Exhibit 10.4
FIRST AMENDMENT TO
EXECUTIVE SEVERANCE AND RETENTION AGREEMENT
          This First Amendment (the “Amendment”) to the Executive Severance and
Retention Agreement (the “Agreement”) dated as of May 22, 2008 by and between
Bookham, Inc., the predecessor to Oclaro, Inc., a Delaware corporation (the
“Company”) and Catherine Hunt Rundle (the “Executive”) is made effective as of
this 14th day of December, 2010 (the “Effective Date”).
PREAMBLE
          WHEREAS, the Executive and the Company desire to update the Agreement
to address certain provisions therein to comply with Section 409A of the
Internal Revenue Code of 1986, as amended, and the guidance promulgated
thereunder (“Section 409A”); and
          WHEREAS, the Agreement provides that it may be amended by a written
instrument executed by the parties thereto.
AGREEMENT
          NOW THEREFORE, effective as of the Effective Date, the parties hereto
agree as follows:

1.   Section 1.5 (Definition of “Good Reason”) is hereby deleted in its entirety
and replaced with the following:

     “1.5 “Good Reason” means the occurrence, without the Executive’s written
consent, of any of the events or circumstances set forth in clauses (a) through
(d) below.
     (a) a material diminution in the Executive’s authority, duties or
responsibilities as in effect immediately prior to the earliest to occur of
(i) the Change in Control Date, (ii) the date of the execution by the Company of
the definitive written agreement or instrument providing for the Change in
Control or (iii) the date of the adoption by the Board of a resolution providing
for a Change in Control (with the earliest to occur of such dates referred to
herein as the “Measurement Date”);
     (b) a material diminution in the Executive’s base compensation as in effect
on the Measurement Date or as the same may be increased from time to time
thereafter;
     (c) a change by the Company in the location at which the Executive performs
Executive’s principal duties for the Company to a new location that is both
(i) outside a radius of 35 miles from the Executive’s principal residence
immediately prior to the Measurement Date and (ii) more than 20 miles from the
location at which the Executive performed Executive’s principal duties for the
Company immediately prior to the Measurement Date; or
     (d) any other action or inaction that constitutes a material breach by the
Company of this Agreement.”

2.   Section 3.1 (Termination of Employment without Cause) is hereby deleted in
its entirety and replaced with the following in lieu thereof:

     “3.1 Termination of Employment Without Cause or Upon Death. Subject to the
terms and conditions set forth in Section 8.14, in the event that the
Executive’s employment is terminated because of the death of the Executive or by
the Company without Cause at any time prior to a Change in Control (such date of
termination or death, the “Section 3 Date of Termination”), the Executive (or
Executive’s heirs) shall be entitled to the following aggregate benefits:
     (a) The sum of (i) the Executive’s Target bonus approved by the Company’s
Compensation Committee for the then current bonus payment period, multiplied by
a fraction, the numerator of which is the number of days preceding

 

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the Section 3 Date of Termination in the current bonus period and the
denominator of which is the total number of days in the current bonus period
(the “Pro-Rata Bonus”), (ii) any prior period bonus approved by the Board or the
Compensation Committee of the Board but not paid, (iii) the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued base salary and/or vacation pay to
the Section 3 Date of Termination, in each case to the extent not previously
paid (the sum of the amounts described in clauses (i), (ii) and (iii) shall be
hereinafter referred to as “Accrued Obligations”), payable in a lump sum in cash
on the first business day that is at least 30 days following the Section 3 Date
of Termination.
     (b) An amount equal to Executive’s base salary then in effect multiplied by
a fraction, the numerator of which shall be (i) the sum of eight (8) plus one
(1) for each whole year of the Executive’s employment by the Company, but in no
event more than eighteen (18), measured from the Section 3 Date of Termination
(the “Section 3 Termination Payment Period”), and (ii) the denominator of which
shall be twelve (12), which amount shall be paid as a lump sum cash payment
basis on the first business day that is at least 30 days following the Section 3
Date of Termination (subject to Section 3.2 below). Existing option, restricted
stock and other equity awards will continue to be governed by the terms of their
respective grants and plan provisions.”

3.   Section 3.2 (Release) is hereby deleted in its entirety and replaced with
the following:

     “3.2 Release. The payment to the Executive (or Executive’s heirs) of the
amounts and benefits payable under Sections 3.1(a)(i) and 3.1(b) shall be
contingent upon (i) the execution by the Executive (or Executive’s heirs) of a
separation agreement and release in a form reasonably acceptable to the Company
and substantially as set forth in Exhibit A to this Agreement (the “Executive
Release”) and upon the Executive Release becoming effective in accordance with
its terms within 30 days following the Section 3 Date of Termination and
(ii) agreement by the Executive to standard confidentiality obligations, a
non-solicitation of Company customers for six-months following the Section 3
Date of Termination and a non-solicitation of Company employees for
twelve-months following the Section 3 Date of Termination.”

4.   The Agreement is hereby amended to add the following Section 3.3 thereto:

     “3.3 Sole Remedy. The payments under this Section 3 constitute the sole
remedy of the Executive as a result of the circumstances set forth in this
Section 3.”

5.   Section 4.1(d) is hereby amended by adding the following sentence to the
end thereto:

     “Notwithstanding the foregoing, such occurrence shall not be deemed to
constitute Good Reason unless (i) within 30 days of the Company’s receipt of the
Notice of Termination, such event or circumstance has not been fully corrected
and the Executive has not been reasonably compensated for any losses or damages
resulting therefrom and (ii) the Executive’s Date of Termination occurs within
two years following the Company’s receipt of the Notice of Termination.”

6.   Section 4.2.1 (Stock Acceleration) is hereby deleted in its entirety and
replaced with the following in lieu thereof:

     “4.2.1.Stock Acceleration. If the Change in Control Date occurs during the
Term, then, effective upon the Change in Control Date, (a) each outstanding
option to purchase shares of Common Stock of the Company held by the Executive
(or Executive’s heirs) shall become immediately exercisable in full and shares
of Common Stock of the Company received upon exercise of any options will no
longer be subject to a right of repurchase by the Company, (b) each outstanding
restricted stock award or restricted stock unit shall be deemed to be fully
vested and will no longer be subject to a right of repurchase by the Company and
(c) notwithstanding any provision in any applicable option agreement to the
contrary, each such option shall continue to be exercisable by the Executive (to
the extent such option was exercisable on the Date of Termination) until the
earlier of (i) a period of six months following the Date of Termination and
(ii) the original expiration date of such option.”

 

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7.   Section 4.2.2 (Compensation) is hereby deleted in its entirety and replaced
with the following in lieu thereof:

     “4.2.2.Compensation. If the Change in Control Date occurs during the Term
and the Executive’s employment with the Company terminates within 12 months
following the Change in Control Date, the Executive shall be entitled to the
following additional benefits:
(a) Termination Upon Death, Without Cause or for Good Reason. Subject to the
terms and conditions set forth in Sections 4.4 and 8.14, if the Executive’s
employment with the Company is terminated (i) because of the death of the
Executive or (ii) by the Company (other than for Cause) or by the Executive for
Good Reason in each case within 12 months following the Change in Control Date,
then the Executive shall be entitled to a lump sum payment in cash, payable on
the first business day that is at least 30 days after the Date of Termination,
of the aggregate of the following amounts:
     (1) the Accrued Obligations; and
     (2) the amount equal to Executive’s base salary then in effect multiplied
by a fraction, the numerator of which shall be (a) the sum of eight (8) plus one
(1) for each whole year of the Executive’s employment by the Company, but in no
event more than eighteen (18), measured from the Termination Date (the
“Termination Payment Period”), and (b) the denominator of which shall be twelve
(12) (such amount the “Change in Control Severance”).
     (b) Resignation Without Good Reason or Disability. Subject to the terms and
conditions set forth in Sections 4.4 and 8.14, if the Executive voluntarily
terminates Executive’s employment with the Company following the Change in
Control Date, excluding a termination for Good Reason, or if the Executive’s
employment with the Company is terminated by reason of the Executive’s
Disability, then the Company shall pay the Executive in a lump sum in cash on
the first business day that is at least 30 days after the Date of Termination,
the Accrued Obligations.”

8.   Section 4.3(d) is hereby deleted in its entirety and replaced with the
following in lieu thereof:

     “(d) Any payments or other benefits otherwise due to the Executive
following a Change in Ownership or Control that could reasonably be
characterized (as determined by the Company) as Contingent Compensation Payments
(the “Potential Payments”) shall not be made until the dates provided for in
this Section 4.3(d). Within 30 days after each date on which the Executive first
becomes entitled to receive (whether or not then due) a Contingent Compensation
Payment relating to such Change in Ownership or Control, the Company shall
determine and notify the Executive (with reasonable detail regarding the basis
for its determinations) (i) which Potential Payments constitute Contingent
Compensation Payments, (ii) the Eliminated Amount and (iii) whether the
Section 4.3(b) Override is applicable. Within 30 days after delivery of such
notice to the Executive, the Executive shall deliver a response to the Company
(the “Executive Response”) stating either (A) that Executive agrees with the
Company’s determination pursuant to the preceding sentence or (B) that Executive
disagrees with such determination, in which case Executive shall set forth
(i) which Potential Payments should be characterized as Contingent Compensation
Payments, (ii) the Eliminated Amount, and (iii) whether the Section 4.3(b)
Override is applicable. If and to the extent that any Contingent Compensation
Payments are required to be treated as Eliminated Payments pursuant to this
Section 4.3, then the Payments shall be reduced or eliminated, as determined by
the Company, in the following order: (W) any cash payments, (X) any taxable
benefits, (Y) any nontaxable benefits, and (Z) any vesting of equity awards, in
each case in reverse order beginning with payments or benefits that are to be
paid the farthest in time from the date that triggers the applicability of the
excise tax, to the extent necessary to maximize the Eliminated Payments. In the
event that the Executive fails to deliver an Executive Response on or before the
required date, the Company’s initial determination shall be final and the
Contingent Compensation Payments that shall be treated as Eliminated Payments
shall be determined by the Company in accordance with the preceding sentence. If
the Executive states in the Executive Response that Executive agrees with the
Company’s determination, the Company shall make the Potential Payments to the
Executive within three business days following delivery to the Company of the
Executive Response (except for any Potential Payments which are not due to be
made until after such date, which Potential Payments shall be made on the date
on which they are due). If the Executive states in the Executive Response that
Executive disagrees with the Company’s determination, then, for a period of
60 days following delivery of the Executive Response, the Executive and the
Company shall use good faith efforts to resolve such

 

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dispute. The Company shall, within three business days following delivery to the
Company of the Executive Response, make to the Executive those Potential
Payments as to which there is no dispute between the Company and the Executive
regarding whether they should be made (except for any such Potential Payments
which are not due to be made until after such date, which Potential Payments
shall be made on the date on which they are due). The balance of the Potential
Payments shall be made within three business days following the resolution of
such dispute. Subject to the limitations contained in Sections 4.3(a) and
(b) hereof, the amount of any payments to be made to the Executive following the
resolution of such dispute shall be increased by amount of the accrued interest
thereon computed at the prime rate announced from time to time by The Bank of
America, compounded monthly from the date that such payments originally were
due.”

9.   Section 4.4 (Payments subject to 409A) is hereby deleted in its entirety
and replaced with the following in lieu thereof:

     “4.4 Release. The payment to the Executive (or the Executive’s heirs) of
both the Pro-Rata Bonus portion of the Accrued Obligations and the Change in
Control Severance in the event of a termination pursuant to Section 4.2.2(a)
shall be contingent on (i) the execution by the Executive (or the Executive’s
heirs) of the Executive Release and upon the Executive Release becoming
effective in accordance with its terms within 30 days following the Date of
Termination and (ii) agreement by the Executive to standard confidentiality, a
non-solicitation of Company customers for six-months following the Change in
Control and a non-solicitation of Company employees for twelve months following
the Change in Control.”

10.   The Agreement is hereby amended to add the following Section 4.5 thereto:

     “4.5 Sole Remedy. The payments under this Section 4 constitute the sole
remedy of the Executive in the circumstances set forth in this Section 4.”

11.   Sections 5.1 (Settlement of Disputes) is hereby amended by replacing the
reference to “Section 4” with “Sections 3 and 4”.

12.   Section 5.2 (Expenses) is hereby deleted in its entirety and replaced with
the following in lieu thereof:

     “5.2 Expenses. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal, accounting and other fees and expenses which the
Executive may reasonably incur as a result of any claim or contest by the
Company, the Executive or others regarding the validity or enforceability of, or
liability under, Sections 3 and 4 of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive
regarding the amount of any payment or benefits pursuant to this Agreement);
provided that Executive prevails in the outcome of such claim or contest.
Notwithstanding the foregoing, (i) the expenses eligible for reimbursement may
not affect the expenses eligible for reimbursement in any other taxable year and
(ii) the right to reimbursement is not subject to liquidation or exchange for
another benefit.”

13.   Section 5.3 (Compensation During a Dispute) is hereby amended by
(i) deleting the words “If the”at the beginning thereto and replacing such
language with the following: “Subject to any limitations under Section 409A, if
the”.

14.   Section 8.4 (Exclusive Severance Benefits) is hereby amended by replacing
the reference to “employment without” in the fourth line thereto with the word
“employment”.

15.   Section 8.5 (Mitigation) is hereby amended by deleting the second sentence
thereto and replacing it with the following:

     “Further, the amount of any payment or benefits provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as a
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
otherwise.”

 

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16.  
Section 8.13 (Executive’s Acknowledgments) is hereby deleted in its entirety and
replaced with the following in lieu thereof:

     “The Executive acknowledges that Executive: (a) has read this Agreement;
(b) has been represented in the preparation, negotiation, and execution of this
Agreement by legal counsel of the Executive’s own choice or has voluntarily
declined to seek such counsel; and (c) understands the terms and consequences of
this Agreement.”

17.  
Section 8.14 (Section 409A) is hereby deleted in its entirety and replaced with
the following in lieu thereof:

     8.14 Payments Subject to Section 409A. Subject to the provisions in this
Section 8.14, any severance payments or benefits under this Agreement shall
begin only upon the date of the Executive’s “separation from service”
(determined as set forth below) which occurs on or after the Section 3 Date of
Termination or the Date of Termination, as applicable. The following rules shall
apply with respect to distribution of the payments and benefits, if any, to be
provided to the Executive under this Agreement.
     8.14.1 It is intended that each installment of the severance payments and
benefits provided under this Agreement shall be treated as a separate “payment”
for purposes of Section 409A of the Code. Neither the Executive nor the Company
shall have the right to accelerate or defer the delivery of any such payments or
benefits except to the extent specifically permitted or required by
Section 409A.
     8.14.2 If, as of the date of the Executive’s “separation from service” from
the Company, the Executive is not a “specified employee” (within the meaning of
Section 409A), then each installment of the severance payments and benefits
shall be made on the dates and terms set forth in this Agreement.
     8.14.3 If, as of the date of the Executive’s “separation from service” from
the Company, the Executive is a “specified employee” (within the meaning of
Section 409A), then:
          (a) Each installment of the severance payments and benefits due under
this Agreement that, in accordance with the dates and terms set forth herein,
will in all circumstances, regardless of when the separation from service
occurs, be paid within the short-term deferral period (as defined in
Section 409A) shall be treated as a short-term deferral within the meaning of
Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible
under Section 409A; and
          (b) Each installment of the severance payments and benefits due under
this Agreement that is not described in Section 8.14.2 above and that would,
absent this subsection, be paid within the six-month period following the
Executive’s “separation from service” from the Company shall not be paid until
the date that is six months and one day after such separation from service (or,
if earlier, the Executive’s death), with any such installments that are required
to be delayed being accumulated during the six-month period and paid in a lump
sum on the date that is six months and one day following the Executive’s
separation from service and any subsequent installments, if any, being paid in
accordance with the dates and terms set forth herein; provided, however, that
the preceding provisions of this sentence shall not apply to any installment of
severance payments and benefits if and to the maximum extent that such
installment is deemed to be paid under a separation pay plan that does not
provide for a deferral of compensation by reason of the application of Treasury
Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary
separation from service). Any installments that qualify for the exception under
Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the
last day of the second taxable year following the taxable year in which the
separation from service occurs.
     8.14.4 The determination of whether and when the Executive’s separation
from service from the Company has occurred shall be made in a manner consistent
with, and based on the presumptions set forth in, Treasury
Regulation Section 1.409A-1(h).
     8.14.5 All reimbursements and in-kind benefits provided under this
Agreement shall be made or provided in accordance with the requirements of
Section 409A to the extent that such reimbursements or in-kind benefits are
subject to Section 409A, including, where applicable, the requirements that
(i) any reimbursement is for expenses incurred during the Executive’s lifetime
(or during a shorter period of time specified in this Agreement), (ii) the

 

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amount of expenses eligible for reimbursement during a calendar year may not
affect the expenses eligible for reimbursement in any other calendar year,
(iii) the reimbursement of an eligible expense will be made on or before the
last day of the calendar year following the year in which the expense is
incurred and (iv) the right to reimbursement is not subject to set off or
liquidation or exchange for any other benefit.
     8.14.6 Notwithstanding anything herein to the contrary, the Company shall
have no liability to the Executive or to any other person if the payments and
benefits provided in this Agreement that are intended to be exempt from or
compliant with Section 409A are not so exempt or compliant.
     IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date set forth above.

             
 
      OCLARO, INC.    
 
           
 
  By:
Its:   /s/ Alain Couder
 
Chief Executive Officer    
 
           
 
      /s/ Catherine Hunt Rundle
 
Catherine Hunt Rundle