Fair Market Value of one Share.

(c) Other Restrictions . The Administrator, in its sole discretion, may impose such restrictions on Restricted Stock Units as it may deem advisable or appropriate.

(i) General Restrictions . The Administrator may set restrictions based upon continued employment or service with the Company and its affiliates, the achievement of Performance Goals or other specific performance objectives (Company-wide, departmental, or individual), or any other basis determined by the Administrator in its discretion.

(ii) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the Restricted Stock Units to qualify as “performance-based compensation” under Section 162(m) of the Code. Restricted Stock Units that are subject to Performance Goals are sometimes referred to as Performance RSUs or PRSUs.

(d) Earning of Restricted Stock Units . After the applicable vesting period or Performance Period has ended, the holder of Restricted Stock Units will be eligible to receive a payout of the number of Restricted Stock Units earned by the Participant, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions or performance objectives or other vesting provisions for such Restricted Stock Units, subject to any applicable limitations imposed under Section 162(m) of the Code.

(e) Form and Timing of Payment of Restricted Stock Units . Except as otherwise provided in an Award Agreement, payment of earned Restricted Stock Units will be made as soon as practicable after the expiration of the applicable vesting period or Performance Period. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Restricted Stock Units at the close of the applicable vesting period or Performance Period) or in a combination thereof.

(f) Cancellation of Restricted Stock Units . On the termination of the Participant’s status as a Service Provider and/or such other date set forth in the Award Agreement, all unearned or unvested Restricted Stock Units will be forfeited to the Company, and again will be available for grant under the Plan.

(g) Stockholder Rights . Unless and until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends (except as otherwise provided in Section 10(h)), or any other rights as a stockholder will exist with respect to the Restricted Stock Units. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, as applicable, except as provided in Section 10(h) and Section 14 of the Plan.

(h) Dividend Equivalents . At the discretion of the Administrator, an Award of Restricted Stock Units may provide the Participant with the right to receive Dividend Equivalents, which may be subject to the same restrictions and vesting conditions applicable to such Award. Notwithstanding the foregoing, to the extent Dividend Equivalents are intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the maximum amount that may be paid to a Participant with respect to such Dividend Equivalents (that are granted in connection with a given Restricted Stock Unit Award) during any one Fiscal Year shall be $10,000,000.

11. Limitation on Grants to Outside Directors . No Outside Director shall be granted, in the aggregate in any Fiscal Year, Awards having a Fair Market Value in excess of $1,000,000. For the purpose of determining the Fair Market Value for Awards of Options or SARs under this section 11, the $1,000,000 limitation shall be applied by reference to the aggregate exercise price at the date of grant. Notwithstanding the foregoing, the Board or compensation committee of the Board may authorize the granting of Dividend Equivalents in respect of an Award granted to the Outside Directors, provided that the maximum amount that may be paid to an Outside Director with respect to such Dividend Equivalents applicable to a given Award during any one Fiscal Year shall be $500,000.

12. Leaves of Absence; Transfer Between Locations . Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of any leave of absence approved by the Company or transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1 st ) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option. The Administrator reserves the right to unilaterally reduce the speed of vesting of, or the number of Shares or units subject to, an Award if a Participant’s level of regular service is reduced (e.g., a reduction from full-time to part-time status).

13. Transferability of Awards . Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.

14. Adjustments; Dissolution or Liquidation; Merger or Change in Control .

(a) Adjustments . If, after the Adoption Date, there is an equity restructuring (within the meaning of FASB Accounting Standards Codification (ASC) 718) that causes the per share value of Shares to change, such as a stock dividend, stock split, spin-off, rights offering, or a large, nonrecurring cash dividend, the Administrator shall cause there to be made an equitable adjustment to: (i) the number and, if applicable, kind of shares that may be issued under the Plan or pursuant to any type of Award under the Plan, (ii) the Award limits established and approved by stockholders for purposes of Code Section 162(m) and Section 421, (iii) the number and, if applicable, kind of shares subject to outstanding Awards and (iv) as applicable, the exercise or purchase price of any then outstanding Awards. Any fractional shares resulting from adjustments made pursuant to this Section 14(a) shall be eliminated. Any adjustment made pursuant to this Section 14(a) shall be conclusive and binding for all purposes of the Plan.

(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.

(c) Change in Control . In the event of a Change in Control, each outstanding Award will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Awards, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse and, to the extent applicable for any kind of Award, all performance goals or other vesting criteria will be deemed achieved at maximum levels and all other terms and conditions met; provided, however, that no such acceleration shall occur to the extent the Administrator determines that an Award constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code and such acceleration would cause the Participant to incur additional taxes pursuant to Section 409A. In addition, if an Option or Stock Appreciation Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.

With respect to Awards granted to an Outside Director that are assumed or substituted for, if on the date of or following such assumption or substitution the Participant’s status as a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant that is not required by or a condition of the applicable definitive agreement pursuant to which the Change in Control occurs, then the Participant will fully vest in, and have the right to exercise Options and/or Stock Appreciation Rights as to, all of the Shares subject to the Award, including Shares as to which such Award would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse and, to the extent applicable for all Awards, all performance goals or other vesting criteria will be deemed achieved at maximum levels and all other terms and conditions met.

For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Unit or Restricted Stock Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). If the consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Unit or Restricted Stock Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

15. Tax Withholding .

(a) Withholding Requirements . The Company and each of its affiliates shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any of its affiliates, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan.

(b) Withholding Arrangements . The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by, without limitation (i) paying cash, (ii) electing to have the Company or any of its affiliates withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, or (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

16. No Effect on Employment or Service . Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company or any of its affiliates, nor will they interfere in any way with the Participant’s right or the right of the Company or any of its affiliates to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.

17. Date of Grant . The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

18. Term of Plan . The Board approved the Plan on April 22, 2013 (the “ Approval Date ”) Subject to Section 22 of the Plan, the Plan will become effective as of November 13, 2014. No Awards shall be granted pursuant to this Plan more than 10 years after the effective date of the Plan.

19. Amendment and Termination of the Plan .

(a) Amendment and Termination . The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Stockholder Approval . The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination . No amendment, alteration, suspension or termination of the Plan or an Award will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company; provided that an amendment or modification that may cause an Incentive Stock Option to become a Nonstatutory Stock Option shall not be treated as adversely affecting the rights of the Participant for purposes of Section 19(c) of the Plan. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

20. Conditions Upon Issuance of Shares .

(a) Legal Compliance . Shares will not be issued under an Award unless the exercise of such Award (if applicable) and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance. No exercise will be deemed effective unless and until the exercise complies with Applicable Laws.

(b) Investment Representations . As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

21. Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.

22. Stockholder Approval . The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.

23. No Repricings . Except as otherwise provided in Section 14, the Company may not, without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities.

Annexure C

MONOLITHIC POWER SYSTEMS, INC.

MASTER CASH PERFORMANCE BONUS PLAN

1. Purpose. As part of its executive compensation program, Monolithic Power Systems, Inc. (the “ Company ”) has designed this Master Cash Performance Bonus Plan (the “ Bonus Plan ”) to permit the payment of bonuses that may qualify as Performance-Based Compensation. This Bonus Plan is intended to increase stockholder value and promote the success of the Company by ensuring that the efforts of key employees are aligned with Company strategy and vision. By providing incentive compensation for key employees, the Bonus Plan will enable the Company to attract, retain and reward critical skills and high performing employees, thereby leveraging and sustaining the Company’s competitive advantages.

2. Definitions.

(a) “ Board ” means the Board of Directors of the Company.

(b) “ Bonus Award ” means, with respect to each Participant, the award determined by the Committee to have been earned under the Bonus Plan.

(d) “ Committee ” means the Compensation Committee of the Board (or a subcommittee thereof), or such other committee of the Board (including, without limitation, the full Board) to which the Board has delegated power to act under or pursuant to the provisions of this Bonus Plan. However, that with respect to payments under the Bonus Plan intended to qualify as Performance-Based Compensation, the Committee will consist, to the extent required by Section 162(m), solely of two or more members of the Board who qualify as “outside directors” within the meaning of Section 162(m).

(e) “ Fiscal Year ” means a fiscal year of the Company.

(f) “ Maximum Bonus Award ” means the maximum Bonus Award that may be granted or earned under the Bonus Plan by a Participant for the Performance Period, which may be, but is not required to be, expressed as a percentage of Participant’s base salary or a specific dollar amount. As to any Participant for any Performance Period, the Maximum Bonus Award will not exceed $3 million multiplied by the number of complete Fiscal Years contained within the Performance Period, or, for any Performance Period of less than one complete Fiscal Year, $3 million.

(g) “ Participant ” means an eligible officer or key employee selected by the Committee, in its sole discretion, to participate in the Bonus Plan.

(h) “ Payout Determination Date ” means the date the Committee determines the amounts actually earned as Bonus Award with respect to the completed Performance Period.

(i) “ Payout Formula ” means, as to any Performance Period, the formula or payout matrix established by the Committee to determine the Bonus Awards, if any, to be paid to Participants, which is generally expressed as a percentage of the Target Award. The formula or matrix may differ from Participant to Participant.

(j) “ Performance-Based Compensation ” means compensation that is intended to qualify as “performance-based compensation” within the meaning of Section 162(m).

(k) “ Performance Goals ” means the goal(s) (or combined goal(s)) determined by the Committee (in its discretion) to be applicable to a Participant with respect to a Bonus Award. As determined by the Committee, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures: (i) revenue, growth in revenue or product revenue; (ii) sales or bookings targets, including product or product family sales or bookings targets; (iii) billings; (iv) market share; (v) stock price performance, including but not limited to growth in the market price of stock, total stockholder return, and return on stockholder equity; (vi) margin, including gross margin, net margin or operating margin; (vii) income, including but not limited to net income, operating income, and operating income after taxes; (viii) profit, including but not limited to operating profit, net operating profit or pre-tax profit; (ix) earnings, including but not limited to earnings per share, net earnings, earnings before interest, taxes and/or depreciation and/or amortization; (x) income, before or after taxes (including net income); (xi) return on assets, capital, operating revenue and/or investments; (xii) expense control and/or cost reductions; (xiii) capital expenditures; (xiv) economic value added; (xv) cash flow, including but not limited to operating cash flow, cash flow per share and cash management; (xvi) improvement in or attainment of working capital levels; (xvii) debt reduction or debt levels; (xviii) contract win, renewal or extension; design win; (xix) delivery and/or design schedule; (xx) milestones in new generation of products or technologies; (xxi) completion of or milestones associated with mergers, acquisitions, strategic investments, restructurings, reorganizations (including entry into term sheets, signing of definitive agreements, closing transactions, funding of investments, and post-closing integration milestones); (xxii) litigation, including litigation outcomes, milestones or management; (xxiii) workforce diversity; (xxiv) customer satisfaction; (xv) other measures of performance selected by the Committee to the extent consistent with Section 162(m); and (xvi) to the extent section 162(m) compliance is not intended, such other measures of performance selected by the Committee.

The Performance Goals may be based on absolute target values, growth, maintenance or limiting losses, as compared to a prior period, or values relative to the performance of one or more comparable companies or to the performance of one or more relevant indices. The Performance Goals may be measured on a Company-wide basis or solely with respect to one or more business units, divisions, affiliates, or business segments. The Performance Goals may differ from Participant to Participant and from Award to Award.

In establishing a Performance Goal on the Target Determination Date, the Committee will define, in an objective fashion, the manner of calculating the Performance Goal it selects to use for such Performance Period. The Performance Goals will be determined in accordance with United States generally accepted accounting principles (“ GAAP ”), unless the Committee determines that a non-GAAP measure can and will be used in a manner that complies with Section 162(m) or that compliance with Section 162(m) is not intended. The Committee may provide that the attainment of the Performance Goal will be measured by appropriately adjusting the evaluation of Performance Goal performance as follows: (1) to include or exclude restructuring and/or other nonrecurring charges; (2) to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated performance goals; (3) to include or exclude the effects of changes to GAAP required by the Financial Accounting Standards Board or to the International Financial Reporting Standard (IFRS); (4) to include or exclude the effects of any statutory adjustments to corporate tax rates; (5) to include or exclude the effects of any “extraordinary items” as determined under GAAP; (6) to include or exclude the effect of payment of bonuses under the bonus plans of the Company; (7) to include or exclude the effect of stock based compensation and/or deferred compensation; (8) to include or exclude any unusual, non-recurring gain or loss or other extraordinary item; (9) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (10) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (11) to include or exclude the effects of divestitures, acquisitions or joint ventures; (12) to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP; (13) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (14) to include or exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders including cash dividends; (15) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (16) to reflect any partial or complete corporate liquidation; (17) to reflect shippable backlog; and (18) to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.

(l) “ Performance Period ” means any Fiscal Year or such other period (including a semi-annual or multi-year period) as determined by the Committee in its sole discretion, provided that such period is not shorter than a single fiscal quarter. There may be more than one Performance Period in effect at the same time, including overlapping Performance Periods.

(m) “ Section 162(m) ” means Section 162(m) of the Code, or any successor to Section 162(m), as such Section may be interpreted from time to time by the Internal Revenue Service, whether by regulation, notice or otherwise.

(n) “ Target Bonus Award ” means the target award that may be earned under the Bonus Plan by a Participant for the Performance Period, which may be, but is not required to be, expressed as a percentage of Participant’s base salary or a specific dollar amount.

(o) “ Target Determination Cutoff Date ” means the latest possible date that will not jeopardize a Bonus Award’s qualification as Performance-Based Compensation.

(p) “ Target Determination Date ” means the date or dates upon which the Committee sets the Performance Goals and each Participant’s Target Bonus Award with respect to the Performance Period.

3. Plan Administration.

(a) The Committee will be responsible for the general administration and interpretation of the Bonus Plan and for carrying out its provisions. Subject to the requirements for qualifying compensation as Performance-Based Compensation, the Committee may delegate specific administrative tasks to Company employees or others as appropriate for proper administration of the Bonus Plan. Subject to the limitations on Committee discretion imposed under Section 162(m), the Committee will have such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following powers and duties, but subject to the terms of the Bonus Plan:

(i) authority to adopt Performance Goals, Payout Formula and Target Bonus Awards for the Performance Period on or prior to the Target Determination Cutoff Date;

(ii) authority to determine eligibility and the amount, manner and time of payment of any Bonus Awards hereunder, including authority to exercise negative discretion in reducing any Bonus Award;

(iii) authority to construe and interpret the terms of the Bonus Plan;

(iv) authority to prescribe forms and procedures for purposes of Bonus Plan participation and distribution of Bonus Awards; and

(v) authority to adopt rules, regulations and bylaws and to take such actions as it deems necessary or desirable for the proper administration of the Bonus Plan.

(b) Any rule or decision by the Committee will be conclusive and binding on all persons, and will be given the maximum deference permitted by law.

4. Eligibility. Participation in the Bonus Plan is at the discretion of the Committee. Officers and key employees of the Company who are regularly employed (full or part time) during any part of the Performance Period are eligible to participate in the Bonus Plan. If an employee is hired after the beginning of the Performance Period, the Committee will have the discretion to determine whether such employee should be eligible to participate in Bonus Plan. If the Participant’s employment terminates before the payment date of any Bonus Award, the Participant will not be eligible to receive a Bonus Award, or any portion of a Bonus Award, except as provided in an applicable severance plan or in an individual employment, retention or severance agreement with such Participant. If a Participant is on a leave of absence for a portion of the Performance Period, the Participant will be eligible for a Bonus Award under the Bonus Plan based on actual salary earned during the Performance Period (exclusive of any salary replacement benefits paid during the leave via insurance).

5. How the Bonus Plan Works.

(a) Performance Goal Determination. On the Target Determination Date, the Committee, in its sole discretion, will establish the Performance Goals for each Participant for the Performance Period, the manner for calculating achievement, and the Performance Formula. Such Performance Goals will be set forth in writing on or prior to the Target Determination Cutoff Date, and the achievement of such Performance Goals will be substantially uncertain at such time. The Committee may also select performance criteria to use as part of the Performance Formula that are not Performance Goals, including subjective metrics, and may choose to make compensation opportunities available under this Bonus Plan that do not qualify as Performance-Based Compensation.

(b) Target Bonus Award. On the Target Determination Date, the Committee, in its sole discretion, will designate a Target Bonus Award and, if applicable, a Maximum Bonus Award for each Participant. These amounts will be set forth in writing on or prior to the Target Determination Cutoff Date.

(c) Determination of Payout Formula. On the Target Determination Date, the Committee, in its sole discretion, will establish a Payout Formula for purposes of determining the Bonus Award (if any) payable to each Participant. Each Payout Formula will be set forth in writing on or prior to the Target Determination Cutoff Date and may provide for a Bonus Award payment greater than or less than the Participant’s Target Award determined based on the extent to which the Performance Goals are achieved. Notwithstanding the preceding, in no event will a Participant’s Bonus Award for any Performance Period exceed the Maximum Award.

6. Bonus Award Payment.

(a) Determination & Certification of the Bonus Award. On any Payout Determination Date, the Committee will certify in writing (which may be electronic) the extent to which the Performance Goals applicable to each Participant for the Performance Period were achieved or exceeded. The Bonus Award for each Participant will be determined by applying the Payout Formula to the level of actual performance that has been certified by the Committee. Notwithstanding any contrary provision of this Bonus Plan, the Committee, in its sole discretion, may eliminate or reduce the Bonus Award payable to any Participant below that which otherwise would be payable under the Payout Formula.

(b) Right to Receive Payment. Each Bonus Award under the Bonus Plan will be paid solely from the general assets of the Company. Nothing in the Bonus Plan will be construed to create a trust or to establish or evidence any Participant’s claim of any right to payment of a Bonus Award other than as an unsecured general creditor with respect to any payment to which he or she may be entitled. No Participant will have the right to alienate, pledge or encumber his or her interest in this Bonus Plan, and such interest will not (to the extent permitted by law) be subject in any way to the claims of the Participant’s creditors or to attachment, execution or other process of law, except that a Participant’s estate will receive any earned but unpaid Bonus Award.

(c) Form of Distributions. The Company will distribute all Bonus Awards to the Participants in cash, or, in the determination of the Committee, in a number of shares of the Company’s common stock having a fair market value equal to that amount of the earned Bonus Award that the Committee determines to pay in shares. These shares of common stock may be issued under the Company’s then effective equity incentive plan, from shares purchased on the open market, or from shares of the Company’s authorized but unissued shares. All payments under this Bonus Plan, including any payments made in shares of common stock, will be subject to applicable tax withholdings.

(d) Timing of Distributions. The Company will distribute amounts payable to Participants as soon as is practicable following the Payout Determination Date for the Performance Period, but in no event later than the 15th day of the third calendar month after the end of the calendar year in which the Participant’s Bonus Award is no longer subject to a substantial risk of forfeiture, within the meaning of Treasury Regulation Section 1.409A-1(d). Payments under this Bonus Plan will be made in a manner that complies with Treasury Regulation Section 1.409A-1(b)(4) and this Bonus Plan will be construed in accordance with such provision. Each payment under this Bonus Plan is a separate payment for purposes of Code Section 409A, including but not limited to if multiple Bonus Awards are payable in respect of the same calendar year of Fiscal Year.

(e) Deferral. Notwithstanding Section 6(d), the Committee may decide to defer payment of Bonus Awards, or any portion thereof, to Participants in accordance with Section 409A of the Code as the Committee, in its sole discretion, determines to be necessary or desirable to preserve the deductibility of such amounts under Section 162(m). In addition, the Committee, in its sole discretion, may permit a Participant to defer receipt of the payment of the Bonus Award that would otherwise be delivered to a Participant under the Bonus Plan. Any such deferral elections will comply with the requirements of Section 409A of the Code, and will be subject to such rules and procedures as will be determined by the Committee in its sole discretion.

7. Term of Bonus Plan. The Bonus Plan will continue until the earlier of (a) the date as of which the Committee terminates the Bonus Plan and (b) the last day of the Company’s Fiscal Year ending in 2017 (provided that Bonus Awards, if any, for such Fiscal Year will be paid in accordance with the terms of the Bonus Plan).

8. Amendment and Termination of the Bonus Plan. The Committee may amend, modify, suspend or terminate the Bonus Plan, in whole or in part, at any time, including adopting amendments deemed necessary or desirable to correct any defect or to supply omitted data or to reconcile any inconsistency in the Bonus Plan or in any Bonus Award granted hereunder; provided, however, that no amendment, alteration, suspension or discontinuation will be made that would increase the amount of compensation payable pursuant to such Bonus Award, or cause compensation that is, or may become, payable hereunder to fail to qualify as Performance-Based Compensation. To the extent necessary under applicable law, including Section 162(m), Bonus Plan amendments will be subject to stockholder approval. At no time before the actual distribution of funds to Participants under the Bonus Plan will any Participant accrue any vested interest or right whatsoever under the Bonus Plan except as otherwise stated in the Bonus Plan.

9. Bifurcation of the Bonus Plan. It is the intent of the Company that the Bonus Plan, and the payments made hereunder, satisfy and be interpreted in a manner that, in the case of Participants whose compensation is subject to the limitations on deductibility of compensation provided under Section 162(m), qualify as Performance-Based Compensation, unless otherwise expressly determined by the Committee at the time of grant or thereafter. Any provision, application or interpretation of the Bonus Plan inconsistent with this intent to so satisfy the requirements of Section 162(m) will be disregarded. However, notwithstanding anything to the contrary in the Bonus Plan, the provisions of the Bonus Plan may at any time be bifurcated by the Board or the Committee in any manner so that the Company may grant awards under this Bonus Plan that do not meet the requirements of Section 162(m) and that those provisions of the Bonus Plan or any payment intended (or required) to satisfy the applicable requirements of Section 162(m) are applicable only to persons or that compensation that is intended to be Performance-Based Compensation.

10. No Guarantee of Employment. The Bonus Plan is intended to provide a financial incentive to Participants and is not intended to confer any rights to continued employment upon Participants whose employment will remain at-will and subject to termination by either the Company or Participant at any time, with or without cause or notice.

11. Recovery. Any amounts paid under this Bonus Plan will be subject to recoupment in accordance with any clawback policy that the Company voluntarily adopts or is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any plan of or agreement with the Company.

12. Applicable Law . The Bonus Plan and all amounts payable hereunder will be construed in accordance with and governed by the laws of the State of California, without regard to the conflict of law provisions.

General	1
Internet Availability of Proxy Materials	1
Record Date; Outstanding Shares	1
Procedure for Submitting Stockholder Proposals	1
Voting	2
Expenses of Solicitation	3
Quorum; Required Votes; Abstentions; Broker Non-Votes	3
Stockholder List	4
PROPOSAL ONE	5
Classified Board of Directors; Nominees	5
Information Regarding Nominees and Other Directors	5
Director Independence	6
Director Qualifications	6
Board Leadership Structure	8
Board Oversight of Risk	9
Board Meetings and Committees	10
Nomination Process	10
Stockholder Communications	11
Attendance at Annual Meetings of Stockholders by the Board of Directors	11
Code of Ethics and Business Conduct	11
Director Compensation	11
PROPOSAL TWO	14
Audit and Other Fees	14
Pre-Approval of Audit and Non-Audit Services	14
PROPOSAL THREE	15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	16
Section 16(a) Beneficial Ownership Reporting Compliance	18
Certain Relationships and Related Transactions	18
EXECUTIVE OFFICER COMPENSATION	18
Compensation Discussion and Analysis	18
Compensation Committee Report	31
Compensation Committee Interlocks and Insider Participation	31
Compensation Risk Management	31
Summary Compensation Table	32
Grants of Plan-Based Awards for the Year Ended December 31, 2012	33
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards During the Year Ended December 31, 2012	34
Outstanding Equity Awards at 2012 Year-End	35
Option Exercises and Stock Vested	37
Potential Payments Upon Termination or Termination Upon Change-in-Control	37
Equity Compensation Plan Information	39
PROPOSAL FOUR	41
PROPOSAL FIVE	56
Audit Committee Report	61
Other Matters	61
Annexure A	62
Annexure B	63
Annexure C	84

Name	Age	Director Since	Principal Occupation
Michael R. Hsing	53	1997	Chairman of the Board, President and Chief Executive Officer of the Company / Nominee
James C. Moyer	70	1998	Chief Design Engineer of the Company and Director
Herbert Chang (1)(3)	51	1999	Lead Director / Nominee

Eugen Elmiger (3)	49	2012	Director / Nominee
Victor K. Lee (2)	56	2006	Director
Douglas McBurnie (2)(3)	70	2007	Director
Karen A. Smith Bogart (1)(3)	56	2007	Director
Dr. Jeff Zhou (1)(2)	58	2010	Director

Michael R. Hsing:	Mr. Hsing, the co-founder of the Company, is a visionary in power management technology as well as a strong leader, motivator and successful entrepreneur. Mr. Hsing provides the Board with valuable insight into management’s perspective with respect to the Company’s operations, and he provides the Board with the most comprehensive view of the Company’s operational history over the past few years. Under his leadership, the Company has experienced significant revenue growth and has been highly profitable. Since the Company’s initial public offering in 2004, stockholder value measured by market capitalization has increased significantly. Having worked in the semiconductor industry for over 25 years, Mr. Hsing’s experience and insight enable him to understand how to control costs effectively and maximize the Company’s technology advantages, which has helped to fuel the Company’s growth and created value for our stockholders. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Hsing should serve as a director of the Company.

James C. Moyer:	Mr. Moyer is a technical expert in the design of analog semiconductors. As co-founder of the Company, Mr. Moyer is intimately familiar with the Company and our products. Mr. Moyer brings insight to the Board because of his cumulative experience gained as an engineer and technical leader in the semiconductor industry. This experience gives him a highly developed understanding of the needs and requirements of the analog market for the Company’s complex products and allows him as a director to lead the Company in the right direction in terms of strategy and business approach. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Moyer should serve as a director of the Company.

Herbert Chang:	Mr. Chang has been a member of the Board since 1999, which gives him significant knowledge of our recent experiences and history. We also continue to benefit from the broad experience gained by Mr. Chang through his numerous successful investments in both public and private high-technology companies. Mr. Chang has served on several boards of the companies in which he has invested, which has given him significant leadership and oversight experience. In addition, through these board and investor responsibilities, Mr. Chang has developed a deep knowledge of the Company’s industry, the Company’s operations, and the accompanying complex financial transactions and controls necessary for us to succeed. Mr. Chang’s financial expertise has also helped the Board analyze significant complex financial transactions that the Company has considered from time to time. Mr. Chang also has very relevant international experience based on his educational background and work experience in the countries where the Company does business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Chang should serve as a director of the Company.

Eugen Elmiger	Mr. Elmiger is a seasoned business executive with over 20 years of experience, including extensive international marketing, sales and product management expertise, executive board experience, knowledge of high-tech component business and technology, broad global experience and operational and strategic planning experience in complex, high-growth global companies. This experience allows him to contribute his valuable executive leadership talent and understanding of international business to Board deliberations. His industrial, medical and automotive background is a valuable asset to the Board as the Company expands its business in these markets. Mr. Elmiger’s appointment to the Board also allows him to bring a new perspective, new ideas and new outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Elmiger should serve as a director of the Company.

Victor K. Lee:	Mr. Lee is the audit committee financial expert on the Audit Committee of the Board. He has been the Chief Financial Officer at several public and private companies, and has worked in the semiconductor industry for over 25 years. Mr. Lee is familiar with not only the inner workings of the industry, but also has intimate knowledge of the financial issues that semiconductor companies often face. His experience has allowed him to understand the broad issues, in particular those affecting the financial and accounting aspects of our business, that the Board must consider and to make sound recommendations to the Company’s management and the Board. Mr. Lee also provides the Board with valuable insight into financial management, disclosure issues and tax matters relevant to our business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Lee should serve as a director of the Company.

Douglas McBurnie:	Mr. McBurnie possesses over 35 years of experience in the semiconductor industry, primarily in executive positions, which has given him valuable executive leadership experience. His understanding of the market and the competitive landscape in which the Company operates is a valuable asset to our Board in understanding how to help the Company succeed. Mr. McBurnie also served on a board of a public company and understands the importance of corporate governance as a result of this service. His experience as a director of another publicly held semiconductor company is valuable in providing insight on effective management and best practices techniques for our Board and committees of the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. McBurnie should serve as a director of the Company.

Karen A. Smith Bogart:	Ms. Smith Bogart has held senior executive positions at several domestic and multi-national companies in various industries, which has given her significant executive leadership experience. She is a seasoned entrepreneur, which allows her to see issues from the perspective of the Company’s investors, and has experience outside of the semiconductor industry. Ms. Smith Bogart has international experience in countries where MPS operates and understands the Company’s multi-national culture. Ms. Smith Bogart’s experiences outside of the semiconductor industry have enabled her to bring a different perspective, with creative and different ideas, when addressing issues that the Board faces. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Smith Bogart should serve as a director of the Company.

Dr. Jeff Zhou:	Dr. Zhou is a senior business executive with over 20 years of industry experience at large, multi-national corporations with global footprints. Dr. Zhou has an extensive background in the global manufacturing and electronics industry. This experience allows him to contribute his valuable executive leadership talent and understanding of international business to Board deliberations. Dr. Zhou’s appointment to the Board also allows him to bring a new perspective, new ideas and new outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Dr. Zhou should serve as a director of the Company.

Annual Board Retainer Fee	$35,000
Lead Director Fee	$12,000
Compensation Committee Chairperson Fee	$15,500 (plus $10,000 incremental stipend)
Compensation Committee Membership Fee (excluding Chairperson)	$7,000
Nominating and Governance Committee Chairperson Fee	$13,500 (plus $10,000 incremental stipend)
Nominating and Governance Committee Membership Fee (excluding Chairperson)	$6,000
Audit Committee Chairperson Fee	$22,500
Audit Committee Membership Fee (excluding Chairperson)	$10,500
Initial Grant to New Directors	5,000 restricted stock units (“RSUs”)
Annual Grant to Incumbent Directors	RSU number equivalent to $85,000 divided by closing stock price on the first day of the open trading window.

	Sincerely,



	Michael R. Hsing
	Chairman of the Board, President and Chief Executive Officer

	By Order of the Board of Directors,



	Saria Tseng
	Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary

Non-Employee Directors	Fees Earned or Paid in Cash		Stock Awards (1)		Option Awards (1)		Total Excluding Dividend Adjustments (2)
Karen A. Smith Bogart	$	65,500	$	84,999	$	---	$	150,499
Herbert Chang	$	60,000	$	84,999	$	---	$	144,999
Eugen Elmiger	$	20,500	$	94,050	$	---	$	114,550
Victor Lee	$	57,500	$	84,999	$	---	$	142,499
Douglas McBurnie	$	51,500	$	84,999	$	---	$	136,499
Jeff Zhou	$	71,000	$	84,999	$	---	$	155,999

Non-Employee Directors	Stock Awards		Option Awards
Karen A. Smith Bogart		5,062		73,29 0
Herbert Chang		5,062		17, 799
Eugen Elmiger		5,235		--
Victor Lee		5,062		99,4 65
Douglas McBurnie		5,062		8 8,995
Jeff Zhou		5,062		41,88 0

Non-Employee Directors	Stock Awards		Option Awards		Total Dividend Adjustments
Karen A. Smith Bogart	$	4,899	$	50,851	$	55,750
Herbert Chang	$	4,899	$	10,359	$	15,258
Eugen Elmiger	$	5,082	$	---	$	5,082
Victor Lee	$	4,899	$	76,400	$	81,299
Douglas McBurnie	$	4,899	$	65,174	$	70,073
Jeff Zhou	$	4,899	$	28,039	$	32,938

	2012		2011
Audit fees	$	955	$	955
Audit-related fees		76		57
Tax fees		75		177
All other fees		--		35
Total	$	1,106	$	1,224

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percent of Shares Beneficially Owned (1)

Named Executive Officers and Directors:
Michael R. Hsing (2)		2,069,301		6	%
James C. Moyer (3)		1,464,525		4	%
Maurice Sciammas (4)		504,988		1	%
Deming Xiao (5)		461,159		1	%
Saria Tseng (6)		172,006		*
Meera Rao (7)		133,345		*
Victor K. Lee (8)		109,056		*
Herbert Chang (9)		98,762		*
Karen A. Smith Bogart (10)		88,081		*
Douglas McBurnie (11)		68,025		*
Jeff Zhou (12)		53,171		*
Eugen Elmiger (13)		5,000		*
All directors and executive officers as a group (12 persons) (14)		5,227,419		14	%

5% stockholders:
FMR LLC (15) (21)		5,320,137		14	%
Columbia Wanger Asset Management, LLC (16) (21)		2,295,000		6	%
BlackRock Inc. (17) (21)		2,296,058		6	%
Frontier Capital Management Co., LLC (18) (21)		2,078,206		6	%
Adage Capital Partners, L.P. (19) (22)		2,044,527		6	%
The Vanguard Group (20) (21)		1,975,506		5	%

Compensation Component	Objectives Associated with the Compensation Component		Key Features of the Compensation Component
Base salary	•	Designed to reward individual effort associated with job-related duties and to attract and retain talented executive officers.	•	Paid in cash.

NEOs	2012 Base Salary		2011 Base Salary		% Increase
Michael Hsing	$	448,000	$	400,000		12	%
Meera Rao	$	260,000	$	260,000		0	%
Deming Xiao	$	340,000	$	320,000		6	%
Maurice Sciammas	$	300,000	$	300,000		0	%
Saria Tseng	$	300,000	$	260,000		15	%

NEOs	Total Target Bonus		Total Bonus Achieved		Actual Bonus Payout Approved by the Compensation Committee
Michael Hsing	$	448,000	$	896,000	$	841,260
Meera Rao	$	208,000	$	332,800	$	309,693
Deming Xiao	$	272,000	$	435,200	$	354,138
Maurice Sciammas	$	240,000	$	384,000	$	365,338
Saria Tseng	$	240,000	$	384,000	$	375,338

							Dividend Adjustments (1)
NEOs	Time-Based RSUs		Target Performance Share Units		Total		Time-Based RSUs and Performance Share Units		Stock Options		Total Equity Awards with Dividend Adjustments
Michael Hsing		76,451		76,450		152,901		13,353		27,057		193,311
Meera Rao		22,244		22,243		44,487		3,764		1,429		49,680
Deming Xiao		32,724		32,723		65,447		5,110		12,721		83,278
Maurice Sciammas		25,666		25,665		51,331		3,905		13,901		69,137
Saria Tseng		25,666		25,665		51,331		3,723		3,048		58,102

NEOs	Stock Ownership Guideline
Michael Hsing		5 x base salary
Meera Rao		2 x base salary
Deming Xiao		2 x base salary
Maurice Sciammas		2 x base salary
Saria Tseng		2 x base salary

NEOs	Year	Salary		Stock Awards (1)		Option Awards		Non-Equity Incentive Plan Compensation (2)		All Other Compensation			Total Excluding Dividend Adjustments (3)
Michael R. Hsing	2012	$	448,000	$	2,688,000	$	---	$	841,260	$	---		$	3,977,260
	2011	$	400,000	$	2,400,570	$	---	$	455,000	$	---		$	3,255,570
	2010	$	400,000	$	4,575,500	$	---	$	650,000	$	---		$	5,625,500
Meera Rao (4)	2012	$	260,000	$	782,082	$	---	$	309,693	$	---		$	1,351,775
	2011	$	253,774	$	925,710	$	---	$	185,000	$	---		$	1,364,484
	2010	$	---	$	---	$	---	$	---	$	---		$	---
Deming Xiao	2012	$	340,000	$	1,150,558	$	---	$	354,138	$	88,089	(6)	$	1,932,785
	2011	$	320,000	$	925,710	$	---	$	304,000	$	---		$	1,549,710
	2010	$	317,231	$	1,381,240	$	---	$	360,000	$	---		$	2,058,471
Maurice Sciammas	2012	$	300,000	$	902,399	$	---	$	365,338	$	---		$	1,567,737
	2011	$	300,000	$	768,810	$	---	$	260,000	$	---		$	1,328,810
	2010	$	300,000	$	793,700	$	---	$	350,000	$	---		$	1,443,700
Saria Tseng (5)	2012	$	300,000	$	902,399	$	---	$	375,338	$	---		$	1,577,737
	2011	$	---	$	---	$	---	$	---	$	---		$	---
	2010	$	---	$	---	$	---	$	---	$	---		$	---

NEOs	Year	Stock Awards		Option Awards		Total Dividend Adjustments
Michael R. Hsing	2012	$	288,158	$	488,582	$	776,740
	2011	$	---	$	---	$	---
	2010	$	---	$	---	$	---
Meera Rao	2012	$	81,226	$	26,809	$	108,035
	2011	$	---	$	---	$	---
	2010	$	---	$	---	$	---
Deming Xiao	2012	$	110,274	$	239,976	$	350,250
	2011	$	---	$	---	$	---
	2010	$	---	$	---	$	---
Maurice Sciammas	2012	$	84,269	$	259,600	$	343,869
	2011	$	---	$	---	$	---
	2010	$	---	$	---	$	---
Saria Tseng	2012	$	80,343	$	58,721	$	139,064
	2011	$	---	$	---	$	---
	2010	$	---	$	---	$	---

		Estimated future payouts under non-equity incentive plan awards (1)						Estimated future payouts under equity incentive plan awards (2)						All other stock awards:		All other option awards:		Exercise or base		Grant date fair value
Name	Grant Date	Threshold		Target		Maximum		Threshold (#)		Target (#)		Maximum (#)		number of shares of stock or units (#)		number of securities underlying options (#)		price of option awards ($/sh)		of stock and option awards
Michael Hsing	-	$	0	$	448 000	$	896,000		-		-		-		-		-		-		-
	2/14/2012		-		-		-		0		76,450		229,350		-		-		-	$	1,343,991
	2/14/2012		-		-		-		-		-		-		76,451		-		-	$	1,344,009
	12/28/2012 (3)		-		-		-		-		-		-		2,941		-		-	$	63,467
	12/28/2012 (3)		-		-		-		-		-		-		514		-		-	$	11,092
	12/28/2012 (3)		-		-		-		-		-		-		4,050		-		-	$	87,399
	12/28/2012 (3)		-		-		-		-		-		-		3,600		-		-	$	77,688
	12/28/2012 (3)		-		-		-		-		-		-		2,248		-		-	$	48,512
	12/28/2012 (3)		-		-		-		-		-		-		-		5,882	$	12.40	$	123,054
	12/28/2012 (3)		-		-		-		-		-		-		-		3,529	$	17.92	$	55,216
	12/28/2012 (3)		-		-		-		-		-		-		-		3,529	$	14.89	$	63,010
	12/28/2012 (3)		-		-		-		-		-		-		-		14,117	$	15.03	$	247,302
Meera Rao	-	$	0	$	208,000	$	332,800		-		-		-		-		-		-		-
	2/14/2012		-		-		-		0		22,243		66,729		-		-		-	$	391,032
	2/14/2012		-		-		-		-		-		-		22,244		-		-	$	391,050
	12/28/2012 (3)		-		-		-		-		-		-		441		-		-	$	9,517
	12/28/2012 (3)		-		-		-		-		-		-		61		-		-	$	1,316
	12/28/2012 (3)		-		-		-		-		-		-		1,561		-		-	$	33,686
	12/28/2012 (3)		-		-		-		-		-		-		1,047		-		-	$	22,594
	12/28/2012 (3)		-		-		-		-		-		-		654		-		-	$	14,113
	12/28/2012 (3)		-		-		-		-		-		-		-		1,429	$	12.92	$	26,809
Deming Xiao	-	$	0	$	272,000	$	435,200		-		-		-		-				-		-
	2/14/2012		-		-		-		0		32,723		98,169		-		-		-	$	575,270
	2/14/2012		-		-		-		-		-		-		32,724		-		-	$	575,288
	12/28/2012 (3)		-		-		-		-		-		-		882		-		-	$	19,034
	12/28/2012 (3)		-		-		-		-		-		-		164		-		-	$	3,539
	12/28/2012 (3)		-		-		-		-		-		-		1,561		-		-	$	33,686
	12/28/2012 (3)		-		-		-		-		-		-		1,541		-		-	$	33,255
	12/28/2012 (3)		-		-		-		-		-		-		962		-		-	$	20,760
	12/28/2012 (3)		-		-		-		-		-		-		-		80	$	10.41	$	1,660
	12/28/2012 (3)		-		-		-		-		-		-		-		2,127	$	10.41	$	43,934
	12/28/2012 (3)		-		-		-		-		-		-		-		3,294	$	11.31	$	71,046
	12/28/2012 (3)		-		-		-		-		-		-		-		1,882	$	17.92	$	29,448
	12/28/2012 (3)		-		-		-		-		-		-		-		1,103	$	14.89	$	19,698
	12/28/2012 (3)		-		-		-		-		-		-		-		4,235	$	15.03	$	74,190
Maurice Sciammas	-	$	0	$	240,000	$	384,000		-		-		-		-		-		-		-
	2/14/2012		-		-		-		0		25,665		76,995		-		-		-	$	451,191
	2/14/2012		-		-		-		-		-		-		25,666		-		-	$	451,208
	12/28/2012 (3)		-		-		-		-		-		-		441		-		-	$	9,517
	12/28/2012 (3)		-		-		-		-		-		-		205		-		-	$	4,423
	12/28/2012 (3)		-		-		-		-		-		-		1,297		-		-	$	27,989
	12/28/2012 (3)		-		-		-		-		-		-		1,208		-		-	$	26,069
	12/28/2012 (3)		-		-		-		-		-		-		754		-		-	$	16,271
	12/28/2012 (3)		-		-		-		-		-		-		-		956	$	8.90	$	19,877
	12/28/2012 (3)		-		-		-		-		-		-		-		3,043	$	8.90	$	63,276
	12/28/2012 (3)		-		-		-		-		-		-		-		1,882	$	11.31	$	40,595
	12/28/2012 (3)		-		-		-		-		-		-		-		2,682	$	17.92	$	41,964
	12/28/2012 (3)		-		-		-		-		-		-		-		1,103	$	14.89	$	19,698
	12/28/2012 (3)		-		-		-		-		-		-		-		4,235	$	15.03	$	74,190
Saria Tseng	-	$	0	$	240,000	$	384,000		-		-		-		-		-		-		-
	2/14/2012		-		-		-		0		25,665		76,995		-		-		-	$	451,191
	2/14/2012		-		-		-		-		-		-		25,666		-		-	$	451,208
	12/28/2012 (3)		-		-		-		-		-		-		441		-		-	$	9,517
	12/28/2012 (3)		-		-		-		-		-		-		288		-		-	$	6,215
	12/28/2012 (3)		-		-		-		-		-		-		1,032		-		-	$	22,271
	12/28/2012 (3)		-		-		-		-		-		-		1,208		-		-	$	26,069
	12/28/2012 (3)		-		-		-		-		-		-		754		-		-	$	16,271
	12/28/2012 (3)		-		-		-		-		-		-		-		894	$	7.64	$	19,068
	12/28/2012 (3)		-		-		-		-		-		-		-		884	$	15.28	$	15,734
	12/28/2012 (3)		-		-		-		-		-		-		-		329	$	14.93	$	5,864
	12/28/2012 (3)		-		-		-		-		-		-		-		941	$	12.42	$	18,055

	Options Awards								Stock Awards
NEOs	Stock Options Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price		Option Expiration Date	Restricted Stock Units Grant Date	Number of Shares of Restricted Stock Units That Have Not Vested (#)		Market Value of Shares of Restricted Stock Units That Have Not Vested		Equity Incentive Plan Awards: Number of Unearned Restricted Stock Units That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Restricted Stock Units T hat Have Not V ested
Michael Hsing	2/27/2007 (1)		125,000		-	$	12.40	2/27/2014	-		-		-		-		-
	8/3/2007 (1)		75,000		-	$	17.92	8/3/2014	-		-		-		-		-
	2/8/2008 (1)		75,000		-	$	14.89	2/8/2015	-		-		-		-		-
	10/28/2008 (1)		300,000		-	$	15.03	10/28/2015	-		-		-		-		-
	12/28/2012 (2)		5,882		-	$	12.40	2/27/2014	-		-		-		-		-
	12/28/2012 (2)		3,529		-	$	17.92	8/3/2014	-		-		-		-		-
	12/28/2012 (2)		3,529		-	$	14.89	2/8/2015	-		-		-		-		-
	12/28/2012 (2)		14,117		-	$	15.03	10/28/2015	-		-		-		-		-
	-		-		-		-	-	2/25/2010 (3)		62,500	$	1,392,500		-		-
	-		-		-		-	-	8/2/2010 (4)		10,938	$	243,699		-		-
	-		-		-		-	-	2/8/2011 (4)		9,563	$	213,064		-		-
	-		-		-		-	-	2/8/2011 (5)		76,500	$	1,704,420		-		-
	-		-		-		-	-	2/14/2012 (6)		-		-		76,450	$	1,703,306
	-		-		-		-	-	2/14/2012 (4)		47,782	$	1,064,583		-		-
	-		-		-		-	-	12/28/2012 (2)		2,941	$	65,525		-		-
	-		-		-		-	-	12/28/2012 (2)		514	$	11,452		-		-
	-		-		-		-	-	12/28/2012 (2)		4,050	$	90,234		-		-
	-		-		-		-	-	12/28/2012 (2)		3,600	$	80,208		-		-
	-		-		-		-	-	12/28/2012 (2)		2,248	$	50,085		-		-
Meera Rao	1/5/2009 (1)		28,908		1,459	$	12.92	1/5/2016	-		-		-		-		-
	12/28/2012 (2)		1,360		69	$	12.92	1/5/2016	-		-		-		-		-
	-		-		-		-	-	2/25/2010 (3)		9,375	$	208,875		-		-
	-		-		-		-	-	8/2/2010 (4)		1,313	$	29,254		-		-
	-		-		-		-	-	2/8/2011 (4)		33,188	$	739,429		-		-
	-		-		-		-	-	2/14/2012 (6)		-		-		22,243	$	495,574
	-		-		-		-	-	2/14/2012 (4)		13,903	$	309,759		-		-
	-		-		-		-	-	12/28/2012 (2)		441	$	9,825		-		-
	-		-		-		-	-	12/28/2012 (2)		61	$	1,359		-		-
	-		-		-		-	-	12/28/2012 (2)		1,561	$	34,779		-		-
	-		-		-		-	-	12/28/2012 (2)		1,047	$	23,327		-		-
	-		-		-		-	-	12/28/2012 (2)		654	$	14,571		-		-

Deming Xiao	12/7/2004 (1)	1,719	-	$	10.41	12/7/2014	-	-		-	-		-
	12/7/2004 (1)	45,217	-	$	10.41	12/7/2014	-	-		-	-		-
	10/26/2006 (1)	70,000	-	$	11.31	10/26/2013	-	-		-	-		-
	8/3/2007 (1)	40,000	-	$	17.92	8/3/2014	-	-		-	-		-
	2/8/2008 (1)	23,450	-	$	14.89	2/8/2015	-	-		-	-		-
	10/28/2008 (1)	90,000	-	$	15.03	10/28/2015	-	-		-	-		-
	12/28/2012 (2)	80	-	$	10.41	12/7/2014	-	-		-	-		-
	12/28/2012 (2)	2,127	-	$	10.41	12/7/2014	-	-		-	-		-
	12/28/2012 (2)	3,294	-	$	11.31	10/26/2013	-	-		-	-		-
	12/28/2012 (2)	1,882	-	$	17.92	8/3/2014	-	-		-	-		-
	12/28/2012 (2)	1,103	-	$	14.89	2/8/2015	-	-		-	-		-
	12/28/2012 (2)	4,235	-	$	15.03	10/28/2015	-	-		-	-		-
	-	-	-		-	-	2/25/2010 (3)	18,750	$	417,750	-		-
	-	-	-		-	-	8/2/2010 (4)	3,500	$	77,980	-		-
	-	-	-		-	-	2/8/2011 (4)	33,188	$	739,429	-		-
	-	-	-		-	-	2/14/2012 (6)	-		-	32,723	$	729,068
	-	-	-		-	-	2/14/2012 (4)	20,453	$	455,693	-		-
	-	-	-		-	-	12/28/2012 (2)	882	$	19,651	-		-
	-	-	-		-	-	12/28/2012 (2)	164	$	3,654	-		-
	-	-	-		-	-	12/28/2012 (2)	1,561	$	34,779	-		-
	-	-	-		-	-	12/28/2012 (2)	1,541	$	34,339	-		-
	-	-	-		-	-	12/28/2012 (2)	962	$	21,433	-		-
Maurice Sciammas	6/15/2005 (1)	20,317	-	$	8.90	6/15/2015	-	-		-	-		-
	6/15/2005 (1)	64,683	-	$	8.90	6/15/2015	-	-		-	-		-
	10/26/2006 (1)	40,000	-	$	11.31	10/26/2013	-	-		-	-		-
	8/3/2007 (1)	57,000	-	$	17.92	8/3/2014	-	-		-	-		-
	2/8/2008 (1)	23,450	-	$	14.89	2/8/2015	-	-		-	-		-
	10/28/2008 (1)	90,000	-	$	15.03	10/28/2015	-	-		-	-		-
	12/28/2012 (2)	956	-	$	8.90	6/15/2015	-	-		-	-		-
	12/28/2012 (2)	3,043	-	$	8.90	6/15/2015	-	-		-	-		-
	12/28/2012 (2)	1,882	-	$	11.31	10/26/2013	-	-		-	-		-
	12/28/2012 (2)	2,682	-	$	17.92	8/3/2014	-	-		-	-		-
	12/28/2012 (2)	1,103	-	$	14.89	2/8/2015	-	-		-	-		-
	12/28/2012 (2)	4,235	-	$	15.03	10/28/2015	-	-		-	-		-
	-	-	-		-	-	2/25/2010 (3)	9,375	$	208,875	-		-
	-	-	-		-	-	8/2/2010 (4)	4,375	$	97,475	-		-
	-	-	-		-	-	2/8/2011 (4)	27,563	$	614,104	-		-
	-	-	-		-	-	2/14/2012 (6)	-		-	25,665	$	571,816
	-	-	-		-	-	2/14/2012 (4)	16,042	$	357,416	-		-
	-	-	-		-	-	12/28/2012 (2)	441	$	9,825	-		-
	-	-	-		-	-	12/28/2012 (2)	205	$	4,567	-		-
	-	-	-		-	-	12/28/2012 (2)	1,297	$	28,897	-		-
	-	-	-		-	-	12/28/2012 (2)	1,208	$	26,914	-		-
	-	-	-		-	-	12/28/2012 (2)	754	$	16,799	-		-
Saria Tseng	11/17/2004 (1)	19,001	-	$	7.64	11/17/2014	-	-		-	-		-
	7/27/2007 (1)	18,800	-	$	15.28	7/27/2014	-	-		-	-		-
	1/31/2008 (1)	7,000	-	$	14.93	1/31/2015	-	-		-	-		-
	10/22/2008 (1)	20,000	-	$	12.42	10/22/2015	-	-		-	-		-
	12/28/2012 (2)	894	-	$	7.64	11/17/2014	-	-		-	-		-
	12/28/2012 (2)	884	-	$	15.28	7/27/2014	-	-		-	-		-
	12/28/2012 (2)	329	-	$	14.93	1/31/2015	-	-		-	-		-
	12/28/2012 (2)	941	-	$	12.42	10/22/2015	-	-		-	-		-
	-	-	-		-	-	2/25/2010 (3)	9,375	$	208,875	-		-
	-	-	-		-	-	8/2/2010 (4)	6,125	$	136,465	-		-
	-	-	-		-	-	2/8/2011 (4)	21,938	$	488,779	-		-
	-	-	-		-	-	2/14/2012 (6)	-		-	25,665	$	571,816
	-	-	-		-	-	2/14/2012 (4)	16,042	$	357,416	-		-
	-	-	-		-	-	12/28/2012 (2)	441	$	9,825	-		-
	-	-	-		-	-	12/28/2012 (2)	288	$	6,417	-		-
	-	-	-		-	-	12/28/2012 (2)	1,032	$	22,993	-		-
	-	-	-		-	-	12/28/2012 (2)	1,208	$	26,914	-		-
	-	-	-		-	-	12/28/2012 (2)	754	$	16,799	-		-

NEOs	Agreement and Date	Termination Without Cause or Departure for Good Reason	Change in Control with Termination
Michael R. Hsing	Employment Agreement dated March 10, 2008, as amended December 16, 2008	Base salary, target annual bonus and benefits for 12 months; and acceleration of vesting of equity grant equal to the number of equity grant that would have vested had the executive remained an employee for 12 months following the termination of employment.	Base salary, target annual bonus and benefits for a period of 12 months; and acceleration of vesting of 100% of the executive’s unvested equity grant.
Deming Xiao	Employment Agreement dated March 10, 2008, as amended December 16, 2008 and March 3, 2011	Base salary, target annual bonus and benefits for six months, as long as the executive is not employed by another company; and acceleration of vesting of equity grant and of ownership interest in Hue Ming LLC equal to the number of equity grant or equity interest that would have vested had the executive remained an employee for six months following the termination of employment.	Base salary, target annual bonus and benefits for a period of 12 months; and acceleration of vesting of 100% of the executives’ unvested equity grant.
Maurice Sciammas	Employment Agreement dated March 10, 2008, as amended December 16, 2008	Base salary, target annual bonus and benefits for six months, as long as the executive is not employed by another company; and acceleration of vesting of equity grant equal to the number of equity grant that would have vested had the executive remained an employee for six months following the termination of employment.	Base salary, target annual bonus and benefits for a period of 12 months; and acceleration of vesting of 100% of the executives’ unvested equity grant.
Meera Rao	Employment Agreement dated January 5, 2009, as amended February 9, 2010
Saria Tseng	Employment Agreement dated December 16, 2008, as amended February 9, 2010

	Terminations Without Cause or Departure for Good Reasons								Change of Control With Termination
NEOs	Base Salary and Target Bonus		Stock Options and Awards		Insurance Benefits		Total Compensation		Base Salary and Target Bonus		Stock Options and Awards		Insurance Benefits		Total Compensation
Michael Hsing	$	896,000	$	4,507,722	$	23,037	$	5,426,759	$	896,000	$	6,619,094	$	23,037	$	7,538,131
Meera Rao	$	234,000	$	543,512	$	4,082	$	781,594	$	468,000	$	1,881,064	$	8,164	$	2,357,228
Deming Xiao	$	306,000	$	823,615	$	6,212	$	1,135,827	$	612,000	$	2,533,776	$	12,423	$	3,158,199
Maurice Sciammas	$	270,000	$	540,421	$	11,470	$	821,891	$	540,000	$	1,936,707	$	22,940	$	2,499,647
Saria Tseng	$	270,000	$	522,928	$	10,906	$	803,834	$	540,000	$	1,846,317	$	21,811	$	2,408,128

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)			Weighted-average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by stockholders		5,461,468	(1)	$	15.62	(2)		9,156,845	(3)
Equity compensation plans not approved by stockholders		---			---			---
Total		5,461,468		$	15.62			9,156,845

		BY ORDER OF THE BOARD OF DIRECTORS

Dated: April 30, 2013

		Saria Tseng
		Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary

	FY2008			FY2009			FY2010			FY2011			FY2012
GAAP operating income	$	22,507		$	19,530		$	30,498		$	13,417		$	17,279
Operating income as a percentage of revenue		14.0	%		11.8	%		13.9	%		6.8	%		8.1	%
Adjustments to reconcile GAAP operating income to non-GAAP total operating income:
Stock-based compensation		12,814			14,366			16,417			12,814			18,652
Litigation provision (reversal)		-			(6,356	)		-			-			-
Non-GAAP operating income	$	35,321		$	27,540		$	46,915		$	26,231		$	35,931
Non-GAAP operating income as a percentage of revenue		22.0	%		16.7	%		21.4	%		13.3	%		16.8	%