Exhibit 10.4

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NeoPhotonics Corporation

Severance Rights Agreement

This Severance Rights Agreement (the “Agreement”) is made and entered into by
and between Ray Wallin (the “Employee”) and NeoPhotonics Corporation, a Delaware
corporation (the “Company”), effective as of January 6, 2014 (or effective hire
date).

RECITALS

A. The Board of Directors of the Company (the “Board”) believes that it is in
the best interests of the Company and its shareholders to provide the Employee
with certain severance benefits should Employee’s employment with the Company
terminate under certain circumstances. Such benefits are intended to provide
Employee with enhanced financial security and with sufficient incentive and
encouragement for Employee to accept employment with the Company and remain with
the Company.

B. Certain capitalized terms used in the Agreement are defined in Section 5
below.

AGREEMENT

The parties hereto agree as follows:

1.

Term of Agreement. The terms of this Agreement shall terminate upon the date
that all obligations of the parties hereunder have been satisfied, if Employee
is eligible to receive benefits hereunder, or immediately upon a termination of
Employee’s employment as to which he has no eligibility for benefits hereunder.
A termination of the terms of this Agreement pursuant to this Section shall be
effective for all purposes.

2.

At-Will Employment. The Company and the Employee acknowledge that the Employee’s
employment is and shall continue to be at-will, as defined under applicable law.
If the Employee’s employment terminates for any reason, the Employee shall not
be entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Agreement, and as may otherwise be available in
accordance with the Company’s established employee plans and policies at the
time of termination.

3.

Agreement Benefits.

(a)

Involuntary Termination Generally. If the Employee’s employment terminates as a
result of Involuntary Termination, except by such Involuntary Termination as
provided in Section 3(b) below, and provided the Employee provides a valid and
effective Release of Claims not later than sixty (60) days after such
termination, the Company will pay the Employee the following severance benefits:

(i)

a lump sum severance payment equal to twelve (12) months of the Employee’s Base
Compensation, with such amount payable within ten (10) business days after the
effective date of the Release of Claims;

(ii)

provided the Employee makes a timely and accurate election for continued health
insurance coverage (including medical, dental, vision and prescription) under
COBRA (or Cal-COBRA or any other applicable state law of similar effect), the
Company will pay the premiums for such continued coverage for the Employee and
his eligible dependents until the earliest of (i) the close of the twelve
(12) month period following Executive’s termination of employment, (ii) the date
the Employee commences new employment following his termination date, or
(iii) such earlier date as the Employee (or his dependents, as applicable) cease
to be eligible for such continuation coverage (such period, the “COBRA Period”);
provided further that if at any time during the COBRA Period the Company
determines in its sole discretion that it cannot provide the foregoing COBRA
benefits without violating applicable law (including, without limitation,
Section 2716 of the Public Health Service Act), the Company will instead pay to
the Employee a taxable monthly cash payment for the remainder of the COBRA
Period in an amount equal to the monthly COBRA premium that the Employee would
be required to pay to continue the Employee’s group health coverage in effect on
the date of his termination (based on the premium for the first month of COBRA
coverage) (each payment, a “Special Severance Payment”), which payments will be
made regardless of whether the Employee elects COBRA continuation coverage and
will be subject to applicable tax withholdings; provided that no Special
Severance Payment will be made prior to the sixtieth (60th) day following the
termination date, and on such date the Company will pay in a lump sum the
aggregate amount of payments that the Company would have paid

 

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prior to that date had payments not been delayed during the consideration period
for the Release of Claims, with the balance of the payments made thereafter on
the original schedule; and

(iii)

the vesting of each of Employee’s then-outstanding compensatory equity awards
granted under any of the Company’s equity incentive plans, and the rate of
lapsing of any repurchase right applicable to any shares received under such
awards, shall automatically be accelerated (and, in the case of options, such
options shall become exercisable), as of the effective date of Employee’s
Involuntary Termination, as to the number of shares that would have vested, or
as to which repurchase rights would have lapsed, in the ordinary course of
business if Employee had maintained his employment or consulting relationship
with the Company for the first eighteen (18) months following the effective date
of the Involuntary Termination.

(b)

Involuntary Termination Following a Change in Control. If the Employee’s
employment terminates as a result of Involuntary Termination on or within twelve
(12) months following a Change in Control, and provided the Employee provides a
valid and effective Release of Claims not later than sixty (60) days after such
termination, the Company will pay the Employee the following severance benefits:

(i)

a lump sum severance payment equal to the sum of (A) twelve (12) months of the
Employee’s Base Compensation and (B) 100% of the Employee’s target Bonus for the
year of termination, with such amount payable within ten (10) business days
after the effective date of the Release of Claims;

(ii)

provided the Employee makes a timely and accurate election for continued health
insurance coverage (including medical, dental, vision and prescription) under
COBRA (or Cal-COBRA or any other applicable state law of similar effect), the
Company will pay the premiums for such continued coverage for the Employee and
his eligible dependents until the earliest of (i) the close of the twelve
(12) month period following Executive’s termination of employment, (ii) the date
the Employee commences new employment following his termination date, or
(iii) such earlier date as the Employee (or his dependents, as applicable) cease
to be eligible for such continuation coverage (such period, the “CIC COBRA
Period”); provided further that if at any time during the CIC COBRA Period the
Company determines in its sole discretion that it cannot provide the foregoing
COBRA benefits without violating applicable law (including, without limitation,
Section 2716 of the Public Health Service Act), the Company will instead pay to
the Employee a taxable monthly cash payment for the remainder of the CIC COBRA
Period in an amount equal to the monthly COBRA premium that the Employee would
be required to pay to continue the Employee’s group health coverage in effect on
the date of his termination (based on the premium for the first month of COBRA
coverage) (each payment, a “Special Severance Payment”), which payments will be
made regardless of whether the Employee elects COBRA continuation coverage and
will be subject to applicable tax withholdings; provided that no Special
Severance Payment will be made prior to the sixtieth (60th) day following the
termination date, and on such date the Company will pay in a lump sum the
aggregate amount of payments that the Company would have paid prior to that date
had payments not been delayed during the consideration period for the Release of
Claims, with the balance of the payments made thereafter on the original
schedule; and

(iii)

the vesting of each of Employee’s then-outstanding compensatory equity awards
granted under any of the Company’s equity incentive plans, and the rate of
lapsing of any repurchase right applicable to any shares received under such
awards, shall automatically be accelerated (and, in the case of options, such
options shall become exercisable), as of the effective date of Employee’s
Involuntary Termination, as to the number of shares that would have vested, or
as to which repurchase rights would have lapsed, in the ordinary course of
business if Employee had maintained his employment or consulting relationship
with the Company for eighteen (18) months following the effective date of the
Involuntary Termination.

(c)

Voluntary Resignation; Termination For Cause. If the Employee voluntarily
resigns from the Company, or if the Company terminates the Employee’s employment
for Cause, then the Employee shall not be entitled to receive severance or other
benefits pursuant to this Agreement, unless the voluntary resignation is for
Good Reason.

(d)

Disability; Death. If the Company terminates the Employee’s employment as a
result of the Employee’s Disability, or if the Employee’s employment terminates
due to the death of the Employee, then the Employee shall not be entitled to
receive severance benefits except as provided in this Section 3(d). Nothing in
this Agreement restricts the Employee’s rights to any payments under any death
or disability insurance policy with the Company in effect at the time of
termination. In addition, if the Employee’s employment terminates due to the
death of the Employee, and his death occurs while he is outside of his country
of residence (for any reason), then the Company will supplement the death
benefit provided by any existing Company-provided life insurance, if necessary,
so that the Employee’s estate or beneficiaries receive total death benefits
equal to two times the Employee’s then-current Base Compensation. Any amount
payable pursuant to this Section 3(d) will be paid in a lump sum to the
Employee’s estate within thirty (30) days following the Employee’s termination
date.

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(e)

Change in Control Benefits. In the event of a Change in Control in which the
acquirer does not assume unvested compensatory equity awards, the vesting of
each of Employee’s then-outstanding compensatory equity awards granted under any
of the Company’s equity incentive plans, and the rate of lapsing of any
repurchase right applicable to any shares received under such awards, shall
automatically become accelerated (and, in the case of options, such options
shall become exercisable) as to the number of shares that would have vested, or
as to which repurchase rights would have lapsed, in the ordinary course of
business if Employee had maintained his employment or consulting relationship
with the Company for eighteen (18) months following the closing of the Change in
Control, in each case as of immediately prior to the closing of the Change in
Control. For purposes of clarity, this eighteen (18) month vesting acceleration
is intended to be in lieu of any automatic accelerated vesting provision
triggered solely on the closing of a Change in Control transaction contained in
the Company’s equity incentive plans.

4.

Excise Tax Payments. The Company and the Employee agree that Employee’s rights
to benefits hereunder are subject to reduction in accordance with the provisions
of Section 9(e) (that is, “Parachute Payments”) of the Company’s 2010 Equity
Incentive Plan.

5.

Definition of Terms. The following terms referred to in this Agreement shall
have the following meanings:

(a)

Base Compensation. “Base Compensation” means an amount equal to Employee’s
existing annual base salary at the time of the Involuntary Termination.

(b)

Bonus. “Bonus” shall mean the target compensation amount for the fiscal year of
termination under any cash incentive program approved for the year of
termination as applicable to the Employee.

(c)

Cause. “Cause” shall mean (i) any act of personal dishonesty taken by the
Employee in connection with his responsibilities as an employee and intended to
result in substantial personal enrichment of the Employee, (ii) the conviction
of a felony, (iii) a willful act by the Employee which constitutes gross
misconduct and which is materially injurious to the Company, and (iv) following
delivery to the Employee of a written demand for performance from the Company
which describes the basis for the Company’s belief that the Employee has not
substantially performed his duties, continued violations by the Employee of the
Employee’s obligations to the Company which are demonstrably willful and
deliberate on the Employee’s part.

(d)

Change in Control. “Change in Control” means the occurrence of any of the
following events:

(i)

any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly,
of securities of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company’s then outstanding voting
securities; or

(ii)

the consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets; or

(iii)

the consummation of a merger or consolidation of the Company with any other
entity, other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or its parent) at least sixty percent
(60%) of the total voting power represented by the voting securities of the
Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation; or

(iv)

a change in the composition of the Board, as a result of which fewer than a
majority of the directors are Incumbent Directors. “Incumbent Directors” shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of those directors whose election or
nomination was not in connection with any transaction described in subsections
(i), (ii) or (iii) or in connection with an actual or threatened proxy contest
relating to the election of directors of the Company.

(e)

Disability. “Disability” shall mean that the Employee has been unable to perform
his Company duties as the result of his incapacity due to physical or mental
illness, and such inability, at least twenty-six (26) weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Employee or the Employee’s
legal representative (such agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least thirty (30) days’ written notice by the Company of its intention to
terminate the Employee’s employment. In the event that the Employee resumes the
performance of substantially all of his duties hereunder before the termination
of his employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.

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(f)

Good Reason. “Good Reason” shall mean the Employee’s voluntary resignation from
all positions he then holds with the Company, effective within ninety (90) days
after the occurrence of: (i) a material reduction or other material adverse
change in the named executive officer’s job duties, responsibilities, authority
or requirements, including the removal of such job duties, responsibilities,
authority or requirements; (ii) any material reduction of the named executive
officer’s annual base compensation; (iii) our requiring the named executive
officer to move his primary work location to a location that increases his
one-way commute by more than 50 miles from our then-current location; or
(iv) the failure of the Company to obtain the assumption, in all material
respects, of this Agreement by any successors to the Company; provided, however,
that the Employee must provide written notice to the Company of the existence of
one of the conditions described above within sixty (60) days after its initial
existence, and the Company must be provided with a period of thirty (30) days
during which it may cure the circumstances giving rise to the condition (in
which case, no right to resign for Good Reason shall exist). An isolated,
insubstantial and inadvertent action taken in good faith and which is remedied
by the Company promptly after receipt of notice thereof given by Employee shall
not give rise to Good Reason.

(g)

Involuntary Termination. “Involuntary Termination” shall mean (i) any
termination of the Employee’s employment by the Company without Cause (and other
than by reason of death or Disability) or (ii) Employee’s resignation for Good
Reason, provided that in either case, such termination constitutes a “separation
from service” as defined under Treasury Regulation Section 1.409A-1(h).

(h)

Release of Claims. “Release of Claims” shall mean a waiver by Employee, in a
form provided by the Company within ten (10) days after the applicable event,
and reasonably acceptable to Employee, of all employment related obligations of
and claims and causes of action against the Company. The Release of Claims must
become effective in accordance with its terms within sixty (60) days following
the event giving rise to the payment obligation hereunder. If the Release of
Claims fails to become effective within the required period, Employee will not
receive any of the benefits provided for under this Agreement.

6.

Successors.

(a)

Company’s Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, merger, consolidation, liquidation or otherwise) or to
all or substantially all of the Company’s business and/or assets shall promptly
(within fifteen (15) days after such transaction) assume the obligations under
this Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. For all
purposes under this Agreement, the term “Company” shall include any successor to
the Company’s business and/or assets which executes and delivers the assumption
agreement described in this Section 6(a) or which becomes bound by the terms of
this Agreement by operation of law.

(b)

Employee’s Successors. The terms of this Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee shall
die at a time when he is receiving payments or benefits hereunder, such payments
and benefits shall continue to be paid or provided to such person or persons
appointed in writing by Employee to receive such amounts or, if no person is so
appointed, to the Employee’s estate.

7.

Notice. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed notices shall
be addressed to him at the home address which he most recently communicated to
the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.

8.

Arbitration. To ensure the timely and economical resolution of disputes that may
arise in connection with Employee’s employment with the Company, Employee and
the Company agree that any and all disputes, claims, or causes of action arising
from or relating to the enforcement, breach, performance, negotiation,
execution, or interpretation of this Agreement, Employee’s employment, or the
termination of Employee’s employment, including but not limited to statutory
claims, shall be resolved to the fullest extent permitted by law by final,
binding and confidential arbitration, by a single arbitrator, in San Jose,
California, conducted by JAMS under the then applicable JAMS rules. By agreeing
to this arbitration procedure, both Employee and the Company waive the right to
resolve any such dispute through a trial by jury or judge or administrative
proceeding. The arbitrator shall: (a) have the authority to compel adequate
discovery for the resolution of the dispute and to award such relief as would
otherwise be permitted by law; and (b) issue a written arbitration decision, to
include the arbitrator’s essential findings and conclusions and a statement of
the award. The arbitrator shall be authorized to award any or all remedies that
Employee or the Company would be entitled to seek in a court of law. The Company
shall pay all JAMS’ arbitration fees in excess of the amount of court fees that
would be required if the dispute were decided in a court of law. Nothing in this
Agreement is intended to prevent either Employee or the Company from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration.

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9.

Miscellaneous Provisions.

(a)

Waiver. No provision of this Agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and signed
by the Employee and by an authorized officer of the Company (other than the
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

(b)

Whole Agreement. This Agreement sets forth the entire agreement of the parties
with respect to the matters set forth herein, and supersedes all previous
contracts, arrangements or understandings between the Company and Employee on
the subjects set forth herein. The Agreement may be amended at any time only by
mutual written agreement signed by the parties hereto.

(c)

Choice of Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of California.

(d)

Severability. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect.

(e)

Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.

(f)

Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together will constitute one and
the same instrument.

(g)

Code Section 409A. All payments upon a termination of service to be made under
this Agreement may be made only upon a “separation of service” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”) and the Department of Treasury regulations and other guidance
promulgated thereunder. Notwithstanding any provision to the contrary in this
Agreement, if Employee is deemed by the Company at the time of Employee’s
separation from service to be a “specified employee” for purposes of Code
Section 409A(a)(2)(B)(i), to the extent delayed commencement of any portion of
the benefits to which Employee is entitled under this Agreement that are deemed
to be “deferred compensation” is required in order to avoid a prohibited
distribution under Code Section 409A(a)(2)(B)(i), such portion of Employee’s
benefits shall not be provided to Employee prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of Employee’s
“separation from service” with the Company or (ii) the date of Employee’s death.
Upon the first business day following the expiration of the applicable Code
Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this
Section 9(g) shall be paid in a lump sum to Employee, and any remaining payments
due under this Agreement shall be paid as otherwise provided herein. For
purposes of Code Section 409A (including, without limitation, for purposes of
Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payments under this
Agreement shall be treated as a separate payment under a right to receive a
series of separate payments and, accordingly, each payment hereunder shall at
all times be considered a separate and distinct payment. It is intended that all
of the severance payments satisfy, to the greatest extent possible, the
exemptions from the application of Code Section 409A provided under of Treasury
Regulation 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement
will be construed to the greatest extent possible as consistent with those
provisions. The Company and Employee agree to work together in good faith to
consider amendments to this Agreement and to take such reasonable actions which
are necessary, appropriate or desirable to avoid imposition of any additional
tax or income recognition prior to actual payment to Employee under
Section 409A.

 

 

 

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IN WITNESS WHEREOF, each of the parties has executed this Severance Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year last set forth below.

 

COMPANY

 

 

 

NEOPHOTONICS CORPORATION

 

 

 

 

 

 

 

 

By:

 

/s/ Timothy S. Jenks

 

 

 

 

Title:

 

CEO

 

 

 

 

Date:

 

12/20/13

 

 

 

 

EMPLOYEE

 

 

 

By:

 

/s/ Clyde R. Wallin

 

 

 

 

Name:

 

Clyde Raymond Wallin

 

 

 

 

Date:

 

12/20/13

 

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