NEWPORT CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

May 19, 2015

To the Stockholders of Newport Corporation:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Newport Corporation will be held at our corporate headquarters, located at 1791 Deere Avenue, Irvine, California 92606, on Tuesday, May 19, 2015, at 9:00 a.m. Pacific Time, for the purpose of considering and acting upon the following:

1.              To elect seven directors named in the proxy statement to serve for a term of one year;

2.              To ratify the appointment of Deloitte & Touche LLP as Newport’s independent auditors for the fiscal year ending January 2, 2016;

3.              To approve Newport’s Amended and Restated 2011 Stock Incentive Plan;

4.              To hold an advisory vote on the approval of the compensation of Newport’s named executive officers; and

5.              To transact such other business as may properly be brought before the meeting or any adjournment thereof.

The foregoing items of business are more fully described in the proxy statement accompanying this notice.

Only stockholders of record at the close of business on March 25, 2015 are entitled to notice of and to vote at the meeting.

All stockholders are cordially invited to attend the meeting.  However, to ensure your representation at the meeting, you are urged to vote by proxy prior to the meeting.  Any stockholder attending the meeting may vote in person even if he or she has voted by proxy.

April 8, 2015

Irvine, California

YOUR VOTE IS IMPORTANT.  EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE BY PROXY PRIOR TO THE MEETING.  IF YOU CHOOSE TO VOTE BY MAIL, PLEASE DO SO PROMPTLY TO ENSURE YOUR PROXY ARRIVES IN SUFFICIENT TIME.

NEWPORT CORPORATION

PROXY STATEMENT

GENERAL INFORMATION

PROXY STATEMENT AND SOLICITATION OF PROXIES

Solicitation by Board

This proxy statement is being furnished in connection with the solicitation of proxies by our Board of Directors for use at our Annual Meeting of Stockholders to be held on May 19, 2015.

Solicitation of Proxies and Related Expenses

All expenses incurred in connection with this solicitation shall be borne by us.  We anticipate that this solicitation of proxies will be made primarily by mail and also pursuant to Rule 14a-16 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); however, in order to ensure adequate representation at the annual meeting, our directors, officers and other employees may communicate with stockholders, brokerage houses and others by telephone, facsimile or electronic transmission, or in person, to request that proxies be furnished.  We may reimburse banks, brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses in forwarding proxy materials to the beneficial owners of the shares held by them.  No additional compensation will be paid to our directors, officers or other employees for solicitation of proxies by such individuals.

Record Date and Voting Securities

Our Board of Directors has fixed the close of business on March 25, 2015 as the record date for the determination of stockholders entitled to receive notice of and to vote at the annual meeting.  As of the record date, there were 39,470,292 shares of our common stock outstanding and entitled to vote.  Each stockholder is entitled to one vote for each share of common stock held as of the record date.

Availability of Materials

We are making this proxy statement and our Annual Report on Form 10-K for our fiscal year ended January 3, 2015 available to all stockholders of record on the record date for the annual meeting for the first time on or about April 8, 2015.  On such date, we are mailing to each stockholder of record on the record date for the annual meeting either a Notice Regarding the Availability of Proxy Materials informing the stockholder of how to electronically access a copy of this proxy statement and our Annual Report on Form 10-K and how to vote online (the “Notice”), or printed copies of such materials, if printed copies have been previously requested by the stockholder.  If any stockholder who receives a Notice would like to receive printed copies of such materials, such printed copies may be requested by following the instructions contained in the Notice and will be provided free of charge.  Except as may be required by Securities and Exchange Commission rules and regulations, our Annual Report on Form 10-K is not to be regarded as proxy soliciting material or as communications by means of which any solicitation is to be made.

We will provide without charge to each stockholder solicited by these proxy solicitation materials a copy of our Annual Report on Form 10-K for the fiscal year ended January 3, 2015 without exhibits upon request of such stockholder made in writing to Newport Corporation, 1791 Deere Avenue, Irvine, California 92606, Attention: Investor Relations.  We will also furnish any exhibit to such Annual Report on Form 10-K if specifically requested in writing.

Quorum

A quorum is the number of shares of capital stock of a corporation that must be present in person or represented by proxy in order to transact business.  A majority of shares entitled to vote, present in person or represented by proxy, will constitute a quorum at the annual meeting.

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Abstentions

When an eligible voter attends the annual meeting but decides not to vote, the voter’s decision not to vote is called an “abstention.”  Properly executed proxy cards that are marked “abstain” on any proposal will be treated as abstentions for that proposal.  We will treat abstentions as follows:

·                  abstention shares will be treated as not voting for purposes of determining the outcome on any proposal for which the minimum affirmative vote required for approval of the proposal is a plurality or a majority (or some other percentage) of the votes actually cast, and thus will have no effect on the outcome; and

·                  abstention shares will have the same effect as votes against a proposal if the minimum affirmative vote required for approval of the proposal is a majority (or some other percentage) of (i) the shares present and entitled to vote, or (ii) all shares outstanding and entitled to vote.

Broker Non-Votes

Broker non-votes occur when shares held in “street name” by a broker, bank or other nominee (each, a “Nominee”) for a beneficial owner are not voted with respect to a particular proposal because (i) the Nominee does not receive voting instructions from the beneficial owner, and (ii) the Nominee lacks discretionary authority to vote the shares.  We will treat broker non-votes as follows:

·                  broker non-votes will not be treated as shares present and entitled to vote for purposes of any matter requiring the affirmative vote of a majority or other proportion of the shares present and entitled to vote (even though the same shares are considered present for quorum purposes and may be entitled to vote on other matters).  Thus, a broker non-vote will not affect the outcome of the voting on a proposal for which the minimum affirmative vote required for approval of the proposal is a plurality or a majority (or some other percentage) of (i) the votes actually cast, or (ii) the shares present and entitled to vote; and

·                  broker non-votes will have the same effect as votes against a proposal for which the minimum affirmative vote required for approval of the proposal is a majority (or some other percentage) of all shares outstanding and entitled to vote.

A Nominee only has discretionary authority to vote shares on a proposal that is considered a “routine” matter under applicable rules and related guidance.  The proposal for the ratification of the appointment of independent auditors is considered a “routine” matter and, accordingly, a Nominee has discretionary authority to vote shares on such proposal.  The other proposals included in this proxy statement are considered “non-routine” matters and, accordingly, a Nominee does not have discretionary authority to vote shares on such proposals.

Vote Required

A quorum is required for the approval of any of the proposals set forth herein.  Pursuant to Section 78.330 of the Nevada Revised Statutes, directors will be elected by a plurality of the votes cast.  The approval of each of the other proposals to be considered at the annual meeting requires the affirmative vote of the holders of a majority of the shares present and entitled to vote at the annual meeting in person or by proxy.

Voting of Proxies

Stockholders may vote by proxy or in person at the annual meeting.  To vote by proxy, stockholders may vote by Internet, telephone or mail.  The instructions and information needed to access our proxy materials and vote by Internet can be found in the Notice.  Alternatively, if printed copies of our proxy materials have been requested by a stockholder, the instructions and information needed to vote by Internet, telephone or mail can be found in the proxy card accompanying such materials.

If you are the beneficial owner of shares held by a Nominee, then your Nominee, as the record owner of the shares, must vote those shares in accordance with your instructions.  Please refer to the voting instruction form that your Nominee makes available to you for voting your shares.

Two of our officers, Charles F. Cargile and Jeffrey B. Coyne, have been designated by our Board as proxies for voting on matters brought before the annual meeting.  Each proxy properly received by us prior to the annual meeting, and not revoked, will be voted in accordance with the instructions given in the proxy.  If a choice is not specified in the proxy, the proxy will be voted (i) FOR the election of the director nominees listed therein; (ii) FOR the ratification of the appointment of Deloitte & Touche LLP as our independent auditors for the fiscal

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year ending January 2, 2016; (iii) FOR the approval of Newport’s Amended and Restated 2011 Stock Incentive Plan; and (iv) FOR the approval of the compensation of our named executive officers.

Revoking a Proxy

Any proxy may be revoked or superseded by executing a later proxy or by giving notice of revocation in writing prior to or at the annual meeting, or by attending the annual meeting and voting in person.  Attendance at the annual meeting will not in and of itself constitute revocation of a submitted proxy.  Any written notice revoking a proxy should be sent to our Corporate Secretary at our corporate offices at 1791 Deere Avenue, Irvine, California 92606, and must be received prior to the commencement of or at the annual meeting.

If your shares are held in the name of a Nominee, you may change your vote by submitting new voting instructions to your Nominee.  Please note that if your shares are held of record by a Nominee and you decide to attend and vote at the annual meeting, your vote in person at the annual meeting will not be effective unless you present a legal proxy, issued in your name, from your Nominee.

STOCKHOLDER PROPOSALS

Any stockholder desiring to submit a proposal for action at our 2016 annual meeting of stockholders and presentation in our proxy statement for such meeting should deliver the proposal to us at our corporate offices no later than December 10, 2015 in order to be considered for inclusion in our proxy statement relating to that meeting in accordance with Rule 14a-8 promulgated under the Exchange Act.  Matters pertaining to proposals, including the number and length thereof, eligibility of persons entitled to have such proposals included in the proxy statement and other aspects are covered by Rule 14a-8 and other laws and regulations, to which interested persons should refer.

In addition, under our bylaws, any stockholder entitled to vote at a meeting of stockholders and who intends to propose business at such meeting must provide timely written notice to our Corporate Secretary.  To be timely, a stockholder’s notice must be delivered to or mailed and received at our corporate offices at least seventy-five (75) days prior to the meeting of stockholders.  Such notice shall set forth as to each matter that the stockholder proposes to bring before any meeting of stockholders: (1) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (2) the name and record address of the stockholder proposing such business; (3) the class and number of shares of Newport stock that are beneficially owned by the stockholder; and (4) any material interest of the stockholder in such business.  If less than ninety (90) days notice or prior public disclosure of the date of any annual meeting of stockholders is given or made to stockholders by Newport, in order to be timely, notice by the stockholder must be so received not later than the close of business on the fifteenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs.  Our bylaws also contain procedures for stockholders to submit nominations of director candidates, which are discussed under the heading “Stockholder Nominations” beginning on page 11 of this proxy statement.  Consistent with past practice, we plan to disseminate proxy materials, including a WHITE proxy card, in connection with our 2016 annual meeting of stockholders.

Rule 14a-4 promulgated under the Exchange Act governs our use of our discretionary proxy voting authority with respect to a stockholder proposal that is not addressed in our proxy statement.  Such rule provides that if a proponent of a proposal fails to notify us with respect to such proposal at least 45 days prior to the current year’s anniversary of the date of mailing of the prior year’s proxy statement, then we will be allowed to use our discretionary voting authority when the proposal is raised at the annual meeting, without any discussion of the matter in the proxy statement.  We anticipate that our next annual meeting of stockholders will be held in May 2016.  If we do not receive any stockholder proposals for our 2016 annual meeting before February 23, 2016, we will be able to use our discretionary voting authority as outlined above.  In addition, if the stockholder does not comply with the requirements of Rule 14a-4(c)(2) promulgated under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such stockholder proposal.

OTHER MATTERS

Management is not aware of any other matters that will be presented for consideration at our 2015 annual meeting.

NEWPORT CORPORATE OFFICE

Our corporate offices are located at 1791 Deere Avenue, Irvine, California 92606.

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PROPOSAL ONE

ELECTION OF DIRECTORS

BOARD OF DIRECTORS

The size of our Board is fixed at seven directors and there are currently seven directors serving on our Board.  Each of our directors holds office until his or her successor has been elected and qualified or until the director’s earlier resignation or removal, and vacancies that occur during the year may be filled by individuals appointed by the Board to serve until the next annual meeting.  Our Corporate Governance Guidelines provide that no director shall stand for reelection after he or she has reached the age of seventy-three (73) years.

Director Nominees

Based upon the recommendation of our Corporate Governance and Nominating Committee, our Board has nominated the individuals set forth below, all of whom are currently serving as directors, to serve as directors until our annual meeting of stockholders in 2016:

Christopher Cox was appointed to the Board in November 2011.  Mr. Cox is a partner in the Business and Finance Practice of Morgan, Lewis & Bockius, LLP, an international law firm, and President of the firm’s subsidiary, Morgan Lewis Consulting LLC, an international legal consulting firm.  From July 2009 to November 2014, Mr. Cox was a partner in the Corporate Practice Group of Bingham McCutchen LLP, an international law firm, and from July 2011 to November 2014, he also served as President of the firm’s subsidiary, Bingham Consulting LLC, an international legal consulting firm.  Bingham combined with Morgan Lewis in November 2014.  Prior to joining Bingham, from August 2005 to January 2009, he served as the 28th Chairman of the Securities and Exchange Commission.  From 1994 to 2005, Mr. Cox served in the elected majority leadership of the U.S. House of Representatives. He was first elected to Congress in 1988, and during his career served as Chairman of the Committee on Homeland Security following the September 11, 2001 attacks; Chairman of the Select Committee on U.S. National Security and Military/Commercial Concerns with the People’s Republic of China; Chairman of the House Policy Committee; Chairman of the Task Force on Capital Markets; Chairman of the Task Force on Budget Process Reform; and Co-Chairman of the Bipartisan Study Group on Enhancing Multilateral Export Controls.  From 1986 to 1988, Mr. Cox served as a White House counsel to President Ronald Reagan. Previously, he had been a partner in the international law firm of Latham & Watkins, specializing in corporate and securities matters, and a member of the faculty of Harvard Business School, where he taught federal income tax.  Mr. Cox brings to the Board extensive experience in international business, capital markets and corporate governance matters, and extensive knowledge of the global defense and security industry.

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Siddhartha C. Kadia was appointed to the Board in December 2014.  Since April 2014, Dr. Kadia has served as President and Chief Executive Officer, and as a director, of Evans Analytical Group, a leading global provider of high-precision laboratory testing, evaluation and analytical services.  Prior to joining Evans Analytical Group, Dr. Kadia was employed by Life Technologies Corporation, a global biotechnology company, from July 2008 to February 2014, holding a number of management positions, most recently President of the Life Sciences Division from April 2013 to February 2014, President of Life Technologies Greater China from April 2011 to April 2013, President of Life Technologies Japan Ltd. from July 2009 to April 2011 and Chief Marketing Officer from July 2008 to June 2009.  From July 2005 to July 2008, Dr. Kadia served in numerous roles at Invitrogen Corporation, a biotechnology company that was merged with Applied Biosystems, Inc. in 2008 to form Life Technologies, including most recently as Vice President of Global Marketing and eBusiness from July 2007 to July 2008.  Before joining Invitrogen Corporation, Dr. Kadia was a management consultant at McKinsey & Company, a leading global consulting firm, where he worked with life and health sciences companies in the U.S. and Europe on a wide range of strategic and operational matters.  Dr. Kadia served on the board of directors of Volcano Corporation, a medical technology company, from March 2013 until the company was acquired by Royal Philips N.V. in February 2015.  Dr. Kadia brings to the Board extensive leadership experience in the life and health sciences industry, and significant expertise in growing businesses in the Asia Pacific region.

Oleg Khaykin was appointed to the Board in September 2010.  Mr. Khaykin is currently a senior advisor to Silver Lake Partners, a private equity firm focused on technology investments.  Mr. Khaykin served as President and Chief Executive Officer, and as a director, of International Rectifier Corporation, a leader in the design, manufacture, and marketing of power management semiconductors for industrial, computing, consumer, automotive, and high reliability applications, from March 2008 until the company was acquired by Infineon Technologies AG in January 2015.  From January 2006 until February 2008, he served as Executive Vice President and Chief Operating Officer of Amkor Technology, Inc., a leading provider of semiconductor assembly and test services, having joined Amkor in May 2003 as Executive Vice President of Strategy and Business Development.  Prior to joining Amkor, Mr. Khaykin was employed by Conexant Systems Inc. and its spin-off, Mindspeed Technologies Inc., where he held positions of increasing responsibilities from 1999 to 2003, most recently as Vice President of Strategy and Business Development from June 1999 until May 2003. Prior to Conexant, he was with the Boston Consulting Group, a leading international strategy and general management consulting firm, where he worked with many European and U.S. firms on a broad range of business and management issues.  Mr. Khaykin brings to the Board extensive experience in strategy development and international operations and in the management and operation of technology companies, particularly in the microelectronics industry, and is an “audit committee financial expert” as defined by the regulations promulgated by the Securities and Exchange Commission.

Cherry A. Murray was appointed to the Board in March 2014.  Since July 2009, Dr. Murray has held the John A. and Elizabeth S. Armstrong Professorship of Engineering and Applied Sciences, and has been a Professor of Physics, at Harvard University.  From July 2009 to December 2014, she also served as Dean of the School of Engineering and Applied Sciences at Harvard.  From December 2004 to June 2009, Dr. Murray was employed by Lawrence Livermore National Laboratory, serving as Principal Associate Director for Science and Technology from October 2007 to June 2009 and as Deputy Director for Science and Technology from December 2004 to October 2007.  Prior to joining Lawrence Livermore, Dr. Murray was employed by Bell Laboratories, the research and development arm of AT&T and subsequently Lucent Technologies, a communications technologies company, from July 1978 to December 2004, holding a number of management positions, most recently Physical Sciences and Wireless Research Senior Vice President from October 2001 to December 2004.  She was elected to the National Academy of Sciences in 1999, to the American Academy of Arts and Sciences in 2001, and to the National Academy of Engineering in 2002.  She currently serves on the advisory or governing boards of a number of scientific and educational organizations.  Dr. Murray received the National Medal of Technology and Innovation in November 2014.  Dr. Murray brings to the Board extensive experience in basic and applied science and high technology research and development and research funding processes, as well as significant contacts in the global research community.

Robert J. Phillippy joined Newport in April 1996 as Vice President and General Manager of the Science and Laboratory Products Division.  In August 1999, he was appointed to the position of Vice President and General Manager of the U.S. operations of our Industrial and Scientific Technologies Division (now a part of our Photonics Group).  In July 2004, Mr. Phillippy was appointed as President and Chief Operating Officer, and in September 2007, he was appointed as President and Chief Executive Officer and as a member of the Board.  Prior to joining Newport, Mr. Phillippy was Vice President of Channel Marketing at Square D Company (now a division of Schneider Electric), an electrical equipment manufacturer, from 1994 to 1996.  He joined Square D Company in

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1984 as a sales engineer and held various sales and marketing management positions with that company prior to his appointment as Vice President in 1994.  Mr. Phillippy brings to the Board his extensive knowledge of our business, operations and markets from his roles with Newport, as well as extensive experience in the management and operation of technology companies.

Kenneth F. Potashner was elected to the Board in 1998.  He served as the Board’s Lead Independent Director from August 2003 to August 2006.  In September 2007, Mr. Potashner was appointed as Chairman of the Board.  From May 2003 to present, Mr. Potashner has been an independent investor.  From March 2012 to January 2014, he held the position of Executive Chairman at Parametric Sound Corporation, a provider of audio solutions, and he served on that company’s board of directors from December 2011 to May 2014.  From 1996 to May 2003, he was Chairman of the Board of Directors of Maxwell Technologies, Inc., a manufacturer of ultracapacitors, microelectronics and high voltage capacitors, and he also served as President and Chief Executive Officer of Maxwell Technologies from 1996 to October 1998.  From November 1998 to August 2002, Mr. Potashner was President, Chief Executive Officer and Chairman of SONICblue Incorporated (formerly S3 Incorporated), a supplier of digital media appliances and services.  Mr. Potashner was Executive Vice President and General Manager of Disk Drive Operations for Conner Peripherals, a manufacturer of storage systems, from 1994 to 1996.  From 1991 to 1994, he was Vice President, Worldwide Product Engineering for Quantum Corporation, a manufacturer of disk drives.  From 1981 to 1991, he held various engineering management positions with Digital Equipment Corporation, a manufacturer of computers and peripherals, culminating with the position of Vice President of Worldwide Product Engineering in 1991.  Mr. Potashner also serves on the boards of directors of three private companies.  Mr. Potashner brings to the Board extensive experience in the management and operation of technology companies, particularly in the microelectronics industry.

Peter J. Simone was appointed to the Board in March 2003.  Mr. Simone currently serves as an independent consultant to several venture capital firms and venture-funded private companies.  Mr. Simone was Executive Chairman of SpeedFam-IPEC, Inc., a semiconductor equipment company, from June 2001 to December 2002 when it was acquired by Novellus Systems, Inc.  He served as a director of and a consultant to Active Controls eXperts, Inc. (“ACX”), a leading supplier of precision motion control and smart structures technology, from January 2000 to August 2000, and was President and a director of ACX from August 2000 to February 2001 when it was acquired by Cymer, Inc.  He served as President, Chief Executive Officer and director of Xionics Document Technologies, Inc., a provider of embedded software solutions for printer and copier manufacturers, from April 1997 until Xionics’ merger with Oak Technology, Inc. in January 2000.  Mr. Simone’s previous experience includes seventeen years with GCA Corporation, a manufacturer of semiconductor photolithography capital equipment, holding various management positions including President and director.  Mr. Simone also serves on the boards of directors of several other private and public companies.  Mr. Simone brings to the Board extensive experience in the management and operation of technology companies, particularly in the microelectronics industry, and is an “audit committee financial expert” as defined by the regulations promulgated by the Securities and Exchange Commission.

Unless otherwise instructed, each proxy received by us will be voted in favor of the election of the nominees named above as directors.  The nominees have indicated that they are willing and able to serve as directors if elected.  If the nominees should become unable or unwilling to serve, it is the intention of the persons designated as proxies to vote instead, in their discretion, for such other persons as may be designated as nominees by our Board.

The Board of Directors recommends a vote “FOR” the election of all of the nominees named in this proxy statement as directors.

Other Directorships

Dr. Kadia previously served on the board of directors of one other publicly reporting company, Volcano Corporation, from March 2013 to February 2015.  Dr. Kadia does not currently serve, and during the past five years has not served, on the board of directors of any other publicly reporting company or investment company.

Mr. Khaykin previously served on the boards of directors of two other publicly reporting companies, International Rectifier Corporation from March 2008 to January 2015, and Zarlink Semiconductor, Inc. from November 2007 to October 2011.  Mr. Khaykin does not currently serve, and during the past five years has not served, on the board of directors of any other publicly reporting company or investment company.

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Mr. Phillippy currently serves on the board of directors of one other publicly reporting company, ESCO Technologies Inc.  Mr. Phillippy does not currently serve, and during the past five years has not served, on the board of directors of any other publicly reporting company or investment company.

Mr. Potashner previously served on the boards of directors of two other publicly reporting companies, Parametric Sound Corporation from 2011 to 2014, and California Micro Devices Corporation from 2009 to 2010.  Mr. Potashner does not currently serve, and during the past five years has not served, on the board of directors of any other publicly reporting company or investment company.

Mr. Simone currently serves on the boards of directors of two other publicly reporting companies, Monotype Imaging, Inc. and Veeco Instruments, Inc.  Mr. Simone previously served on the boards of directors of two additional publicly reporting companies, Cymer, Inc. from 1993 to 2013, and Inphi Corporation from 2010 to 2013.  Mr. Simone does not currently serve, and during the past five years has not served, on the board of directors of any other publicly reporting company or investment company.

No other director currently serves, or during the past five years has served, on the board of directors of any other publicly reporting company or investment company.

CORPORATE GOVERNANCE

We are committed to promoting the best interests of our stockholders by maintaining sound corporate governance practices and the highest standards of responsibility and ethics.  Our Board of Directors has adopted Corporate Governance Guidelines, which consist of written standards relating to, among other things, the composition, leadership, operation and evaluation of the Board and its committees.  The Corporate Governance and Nominating Committee of our Board reviews and evaluates, at least annually, the adequacy of and our compliance with such guidelines.  A copy of our Corporate Governance Guidelines is available on our Internet site at www.newport.com/corporategovernance.  We will also provide an electronic or paper copy of these guidelines, free of charge, upon request made to our Corporate Secretary.

Board of Directors

Independence

With the exception of Mr. Phillippy, who serves as our President and Chief Executive Officer, all of the members of our Board of Directors are “independent” as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules.  Michael T. O’Neill and C. Kumar N. Patel, who served on our Board until their retirement in May 2014, were also “independent” as defined by such Rule.  Our Board has determined that no current member of the Board has a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director.  The independence of each director is reviewed periodically to assess the appropriateness of each director’s service on board committees and to ensure that at least a majority of our Board is independent.

Board Leadership

At such times as an independent director is serving as Chairman of the Board, the leadership of the Board is the responsibility of the Chairman.  Mr. Potashner, who is an independent director, has served as Chairman of the Board since September 2007.  In accordance with our Corporate Governance Guidelines, if a non-independent director, such as our Chief Executive Officer, is serving as Chairman of the Board, the leadership of the Board would be shared by the Chairman and a lead independent director who would be appointed by the independent directors from among themselves.  We believe that this leadership structure provides the appropriate level of independent oversight necessary to ensure that the Board meets its fiduciary obligations to our stockholders, that the interests of management and our stockholders are properly aligned, and that we establish and follow sound business practices and strategies that are in the best interests of our stockholders.

Board’s Role in Risk Management

The Board provides oversight with respect to our management of risk, both as a whole and through its standing committees.  The Board reviews and discusses with management at each of its regular quarterly meetings, information presented by management relating to our operational results and outlook, including information regarding risks related to our business and operations, as well as risks associated with the markets we serve.  At least annually, the Board reviews and discusses an overall risk assessment conducted by management and the strategies

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and actions developed and implemented by management to monitor and mitigate such risks.  The Board’s role in risk oversight has no effect on the Board’s leadership structure.

The committees of our Board provide certain additional risk oversight functions.  The Audit Committee of our Board provides risk oversight, focusing in particular on financial and credit risk, as well as cybersecurity risks and risks associated with certain regulatory compliance matters.  The Audit Committee oversees the management of such risks, generally as part of its responsibilities related to the review of our financial results, our internal control over financial reporting and our other internal audit activities, and specifically in connection with its consideration of particular actions being contemplated by us, such as financing and other activities affecting our capital structure.  The Compensation Committee has responsibility for overseeing the management of risk related to our compensation policies and practices.  The Compensation Committee considers risks associated with our business in developing compensation policies and the components of our executive compensation program, and periodically reviews and discusses assessments conducted by management with respect to risks that may arise from our compensation policies and practices for all employees.

Meetings

It is the policy of our Board to hold at least four regular, in-person meetings each year, typically in February, May, August and November.  The regular meeting held in May of each year coincides with our annual meeting of stockholders.  In addition, our Board holds special meetings as and when deemed necessary by the directors.  We have not adopted a formal policy regarding attendance by members of the Board of Directors at our annual meetings of stockholders; however, generally, all directors attend such meetings.  All directors who were serving on our Board at the time of our 2014 annual meeting of stockholders attended such meeting.

Our Board held ten meetings (including telephonic meetings) during the fiscal year ended January 3, 2015.  Each director attended more than seventy-five percent of the aggregate of the number of meetings of the Board (held during the period in which he or she served as a director) and the total number of meetings held by all committees of the Board on which he or she served (held during the period in which he or she served on such committees).

Private Sessions

Our independent directors meet privately, without management present, at least four times during the year.  These private sessions are generally held in conjunction with the regular quarterly Board meetings.  Other private meetings are held as often as deemed necessary by the independent directors.

Board Evaluation

The Corporate Governance and Nominating Committee evaluates the performance of the Board on an annual basis.  As part of this evaluation during the past several years, self-assessment questionnaires have been completed by the individual non-employee directors.  The self-assessment questionnaire is intended to assist the Corporate Governance and Nominating Committee in evaluating the Board and identifying ways to improve Board practices and enhance the Board’s overall effectiveness.  It addresses matters such as the size and composition of the Board, the structure and responsibilities of the Board’s committees, the key areas of focus and the sufficiency of the depth and breadth of topics reviewed and discussed by the Board, the skills and experience of directors and their knowledge regarding Newport’s business, and other matters pertaining to the organization and activities of the Board.  The responses to the self-assessment are compiled and summarized by our General Counsel, with all individual responses and comments kept anonymous, and the overall findings are presented to and reviewed by the Corporate Governance and Nominating Committee.  Based on its evaluation of the Board’s performance, the Corporate Governance and Nominating Committee may recommend actions to address any concerns raised and/or to improve Board practices.

Committees of the Board

Our Board has three separate standing committees: the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee.  Each committee operates under a written charter adopted and reviewed annually by the Board.  Copies of the charters of all standing committees are available on our Internet site at www.newport.com/corporategovernance.  We will also provide electronic or paper copies of the standing committee charters free of charge, upon request made to our Corporate Secretary.  The Board may establish other committees from time to time as deemed appropriate by the Board based on the needs of the Board and the company.

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Audit Committee

The Audit Committee is comprised of three directors.  The current members are Messrs. Simone (Chairman) and Khaykin and Dr. Kadia.  Dr. Patel also served on the Audit Committee during 2014 until he retired from the Board in May 2014, and Mr. Potashner served on the Audit Committee from May 2014 until Dr. Kadia’s appointment to the committee in February 2015.  None of the members serving on the Audit Committee currently or during 2014 are or have been our officers or employees, and each member qualifies as an independent director as defined by Rules 5605(a)(2) and (c)(2) of the Nasdaq Listing Rules and Section 10A(m) of the Exchange Act and Rule 10A-3 thereunder.  The Board has determined that Messrs. Khaykin and Simone are “audit committee financial experts” as defined by the regulations promulgated by the Securities and Exchange Commission.  The Audit Committee held eight meetings (including telephonic meetings) during the fiscal year ended January 3, 2015.

The Audit Committee has the sole authority to appoint and, when deemed appropriate, replace our independent auditors, and to compensate and oversee the work of our independent auditors.  The Audit Committee has a policy of pre-approving all audit and permissible non-audit services provided by our independent auditors and the fees associated therewith.  The Audit Committee has, among other things, the responsibility to:

·                  evaluate the qualifications and independence of our independent auditors;

·                  review and approve the scope and results of the annual audit;

·                  evaluate independently and with our independent auditors our financial and internal audit staff and the adequacy and effectiveness of our systems and internal control over financial reporting;

·                  review and discuss with management and the independent auditors the content of our financial statements prior to the filing of our quarterly reports on Form 10-Q and annual reports on Form 10-K;

·                  review the content and clarity of our press releases and related Securities and Exchange Commission reports regarding our operating results and other financial matters;

·                  review significant changes in our accounting policies;

·                  review and approve transactions with related persons for which disclosure and/or approval is required under applicable law, including Securities and Exchange Commission and Nasdaq rules;

·                  establish procedures for receiving, retaining and investigating reports of illegal acts involving us or complaints or concerns regarding questionable accounting or auditing matters, and supervise the investigation of any such reports, complaints or concerns;

·                  establish procedures for the confidential, anonymous submission by our employees of concerns or complaints regarding questionable accounting or auditing matters;

·                  oversee our internal audit function, including the selection and removal of senior internal audit management and the review of internal audit plans and findings;

·                  review and discuss assessments conducted by management with respect to our major financial and credit risk exposures, as well as cybersecurity and anticorruption risk exposures, and actions being taken to monitor and control such exposures;

·                  periodically meet with our independent auditors without management present;

·                  adopt and periodically review and assess our investment policy, and oversee the management of our investment portfolio and evaluate the performance of our portfolio managers, during times in which we maintain a managed investment portfolio; and

·                  review and approve or make recommendations to the Board with respect to certain significant spending proposals.

Compensation Committee

The Compensation Committee is comprised of three directors.  The current members are Messrs. Khaykin (Chairman) and Potashner and Dr. Murray.  Mr. O’Neill and Dr. Patel also served on the Compensation Committee during 2014 until they retired from the Board in May 2014.  None of the members serving on the Compensation Committee currently or during 2014 are or have been our officers or employees, and each member qualifies as an independent director as defined by Rules 5605(a)(2) and (d)(2) of the Nasdaq Listing Rules.

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The Compensation Committee held five meetings during the fiscal year ended January 3, 2015.  The Compensation Committee has, among other things, the responsibility to:

·                  develop and implement and review the competitiveness of our executive compensation programs, evaluate and take into consideration the results of stockholder advisory votes on executive compensation, and approve all cash and equity compensation for our Chief Executive Officer and other executive officers;

·                  oversee the development of and administer our long-term incentive plans, including equity-based incentive plans;

·                  develop guidelines for and approve awards to key personnel under our equity-based incentive plans;

·                  review and discuss assessments conducted by management with respect to risks that may arise from our compensation policies and practices for all employees; and

·                  evaluate the form and amount of director compensation and make recommendations to the Board related thereto.

Additional information regarding the Compensation Committee’s consideration and determination of executive officer and director compensation is included under the sections entitled “Compensation Discussion and Analysis” beginning on page 13, and “Director Compensation” beginning on page 36, of this proxy statement.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee is comprised of three directors.  The current members are Messrs. Potashner (Chairman) and Simone and Dr. Murray.  Dr. Patel also served on the Corporate Governance and Nominating Committee during 2014 until his retirement in May 2014.  None of the members serving on the Corporate Governance and Nominating Committee currently or during 2014 are or have been our officers or employees, and each member qualifies as an independent director as defined by Rule 5605(a)(2) of the Nasdaq Listing Rules.  The Corporate Governance and Nominating Committee held three meetings during the fiscal year ended January 3, 2015.

The Corporate Governance and Nominating Committee ensures that the Board is properly constituted to meet its fiduciary obligations to Newport and our stockholders and that we have and follow appropriate governance standards.  To carry out this purpose, the Corporate Governance and Nominating Committee has, among other things, the responsibility to:

·                  develop, continually assess and monitor compliance with our corporate governance guidelines;

·                  evaluate the size and composition of our Board, the criteria for Board membership and the independence of Board members;

·                  oversee the evaluation of the performance of our Board and its committees and our management;

·                  assist our Board in establishing appropriate committees and recommend members for such committees;

·                  identify, evaluate and recommend to our Board candidates for nomination and election as members of our Board; and

·                  review and make recommendations to our Board regarding our responses to proposals and advisory votes received from stockholders, and engage in discussions with the proponents of approved stockholder proposals.

Identifying and Evaluating Director Candidates

The Corporate Governance and Nominating Committee identifies potential director candidates through a variety of sources, including recommendations made by current or former directors, members of our executive management, stockholders and business, academic and industry contacts.  When appropriate, a search firm may be retained by the Corporate Governance and Nominating Committee to identify director candidates.  Dr. Kadia, who was appointed to the Board in December 2014, was identified as a director candidate by our chief financial officer, who had been introduced to Dr. Kadia by a business contact.

There are no specific minimum qualifications that the Corporate Governance and Nominating Committee requires to be met by a director nominee recommended for a position on the Board, nor are there any specific qualities or skills that are necessary for one or more members of our Board to possess, other than as are necessary to meet the

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requirements of the rules and regulations applicable to us.  The Corporate Governance and Nominating Committee reviews and assesses at least annually the size and composition of our Board and the criteria for Board membership, including business background, experience, judgment, independence, character, age, diversity, and other relevant matters.  Director candidates are evaluated based on such established criteria and certain provisions of our bylaws.  Our Board does not have a formal policy regarding racial/ethnic, gender or other diversity of director candidates, but considers diversity as a factor in evaluating such candidates.

In assessing the composition of the Board, the Corporate Governance and Nominating Committee considers the Board’s current and anticipated needs, and makes every effort to maintain an appropriate balance of different business backgrounds, skills and expertise based on the nature and requirements of our business and the markets that we serve.  In evaluating a potential director candidate, the Corporate Governance and Nominating Committee considers all relevant information regarding the candidate, including the membership criteria stated above, and whether the candidate would meet the Corporate Governance and Nominating Committee’s objectives for the overall composition of the Board, as well as the candidate’s ability and willingness to devote adequate time to Board responsibilities.  When appropriate, the Corporate Governance and Nominating Committee will recommend qualified candidates for nomination by the full Board.  Any stockholder may recommend candidates for evaluation by the Corporate Governance and Nominating Committee by submitting a written recommendation to our Corporate Secretary in accordance with the requirements described under the heading “Stockholder Nominations” below.  The Corporate Governance and Nominating Committee will consider any such recommended candidates in the same manner as all other proposed candidates in accordance with these standards.

Stockholder Nominations

In accordance with our bylaws, stockholders may nominate a candidate for election as director by delivering a written notice to our Corporate Secretary at least ninety (90) days prior to the date corresponding to the record date of our previous year’s annual meeting in the event of election at an annual meeting, and at least seventy-five (75) days prior to the initiation of solicitation to our stockholders for election in the event of election other than at an annual meeting.  Such notice shall set forth (1) the name, age, business address and residence address of such nominee, (2) the principal occupation or employment of such nominee, (3) the number of shares (if any) of our capital stock that are beneficially owned by such nominee, and (4) such other information concerning such nominee as would be required under the then-current rules of the Securities and Exchange Commission to be included in a proxy statement soliciting proxies for the election of the nominee.  Any such notice shall be accompanied by a signed consent of such nominee to serve as a director, if elected.  If the Corporate Governance and Nominating Committee or the Board determines that any nomination made by a stockholder was not made in accordance with the foregoing procedures, the rules and regulations of the Securities and Exchange Commission or other applicable laws or regulations, such nomination will be void.  Our bylaws also contain certain restrictions on the eligibility of a person to be elected or to serve as a director who is an employee, officer, director or agent of, or is otherwise affiliated with, a business entity that competes with us, as more specifically described in our bylaws.  Such restrictions will also be taken into account in determining whether any nomination made by a stockholder is proper.

Communications with our Board

Any stockholder may communicate with our Board, any Board committee or any individual director.  All communications should be made in writing, addressed to the Board, the Board committee or the individual director, as the case may be, in care of our Corporate Secretary, mailed or delivered to our corporate offices at 1791 Deere Avenue, Irvine, California 92606.  Our Corporate Secretary will forward or otherwise relay all such communications to the intended recipient(s).

Corporate Responsibility

Code of Ethics

Our Board has adopted a written code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Corporate Controller and persons performing similar functions.  Such code of ethics consists of standards that, among other things, are designed to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or furnish to, the Securities and Exchange Commission and/or make in other public communications; compliance with applicable governmental laws, rules and regulations; the prompt internal reporting of violations of the code of ethics to our Legal Department and/or our Audit Committee; and accountability for adherence to the code of ethics.  A copy of

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our code of ethics is available on our Internet site at www.newport.com/corporategovernance.  We will also provide an electronic or paper copy of the code of ethics, free of charge, upon request made to our Corporate Secretary.  If any substantive amendments are made to the written code of ethics, or if any waiver (including any implicit waiver) is granted from any provision of the code of ethics to our Chief Executive Officer, Chief Financial Officer or Corporate Controller, we will disclose the nature of such amendment or waiver on our Internet site at www.newport.com/corporategovernance or, if required, in a current report on Form 8-K.

Procedures for Submitting Complaints Regarding Accounting and Auditing Matters

We are committed to compliance with all applicable securities laws and regulations, accounting standards and accounting controls.  The Audit Committee has established written procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by our employees of concerns or complaints regarding such matters.  The Audit Committee oversees the handling of such concerns or complaints.  The procedures for non-employees to submit concerns or complaints regarding accounting, internal accounting controls and auditing matters are available on our Internet site at www.newport.com/corporategovernance.  We will also provide an electronic or paper copy of these procedures free of charge, upon request made to our Corporate Secretary.

EXECUTIVE OFFICERS

We currently have five executive officers who serve at the pleasure of our Board and are elected on an annual basis:

Mr. Phillippy’s biography is presented beginning on page 5.  The biographies of our other executive officers are set forth below.

Charles F. Cargile joined us in October 2000 as Vice President and Chief Financial Officer.  In July 2004, he was appointed Senior Vice President.  He has also served as Treasurer since April 2013 and previously from February 2005 until April 2010.  Prior to joining us, Mr. Cargile was Vice President, Finance and Corporate Development for York International Corporation (now a division of Johnson Controls, Inc.), a manufacturer of air conditioning and refrigeration products.  He joined York in November 1998, and served in a number of executive positions, including Corporate Controller and Chief Accounting Officer, until his promotion to Vice President, Finance and Corporate Development in February 2000.  Prior to joining York, Mr. Cargile was employed by Flowserve Corporation, a global company engaged in the design, manufacture, distribution and service of industrial flow management equipment, in various positions, most recently as Corporate Controller and Chief Accounting Officer from February 1995 to November 1998.

Jeffrey B. Coyne joined us in June 2001 as Vice President, General Counsel and Corporate Secretary.  In July 2004, he was appointed Senior Vice President, with responsibility for human resources in addition to legal affairs.  Prior to joining us, Mr. Coyne was a partner in the Corporate and Securities Law Department of Stradling Yocca Carlson & Rauth, our outside corporate counsel, from January 2000 to June 2001, and was an associate attorney at such firm from February 1994 to December 1999.  From November 1991 to February 1994, Mr. Coyne was an associate attorney at Pillsbury Madison & Sutro (now Pillsbury Winthrop Shaw Pittman LLP), an international law firm.  Mr. Coyne is a member of the State Bar of California and the Orange County Bar Association.

David J. Allen joined us in March 2007 as Vice President and General Manager of our Lasers Division.  In May 2012, he was appointed as Senior Vice President, and he now holds the position of Senior Vice President and General Manager of our Lasers Group.  Prior to joining us, from October 1999 to July 2006, Mr. Allen was employed by Agilent Technologies, Inc., a global provider of measurement and analytical instrumentation, and Avago Technologies, Inc., a company which was formed in December 2005 by the spin-off of Agilent’s

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semiconductor products division.  During such time, he held a number of management positions, most recently serving as Vice President and General Manager, Fiber Optics Products Division from April 2004 to July 2006, as Vice President and General Manager, Networking Solutions Business Unit from November 2003 to December 2005, and as Vice President and General Manager, Personal Systems Business Unit from November 2001 to October 2003.  Prior to his positions with Agilent and Avago, Mr. Allen held various management positions at Hewlett-Packard Company from December 1984 to October 1999.  Prior to joining Hewlett-Packard Company, Mr. Allen held various sales positions at General Electric Company.

Dennis L. Werth joined us in July 2004, serving as Senior Director and General Manager of the Oriel Instruments business, which we acquired as a part of our acquisition of Spectra-Physics, until February 2005.  From February 2005 to January 2013, Mr. Werth served as Vice President of the Precision Components and Systems Business of our former Photonics and Precision Technologies Division.  In January 2013, in connection with the realignment of our operating groups, he was appointed as Senior Vice President and General Manager of our Photonics Group, which includes the Precision Components and Systems Business and the photonics businesses of our former Ophir Division.  Prior to joining Oriel Instruments in January 2004, Mr. Werth was the Chief Operating Officer of Isowave, a supplier of advanced optical materials and fiber optic components serving the telecommunications and R&D markets, from July 2001 to December 2003.  From November 1996 to June 2001, he served as Business Segment Leader, Electronic Components and Electronic Article Surveillance, at Allied Signal, Inc., a diversified manufacturer, which merged with Honeywell, Inc. in 1999.  Prior to joining Allied Signal, from May 1985 to June 1996, Mr. Werth held various management positions of increasing responsibility at Amoco Corporation, most recently serving as Vice President of Marketing and Business Development of that company’s ATx Telecom Systems, Inc. subsidiary (formerly, Amoco Laser Company, which Mr. Werth co-founded in 1987 and which was sold to Scientific Atlanta in June 1996).

Family Relationships

There are no family relationships between any director, executive officer or person nominated or chosen to become a director or executive officer.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information about the compensation objectives and policies for our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers (our “named executive officers”) to give context to the information contained in the compensation tables that follow this Compensation Discussion and Analysis.  In this Compensation Discussion and Analysis, we refer to the Compensation Committee of our Board as the “Committee,” and the terms “we,” “us,” “our” and “Newport” refer to the company.

Executive Summary

Highlights of 2014 Performance

Newport delivered a strong performance in 2014, highlighted by the following achievements:

·                  Our net sales grew 8% year-over-year, to $605.2 million, the highest level in our history;

·                  We leveraged this sales growth to increase our non-GAAP operating profit by approximately 21% and our non-GAAP earnings per diluted share by approximately 28% compared with 2013 (see Appendix A to this proxy statement for a reconciliation of such non-GAAP amounts to our corresponding GAAP results);

·                  Our new orders in 2014 were $636.0 million, also an all-time record for Newport; and

·                  We continued to make good progress on our strategic initiatives, introducing over 100 new products, achieving new design wins for customer programs, and completing the acquisition of V-Gen, Ltd.

As a result of our strong financial performance, our named executive officers received payouts under our cash incentive plan ranging from approximately 132% to 143% of their target annual incentives for 2014, as discussed in more detail below.  We also achieved the profitability threshold established for the restricted stock unit awards granted to our executives in 2014, and so those awards will continue to vest in accordance with their time-based vesting schedule.

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Compensation Philosophy

Emphasis on Pay-for-Performance.  The core of Newport’s executive compensation philosophy and practice continues to be to pay-for-performance.  Newport’s executive officers are compensated in a manner consistent with our strategy, competitive practice, sound corporate governance principles, and stockholder interests and concerns.  We believe that our compensation program is strongly aligned with the long-term interests of our stockholders.  A significant portion of each named executive officer’s total compensation is tied to the achievement of pre-established performance objectives, and for 2014, performance-based compensation accounted for approximately 51% to 63% of each named executive officer’s target total direct compensation, as follows:

·                  Our cash incentive plan provides for payouts that are 100% tied to the achievement of financial performance goals, and the payouts for all financial measures are conditioned upon the achievement of at least the minimum level for each executive’s primary profitability goal.

·                  In addition, the vesting of all restricted stock unit awards granted to our executives in 2014 was conditioned upon achievement of a profitability threshold for 2014, in addition to time-based vesting over a three-year period.

A breakdown of the elements of Mr. Phillippy’s compensation, as percentages of his target total direct compensation for 2014, is shown in Figure 1 below.  An average breakdown of the elements of compensation of our other named executive officers, as percentages of target total direct compensation for 2014, is shown in Figure 2 below.

Breakdown of Elements of 2014 Target Total Direct Compensation

In Figures 1 and 2 above, the percentages of 24% for Mr. Phillippy and 21% for all other named executive officers correspond to the target payouts under our cash incentive plan, which are 100% tied to the achievement of financial performance goals.  The percentages of 39% for Mr. Phillippy and 32% for all other named executive officers correspond to the grant date values of restricted stock units awarded to the executives in 2014, the vesting of which was conditioned upon achievement of a profitability threshold for 2014, in addition to time-based vesting over a three-year period.  The percentages of 16% for Mr. Phillippy and 14% for all other named executive officers correspond to the grant date values of stock-settled stock appreciation rights awarded to the executives in 2014, which are subject to time-based vesting over a three-year period.  The percentages of 21% for Mr. Phillippy and 33% for all other named executive officers correspond to the 2014 base salaries of the executives.

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This emphasis on pay-for-performance causes our executives’ actual compensation to fluctuate with, and be commensurate with, our actual financial performance for the year.  Figure 3 below illustrates the average payout received by our named executive officers under our cash incentive plans in effect over the past four years, as a percentage of the target annual incentive, relative to our non-GAAP net income performance for such year.  See Appendix A to this proxy statement for a reconciliation of our GAAP and non-GAAP net income results for such years.

Figure 3

As discussed above, based on our strong financial performance in 2014, our named executive officers received payouts that exceeded the target payouts under our cash incentive plan.  By contrast, in 2012 and 2013, we did not meet most of the performance objectives set by our Board under our cash incentive plans.  Consequently, none of the named executive officers received any payouts for 2013, and only two named executive officers received payouts for 2012, which were significantly below their target payout levels.  We believe that these results demonstrate the strong linkage between Newport’s performance and the compensation of our executives.

Alignment with Long-Term Interests of Stockholders.  We provide a significant portion of each named executive officer’s total compensation in the form of equity awards that vest over multiple years, which encourages the executive to remain employed by us and to drive sustained, long-term financial performance.  In 2014, our executives received a combination of restricted stock units with both a performance-based condition and a three-year time-based vesting schedule, and stock-settled stock appreciation rights with a three-year time-based vesting schedule.  The stock appreciation rights awarded to our executives are intended to incentivize them to drive performance that will increase stockholder value, as executives can realize value under the awards only if and to the extent that our stock price increases following the grant date.  We believe that the types and structure of equity awards granted to our executives align the interests of our executives with those of our stockholders to build long-term stockholder value, while also minimizing stockholder dilution.

Competitive Pay Reflecting Best Practices.  We pay compensation to our named executive officers at levels that are competitive with other technology companies of similar size and scope, as measured by a range of annual revenue, number of employees and market capitalization.  The Committee targets total direct compensation at approximately the 50th percentile of market, with actual realized pay and competitive positioning designed to fluctuate with and be commensurate with our actual performance relative to the financial objectives set by the Committee.  For 2014, based on peer group compensation data received from the Committee’s compensation consultants in November 2012 and other factors, the Committee determined that the target total direct compensation of our executive officers continued to be below the 50th percentile of market, and accordingly approved certain increases to the compensation of our named executive officers, as discussed in more detail below.  Such increases brought Mr. Phillippy’s target total direct compensation to a level that was approximately 13% below the 50th percentile of market, and brought the target total direct compensation of the other named executive officers within a range of approximately 5% above to 8% below the 50th percentile of market, based on the 2012 peer group data.  Consistent with the Committee’s pay-for-performance philosophy, such increases were more heavily weighted towards performance-based compensation.

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Compensation Governance

As discussed above, the core of Newport’s executive compensation continues to be pay-for-performance.  In addition, the Committee continually monitors and considers best practices in compensation governance.  The Committee’s compensation governance framework includes the following features:

·                  The Committee is comprised entirely of directors who meet the independence standards of the Securities and Exchange Commission and Nasdaq;

·                  The Committee’s independent compensation consultants are retained directly by the Committee and perform no other material services for Newport;

·                  Our executive compensation program includes a combination of sales, profitability and cash flow objectives and short-term and long-term incentives, to mitigate the risk of excess focus on any one area, and do not incentivize excessive risk taking by our executives;

·                  None of our executive officers have other than “at will” employment agreements;

·                  Our change-of-control agreements with our executives are structured as “double trigger” agreements that provide for payment only if the executive’s employment is terminated following a change-of-control;

·                  We prohibit our executives from engaging in any hedging or other speculative transactions involving Newport securities; and

·                  We maintain stock ownership guidelines applicable to our director and executive officers.

Overview of Executive Compensation Program and Objectives

Our executive compensation program is intended to fulfill three primary objectives: first, to attract and retain the high-caliber executives required for the success of our business; second, to reward these executives for strong financial and operating performance; and third, to align their interests with those of our stockholders to incentivize them to create long-term stockholder value.

To fulfill these objectives, the Committee has adopted the following policies:

·                  paying compensation that is competitive with other technology companies in our markets and in our geographic locations that have revenue levels, number of employees and market capitalization that are comparable with ours;

·                  tying a significant portion of our executives’ total compensation to performance, by:

·                  providing cash incentives that are tied to the achievement of pre-established financial performance objectives; and

·                  providing long-term equity-based incentives, significant portions of which are tied to the achievement of pre-established financial performance objectives, and for which the value ultimately realized by the executive is tied to our stock price; and

·                  providing significant long-term incentives to executives to encourage them to remain with Newport for long and productive careers and to build long-term stockholder value.

Implementation of Our Compensation Objectives and the Role of Our Compensation Committee

Our executive compensation program is overseen and administered by the Committee, which is comprised entirely of independent directors as determined in accordance with applicable Nasdaq, Securities and Exchange Commission and Internal Revenue Service rules.  The Committee operates under a written charter adopted and reviewed annually by our Board.  A copy of this charter is available on our Internet site at www.newport.com/corporategovernance.  We will also provide electronic or paper copies of this charter, free of charge, upon request made to our Corporate Secretary.

The Committee is guided by the above policies in designing and administering our executive compensation program.  In determining the particular elements of compensation that will be used to implement these compensation policies and the allocation of compensation among these elements, the Committee takes into consideration a number of factors related to our performance, such as our revenue, profit and other financial performance and goals, as well as competitive practices among our peer companies.  The Committee also evaluates risk factors associated with our

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businesses in determining our compensation policies and the components of our executive compensation program.  The Chairman of the Committee also serves as a member of the Audit Committee, which provides the Committee with further insight regarding our business risks and additional information in considering the impact of those risks on our compensation structure and pay practices.

The Committee typically determines each executive’s target total annual cash compensation (salary and cash incentive) and target total direct compensation (salary, cash incentive and long-term equity incentive) after reviewing similar compensation information from a group of peer companies in the technology industry with whom we compete for executive talent.  This review generally occurs in the second half of each year, in order to align the Committee’s compensation decisions with our operating planning process.  Any adjustments to compensation will then become effective for the next succeeding year.  Adjustments to base salaries (if any) are generally effective as of April 1 of each year and adjustments to target incentives (if any) are effective for the full succeeding year.

The Committee engaged compensation consultants, Radford Compensation Consulting (“Radford”), a consulting unit of Aon Inc. (“Aon”), in the second half of 2012 to conduct a market study of executive compensation levels, which the Committee reviewed in August and November of 2012 in connection with its executive compensation determinations for 2013.  In August 2013, in light of business conditions at that time and our outlook for 2014, the Committee determined that it was not necessary to conduct a new market study of executive compensation levels.  As such, in November 2013, the Committee reviewed the market data and recommendations that had been provided by Radford in 2012 and used such data and recommendations (with minor adjustments based on trend data) to assist the Committee in establishing compensation levels and plans for 2014.  The Committee most recently engaged Radford to conduct a market survey of executive compensation levels in August 2014, which the Committee reviewed in connection with its executive compensation determinations for 2015.

In connection with the Committee’s review of executive compensation in August and November of 2012, the Committee considered the following 26 technology companies with similar industry focus to Newport’s, and of similar size and scope as Newport, as measured by ranges of annual revenue, number of employees and market capitalization:

Newport ranked in the 49th percentile with respect to revenue and income, 82nd percentile with respect to number of employees, and 16th percentile with respect to market capitalization, of this peer group.

The peer group considered by the Committee in 2014, in connection with its review of executive compensation for 2015, is comprised of substantially the same companies as the peer group utilized in 2012.  Six companies were removed from the peer group in 2014 because they had been acquired or no longer met the selection criteria for the peer group, and five new companies meeting the targeted profile were added to the peer group.

Data on the compensation practices of these peer companies is generally gathered by the Committee’s compensation consultants through searches of publicly available information, as well as the Radford Global Technology Survey.  Peer group data is gathered with respect to target total direct compensation, which includes base salary, target annual incentive and target annual equity awards (including stock options, stock appreciation rights and restricted stock), but excludes pension and deferred compensation benefits and benefits that are generally available to all employees, such as 401(k) plan matching contributions and health care coverage.

The Committee generally targets base salaries, target annual incentive compensation and equity compensation at the 50th percentile of the peer group, and ties a significant portion of our executives’ total compensation to the achievement of pre-established performance objectives and/or increases in the price of our stock, which the Committee believes helps to align the interests of executives with those of our stockholders.  The base salary, target annual incentive compensation and equity compensation amounts for each executive may vary from the 50th

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percentile of the peer group data depending on the factors the Committee considers most relevant each year, which include an executive’s performance, the scope of the executive’s position and responsibilities, and internal pay equity among our executive officers.

Role of Compensation Consultants in the Compensation Determination Process

The Committee has the authority to engage its own compensation consultants and other independent advisors to assist in designing and administering our executive compensation policies and programs.  The Committee directly engaged Radford in the second half of 2012 and in the second half of 2014 to conduct market studies of compensation levels and structures, which included a review and analysis of (i) executive cash and equity compensation, (ii) broad-based equity compensation, and (iii) non-employee director cash and equity compensation.  For both market studies, Radford was requested by the Committee to present assessments of our compensation levels relative to our peer companies and to provide recommendations regarding the compensation levels and the structure of our compensation plans.

The Committee reviewed the market data and recommendations that had been provided by Radford in 2012 and used such data and recommendations (with minor adjustments based on trend data) to assist the Committee in establishing compensation levels and plans for 2014.  In February 2014, in connection with its consideration of the cash incentive plan structure for 2014, one of the factors considered by the Committee was the recommendation of The Alexander Group, a compensation consultant engaged by management to review our non-executive incentive plans, that moving to six-month performance periods would allow for more effective goal setting given the cyclicality of certain areas of our business.  The Committee reviewed updated assessments and recommendations provided by Radford in August and November of 2014, as well as supplemental data provided by Radford in February 2015, and used them to assist the Committee in establishing compensation levels and plans for 2015.

Separate units of Aon performed advisory and brokerage services for us in 2014 relating to certain lines of insurance.  The fees for such other services performed by Aon did not exceed $120,000 during our fiscal year ended January 3, 2015.  The Alexander Group did not perform any services for us in 2014 other than their review of our non-executive incentive plans, the fees for which did not exceed $120,000 during 2014.  The Committee has evaluated the relationships among Newport, the Committee, Aon and Radford, as well as the relationships among Newport, the Committee and The Alexander Group, taking into account the following six factors: (i) the provision of other services to Newport by such consultants; (ii) the amount of fees received from Newport by such consultants, as a percentage of their total revenue; (iii) the policies and procedures of such consultants that are designed to prevent conflicts of interest; (iv) any business or personal relationships of such consultants with a member of the Compensation Committee; (v) any Newport stock owned by such consultants; and (vi) any business or personal relationships of such consultants with any of Newport’s executive officers, and has determined that no conflicts of interest have been raised by the work performed by such consultants in making recommendations relating to Newport’s executive and director compensation.

Role of Management in the Compensation Determination Process

The Committee periodically meets with our Chief Executive Officer and/or other executive officers to obtain recommendations with respect to compensation programs for executives and other employees.  Our Chief Executive Officer makes recommendations to the Committee on the base salaries, incentive targets and measures and equity compensation for our executives and other key employees, generally in accordance with the recommendations of the Committee’s compensation consultants but occasionally proposing adjustments for reasons of individual performance and scope of responsibility, internal equity and retention risk.  The Committee considers, but is not bound to and does not always accept, management’s recommendations with respect to executive compensation.  The Committee has made modifications to several of management’s proposals in recent years.  Our Chief Executive Officer and certain other executives attend most of the Committee’s meetings, but the Committee also holds private sessions outside the presence of members of management and non-independent directors.  The Committee discusses our Chief Executive Officer’s compensation package with him, but makes decisions with respect to his compensation without him present.  The Committee has delegated to management the authority to make decisions regarding salary adjustments, annual incentives and long-term incentive awards for employees other than executive officers and certain other members of senior management under guidelines set by the Committee.  The Committee has not delegated any of its authority with respect to the compensation of executive officers and certain other members of senior management.

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Consideration of Results of Advisory Votes of Stockholders on Executive Compensation

The Committee is very interested in the ideas and concerns of our stockholders regarding executive compensation matters, and pursuant to Rule 14a-21(a) promulgated under the Exchange Act, we periodically seek approval of the compensation of our named executive officers from our stockholders on an advisory basis.  At our 2014 annual meeting of stockholders, we held an advisory vote for our stockholders to approve the compensation of our named executive officers.  The holders of approximately 95% of the shares of our common stock present and entitled to vote on the proposal voted in favor of the approval of the compensation of our named executive officers.  The Committee considered the results of this vote and, based in part on the level of support received from our stockholders, the Committee determined not to make any significant changes to our executive compensation programs and policies.

Based on the significant support expressed by our stockholders at our 2011 annual meeting for holding such advisory votes on an annual basis, our Board determined that we will seek advisory votes on the approval of executive compensation on an annual basis until our annual meeting in 2017, at which time we will ask our stockholders to approve, on an advisory, non-binding basis, how frequently thereafter we will seek an advisory vote from stockholders on the approval of executive compensation.  Although such advisory votes are not binding on us, the Committee values feedback from our stockholders, and has considered, and will continue to consider in the future, the outcomes of such votes in developing compensation programs and making compensation decisions.

At our 2015 annual meeting, we will be seeking an advisory vote on the approval of the compensation of our named executive officers as disclosed in this proxy statement, as described in Proposal Four beginning on page 57.

Elements of 2014 Executive Compensation Program

There are four major elements that comprise our executive compensation program: (i) base salary; (ii) cash incentives; (iii) long-term equity incentives; and (iv) executive perquisites and benefits, retirement benefits provided under our 401(k) plan, and other generally available benefit programs.  The Committee has selected these elements because it believes that each helps to fulfill one or more of the principal objectives of our executive compensation policy.  The Committee believes that the combination of these compensation elements is effective in achieving the objectives of our executive compensation program.  The Committee will continue to review all elements of our executive compensation program on at least an annual basis to ensure that they remain competitive and that each element continues to be effective in achieving our objectives.

Base Salary

The Committee reviews the base salaries for our executives on at least an annual basis and makes adjustments thereto as it deems appropriate in its sole discretion.  The Committee generally targets base salary levels at approximately the 50th percentile of the peer group, but the Committee also takes into account factors such as the scope of the executives’ responsibilities, their performance and contributions to our success, length of service with the company and internal pay equity among our executives in determining base salary levels.  Although the Committee’s general policy is for executive compensation to be more heavily weighted towards performance-based compensation, it has continued to make base salaries a significant part of the total executive compensation package to remain competitive in attracting and retaining executive talent.

In November 2013, the Committee reviewed and considered the executive compensation assessment that had been conducted by Radford in 2012, and the recommendations of Radford, in evaluating base salaries for 2014.  The peer group data included in such assessment indicated that Mr. Phillippy’s 2013 base salary was approximately 15% below the 50th percentile of market, and that the 2013 base salaries of our other named executive officers included in this proxy statement ranged from approximately 1% to 9% below the 50th percentile of market.  After reviewing the peer group data and recommendations of Radford (with minor adjustments based on trend data), and after considering our financial outlook and operating plan for 2014, the Committee increased the base salaries of Mr. Phillippy and the other named executive officers for 2014 by 2.5%.  Such increases brought Mr. Phillippy’s base salary to a level that was approximately 13% below the 50th percentile of market, and brought the base salaries of the other named executive officers within a range of approximately 1% above to 7% below the 50th percentile of market, based on the 2012 peer group data.  The Committee determined that these levels were appropriate based on the responsibilities and performance of each named executive officer and internal equity considerations, as well as on our 2014 financial outlook and operating plan.

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In November 2014, after reviewing and considering the executive compensation assessment conducted by Radford in 2014 and the recommendations of Radford, as well as our 2015 financial outlook, the Committee increased Mr. Phillippy’s base salary for 2015 by 2.5%, and increased the base salaries of the other named executive officers for 2015 by amounts ranging from 2.5% to 3.0%.

Cash Incentives

Our executives participate in a cash incentive plan developed by the Committee each year.  These cash incentive plans focus on linking a significant portion of each executive’s total compensation to the achievement of pre-established performance goals.  The Committee also may award bonuses outside of these cash incentive plans, but the Committee did not award any such bonuses for 2014.

As part of the Committee’s review of executive compensation for 2014, the Committee evaluated whether it would be advisable to move from annual performance periods to semi-annual performance periods under the cash incentive plans to better align the plans with the volatility and cyclicality of our business.  Due to the cyclical nature of certain of our primary end markets, as well as the uncertainty in macroeconomic conditions affecting our primary end markets in recent years, annual performance periods under our cash incentive plans have often led to significant overachievement or underachievement of financial goals, which detracts from the incentive value of such plans.  As part of this evaluation, the Committee considered the advice of The Alexander Group, a compensation consulting firm engaged by management to review our non-executive incentive plans, that semi-annual performance periods are better suited for incentivizing executives in cyclical technology industries, as they allow for more precise goal setting and tighter linkage between the executive’s performance and reward.

As a result of such evaluation, for 2014, the Committee established a semi-annual cash incentive plan under which one-half (1/2) of each executive’s annual target incentive was tied to the achievement of financial performance goals for each half of 2014.  The Committee determined the target incentive amount and weighting of performance measures for each executive and the performance targets and payout structure under the cash incentive plan, as discussed below.

Target Incentives.  The Committee generally sets target incentive levels at approximately the 50th percentile of the peer group, but the Committee also takes into account factors such as the scope of the executives’ responsibilities, their performance and contributions to our success, length of service with the company and internal pay equity among our executives in determining such target levels.  For 2014, the target cash incentives for the named executive officers were as follows:

These target incentive levels were generally in line with the peer group data reviewed by the Committee in November 2012, but the target incentives for certain named executive officers were set by the Committee at levels that varied slightly from such peer group data based on the factors listed above.

Payout Structure.  Under our cash incentive plans, the Committee generally establishes minimum, target and maximum achievement levels for each financial measure.  The Committee believes that this structure is appropriate because it provides a partial reward for performance that is near, but slightly below, the target level, while incentivizing the executive to exceed the target level.  For the 2014 semi-annual cash incentive plan, the Committee established the achievement levels for each financial measure for the first half of the year in February 2014, and the target level for each such financial measure was set at approximately the level set forth in our operating plan.  The Committee established the achievement levels for each financial measure for the second half of the year in July 2014, and the target level for each such financial measure was set at approximately the level set forth in our then-current forecast, which had been updated based on our actual results in the first half of the year and our outlook for the second half of the year.  For each half-year period, the minimum, target and maximum performance levels

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corresponded to payout levels of 50%, 100% and 200%, respectively, of the executive’s target incentive for that measure for such period.  The table entitled “Grants of Plan-Based Awards in Fiscal Year 2014” on page 29 sets forth the total minimum, target and maximum payout levels for all measures for each executive under the cash incentive plan for each half of 2014.

Payouts were prorated on a straight-line basis for achievement between the minimum and target levels or between the target and maximum levels.  If we did not exceed the minimum performance level for a measure, no payout would be made for that measure.  In addition, the payout for all of the financial measures was conditioned upon the achievement of at least 90% of the minimum level for the executive’s primary profitability goal (earnings per share for Messrs. Phillippy, Cargile and Coyne, and group operating income after tax for Messrs. Allen and Werth), as the Committee believes that no incentive should be paid to the executive unless a minimum profitability level is achieved.

Performance Measures.  The financial performance measures for each executive, and their relative weighting, are selected by the Committee each year based on our corporate goals for that year and the Board’s priorities.  The measures selected, and their relative weighting, vary among the executives based upon such executive’s area of responsibility and potential impact on our operating and financial performance, to strengthen the correlation between performance and reward.  The Committee generally seeks to balance sales, profitability and cash flow measures, so as to reward overall performance and not overemphasize any single area of focus.  Management provides recommendations to the Committee with respect to financial performance measures for each executive and the relative weighting of such measures, but the Committee makes all final determinations with respect to the performance measures and relative weightings.  The Committee has made modifications to several of management’s proposals in recent years.

For 2014, the Committee selected a combination of performance measures for each named executive officer, based on sales, profitability and cash flow, which it believed were the most important measures of management’s performance in achieving the goals of profitable growth and effective financial management established by the Board.  The Committee believes that these goals are among the most important drivers of stockholder value.

For 2014, the financial performance measures and relative weightings thereof for each named executive officer were as follows:

(1)         Mr. Werth’s financial measures were tied to the performance of the Photonics Group, and Mr. Allen’s financial measures were tied to the performance of the Lasers Group, representing their respective primary areas of responsibility during 2014.

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The minimum, target and maximum performance levels established for the financial performance measures, and the actual performance results with respect to such measures, for the first half and second half of 2014, were as follows:

First Half of 2014

Second Half of 2014

(1)         Our Board of Directors reviews and approves our operating plans and forecasts, as prepared in accordance with generally accepted accounting principles (GAAP), as well as on a non-GAAP basis, excluding certain items that are outside of our core operating results.  The Committee established the financial performance goals under the 2014 semi-annual cash incentive plan on a non-GAAP basis, which excluded the amortization of intangible assets, stock-based compensation expense, certain acquisition-related, restructuring and severance costs, the results of businesses acquired or divested during the year, and the tax impact of such items.  Further, the Committee established the goals with the expectation that, in determining the actual level of achievement of the goals, the financial impact of certain events that occur during the period, such as acquisition and divestiture related activities and other non-recurring items that are outside of our core operating plan and results, may be excluded in determining achievement of the financial goals under the cash incentive plan, as determined by the Committee in its discretion.  Certain of the financial results shown in the tables above reflect non-GAAP amounts that exclude certain items.  A description of such items and a reconciliation of the non-GAAP amounts to our corresponding GAAP results for all measures are included in Appendix A to this proxy statement.  The Committee evaluated and approved the exclusion of such items in determining the level of achievement of the financial performance goals under the cash incentive plan for each half of 2014.

(2)         Photonics Group Operating Income After Tax and Lasers Group Operating Income After Tax are calculated as the operating income of the group, tax-effected utilizing the tax rate applicable to the group.

(3)         Photonics Group Cash Flow and Lasers Group Cash Flow are calculated as the operating income of the group, plus depreciation and amortization, stock compensation expense and changes in inventory, and less capital expenditures during 2014.

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As noted previously, for the first half of 2014, the target achievement levels for all financial measures were set at approximately the levels set forth in our 2014 operating plan, and for the second half of 2014, the target achievement levels for all financial measures were set at approximately the levels set forth in our forecast as of July 2014, which in most cases exceeded our actual performance in the first half of 2014.  The Committee believed that the minimum and target levels were challenging but achievable with significant effort, and that the maximum levels were set at levels that represented both very challenging performance goals and outstanding achievement.

2014 Results.  In 2014, our net sales increased by approximately 8% compared with our sales in 2013, and we leveraged this sales growth to increase our non-GAAP operating profit by approximately 21% and our non-GAAP earnings per diluted share by approximately 28% compared with 2013.  See Appendix A to this proxy statement for a reconciliation of such non-GAAP amounts to our corresponding GAAP results.

Our financial performance in the first half of 2014 was stronger than anticipated, and so we exceeded the target level for all financial measures applicable to the named executive officers under the cash incentive plan for the first half of 2014, and we achieved the maximum level for the earnings per share, consolidating operating income and Photonics Group operating income after tax measures.  Based on our financial performance in the second half of 2014, we achieved at least the minimum level for all financial measures applicable to the named executive officers under the cash incentive plan for the second half of 2014, we exceeded the target level for all of the profitability measures and the Lasers Group net sales measure, and we achieved the maximum level for the Photonics Group cash flow measure.

The total payouts received by the named executive officers for each half of 2014 and for the full year of 2014, as an approximate percentage of their target incentive for each period, are shown in the table below. The Summary Compensation Table on page 28 reflects the total dollar amounts earned by the named executive officers under the 2014 semi-annual cash incentive plan.

2015 Cash Incentive Plan.  In February 2015, after considering our strategic and operating priorities for 2015, the Committee approved a semi-annual cash incentive plan for the year.  The overall structure of the 2015 plan is substantially the same as the 2014 semi-annual cash incentive plan.  Each named executive officer’s financial measures are also the same as in 2014, with minor adjustments to the weightings of certain measures.  No changes were made to the target incentive percentages for the named executive officers for 2015.  The Committee established the achievement levels for each financial measure for the first half of the year in February 2015, and will establish the achievement levels for each financial measure for the second half of the year in approximately July 2015.

Long-Term Equity Incentives

We provide long-term incentive compensation to our executives through equity-based awards, such as stock options, stock-settled stock appreciation rights, restricted stock and/or restricted stock units, which generally vest over multiple years.  The Committee believes that a substantial portion of executives’ long-term equity incentives should be conditioned upon the achievement of pre-established performance thresholds that the Committee believes are important drivers of stockholder value.  The Committee believes that this policy further aligns the interests of executives with those of our stockholders and incentivizes executives to drive sustained, long-term financial performance.  In addition, due to the time-based vesting provisions of our equity awards, the Committee believes that this program promotes our executive retention goals.

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The Committee determines the appropriate award size and the appropriate equity-based vehicles or combination of vehicles when making long-term equity incentive decisions.  The Committee generally sets target long-term equity incentive levels at approximately the 50th percentile of our peer companies.  However, the Committee also considers other factors, including the compensation expense associated with the awards, and individual factors such as the executive’s performance and scope of responsibility and internal pay equity among our executives, in making award decisions.  The Committee does not consider existing equity ownership as a material factor in making award decisions, as it does not want to discourage executives from holding significant amounts of our stock.  In selecting the equity vehicles to be used each year, the Committee seeks to achieve an appropriate balance between awards that provide higher incentive value, such as options or stock appreciation rights, and awards that provide higher retention value, such as restricted stock or restricted stock units.  The Committee also takes into account the relative efficiencies of each type of equity vehicle in terms of the number of shares required to provide the targeted value to the executive, in order to minimize stockholder dilution.

As noted previously, the Committee reviewed and considered the compensation assessment that had been conducted by Radford in 2012 and the recommendations of Radford in establishing equity compensation levels and plan structure for 2014.  Such peer group data indicated that the total grant date value of the awards made to Mr. Phillippy in 2013 was approximately 38% below the 50th percentile of market, and the grant date values of the awards made to the other named executive officers in 2013 ranged from approximately 4% to 34% below the 50th percentile of market.  In addition, the peer group data indicated that a majority of our peer companies grant full value awards (restricted stock or restricted stock units) subject only to time-based vesting conditions, rather than performance-based vesting conditions.  The peer group data also indicated that other awards, such as stock appreciation rights and stock options, which are performance-based by their nature as their values are derived solely from increases in a company’s stock price, generally are not subject to additional performance conditions.

2014 Equity Vehicles.  In 2014, the Committee granted equity awards to each named executive officer under our 2011 Stock Incentive Plan.  Such awards are reflected in the table entitled “Grants of Plan-Based Awards in Fiscal Year 2014” on page 29 of this proxy statement.  One-half of the total number of shares awarded to each executive was provided in the form of restricted stock units (representing approximately two-thirds of the total award value) and one-half was provided in the form of stock-settled stock appreciation rights (representing approximately one-third of the total award value).  The Committee selected this combination of equity vehicles after considering several factors, including the retention value offered by restricted stock units, the incentive value offered by stock appreciation rights, and the minimization of stockholder dilution.

2014 Award Values.  In determining the grant date values of the 2014 awards, the Committee took into consideration the peer group data and recommendations provided by Radford in 2012, the compensation expense budget included in our 2014 operating plan, and the other individual factors noted above.  In order to bring our equity compensation levels closer to market, the total grant date value of equity awards granted to Mr. Phillippy in 2014 was increased by approximately 33%, and the total grant date values of equity awards granted to the other named executive officers in 2014 were increased by amounts ranging from approximately 10% to 28%, compared with the grant date values of the 2013 equity awards.  These increases brought the 2014 grant date value for Mr. Phillippy to approximately 17% below, and the grant date values for the other named executive officers to a range of approximately 15% below to 6% above, the 50th percentile of market, based on the 2012 peer group data.

2014 Vesting Structure.  For the 2014 awards, the Committee established a vesting structure that included both performance-based and time-based components.  The Committee determined that this vesting structure was appropriate based on its objectives of incentivizing financial performance and executive retention, as well as on the peer group data discussed above and the recommendations of the Committee’s compensation consultants.  The vesting of the restricted stock unit awards granted to the named executive officers was conditioned upon the achievement of a financial performance threshold of $51 million of consolidated operating income for 2014 and, if such financial performance threshold was achieved, the awards would vest in equal one-third installments on March 31, 2015, 2016 and 2017, subject to the executive’s continued employment with the company through such dates.  The stock appreciation rights awarded to the named executive officers in 2014 are subject to time-based vesting conditions only and will vest in three equal one-third installments on March 31, 2015, 2016 and 2017, subject to the executive’s continued employment with the company through such dates.

The performance threshold for the 2014 restricted stock unit awards was set approximately 17% below the level of consolidated operating income in our 2014 operating plan, on a non-GAAP basis.  The Committee believed that this performance threshold, together with the overall vesting structure for the 2014 awards, were appropriate, as they

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enabled the long-term retention incentive of the awards to be retained if consolidated operating income achievement in 2014 was above, at or moderately below the operating plan level, while ensuring that the awards would not vest in the event of consolidated operating income achievement in 2014 that was significantly below the 2014 operating plan level.  For 2014, we achieved consolidated operating income of $79 million on a non-GAAP basis, exceeding the performance threshold established for the 2014 restricted stock unit awards.  As such, the awards will continue to vest in accordance with the applicable time-based vesting schedule.  A description of the items that were excluded from such non-GAAP result, and the corresponding GAAP result, are included in Appendix A to this proxy statement.  The Committee evaluated and approved the exclusion of such items in determining whether the performance threshold had been achieved for the 2014 restricted stock unit awards.

Executive Perquisites and Benefits

We provide our executives with certain other benefits that we believe are reasonable, competitive and consistent with our overall executive compensation program.  The costs of these benefits are included in the “All Other Compensation” column in the Summary Compensation Table on page 28 of this proxy statement, and consist of term life insurance for the benefit of the executives, supplemental long-term disability insurance, auto allowances and annual physical examinations that are more extensive than those provided under our standard plans.  The costs of these benefits constitute only a small percentage of each executive’s total compensation.

Generally Available Benefit Programs

Executives also are eligible to receive benefits pursuant to programs that are generally available to most of our employees.  These benefit programs include our 401(k) plan, employee stock purchase plan, deferred compensation plan, medical, dental and vision insurance, long-term and short-term disability insurance, life and accidental death and dismemberment insurance, health and dependent care flexible spending accounts, business travel accident insurance, wellness programs, educational assistance, employee assistance and certain other benefits.

Section 401(k) Plan

We maintain a tax-qualified retirement plan that provides eligible employees, including our executives, with an opportunity to save for retirement on a tax advantaged basis.  Participants are able to defer up to 50% of their eligible compensation, subject to applicable annual limits under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).  Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participant’s directions.  We match employee elective deferrals up to a maximum of 6% of eligible compensation, subject to applicable annual Internal Revenue Code limits.  Employee elective deferrals and matching contributions are immediately vested.  The 401(k) plan is intended to qualify under Sections 401(a) and 501(a) of the Internal Revenue Code.

Employee Stock Purchase Plan

We maintain an employee stock purchase plan, which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code, to promote stock ownership by employees.  To participate in the plan, an employee must designate, prior to the commencement of a quarterly offering period, the amount of payroll deductions to be made from his or her paycheck for the purchase of shares of our common stock under the plan, which amount may not exceed 15% of his or her compensation, subject to a maximum annual limit of $25,000.  On each purchase date, shares of our stock are purchased automatically for each participant with the amounts held from his or her payroll deductions at a price equal to 95% of the fair market value of the shares on the purchase date.

Deferred Compensation Plan

We have established a Deferred Compensation Plan to allow certain individuals, including members of our Board of Directors, our executives and other highly compensated members of management, to defer a portion of their current income on a pre-tax basis and receive a tax-deferred return on such deferrals.  Our Deferred Compensation Plan is offered to these employees and directors to allow them to defer more compensation than they would otherwise be permitted to defer under a tax-qualified retirement plan, such as our 401(k) plan.

Under the plan, a participant may defer up to 100% of his or her annual base salary (or director fees, in the case of directors) and/or annual incentive bonus, subject to a minimum deferral amount of $2,000 in each plan year.  At the Committee’s discretion, a participant may also defer restricted stock or restricted stock unit awards, subject to certain terms and conditions of the plan.  In addition to a participant’s deferrals, amounts are credited or debited to a participant’s account based on the performance of one or more measurement funds selected by the participant.  The measurement funds available under the plan are selected and announced by the plan committee based on certain

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mutual funds and crediting rates.  The plan committee may, in its sole discretion upon written notice to participants, discontinue, substitute or add a measurement fund under the plan.  Any restricted stock or restricted stock units deferred under the plan are at all times allocated to a company stock fund which consists solely of our common stock, with any dividends paid on restricted stock being reinvested in additional shares of our common stock.  Amounts credited or debited to a participant’s account are based solely on the market performance of the measurement funds selected by the participant, and we do not pay any “above-market” interest or return on the deferrals made by any participant.  As such, in accordance with Securities and Exchange Commission rules, these amounts are not shown in the Summary Compensation Table in this proxy statement.

Three of our named executive officers have elected to defer amounts under the Deferred Compensation Plan in previous years and have accumulated the deferred compensation amounts shown in the table entitled “Nonqualified Deferred Compensation in Fiscal Year 2014” on page 34 of this proxy statement.  The amounts deferred are unsecured obligations of the company, receive no preferential standing, and are subject to the same risks as any of our other general obligations.

Stock Ownership Guidelines

Our Board of Directors has established stock ownership guidelines for executives that are designed to increase the executive’s equity stake in Newport and more closely align his or her interests with those of our stockholders.  The current guidelines provide that each executive should own, at a minimum, a specified number of shares of our common stock depending upon the position held, as follows: our Chief Executive Officer, 65,000 shares; our Senior Vice President and Chief Financial Officer, 35,000 shares; and our other executive officers, 25,000 shares.  Newly appointed or promoted executives should achieve the applicable minimum stock ownership guideline within two years of such appointment or promotion.  All of our named executive officers are currently in compliance with these stock ownership guidelines.

The guidelines also provide that our executives shall not sell shares of our stock if the executive is not in compliance, or if such sale would cause the executive to become out of compliance, with the minimum stock ownership guidelines, except under certain circumstances, including cases of financial hardship, if approved by the Chairman of the Compensation Committee of our Board.  These restrictions do not apply to the sale, or the surrender to us, of shares in connection with the exercise or settlement of a stock option, stock appreciation right or restricted stock unit, or the vesting of restricted stock, in payment of the exercise price and/or withholding taxes due in connection with such exercise, settlement or vesting, or to the transfer of shares as required by a domestic relations order.

In addition to the guidelines described above, the terms of certain stock options previously granted to certain executives provide that the executive must hold at least 50% of the shares received upon the exercise of a stock option (after any sale of shares in payment of the exercise price and withholding taxes), for the longer of one year or until such time as the executive is in compliance with these stock ownership guidelines.

Under our insider trading policy, covered employees (including the named executive officers) are prohibited from trading in any interest or position relating to the future price of our securities, such as a put, call or short sale.

Accounting and Tax Considerations

In designing our compensation programs, we take into consideration the accounting and tax effect that each element will or may have on Newport and the executive officers and other employees as a group.  We aim to keep the expense related to our compensation programs to the minimum necessary to accomplish the objectives of such programs.  When determining how to allocate between differing elements of compensation, the goal is to meet our objectives while maintaining cost neutrality.

Section 162(m) of the Internal Revenue Code generally disallows a federal income tax deduction for compensation paid to certain of our named executive officers in excess of $1 million during any fiscal year.  Certain compensation is exempt from this limitation to the extent that it is “performance-based” under Section 162(m).  As one of the factors in its consideration of compensation matters, the Committee considers the anticipated tax treatment to Newport and to our named executive officers of various payments and benefits, including our ability to deduct these amounts as compensation under Section 162(m).  However, the Committee retains the flexibility to provide total compensation as it deems appropriate in line with competitive practice, our compensation philosophy and the interests of stockholders.  Accordingly, we may pay compensation to our named executive officers that may not be deductible for federal income tax purposes.  In addition, because of ambiguities and uncertainties as to the

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application and interpretation of Section 162(m) and related regulations, and the fact that such regulations and interpretations may change from time to time (with potentially retroactive effect), no assurance can be given that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact do so.

Employment Agreements and Arrangements

With the exception of the severance compensation agreements discussed below, which provide for payment of certain compensation and benefits in the event of termination of employment under certain circumstances, we do not have an agreement with any named executive officer with respect to the length of his employment or the level of cash compensation, equity compensation or other benefits payable to him.  The base salary and any annual or long-term cash or equity incentive compensation of each executive officer are determined by the Compensation Committee, in its sole discretion, in accordance with its compensation philosophy, policies, objectives and guidelines discussed above.

Termination Following Change in Control

We have entered into a severance compensation agreement with each of our named executive officers providing for certain payments and benefits in the event that such officer’s employment is terminated within two years of a “change in control” of Newport (as defined in the agreement), and such termination constitutes a termination by us or an acquirer without “cause” (as defined in the agreement) or a resignation by the officer for “good reason” (as defined in the agreement).  In such event, the executive officer will be entitled to: (i) a lump sum payment equal to twelve months of such officer’s highest base salary during the twelve month period preceding termination (with the exception of Mr. Phillippy, who will be entitled to a payment equal to twenty-four months of salary); (ii) a lump sum payment equal to such officer’s incentive compensation bonus payable under our cash incentive plan or other bonus plans then in effect, based on 100% satisfaction of all performance goals (with the exception of Mr. Phillippy, who will be entitled to receive two times such bonus payment); (iii) continuation of benefits under our medical, dental and vision plans, and long-term disability insurance for twenty-four months; (iv) automatic vesting and settlement of all unvested restricted stock and restricted stock units held by such officer, based on 100% satisfaction of any applicable performance goals and, at the executive’s election, our repurchase of all such shares received by the executive at the fair market price (calculated as set forth in the agreement); (v) automatic vesting and settlement of all unvested stock appreciation rights held by such officer, based on 100% satisfaction of any applicable performance goals and, at the executive’s election, our repurchase of all such shares received by the executive at the fair market price (calculated as set forth in the agreement); (vi) automatic vesting of all unvested stock options and, unless otherwise specified by such officer, payment of an amount equal to the difference between the exercise price and the fair market price (calculated as set forth in the agreement) of the shares of common stock subject to all vested and unvested stock options held by such officer; and (vii) certain other benefits, including payment of an amount sufficient to offset any excess “parachute payment” excise tax payable by such officer pursuant to the provisions of the Internal Revenue Code, and/or any comparable provision of state or foreign law.  The agreements with our named executive officers that include the right to a payment to offset any excess “parachute payment” excise tax were entered into in or prior to 2008.  We do not intend to enter into any new agreements with any named executive officers that include a right to receive any such payment, nor do we intend to amend any agreements to add such a right, in the future.  The Committee believes that these severance compensation agreements serve as important retention tools for our named executive officers in the event of a pending change in control transaction.

Other Termination

Our agreements with each of Mr. Phillippy and Mr. Cargile provide for certain severance benefits in the event we terminate his employment other than for cause at any time during the term of the agreement in the absence of a change in control of Newport.  In such event, he will be entitled to receive (i) a payment equal to twelve months of his highest base salary in effect during the twelve month period preceding termination, payable in a lump sum on his date of termination, (ii) a payment equal to his incentive bonus payable under our cash incentive plan or other bonus plans then in effect, based on 100% satisfaction of all performance goals, payable in a lump sum on his date of termination, and (iii) continuation of benefits under our medical, dental and vision plans, and long-term disability insurance for twelve months.

The estimated payments and benefits that each named executive officer would have received under the severance compensation agreements described above in the event that his employment had been terminated by us under certain circumstances as of January 3, 2015 are discussed under the heading “Payments Upon Certain Termination Events” beginning on page 35 of this proxy statement.

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SUMMARY COMPENSATION TABLE

The following table sets forth compensation earned during the fiscal years ended January 3, 2015, December 28, 2013 and December 29, 2012 by our principal executive officer, Robert J. Phillippy; our principal financial officer, Charles F. Cargile; and our three other most highly compensated executive officers who were serving as executive officers at January 3, 2015 and whose total compensation exceeded $100,000 for the fiscal year ended January 3, 2015; as well as the grant date fair values of share-based compensation awarded to such officers during such fiscal years, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”).  These officers are referred to in this proxy statement as the “named executive officers.”

Summary Compensation Table

(1)         Reflects the grant date fair values of restricted stock units awarded to each named executive officer in each year, which were computed based on the closing market price of our common stock on the respective grant date.  The vesting of all restricted stock units awarded to the named executive officers in each year was conditioned upon the achievement of certain specified performance conditions, in addition to a time-based schedule.  As of the grant date of each award, the achievement of the applicable performance condition (for the 2013 awards, the target performance level) was considered probable and, therefore, the full grant date fair values of the awards are shown in the table above.  We have achieved the applicable performance condition for each year (for the 2013 awards, the target performance level), and accordingly, such awards have continued to vest in accordance with the applicable time-based vesting schedules.  See additional information regarding the 2014 awards in the section entitled “Compensation Discussion and Analysis” beginning on page 13 and in the table entitled “Grants of Plan-Based Awards in Fiscal Year 2014” on page 29.

(2)         Reflects the grant date fair values of stock-settled stock appreciation rights awarded to each named executive officer in each year.  The fair value of the stock-settled stock appreciation rights was estimated on the respective grant date using the Black-Scholes-Merton option pricing model.  The assumptions used in the valuation of such stock appreciation rights are discussed in Note 1, under the heading “Stock-Based Compensation,” and in Note 7 to our consolidated financial statements included in our Annual Reports on Form 10-K for our fiscal years ended January 3, 2015, December 28, 2013 and December 29, 2012.  The vesting of the stock appreciation rights awarded in each year is subject to a time-based schedule.  See additional information regarding the 2014 awards under “Compensation Discussion and Analysis” and in the table entitled “Grants of Plan-Based Awards in Fiscal Year 2014.”

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(3)         Reflects the amounts earned (if any) by each named executive officer under our cash incentive plans based upon the achievement of semi-annual financial performance goals for 2014 and annual financial performance goals for 2012.  No amounts were earned by the named executive officers under our cash incentive plan for 2013.  The amounts earned for 2012 were paid in March of 2013, and the amounts earned for 2014 were paid in August 2014 and March 2015, in accordance with the terms of such plans.

(4)         All other compensation for 2014 consists of: (i) company contributions to our 401(k) plan of $15,600 for each named executive officer other than Mr. Allen; (ii) company-paid premiums for term life insurance for the benefit of each named executive officer; (iii) company-paid premiums for supplemental long-term disability insurance for the benefit of each named executive officer, which totaled $13,190 for Mr. Phillippy; (iv) auto allowances paid to Messrs. Phillippy, Cargile and Coyne; and (v) executive physicals for Messrs. Phillippy, Cargile and Coyne.

GRANTS OF PLAN-BASED AWARDS

The following table sets forth information regarding grants of awards to each named executive officer during our fiscal year ended January 3, 2015 under our equity plans and non-equity incentive plans.

Grants of Plan-Based Awards in Fiscal Year 2014

(1)         Reflects the potential payouts to the named executive officers under awards granted for the first half and second half of 2014 under our semi-annual cash incentive plan, which is described in more detail in the section entitled “Compensation Discussion and Analysis” beginning on page 13.  The amounts shown as threshold, target and maximum payouts represent 50%, 100% and 200% payouts, respectively, of one-half (1/2) of each executive’s annual target incentive based on minimum, target and maximum performance levels for certain financial performance measures established under such plan for the first half and second half of 2014.  Payouts would be

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made for a particular financial measure only if we exceed the minimum performance level for that measure, subject to additional conditions described in more detail under “Compensation Discussion and Analysis.”  The actual amounts earned by the named executive officers under the 2014 semi-annual cash incentive plan are included in the Summary Compensation Table on page 28 under the column heading “Non-Equity Incentive Plan Compensation” for the year 2014.

(2)         Consists of restricted stock units awarded to each named executive officer under our 2011 Stock Incentive Plan, which are described in more detail under “Compensation Discussion and Analysis.”  No consideration was paid by any named executive officer for any restricted stock unit award.  The vesting of the restricted stock unit awards was conditioned upon achievement of a single target performance level for a single financial measure established under the plan, as well as upon continued employment with the company, as described in more detail under “Compensation Discussion and Analysis.”  We have achieved the performance condition for such restricted stock unit awards and, therefore, one-third (1/3) of such awards vested on March 31, 2015 and the remaining two-thirds (2/3) of such awards will vest in equal installments on March 31, 2016 and 2017, subject to the executive’s continued employment with the company through such dates.

(3)         Consists of stock-settled stock appreciation rights awarded to each named executive officer under our 2011 Stock Incentive Plan, which are described in more detail under “Compensation Discussion and Analysis.”  No consideration was paid by any named executive officer for any stock appreciation right award.  Such stock appreciation right awards are subject to a time-based vesting schedule.  One-third (1/3) of such awards vested on March 31, 2015 and the remaining two-thirds (2/3) of such awards will vest in equal installments on March 31, 2016 and 2017, subject to the executive’s continued employment with the company through such dates.

(4)         Reflects the base value of the stock-settled stock appreciation rights awarded to each named executive officer, which is equal to the closing price of our common stock on the grant date.

(5)         Reflects the grant date fair values of the restricted stock units and stock-settled stock appreciation rights awarded to each named executive officer.  The fair values of the restricted stock units were determined based on the closing price of our common stock on the grant date, which was $18.29 per share.  As of the grant date of each restricted stock unit award, the achievement of the applicable performance condition was considered probable and, therefore, the full grant date fair values of such awards are shown in the table above.  The fair values of the stock appreciation rights were estimated on the grant date using the Black-Scholes-Merton option pricing model.  The assumptions used in the valuation of such stock appreciation rights are discussed in Note 1, under the heading “Stock-Based Compensation,” and in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for our fiscal year ended January 3, 2015.

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OUTSTANDING EQUITY AWARDS

The table below sets forth information regarding outstanding equity awards held by each named executive officer as of January 3, 2015 including: (i) the number of shares of our common stock underlying both exercisable and unexercisable stock options and stock-settled stock appreciation rights held by each named executive officer (all of which had been earned) and the exercise prices (or base values) and expiration dates thereof; and (ii) the number of restricted stock units held by each named executive officer, and the market value thereof, that were earned (meaning the pre-established performance conditions had been achieved) but had not yet vested (based on the vesting schedule) as of January 3, 2015.  All unvested restricted stock units held by each named executive officer had been earned as of January 3, 2015.

Outstanding Equity Awards at 2014 Fiscal Year End