Oclaro, Inc.
OCLARO, INC. (Form: DEF 14A, Received: 10/05/2016 16:12:30)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A

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LOGOA03.JPG
OCLARO, INC.
225 Charcot Avenue
San Jose, California 95131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on November 18, 2016
To the Stockholders of Oclaro, Inc.:
The annual meeting of stockholders of Oclaro, Inc., a Delaware corporation (Oclaro, we, us or our), will be held on Friday, November 18, 2016, at 8:00 a.m., local time, at our corporate headquarters, 225 Charcot Avenue, San Jose, California, for the purpose of considering and voting upon the following matters:
1.
To elect Joel A. Smith III and Kendall Cowan as Class III directors to serve three-year terms and until their successors are duly elected and qualified or until their earlier resignation or removal;
2.
To approve an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan;
3.
To approve the advisory resolution approving the compensation of our named executive officers; and
4.
To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for the current fiscal year.
The stockholders will also act on such other business as may properly come before the annual meeting, including any postponements or adjournments thereof. Our board of directors has no knowledge of any other business to be transacted at the annual meeting.
The proxy statement accompanying this notice describes each of these items of business in detail. We are enclosing a copy of our Annual Report on Form 10-K for the fiscal year ended July 2, 2016 with the proxy statement that accompanies this notice of meeting. The Annual Report on Form 10-K for the fiscal year ended July 2, 2016 contains consolidated financial statements and other information of interest to you. Holders of     our common stock at the close of business on September 29, 2016 are entitled to receive this notice and to vote at the annual meeting or any adjournment thereof.
YOUR VOTE IS VERY IMPORTANT. We encourage you to attend the annual meeting in person. However, in order to make sure that you are represented at the annual meeting, we urge you to vote your shares over the Internet or by telephone as provided in the instructions set forth on the proxy card, or complete, sign and return the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope.
By order of the Board of Directors,
MARISSASIGNATUREA03.JPG
Marissa Peterson
Chairman of the Board of Directors
 
October 5, 2016



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OCLARO, INC.
Proxy Statement for the Annual Meeting of Stockholders
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OCLARO, INC.
Proxy Statement for the Annual Meeting of Stockholders
To Be Held on November 18, 2016
This proxy statement is furnished to you in connection with the solicitation of proxies by our board of directors (the Board) for the 2016 annual meeting of stockholders (the Annual Meeting) to be held on Friday, November 18, 2016 at 8:00 a.m., local time, at our corporate headquarters, 225 Charcot Avenue, San Jose, California, including any postponements or adjournments thereof. The notice of the Annual Meeting, this proxy statement, our Annual Report on Form 10-K for the fiscal year ended July 2, 2016 (the 2016 Annual Report), which includes our audited financial statements for the fiscal year ended July 2, 2016 (fiscal year 2016), and the enclosed proxy card are first being mailed to stockholders on or about October 5, 2016.
We have elected to provide access to our proxy materials over the Internet. Accordingly, on or about October 5, 2016, we are sending a Notice Regarding the Availability of Proxy Materials (Notice) to certain of our stockholders of record, and we are sending a paper copy of the proxy materials and proxy card to other stockholders of record who we believe would prefer receiving such materials in paper form. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting to be Held on November 18, 2016
This proxy statement and our 2016 Annual Report are available for viewing, printing and downloading at www.proxyvote.com.
You can also find this proxy statement and our 2016 Annual Report on the Internet at our website at www.oclaro.com or through the Securities and Exchange Commission’s electronic data system, called EDGAR, at www.sec.gov . You may also obtain a copy of our 2016 Annual Report, as filed with the Securities and Exchange Commission (which we sometimes refer to herein as the Commission) without charge as provided in the Notice or upon written request to Oclaro, Inc., 225 Charcot Avenue, San Jose, California, 95131, Attn: Stock Administrator. We will provide the 2016 Annual Report without exhibits unless you specify in writing that you are requesting copies of the exhibits.
Certain documents referenced in this proxy statement are available on our website at www.oclaro.com . We are not including the information contained on our website, or any information that may be accessed by links on our website, as part of, or incorporating it by reference into, this proxy statement.
Voting Your Shares and Revocation of Proxies
You may vote by attending the Annual Meeting and voting in person or you may vote by submitting a proxy.
The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy, and (2) for shares held as a record holder and shares held in “street name.” If you hold your shares of common stock as a record holder and you are viewing this proxy statement on the Internet, you may vote by submitting a proxy over the Internet by following the instructions on the website referred to in the Notice previously mailed to you. If you hold your shares of common stock as a record holder and you are reviewing a paper copy of this proxy statement, you may vote your shares by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the pre-addressed, postage paid envelope provided to you, or by submitting a proxy over the Internet or by telephone by following the instructions on the proxy card. If you hold your shares of common stock in “street name," which means your shares are held of record by a broker, bank or nominee, you will receive a Notice from your broker, bank or nominee that includes instructions on how to vote your shares. Your broker, bank or nominee may allow you to deliver your voting instructions over the Internet and may also permit you to vote by telephone. In addition, you may request paper copies of the proxy statement and proxy card from your broker, bank or nominee by following the instructions on the Notice provided by your broker, bank or nominee.
The Internet and telephone voting facilities will close at 11:59 p.m. Eastern Time on November 17, 2016. If you vote through the Internet, you should be aware that you may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers and that these costs must be borne by you. If you vote by Internet or telephone, then you need not return a written proxy card by mail.

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Your vote is very important . You should submit your proxy even if you plan to attend the Annual Meeting in person.
All shares held by stockholders who are entitled to vote and who are represented at the Annual Meeting by properly submitted proxies received before the polls are closed at the Annual Meeting will be voted in accordance with the instructions indicated on the proxy card, unless such proxy is properly revoked prior to the vote being taken on the matter submitted to the stockholders at the Annual Meeting.
A proxy may be revoked and your vote changed in advance of the Annual Meeting. If you are a stockholder of record, you can change your vote and revoke your proxy at any time before the vote is taken at the Annual Meeting by doing any one of the following:
filing with our corporate secretary, at or before the taking of the vote, a written notice of revocation bearing a later date than the proxy;
duly executing a later dated proxy relating to the same shares and delivering it to our corporate secretary before the taking of the vote;
accessing the Internet and following the instructions for voting by Internet that appear on the enclosed proxy card;
following the instructions that appear on the enclosed proxy card for voting by telephone; or
attending the Annual Meeting and voting in person. Attendance at the Annual Meeting, if a stockholder does not vote, will not be sufficient to revoke a proxy.
Any written notice of revocation or subsequent proxy should be sent to us at the following address: Oclaro, Inc., 225 Charcot Avenue, San Jose, California 95131, Attention: Corporate Secretary. If your shares are held in street name, you must follow the instructions of your broker, bank or nominee to revoke a previously given proxy.
If a proxy card does not specify how the proxy is to be voted with respect to:
the election of the two nominated Class III directors for a three year term, the shares will be voted “FOR” the election of the two nominated Class III directors;
the approval of an amendment to the Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan, the shares will be voted “FOR” the approval of the amendment;
the approval of the advisory resolution approving the compensation of our named executive officers, the shares will be voted “FOR” the approval of the advisory resolution approving the compensation of our named executive officers; and
the ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm for the current fiscal year, the shares will be voted “FOR” the ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm for the current fiscal year.
By submitting a proxy (whether by telephone, over the Internet or by signing a proxy card), you are conferring discretionary authority upon the named proxy holders with respect to amendments or variations to the matters identified in the accompanying notice of Annual Meeting and with respect to any other matters which may properly come before the Annual Meeting. The Board does not know of any other matters that may come before the Annual Meeting. If any other matter properly comes before the Annual Meeting, including consideration of a motion to adjourn the Annual Meeting to another time or place (including for the purpose of soliciting additional proxies), the persons named in the proxy will exercise their judgment in deciding how to vote, or otherwise act, at the Annual Meeting with respect to that matter or proposal.
If you receive more than one proxy card, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card you receive.
Attendance at the Annual Meeting
Only holders of our common stock as of the record date for the Annual Meeting, their proxy holders, and guests we may invite may attend the Annual Meeting. If you wish to attend the Annual Meeting in person but you hold your shares through someone else, such as a broker, you must bring proof of your ownership and photo identification to the Annual Meeting. For example, you could bring an account statement showing that you beneficially owned shares of our common stock as of the record date as acceptable proof of ownership. You must also contact your broker and follow their instructions in order to vote your shares at the Annual Meeting. You may not vote your shares at the Annual Meeting unless you have first followed the procedures outlined by your broker.

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Stockholders Entitled to Vote
The Board fixed September 29, 2016 as the record date for the determination of stockholders entitled to vote at the Annual Meeting. Only holders of record of our common stock at the close of business on the record date are entitled to notice of and to vote at the Annual Meeting. On September 29, 2016, there were 165,897,399 shares of our common stock outstanding and entitled to vote. Each share of common stock will have one vote for each matter to be voted upon at the Annual Meeting.
A list of stockholders eligible to vote at the Annual Meeting will be available for inspection at the Annual Meeting, and at our corporate headquarters during regular business hours for a period of no less than ten days prior to the Annual Meeting.
Votes Required
The holders of at least a majority in voting power of the shares of our common stock issued and outstanding and entitled to vote at the Annual Meeting will constitute a quorum for the transaction of business at the Annual Meeting. Shares of common stock present in person or represented by proxy, including shares that abstain or do not vote with respect to one or more of the matters presented for stockholder approval, will be counted for purposes of determining whether a quorum is present at the Annual Meeting. If a broker indicates on its proxy that it does not have discretionary voting authority to vote shares for which it is the holder of record at the Annual Meeting, the shares will still be counted in determining whether a quorum is present.
Brokers or other nominees who hold shares of common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the election of directors or for the approval of matters which are “non-routine,” without specific instructions from the beneficial owner. We believe that the proposal to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the current fiscal year is considered to be a “routine” matter. Accordingly, we do not expect “broker non-votes” on this proposal. The other proposals to be voted on at the Annual Meeting are not considered routine matters, and without your instruction, your broker cannot vote your shares. Accordingly, we expect “broker non-votes” on these proposals.
If the shares you own are held in “street name,” the bank, brokerage firm or nominee, as the record holder of your shares, is required to vote your shares in accordance with your instructions. In order to vote your shares held in “street name,” you will need to follow the directions that your bank, brokerage firm or nominee provides you. If you desire to vote your shares held in “street name” at the Annual Meeting by proxy, you will need to obtain a proxy card from the holder of record.

On all matters, each share has one vote. We have a majority voting standard for the election of directors in an uncontested election, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected as of the tenth day preceding the date we first mail our notice of meeting for the Annual Meeting. Under this voting standard, each nominee for the two director seats must be elected by the affirmative vote of the majority of the votes cast by stockholders for that nominee (meaning the number of shares voted “for” a nominee’s election must exceed the number of shares voted “against” such nominee’s election). With respect to the proposal regarding the election of our directors, neither “broker non-votes” nor abstentions are counted as a vote cast either “for” or “against” that nominee’s election. It is the policy of the Board that incumbent director nominees, such as the two directors nominated for re-election at the Annual Meeting, must submit to the Chairman of the nominating and corporate governance committee of the Board or, in the case of such Chairman, to the Chairman of the Board, an advance irrevocable resignation that is conditioned upon (i) the director’s failure to receive the affirmative vote of the majority of the votes cast by stockholders for that director in an uncontested election, and (ii) the Board’s acceptance of such resignation. Each of Kendall Cowan and Joel A. Smith III has submitted a conditional irrevocable resignation to the Chairman of the nominating and corporate governance committee of the Board in accordance with the Board’s policy.

For the other proposals to be approved, our by-laws require the affirmative vote of the holders of a majority in voting power of the shares of our common stock as of the record date that are present in person or represented by proxy and voting on such matters. “Broker non-votes” and abstentions are not included in the tabulation of the voting results and, accordingly, they do not have the effect of votes “AGAINST” such proposals.
Security Ownership of Certain Beneficial Owners and Management
The following table shows the number of shares of our common stock beneficially owned as of September 1, 2016 by each entity or person who is known to us to own five percent or more of our common stock, each director, each executive officer listed in the Fiscal Year 2016 Summary Compensation Table below, and all directors and executive officers as a group.

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Beneficial ownership is determined in accordance with the rules of the Commission. Except as indicated by footnote, to our knowledge, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Shares of our common stock issuable pursuant to options to purchase or other rights to acquire shares of common stock that are exercisable within 60 days of September 1, 2016 are deemed to be beneficially owned by the person holding such options or rights for the purpose of computing ownership of such person, but are not treated as outstanding for the purpose of computing the ownership of any other person. Applicable percentage of beneficial ownership is based on 147,936,427 shares of our common stock outstanding as of September 1, 2016. The information contained in the following table is not necessarily indicative of beneficial ownership for any other purpose and the inclusion of any shares in the table does not constitute an admission of beneficial ownership of those shares.
The address of each of our executive officers and directors is c/o Oclaro, Inc., 225 Charcot Avenue, San Jose, California 95131.
Beneficial Owner
Number
of Shares
 
Percentage
of Total
5% Stockholders
 
 
 
Soros Fund Management, LLC (1)
888 Seventh Avenue, 33rdFloor
New York, NY 10106
12,051,282

 
8.1%
Kopp Family Office, LLC (2)
8400 Normandale Lake Boulevard, Suite 1450
Bloomington, MN. 55437
9,212,359

 
6.2%
Named Executive Officers and Directors
 
 
 
Greg Dougherty (3)
751,573

 
*
Pete Mangan (4)
254,110

 
*
Yves LeMaitre (5)
254,898

 
*
Jim Haynes (6)
351,501

 
*
David Teichmann (7)
176,379

 
*
Denise Haylor (8)
26,702

 
*
Joel A. Smith, III (9)
240,939

 
*
Edward Collins (10)
313,998

 
*
William L. Smith (11)
217,891

 
*
Kendall Cowan (12)
212,470

 
*
Marissa Peterson (13)
278,334

 
*
All executive officers and directors as a group (13 persons) (14)
3,374,919

 
2.3%
*
less than 1%
(1)
The number of shares listed above is based upon a privately negotiated exchange agreement we entered into with Quantum Partners LP (Quantum Partners) to exchange $23.5 million of our 6.00% convertible senior notes due 2020 held by Quantum Partners for shares of our common stock. Based on a Schedule 13G filed with the Commission on February 23, 2015, Soros Fund Management LLC (SFM LLC) serves as principal investment manager to Quantum Partners. As such, SFM LLC has been granted investment discretion over portfolio investments, including the shares listed above, held for the account of Quantum Partners. George Soros serves as Chairman of SFM LLC and Robert Soros serves as President and Deputy Chairman of SFM LLC. The Schedule 13G indicates that SFM LLC has sole power to vote or direct the vote, and to dispose or direct the disposition of, these shares and that George Soros and Robert Soros have shared power to vote or direct the vote, and to dispose or direct the disposition of, these shares.
(2)
The following information is based on a Schedule 13G filed with the Commission on September 8, 2016 by Kopp Family Office (KFO). KFO is the beneficial owner of 9,212,359 shares of our common stock owned by KFO’s clients and held in discretionary accounts managed by KFO. KFO has shared voting power and shared dispositive power with respect to these shares of our common stock. Kopp Holding Company, LLC (HoldCo) is the parent of KFO. HoldCo beneficially owns and has shared voting power with respect to 10,091,232 shares of our common stock and has shared dispositive power with respect to 5,551,307 shares of our common stock. LeRoy C. Kopp is the control person of HoldCo. Mr. Kopp beneficially owns 10,200,807 shares of our common stock, has shared voting power with respect to 10,091,232 shares of our common

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stock, has sole dispositive power with respect to 4,649,500 shares of our common stock and has shared dispositive power with respect to 5,551,307 shares of our common stock.
(3)
Represents 717,119 shares beneficially owned by Mr. Dougherty and 34,454 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(4)
Represents 200,860 shares beneficially owned by Mr. Mangan and 53,250 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(5)
Represents 173,071 shares beneficially owned by Mr. LeMaitre and 81,827 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(6)
Represents 150,199 shares beneficially owned by Mr. Haynes and 201,302 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(7)
Represents 121,275 shares beneficially owned by Mr. Teichmann and 55,104 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(8)
Represents 26,702 shares beneficially owned by Ms. Haylor.
(9)
Represents 206,399 shares beneficially owned by Mr. Smith individually, 86 shares beneficially owned by his spouse and 34,454 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(10)
Represents 130,488 shares beneficially owned by Mr. Collins, 77,731 held in trust, 70,000 shares owned by his spouse and 35,779 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(11)
Represents 217,891 shares beneficially owned by Mr. Smith.
(12)
Represents 212,470 shares beneficially owned by Mr. Cowan.
(13)
Represents 261,288 shares beneficially owned by Ms. Peterson and 17,046 shares issuable pursuant to options exercisable within 60 days of September 1, 2016.
(14)
Includes 81,666 shares issuable pursuant to options exercisable within 60 days of September 1, 2016 held by our executive officers not listed in the table.
Forward-Looking Statements
This proxy statement contains “forward-looking statements” (as defined in the Private Securities Litigation Reform Act of 1995). These statements are based on our current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those set forth in the statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. The forward-looking statements may include statements regarding actions to be taken by us. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements involve significant risks and uncertainties, including those mentioned in the risk factors in our Annual Report on Form 10-K for the year ended July 2, 2016 filed with the SEC, and actual results may vary materially.

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PROPOSAL I
ELECTION OF CLASS III DIRECTORS
We have three classes of directors, currently consisting of three Class I directors, two Class II directors and two Class III directors. The Class I, Class II and Class III directors serve until the annual meeting of stockholders to be held in 2017, 2018, and 2016, respectively, or until their respective successors are elected and qualified. At each annual meeting, directors are elected for a full term of three years to succeed those whose terms are expiring. The terms of the three classes are staggered in a manner so that only one class is elected by stockholders annually. Kendall Cowan and Joel A. Smith III are each currently serving as Class III directors.
Upon the recommendation of our nominating and corporate governance committee, the Board has nominated Mr. Cowan and Mr. Smith for re-election to serve as Class III directors (the Nominees). If the Nominees are elected this year, they will be elected to serve as members of the Board until the 2019 annual meeting of stockholders, or until their successors are elected and qualified. The Nominees have each indicated their willingness to serve on the Board, if elected; however, if any of them should be unable to serve, the person empowered to act pursuant to a validly submitted proxy may vote the proxy for a substitute nominee designated by the Board. The Board has no reason to believe that any of the Nominees would be unable to serve if elected. Proxies cannot be voted for a greater number of persons than the number of nominees named above.
For each member of the Board and person nominated to become a director there follows information given by each concerning his or her principal occupation and business experience for at least the past five years, the names of other public reporting companies of which he or she serves, or has during the past five years served, as a director and his or her age and length of service as one of our directors. In addition, for each director and person nominated to become a director, there follows information regarding the specific experience, qualifications, attributes or skills that led to the conclusion of the Board that the person should serve as a director. There are no family relationships among any of our directors and executive officers. No director or executive officer is related by blood, marriage or adoption to any other director or executive officer. Other than as disclosed in the registration statement on Form S-4 (File No. 333-181254) filed by us with the Commission relating to the appointment of former Opnext directors to the Board in connection with our acquisition of Opnext, no arrangements or understandings exist between any director or person nominated for election as a director and any other person pursuant to which such person is to be selected as a director or nominee for election as a director.
Board Recommendation
The Board believes that the election of Kendall Cowan and Joel A. Smith III to serve as Class III directors is in the best interest of Oclaro and our stockholders and, therefore, unanimously recommends that the stockholders vote “FOR” the election of the Nominees.
Class I Directors — Terms Expiring 2017
Edward Collins, 73, has served as a director of Oclaro since May 2008. From 1995 to 2014, Mr. Collins served as the Managing Director and a Partner at ChinaVest Group, a private equity group investing in China. In connection with the winding up of ChinaVest V, LP, he was Chairman and CEO of Phoenix Liquidation, Inc. From 2012 to March 2015, Mr. Collins was Senior Counsel with the international law firm White and Case.  From 2007 to 2010, Mr. Collins served as Chairman, and is currently a director, of California Bank of Commerce. From 1999 to 2011 he served as chairman of the audit committee of TFC - the Taiwan Greater China Fund, listed on the NYSE, and was a director and chairman of the audit committee of the successor to TFC, the Shelton Greater China Fund, until 2012. Since 2009, Mr. Collins has served as non-executive Chairman of Branded Spirits, Ltd., a privately held company that sells branded spirits.  He served as non-executive Chairman of MedioStream, Inc., a software company,  from 2001 to 2014.  From 1988 to 1994, Mr. Collins was a partner at the law firm of McCutchen, Doyle, Brown, & Enersen, where he was responsible for the Greater China practice. He has served as counsel to various investment groups, banks and manufacturing companies in Hong Kong and Taiwan, and is a member of the State Bar of California.  With his many years of experience in the private equity industry, Mr. Collins brings to our Board in-depth knowledge of finance and strategic investment strategy. Mr. Collins’ experience and training as a practicing attorney also enables him to bring valuable insights to the Board, including his thorough understanding of the legal risk of our business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Collins should serve as a director.
Denise Haylor , 52, has served as a director of Oclaro since August 2016. She has served as the Chief Human Resources Officer and member of the Executive Committee of Royal Philips, a global industrial company with businesses in lighting, healthcare and consumer lifestyle, since June 2014. Prior to joining Royal Philips, from February 2011 to November 2012, Ms. Haylor was the Senior Vice President, HR Operations, HR Business Partners and Talent Management of Flextronics, an electronics, manufacturing services and end to end supply chain solutions provider, and from November 2012 to June 2014, Ms. Haylor was the Chief Human Resources Officer of Flextronics. Ms. Haylor began her carrier in human resources with Siemens in 1988 and later joined Motorola in June 1998,

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where she held a number of HR roles within Motorola and worked in many businesses. She earned an M.A. in Strategic Human Resource Management from the Kingston Business School of the University of London, graduated from the Advanced HR Executive Program at the University of Michigan and earned a Six Sigma - Black Belt. Ms. Haylor brings to the Board her extensive knowledge in the area of human resources, as well as experience as a senior executive of a global, complex and well-respected industrial company. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Haylor should serve as a director.
William L. Smith,  59, has served as a director of Oclaro since July 2012. Prior to Oclaro, Mr. Smith served on Opnext’s Board of Directors from April 2009 to July 2012. From September 2014 to September 2016, Mr. Smith served as President, AT&T Technology Operations, where he was responsible for all technology-related operations across AT&T’s global service footprint, including network planning and engineering, AT&T’s global network operations center, mobility and wireline central offices, undersea cable infrastructure, construction and engineering with wireless field operations, core installation and maintenance, U-verse field operations and data center operations. From January 2010 to September 2014, Mr. Smith was President, AT&T Network Operations. From March 2008 to December 2009, Mr. Smith was President, Local Network Operations at AT&T, where he was responsible for all local network-related operations across AT&T’s domestic footprint. From October 2007 to March 2008, Mr. Smith was AT&T’s Executive Vice President — Shared Services, in charge of mass market and enterprise operations, corporate real estate, procurement, regional wireline planning, and business planning and integration, and from January 2007 to October 2007 he served as AT&T’s Senior Vice President of Network Operations in the Southeast. Before AT&T’s acquisition of BellSouth Corporation in December 2006, Mr. Smith served as Chief Technology Officer for BellSouth from 2001 until December 2006, responsible for setting the overall technology direction for BellSouth’s core infrastructure. In that position, he was responsible for network and operations technology, internet protocol applications, next generation strategy, and BellSouth Entertainment, LLC. He served in a variety of roles at AT&T between February 1979 and 2001. Mr. Smith graduated with honors from North Carolina State University at Raleigh in 1979, and was on the board of advisors of its graduate school for several years. He is the former chairman of the board of the Make a Wish Foundation of Georgia and Alabama and has served on several other non-profit boards. With Mr. Smith’s previous service as a director of Opnext, he brings to the Board extensive knowledge of our business, operations, products and industry. In addition, his more than three decades of service in various management and executive positions at a large, international telecommunications company enables Mr. Smith to make a significant contribution in his role as director, especially with respect to the operational and strategic issues we encounter. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Smith should serve as a director.
Class II Directors — Terms Expiring 2018
Greg Dougherty , 56, has served as Chief Executive Officer of Oclaro since June 2013 and has served as a director of Oclaro since April 2009. Prior to Oclaro, Mr. Dougherty served as a director of Avanex Corporation ("Avanex"), a leading global provider of Intelligent Photonic solutions™, from April 2005 to April 2009, when Avanex and Bookham merged to create Oclaro. Mr. Dougherty also served as a director of Picarro, Inc., a manufacturer of ultra-sensitive gas spectroscopy equipment using laser-based technology, from October 2002 to August 2013, and as its Interim Chief Executive Officer from January 2002 to April 2004. He also served on the board of directors of the Ronald McDonald House at Stanford from January 2004 to December 2009. From February 2001 until September 2002, Mr. Dougherty was the Chief Operating Officer at JDS Uniphase Corporation (JDS), an optical technology company. Prior to JDS he was the Chief Operating Officer of SDL, Inc., from March 1997 to February 2001 when they were acquired by JDS. From 1989 to 1997, Mr. Dougherty was the Director of Product Management and Marketing at Lucent Technologies Microelectronics in the Optoelectronics Strategic Business Unit. Mr. Dougherty received a B.Sc. degree in Optics in 1983 from the University of Rochester. Mr. Dougherty brings significant leadership, operations, sales, marketing and general management experience to the Board. Mr. Dougherty provides the Board with valuable insight into management’s perspective with respect to our operations. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Dougherty should serve as a director.
Marissa Peterson , 54, was elected Chairman of the Board of Directors in June 2013 and has served as a director of Oclaro since July 2011. She currently runs an executive coaching and management consulting practice. Ms. Peterson was formerly Executive Vice President, Worldwide Operations, Services and Customer Advocacy for Sun Microsystems Inc., a seller of computers, computer components, computer software, and information technology services until her retirement in 2005 after 17 years with the company. From August 2008 to the present, Ms. Peterson has served as a director of Humana Inc., a healthcare benefits and insurance provider, and is currently a member of their nominating and corporate governance and organization and compensation committees. From August 2006 to the present, she has served as a director for Ansell Limited, a public company listed on the Australia Stock Exchange and a global leader in safety and protection solutions, where she is currently a member of the audit and compliance committee and chairperson of the risk committee. She previously served as a director of Supervalu Inc., the Lucile Packard Children’s Hospital at Stanford, Quantros, Inc., and served on the board of trustees of Kettering University. Ms. Peterson has received the distinction of

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being an NACD (National Association of Corporate Directors) Board Leadership Fellow. She earned an M.B.A. from Harvard University, and an honorary doctorate of management and a B.S. in mechanical engineering from Kettering University. Ms. Peterson brings to the Board her extensive knowledge in the areas of operations, management, and customer relations, as well as experience as a senior executive of a large, global, complex and well-respected technology company. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Peterson should serve as a director.
Class III Directors — Nominees for Election to the Board at the 2016 Annual Meeting
Kendall Cowan,  62, has served as a director of Oclaro since July 2012. Prior to Oclaro, Mr. Cowan served on Opnext’s Board of Directors from March 2007 through July 2012. Mr. Cowan has served as Chairman and Chief Executive Officer of The Cowan Group, LLC, an investment and consulting firm, since January 2000, and Chairman and Chief Executive Officer of Cowan Holdings, Inc., since October 2006. Mr. Cowan is also a shareholder and board member of several privately owned businesses. In addition, Mr. Cowan currently serves as a board member of Lea County Bancshares, Inc., and served as a board member and chairman of the audit committee of DBSD North America, Inc., a provider of satellite and terrestrial wireless service, from 2006 until March 2012. Mr. Cowan was the Chief Financial Officer of Alamosa Holdings, Inc., a wireless telephone network operator, from December 1999 until February 2006, and he served on the Board from April 2003 to February 2006. He became a partner in an international public accounting firm in 1983, and from January 1986 until September 1993 he was a partner at Coopers & Lybrand. Mr. Cowan received his Bachelor’s in Business Administration in accounting in 1976 from Texas Tech University. He is a Certified Public Accountant and a member of both the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. Mr. Cowan brings significant financial management and financial disclosure experience, as well as significant knowledge of Opnext’s history and experiences to the Board. Mr. Cowan also brings to the Board his extensive knowledge in the areas of finance, management, financial reporting, and controls and experience as a leader of a well-respected telecommunications company and as a partner at a large international public accounting firm. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Cowan should serve as a director.
Joel A. Smith III, 71 has served as a director since April 2009 and served as lead independent director of Oclaro between July 2011 and June 2013. Prior to Oclaro, Mr. Smith served as a director of Avanex Corporation from December 1999 to April 2009, when Avanex and Bookham merged to create Oclaro. Mr. Smith was the Dean of the Darla Moore School of Business of the University of South Carolina from October 2000 to December 2007. Previously, Mr. Smith served as the President of Bank of America East, a financial institution, from October 1998 to September 2000. From July 1991 to October 1998, Mr. Smith served as President of Nations Bank Carolinas, a financial institution. Mr. Smith earned a bachelor’s degree in political science and economics from the University of the South. Mr. Smith brings significant financial management and financial disclosure experience, as well as significant knowledge of Avanex’s history and experiences to the Board. Mr. Smith brings to the Board his extensive knowledge in the areas of finance, management, financial reporting, and controls and experience as a leader of large, well-respected financial institutions. Mr. Smith also brings to the Board significant experience in corporate governance matters, which gives him the ability to assist in governance decisions and related responsibilities. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Smith should serve as a director.
Executive Officers
Greg Dougherty, see “Class II Directors — Terms Expiring 2018” above.
Oclaro Management Team
Dr. Adam Carter, 52 , has served as Oclaro's Chief Commercial Officer since July 2014. Prior to joining Oclaro, he served as the Senior Director and General Manager of the Transceiver Module Group at Cisco Systems, Inc. ("Cisco") from February 2008 to July 2014, where he was instrumental in the acquisition of Lightwire, a Silicon Photonics start-up. He also served as a Marketing Director at Cisco from February 2007 to February 2008. From September 1994 to February 2007, Dr. Carter held various strategic marketing and business development roles at Avago Technologies, Agilent Technologies and Hewlett Packard. In addition, Dr. Carter was a Process and Device Engineer at British Telecom & Dupont from November 1989 to September 1994. Dr. Carter holds a B.Sc. (Honors) in Applied Physics from Portsmouth University and received a PhD from the University of Wales, Cardiff, for his research on plasma etching of III-V semiconductor materials.
Jim Haynes , 54, has served as Oclaro's Chief Operating Officer since May 2014. Prior to this, Mr. Haynes was President of Integrated Photonics Business from November 2013 to April 2014. He was also President of Global Business from May 2012 to October 2013, with responsibility for Oclaro's Business Units. From January 2011 to May 2012, he was President and General Manager, Photonic Components, for Oclaro. From March 2005 until January 2011, he served as Chief Operating Officer of the company. From August 2004 to March 2005, Mr. Haynes was the company's Vice President, U.K. Operations. From June 2003 to

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August 2004, Mr. Haynes served as Vice President, Operations, and Site Leader, Caswell, for the company. From December 2000 to June 2003, Mr. Haynes served as Chief Operating Officer of Agility Communications, Inc., a tunable laser company. From 1998 to December 2000, Mr. Haynes served as Director of Technology for Nortel Networks Corporation. Mr. Haynes earned a bachelor's degree (honors) in material sciences and technology from Swansea University, Wales.
Yves LeMaitre, 52 , has served as Oclaro's President of Optical Connectivity Business since October 2013. Prior to this, Mr. LeMaitre was Oclaro's Chief Commercial Officer from July 2011 to September 2013. He previously served as Executive Vice President, Strategy and Corporate Development, from February 2011 to July 2011, and was Executive Vice President and General Manager of Oclaro's Advanced Photonic Solutions division from April 2009 to January 2011. Previously, Mr. LeMaitre served as Vice President of Telecommunications Sales and Corporate Marketing for the company from February 2008 to April 2009. From May 2005 to December 2007, Mr. LeMaitre was with Avanex, most recently serving as Chief Marketing Officer in charge of worldwide sales and marketing. Previously, Mr. LeMaitre was President and Chief Executive Officer of Lightconnect, a leading supplier of optical MEMS components and modules. In addition, he worked for Alcatel and its joint venture with Sprint International in a variety of general management, senior marketing and engineering positions in the United States, France, the Netherlands and Italy. Mr. LeMaitre earned a master's degree in mathematics and computer science from Nantes University in France. He also holds an engineering degree from Ecole Nationale Superieure des Telecommunications (ENST) in Paris.
Pete Mangan , 57 , has served as Chief Financial Officer (CFO) since November 2013. From May 2012 to November 2013, Mr. Mangan served as Oclaro’s Vice President of Corporate Finance where he was initially responsible for the global operations finance team and then the corporate accounting and tax group. Mr. Mangan brings Oclaro nearly 30 years of experience in a wide range of finance positions with leading companies including AMD, Trident Microsystems, FormFactor, Spansion, Asyst Technologies, and Sun Microsystems. Mr. Mangan served as CFO at Trident Microsystems from 1996 to 1998 and again from 2008 to 2012. Trident Microsystems, Inc. filed for Chapter 11 bankruptcy protection in January 2012 and subsequently liquidated in accordance with its plan of liquidation. He holds a bachelor's degree in Business Economics from the University of California, Santa Barbara.

Dr. Beck Mason, 49 , has served as President, Integrated Photonics Business, since September 2016.  From January 2015 to September 2016, Dr. Mason served as Oclaro’s Senior Vice President of R&D, Integrated Photonics Business.  Prior to joining Oclaro, from February 2007 to January 2015, he served in a variety of management positions at JDSU Corporation, a company that designed and manufactured products for optical communications networks, communications test and measurement equipment, lasers, optical solutions for authentication and decorative applications, and other custom optics, most recently as its Vice President of R&D for Transmission Products.  Prior to 2007, Dr. Mason served in a variety of technology management roles at Collinear, Finisar Corporation, Agere Systems and Lucent Technologies Bell Laboratories.  He holds a Bachelors degree in Engineering from the University of Waterloo in Canada, a Masters degree in Aerospace Engineering from the University of Toronto in Canada and a Ph.D. degree in Electrical and Computer Engineering from the University of California at Santa Barbara.
Lisa Paul, 52, has served as Oclaro's Executive Vice President, Human Resources since November 2014. Prior to joining Oclaro, she served from April 2012 to November 2014 as the Vice President, Talent Management of Flextronics International, a public supply chain solutions company, and from June 2011 to March 2013 as the Vice President, Human Resources Business Partner of its Integrated Network Solutions Business Group. From May 2006 to June 2011 she served as a Human Resources Business Partner with Cisco. Prior to Cisco, Ms. Paul served in a variety of human resources roles at Sun Microsystems and other companies.
David Teichmann, 60, has served as Oclaro's Executive Vice President, General Counsel and Corporate Secretary since January 2014. Prior to joining Oclaro, he served from April 2007 to December 2012 as the Executive Vice President, General Counsel and Corporate Secretary of Trident Microsystems, Inc., a public fabless semiconductor company that sold television and set top box integrated circuits. Trident Microsystems, Inc. filed for Chapter 11 bankruptcy protection in January 2012 and subsequently liquidated in accordance with its plan of liquidation. From August 1998 to February 2006, he served as the Senior Vice President, General Counsel and Secretary of GoRemote Internet Communications, Inc., a secure managed global remote access solutions provider, guiding the company through its initial public offering in 1999 and its acquisition by iPass, Inc. in 2006. From 1993 to July 1998, he served in various positions at Sybase, Inc., an enterprise software company, including Vice President, International Law as well as Director of European Legal Affairs based in The Netherlands. From 1989 to 1993, Mr. Teichmann was Assistant General Counsel for Tandem Computers Corporation, a fault tolerant computer company, handling legal matters in Asia-Pacific, Japan, Canada and Latin America. He began his legal career as an attorney with the Silicon Valley-based Fenwick & West LLP. Mr. Teichmann holds a B.A. degree in Political Science from Trinity College, an M.A.L.D. degree in Law & Diplomacy from the Fletcher School of Law & Diplomacy and a J.D. degree from the William S. Richardson School of Law at the University of Hawaii. He was also a Rotary Foundation Scholar at the Universidad Central de Venezuela, where he did post-graduate work in Latin American Economics and Law.


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Director Compensation
The Board believes that providing competitive compensation is necessary to attract and retain qualified non-employee directors. However, the Board is also mindful of our compensation budget and cash constraints. During fiscal year 2016, each of our non-employee directors received an annual retainer (paid quarterly) of $34,000, except the chairman of the board, who received an annual retainer (paid quarterly) of $85,000. During fiscal year 2016, the chairman of the audit committee received an additional annual retainer (paid quarterly) of $39,950, the chairman of the compensation committee received an additional annual retainer (paid quarterly) of $21,250 and the chairman of the nominating and corporate governance committee received an additional annual retainer (paid quarterly) of $18,275. Each member of the audit committee other than its chairman received an additional $8,500 annual retainer (paid quarterly). Each member of the compensation committee other than its chairman received an additional $5,950 annual retainer (paid quarterly). Each member of the nominating and corporate governance committee other than its chairman received an additional $4,250 annual retainer (paid quarterly). No additional compensation was paid to any director based on the number of meetings attended in fiscal year 2016. We reimbursed our non-employee directors for reasonable out-of-pocket expenses incurred in attending Board and committee meetings. The following table shows the Board and Board committee retainers for fiscal year 2016.
Board of Director/Committee Position
Annual Retainer
 
 
Board Chairman
$
85,000

Board Member (non-Chairman)
$
34,000

Audit Committee Member (non-Chairman)
$
8,500

Audit Committee Chairman
$
39,950

Compensation Committee Member (non-Chairman)
$
5,950

Compensation Committee Chairman
$
21,250

Nominating and Corporate Governance Committee Member (non-Chairman)
$
4,250

Nominating and Corporate Governance Committee Chairman
$
18,275

Fiscal 2016 Director Compensation Table
The following table sets forth information concerning the compensation of our non-employee directors for fiscal year 2016:
Name (1)
Fees Earned or
Paid in Cash ($)
 
Stock
Awards
($)(2)
 
Option
Awards($)
 
All Other
Compensation($)
 
Total ($)
Edward B. Collins
$
50,150

 
$
118,498

 

 

 
$
168,648

Kendall Cowan
$
68,425

 
$
118,498

 

 

 
$
186,923

Lori Holland
$
84,150

 
$
118,498

 

 

 
$
202,648

Marissa Peterson
$
85,850

 
$
118,498

 

 

 
$
204,348

Joel A. Smith III
$
59,500

 
$
118,498

 

 

 
$
177,998

William L. Smith
$
38,675

 
$
118,498

 

 

 
$
157,173

 
(1)
The compensation information for Mr. Dougherty is set forth below under “Compensation Discussion and Analysis” and the corresponding compensation tables, footnotes and accompanying narratives. Ms. Haylor joined the Board in August 2016 and, therefore, did not receive any compensation from us during fiscal year 2016.
(2)
The amounts reported in this column reflect the grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation ("ASC 718"), of the restricted stock awards granted during the fiscal year ended July 2, 2016. There can be no assurance that the ASC 718 amounts will ever be realized. The assumptions we used to calculate these amounts are included in Note 11 to our audited consolidated financial statements included in our 2016 Annual Report filed with the SEC on August 26, 2016. All the restricted stock awards listed were granted on November 10, 2015.

The following table sets forth the number of shares of our common stock subject to outstanding stock awards and option awards held by each of our non-employee directors as of the end of fiscal year 2016.

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Name
 
Stock Awards (A)
 
Option Awards (B)
Edward B. Collins
 
34,750

 
35,779

Kendall Cowan
 
34,750

 

Lori Holland
 
34,750

 
38,779

Marissa Peterson
 
34,750

 
17,046

Joel A. Smith III
 
34,750

 
34,454

William L. Smith
 
34,750

 

 
 
(A) Stock awards consist of unvested shares of our common stock subject to such awards.
(B) Option awards include vested (but unexercised) shares of our common stock subject to such awards.
 
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and the holders of more than 10% of our common stock to file with the Commission initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% stockholders are required by Commission regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of copies of reports filed by the reporting persons furnished to us, or written representations from such reporting persons, we believe that, during fiscal year 2016, all filings required to be made by our reporting persons were timely made in accordance with the requirements of Section 16(a) of the Exchange Act, except as follows: one Form 4 was filed late for each of Adam Carter, Greg Dougherty, Mike Fernicola, Jim Haynes, Yves LeMaitre, Pete Mangan, Lisa Paul and David Teichmann, in each case, relating to a PSU for which the performance condition was achieved in October 2015, but not reported until the first vesting in August 2016.
COMPENSATION COMMITTEE REPORT
The information contained under this “Compensation Committee Report” shall not be deemed to be “soliciting material” or to be “filed” with the Commission, nor shall such information be incorporated by reference into any filings under the Securities Act of 1933, as amended, or under the Exchange Act, or be subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate this information by reference into any such filing.
The compensation committee of the Board has reviewed and discussed with management the Compensation Discussion and Analysis below. Based on this review and discussion, the compensation committee recommended to the Board that the Compensation Discussion and Analysis be included in our proxy statement for the 2016 annual meeting of stockholders and in our 2016 Annual Report.
Submitted by the compensation committee of the Board of Directors:
Denise Haylor, Chair
Kendall Cowan
William Smith


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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides information regarding the fiscal year 2016, or fiscal 2016, compensation program for our Chief Executive Officer, our Chief Financial Officer, and our three most-highly compensated executive officers (other than our Chief Executive Officer and Chief Financial Officer) who were serving at the end of fiscal 2016. For fiscal 2016, these individuals -- our Named Executive Officers -- were:
Greg Dougherty, our Chief Executive Officer;
Pete Mangan, our Chief Financial Officer;
Jim Haynes, our Chief Operating Officer;
Yves LeMaitre, our President, Optical Connectivity Business; and
David Teichmann, our Executive Vice President, General Counsel and Corporate Secretary.
Executive Summary
During fiscal 2016, we were one of the leading providers of optical components, modules and subsystems for the core optical transport, service provider, enterprise and data center markets. Leveraging over three decades of laser technology innovation, photonic integration and subsystem design, we provide differentiated solutions for optical networks and high-speed interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications.
Given that we operate in this highly competitive and cyclical industry, we have focused on achieving positive EBITDA and controlling expenses during the past few years, doing so in part through the conservative use of cash and equity compensation for our officers and our employees. For fiscal 2016, our principal objective was to achieve operating income for the first time since fiscal 2010, primarily by increasing revenues and improving gross margins . During fiscal 2016, we achieved our principal objective, and thoughtfully rewarded our employees, including our officers, through cash and equity compensation.
Fiscal 2016 Business Highlights
For fiscal 2016, we achieved the following positive results:

Positive GAAP operating income of $15.8 million, as compared to GAAP operating losses of $45.5 million and $102.3 million in fiscal 2015 and fiscal 2014, respectively.

Annual revenue of $407.9 million, a 20% increase from $341.3 million in fiscal 2015, in part by becoming the market leader in 100G client side products and achieving critical milestones in our new flagship product, CFP2-ACO.

Adjusted EBITDA of $13.2 million for the first half of fiscal 2016 and adjusted EBITDA of $27.7 million for the second half, as compared to negative $14.4 million for the first half of fiscal 2015 and negative $6.5 million for the second half of fiscal 2015. Please see Annex A for a reconciliation of our GAAP net income to adjusted EBITDA for the first and second halves of fiscal 2016 and fiscal 2015, respectively.

Reduced GAAP operating expenses over a three year period, from $154.8 million in fiscal 2014, to $102.2 million in fiscal 2015, and then to $100.6 million in 2016.

Increased our gross margin to 28.5% for fiscal 2016, as compared to 16.6% in fiscal 2015.
Fiscal 2016 Executive Compensation Actions
On behalf of our Board of Directors, the compensation committee of the Board (the "Compensation Committee") closely monitored our executive compensation levels throughout fiscal 2016. Key compensation decisions for fiscal 2016 were as follows:

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Salary : Effective January 1, 2016, the Compensation Committee reinstated base salaries for our executive officers at the levels in effect in early fiscal 2013, in recognition of our improved financial condition through the end of fiscal 2015 and the first half of fiscal 2016, and the critical role our executive officers played in reducing expenses and increasing profitability.
Annual Cash Incentive Awards : The Compensation Committee transitioned our semi-annual cash incentive program metric during fiscal 2016 from an adjusted EBITDA-based metric, which we have used as a semi-annual metric in prior fiscal years, to operating income, to focus our executive officers on the next phase of corporate growth. Specifically, after achieving positive adjusted EBITDA in the first half of fiscal 2016 for the first time since fiscal 2011, the Compensation Committee selected operating income as the metric for the second half of fiscal 2016. We exceeded the target levels established for each of the first and second halves of fiscal 2016. However, our executive officers requested that they receive less than the full cash incentive bonuses which they were eligible to receive based on company performance, so that this cash could be used to provide bonuses to our broad-based employees who were not otherwise part of our annual incentive compensation program. In recognition of this team-centric sacrifice by our executive officers, our Compensation Committee granted these executive officers a one-time special restricted stock unit award that vests over fiscal 2017, providing additional retention incentives while recognizing the contributions of our executive officers to the success of fiscal 2016.
Equity Awards : In August 2015, we granted each of the Named Executive Officers an annual equity award comprised of both a performance-based restricted stock unit award and a time-based restricted stock unit award. Approximately 56% of the annual equity award value granted our Chief Executive Officer and 50% of the equity award value granted to each other executive officer was in the form of a performance-based restricted stock unit award to be earned based on achievement of positive free cash flow in any fiscal quarter ending prior to June 30, 2018. Any shares earned pursuant to the performance-based restricted stock unit award will vest over three years from the date of grant. The remaining equity award value was granted in the form of time-based restricted stock unit awards vesting over three years.
In fiscal 2016, 53% of our Chief Executive Officer's target total direct compensation was performance-based and, thus, only paid or earned to the extent that we achieved one or more pre-established performance objectives.
CEOPAYTARGET2016.JPG     
Fiscal 2016 Executive Compensation Policies and Practices
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program on an ongoing basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following policies and practices continued in effect during fiscal 2016:
Independent Compensation Committee. The Compensation Committee is comprised solely of independent directors who have established effective means for communicating with our stockholders regarding their executive compensation ideas and concerns.

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Independent Compensation Committee Advisors. The Compensation Committee engaged its own compensation consultant to assist with its fiscal 2016 compensation reviews. This consultant performed no consulting or other services for the Company.
Annual Executive Compensation Review. The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation peer group used for comparative purposes and a review of our compensation-related risk profile to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the Company.
Executive Compensation Policies and Practices. Our compensation philosophy and related corporate governance policies and practices are complemented by several specific compensation practices that are designed to align our executive compensation with long-term stockholder interests, including the following:
Compensation At-Risk. Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on corporate performance, as well as equity-based to align the interests of our executive officers and stockholders.
No Perquisites. We do not provide any perquisites or other personal benefits to our executive officers
No Tax Reimbursements. We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than standard relocation benefits.
No Special Health or Welfare Benefits. Our executive officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.
No Post-Employment Tax Reimbursements. We do not provide any tax reimbursement payments (including “gross-ups”) on any severance or change-in-control payments or benefits.
“Double-Trigger” Change-in-Control Arrangements. All change-in-control payments and benefits are based on a “double-trigger” arrangement (that is , they require both a change-in-control of the Company plus a qualifying termination of employment before payments and benefits are paid).
Performance-Based Incentives. We use performance-based short-term and long-term incentives.
Multi-Year Vesting Requirements. The equity awards granted to our executive officers generally vest or are earned over multi-year periods, consistent with current market practice and our retention objectives. Since fiscal 2014, we have steadily increased the time-based vesting period for our restricted stock unit awards, with the awards granted in August 2016 having a four-year time-based vesting requirement.
Hedging and Pledging Prohibited. We prohibit our employees from hedging any Company securities or pledging any Company securities.
Fiscal 2016 Stockholder Advisory Vote on Executive Compensation
At our fiscal 2015 Annual Meeting of Stockholders, we conducted a stockholder advisory vote on the fiscal 2015 compensation of the Named Executive Officers (commonly known as a “Say-on-Pay” vote). Our stockholders approved the fiscal 2015 compensation of the Named Executive Officers with approximately 96% of the votes cast in favor of the proposal.
We believe that the outcome of the Say-on-Pay vote reflects our stockholders’ support of our compensation approach, specifically our efforts to attract, retain, and motivate the Named Executive Officers. Accordingly, no significant design changes were made in response to the fiscal 2015 Say-on-Pay vote. Further, any design changes resulting from the Say-on-Pay vote would not typically show up in compensation until the following fiscal year due to the timing of our annual meeting of stockholders compared to the timing of our annual executive compensation decisions.
We value the opinions of our stockholders and will continue to consider the outcome of future Say-on-Pay votes, including the vote to be held at this Annual Meeting, as well as feedback received throughout the year, when making compensation decisions for our executive officers, including the Named Executive Officers.
Based on the results of a separate stockholder advisory vote on the frequency of future stockholder advisory votes regarding the compensation of the Named Executive Officers (commonly known as a “Say-When-on-Pay” vote)

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conducted at our fiscal 2011 Annual Meeting of Stockholders, the Board determined that we will hold our Say-on-Pay votes on an annual basis. The next stockholder advisory vote on the frequency of future stockholder advisory votes regarding the compensation of the Named Executive Officers will take place at the fiscal 2017 Annual Meeting of Stockholders.
Compensation Philosophy and Objectives
We believe that the quality, skills, and dedication of our executive officers are critical factors affecting our performance and stockholder value. Accordingly, the key objective of our executive compensation program is to attract, retain, and motivate superior executive talent while maintaining an appropriate cost structure. In addition, we seek to implement an overarching pay-for-performance philosophy by designing our executive compensation program to link a substantial component of our executive officers’ target total direct compensation to the achievement of performance objectives that directly correlate to company objectives and the long-term enhancement of stockholder value. Thus, the Compensation Committee believes that the compensation paid to our executive officers should be closely aligned with our corporate performance on both a short-term and long-term basis, linked to specific, measurable results such as adjusted EBITDA and operating income, and that such compensation should assist us in motivating and retaining the key executive officers critical to our long-term success. Finally, our executive compensation program is designed to maintain an appropriate balance of annual and long-term incentive compensation opportunities to ensure an appropriate focus on operational objectives and the creation of long-term stockholder value.
Compensation Program Design
To accomplish the foregoing objectives, for fiscal 2016, the Compensation Committee structured our executive compensation program to include the following principal compensation elements:

Base salaries at levels that we believe allow us to attract and retain key executive officers, but that also reflect changes in our financial position;

Semi-annual cash incentive compensation opportunities tied to the achievement of pre-established performance goals related to the important financial objectives set forth in our annual operating plan;

Long-term incentive compensation in a mix of restricted stock restricted stock unit and performance-based restricted stock unit awards, to align the interests of our executive officers with those of our stockholders and to promote our performance and retention objectives; and

Limited post-employment compensation arrangements payable on an involuntary termination of employment, with the cash component not exceeding three times the executive’s annual cash compensation.
Generally, the Compensation Committee seeks to allocate a substantial portion of our executive officers’ target total direct compensation opportunity to elements that are performance-based and, therefore, “at risk.” including cash and equity based incentives. However, the Compensation Committee does not maintain formal policies for allocating between annual and long-term compensation or between cash and non-cash compensation. Instead, the Compensation Committee maintains flexibility and adjusts different elements of compensation based upon its evaluation of our financial position (including cash needs), the impact on stockholder dilution, hiring and retention concerns, and the compensation mix paid by our peers.
While compensation levels may differ among our executive officers, including the Named Executive Officers, based on the role, responsibilities and performance of each individual executive officer, there are no material differences in the compensation philosophy, policies, or practices among our executive officers.
Compensation-Setting Process
The Compensation Committee is the primary architect of our executive compensation program. The Compensation Committee conducts an annual review of our executive compensation strategy to ensure that it is appropriately aligned with our business strategy, reflective of our compensation philosophy and working toward our desired objectives. The Compensation Committee also reviews market trends and changes in compensation practices. Based on its review and assessment, the Compensation Committee either approves, or recommends to the Board for approval, the annual changes in our executive compensation program.

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For fiscal 2016, the Compensation Committee reviewed and either approved, or recommended to the Board for approval, the compensation for each of our Named Executive Officers. The Compensation Committee also oversaw management’s decisions concerning the compensation of other company officers and employees, administered our equity compensation plans, and evaluated the effectiveness of our overall executive compensation program.
The Compensation Committee’s authority, duties, and responsibilities are described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available at investor.oclaro.com/governance.cfm.
Role of Executive Officers
In formulating its compensation decisions, the Compensation Committee meets with our Chief Executive Officer to obtain his feedback and recommendations with respect to the structure of our executive compensation program, as well as his assessment of the performance of each of the other executive officers and his recommendations on the compensation for each other executive officer. In addition, our Chief Executive Officer, Chief Financial Officer and senior Human Resources leaders develop recommendations for performance measures and target award opportunities under our annual cash incentive compensation plan based on management’s business forecast both at the company and business unit levels, as well as provide information at year end regarding individual and company performance. Our General Counsel also supports the Compensation Committee's review and deliberations on compensation programs, as and when requested by the Compensation Committee.
Role of Compensation Consultant
The Compensation Committee has the authority to retain the services of external advisors, including compensation consultants, legal counsel, accounting, and other advisors. During fiscal 2016, the Compensation Committee continued to directly engage Compensia, Inc., a national compensation consulting firm (“Compensia”), as its adviser for executive officer and director compensation, and broad based equity compensation matters. More specifically, Compensia:

Reviewed and provided market data on executive officer and director cash and equity compensation;

Reviewed and provided recommendations on the annual and long-term incentive compensation award design;

Reviewed and provided an analysis of annual share utilization and stockholder dilution levels resulting from our employee stock plans;

Reviewed and provided recommendations for the proposed amendment of our Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan submitted to our stockholders for approval in our proxy statement for fiscal 2015; and

Reviewed and provided comments on the Compensation Discussion & Analysis section of our proxy statement for fiscal 2015.
In fiscal 2016, the Compensation Committee considered the independence of Compensia in light of the listing standards of NASDAQ on compensation committee independence and the rules of the Securities and Exchange Commission. Based on these standards and rules, the Compensation Committee has concluded that the work performed by Compensia did not raise any conflict of interest.
Competitive Positioning
During fiscal 2015, the Compensation Committee directed Compensia to develop and recommend a compensation peer group to be used as a reference in its executive compensation deliberations for fiscal 2016. In conducting this project, Compensia reviewed, but did not rely on, the compensation peer group originally developed for use in fiscal 2013, which was the last time that the Compensation Committee had made use of competitive market data as part of its decision-making process. Among other things, Compensia developed this compensation peer group to reflect our market capitalization, recognize our evolving business focus, and account for acquisitions of prior peer companies. The companies in this compensation peer group were selected on the basis of their similarity to us, based on the following criteria:


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similar revenue size - ~0.5x to ~2.5x our last four fiscal quarter revenue of approximately $383 million (approximately $200 million to approximately $1.0 billion);

similar market capitalization - ~0.25x to ~6.0x our market capitalization of $158 million (approximately $40 million to approximately $1.0 billion);

industry - communications equipment (with a focus on optical networking) and semiconductor and hardware (with a focus on networking/communications);

executive positions similar in breadth, complexity, and/or scope of responsibility; and

competitors for executive talent.

As a result, the Compensation Committee approved a revised compensation peer group for use in fiscal 2016 consisting of the following companies:

Alliance Fiber Optic Product
Electro Scientific
NeoPhotonics
Applied Optoelectronics
Extreme Networks
Newport
Aviat Networks
Harmonic
Novatel Wireless
Bel Fuse
Hutchinson Technology
Radisys
Black Box
Ixia
ROFIN-SINAR Technologies
Calix
MRV Communications
TESSCO Technologies
Comtech Telecommunications
 
 

To analyze the compensation practices of the companies in our compensation peer group, Compensia gathered data from public filings (primarily proxy statements) for the peer group companies. This market data was then used as a reference point for the Compensation Committee to assess our current compensation levels in the course of its deliberations on compensation forms and amounts.

Going forward, the Compensation Committee intends to review and update the compensation peer group as needed and make adjustments to its composition, taking into account changes in both our business and the businesses of the companies in the peer group.
Explanation of Decisions Made with Respect to Fiscal 2016 Compensation
Base Salary
As noted above, we generally rely on base salaries to attract and retain key executive officers. At the start of fiscal 2016, the Compensation Committee evaluated our performance in fiscal 2015, determined the relative stability of our annual cash flow and reviewed the strong steady progress our Named Executive Officers have made in bringing the Company closer to profitability over the past three years. Based on these considerations, effective in January 2016, the Compensation Committee approved the restoration of base salaries for our executive officers to the levels in effect at the start of fiscal year 2013. Mr. Teichmann joined the Company in January 2014, and the Compensation Committee set his initial base salary taking into account internal pay equity with the Company’s other executive officers. Therefore, effective in February 2016, in recognition of his strong contribution to our performance over the prior two years without any interim increase in his base salary, our Chief Executive Officer recommended, and our Compensation Committee approved, a 10% increase in Mr. Teichmann’s base salary.
Annual Cash Incentive Compensation
We use performance-based cash incentives to motivate our executive officers to focus on specific goals established by the Board in our annual operating plan, to provide additional cash compensation opportunities beyond base salary in a manner that is consistent with our peers’ practices, and to recognize and reward achievement above our targeted levels of performance. For fiscal 2016, the Compensation Committee recommended, and our Board approved, maintaining the semi-annual performance period structure we have used since fiscal 2008. The Compensation Committee believed that, in our current environment, and with the rapid progress toward positive

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adjusted EBITDA, the semi-annual performance period structure would enable us to set goals that allow our executive officers to focus more effectively on our transitioning financial goals. That is, in prior years, we focused our executive officers on achieving positive adjusted EBITDA. As we approached that goal, we wanted to be able to have our executive officers shift to focusing on operating income.
For fiscal 2016, the Compensation Committee recommended, and the Board decided, that in consideration of the restoration of base salaries, and the impact that has on target bonus levels, no changes would be made to the target bonus opportunities for each executive officer. As such, Mr. Dougherty’s target bonus opportunity remained at 100% of his base salary and each of our other executive officers continued to have a target bonus opportunity equal to 60% of his or her base salary.
First Half of Fiscal 2016
Our Chief Executive Officer recommended to the Compensation Committee that the performance measure for the first half of fiscal 2016 (that is, the period ending December 26, 2015) be "VPP Adjusted EBITDA", with a threshold performance level of $2 million (resulting in payout of 50% of the target bonus opportunity), a target performance level of $6 million, and a stretch goal of $10 million (resulting in payout of 150% of the target bonus opportunity for executive officers other than Mr. Dougherty, whose stretch payout was 200% of his target bonus opportunity). Our Compensation Committee agreed with management’s recommendation, and recommended to the Board, and the Board approved, these metrics, to encourage our executive officers to continue to work to achieve positive adjusted EBITDA for the first time since fiscal 2011, as adjusted EBITDA is an important financial indicator of profitable growth and cash generation. The Compensation Committee believed that establishing threshold and maximum payout levels under our program would provide a means to mitigate risk associated with this incentive compensation program, while also providing motivation to exceed expectations.
For purposes of the fiscal 2016 annual cash incentives, "VPP Adjusted EBITDA" was calculated as net income/loss excluding the impact of income taxes, net interest income/expense, depreciation and amortization, net gains/losses on foreign currency transactions, as well as restructuring, acquisition and related costs, non-cash compensation related to stock and options, and other unusual one-time charges, and further excluding the impact on EBITDA of certain foreign exchange rate fluctuations.
At the conclusion of the first half of fiscal 2016, our Compensation Committee determined that we had achieved $14.7 million in VPP Adjusted EBITDA. This performance would have resulted in a payout of 150% of the target bonus opportunity for each of the executive officers other than Mr. Dougherty, and 200% for Mr. Dougherty (as indicated in the column below showing the maximum payment). However, our executive officers requested that they receive less than the full cash incentive bonus which they were eligible to receive based on Company performance, so that this cash could be used to provide bonuses to a broader group of our employees who were not otherwise part of our annual incentive compensation program. Management believed that our employees played a critical role in reaching this VPP Adjusted EBITDA milestone and should be rewarded for their part in the team effort. As a result, the Compensation Committee approved a reduced payout (as show in the actual payout column below).
Named Executive Officer
First Half Fiscal 2016
Maximum Cash Incentive Award Payment
First Half Fiscal 2016
Actual Cash Incentive Award Payment
Mr. Dougherty
$
600,000

$
375,000

Mr. Mangan
$
157,500

$
131,250

Mr. LeMaitre
$
157,500

$
131,250

Mr. Haynes
$
141,845

$
118,204

Mr. Teichmann
$
135,000

$
112,500

In recognition of this team-centric sacrifice by our executive officers, our Compensation Committee granted each of our Named Executive Officers a one-time special restricted stock unit award, covering the number of shares set forth below. This one time award vests during the second half of fiscal 2017, providing additional retention incentives while recognizing the contributions of our executive officers to the success of fiscal 2016.
Named Executive Officer
Number of Shares
Grant Date Fair Value
Mr. Dougherty
 
66,000

 
$
271,260

Mr. Mangan
 
8,000

 
$
32,880

Mr. LeMaitre
 
8,000

 
$
32,880

Mr. Haynes
 
8,000

 
$
32,880

Mr. Teichmann
 
6,500

 
$
26,715


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Second Half of Fiscal 2016
For the second half of fiscal 2016 (that is, the six-month period ending July 2, 2016), our Chief Executive Officer recommended to the Compensation Committee that the performance measure be non-GAAP operating income, with a threshold performance level of $9 million (resulting in payout of 50% of the target bonus opportunity), a target performance level of $13.5 million, and a stretch performance goal of $18 million (resulting in payout of 150% of the target bonus opportunity for executive officers other than Mr. Dougherty, whose stretch payout was 200% of his target bonus opportunity). Our Compensation Committee agreed with management’s recommendation, and recommended to the Board, and the Board approved, these metrics, to encourage our executive officers to continue to work to achieve positive operating income for the first time since fiscal 2010.
At the end of the performance period, our Compensation Committee determined that we had achieved $19.7 million of non-GAAP operating income. This performance resulted in a payout of 150% of the bonus opportunity for each Named Executive Officer other than Mr. Dougherty, and 200% for Mr. Dougherty. Our Board approved the payments to the Named Executive Officers as follows.
Named Executive Officer
Second Half Fiscal 2016
Maximum Cash Incentive Award Payment
Second Half Fiscal 2016
Cash Incentive Award Payment
Mr. Dougherty
$
600,000

$
600,000

Mr. Mangan
$
157,500

$
157,500

Mr. LeMaitre
$
157,500

$
157,500

Mr. Haynes
$
141,845

$
141,845

Mr. Teichmann
$
148,500

$
148,500

Long-Term Incentive Compensation
We provide equity compensation opportunities to our executive officers to align their financial interests with those of our stockholders, to provide compensation that is consistent with the practices of our peers so that we can attract and retain qualified talent, and to motivate our executive officers to achieve specific performance vesting goals. We generally grant a mix of time-based and performance-based full value awards for annual retention and refresh grants, as we believe this is most consistent with current competitive market practices.
On August 10, 2015, each of the Named Executive Officers received an annual equity award comprised of a time-based restricted stock unit award and a performance-based restricted stock unit award. In order to align the interests of our executive officers with the interests of our stockholders, half of the value of such annual equity award granted to each executive officer other than our Chief Executive Officer, and 56.25% of the value of such annual equity award granted to our Chief Executive Officer was granted in the form of a performance-based restricted stock unit award to be earned based on the achievement of positive free cash flow (defined as adjusted EBITDA less capital expenditure) in any fiscal quarter ending prior to June 30, 2018. Any shares earned pursuant to the performance-based restricted stock unit award will vest over three years from the date of grant. Our Compensation Committee chose free cash flow as the performance metric as the next step in the progression from positive adjusted EBITDA, to positive operating income, to positive cash flow. The remaining amount of the value to be delivered was granted in the form of restricted stock unit awards subject to time-based vesting over three years (with a one year cliff and quarterly vesting thereafter).
In determining the value of each of these awards, the Compensation Committee and the Board considered competitive market data (based on the compensation peer group data), as well as its objective of creating a meaningful retention and performance incentive for each Named Executive Officer, managing internal pay equity, and balancing the impact of these awards on our burn rate and available reserves.
Health, Welfare, and Other Benefits
Our executive officers, including the Named Executive Officers, are eligible to participate in our employee benefit plans, which are generally provided for all full-time employees, including a tax-qualified Section 401(k) savings plan. We currently match any contributions made to the Section 401(k) plan by our employees, including our executive officers, of up to 4% of the employee’s compensation (up to a $265,000 annual salary limit).
In addition, we provide other benefits to our Named Executive Officers, on the same basis as all of our full-time employees in the country in which they are resident. These benefits include group health insurance (medical, dental, and vision), group disability insurance, and group life insurance.

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Perquisites and Other Personal Benefits

Currently, we do not provide any perquisites or other personal benefits to our Named Executive Officers. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation or retention purposes. We do not expect that these perquisites or other personal benefits will be a significant aspect of our executive compensation program. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.
Employment Agreements

We generally rely on "at-will" employment offer letters and do not have written employment agreements with a specified term of employment. However, we did enter into an "at-will" employment agreement with our current Chief Executive Officer, Mr. Dougherty, after he was hired, reflecting the slightly more complicated terms of his new hire compensation package and the significance of his service as our Chief Executive Officer. We also used a market-standard written agreement to document the terms and conditions of Mr. Haynes’ employment since such arrangements are customary in the United Kingdom.
Post-Employment Severance Benefits
Each of the Named Executive Officers other than Mr. Dougherty has entered into an Executive Severance and Retention Agreement (which we refer to as the "Retention Agreements"). These Retention Agreements provide, under certain circumstances, for payments and benefits upon an involuntary termination of employment following a change in control of the Company. In the case of Mr. Dougherty, his employment agreement provides for certain payments and benefits in similar circumstances (other than in connection with his death) as well as involuntary terminations of employment occurring in the absence of a change in control of the Company.
The payments and benefits payable under these arrangements in the event of a change in control of the Company are subject to a “double trigger,” meaning that both a change in control of the Company and a subsequent involuntary termination of employment are required. In other words, the change in control of the Company does not by itself trigger any payments or benefits. Instead, payments and benefits are paid only if the employment of the Named Executive Officer is subsequently terminated without “cause” (or the Named Executive Officer resigns for “good reason”) during a specified period following the change in control. We believe that a “double trigger” arrangement maximizes stockholder value because it prevents an unintended windfall to our executive officers in the event of a change in control of the Company, while still providing them appropriate incentives to cooperate in negotiating a transaction involving a potential change in control of the Company in which they believe they may lose their jobs.
We believe providing these arrangements helps us compete for and retain executive talent. After reviewing the practices of companies represented in the compensation peer group, we believe that our severance and change of control payments and benefits are generally comparable with severance packages offered to executive officers by the companies in the compensation peer group.
Other Compensation Policies

Equity Award Grant Policy

Our equity award grant policy provides that, in the case of newly-hired or newly-promoted executive officers, options to purchase shares of our common stock and restricted stock and restricted stock unit awards for shares of our common stock will be approved by the Compensation Committee at a regularly-scheduled quarterly meeting of the Board (or at a special meeting called between regularly-scheduled meetings of the Board). The grant date of equity awards for newly-hired executive officers approved by the Compensation Committee is (i) the 10th day of the month in which such approval occurs (if such approval occurs on or prior to the 8th day of such month), (ii) the 10th day of the following month (if such approval occurs after such 8th day) or (iii) such other date as the Compensation Committee determines, after giving due consideration to the purposes of this policy (or the next succeeding trading day on NASDAQ if such 10th day or other date so determined is not a trading day). However, if the award is an option to purchase shares of our common stock and the tentative grant date falls on a date on which the Company’s trading window is closed, the grant date of such option will be the date on which the trading window reopens.


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In accordance with our equity award grant policy, all new-hire and promotion equity awards for non-executive officers will be approved by the Compensation Committee, or, if so delegated, the Chairman of the Compensation Committee. The grant date of such equity awards is (i) the 10th day of the month in which award approval occurs (if such approval occurs on or prior to the 8th day of such month), (ii) the 10th day of the following month (if such approval occurs after such 8th day) or (iii) such other date as the Compensation Committee (or, if authority has been delegated, the Chairman of the Compensation Committee) determines, after giving due consideration to the purposes of the policy (or the next succeeding trading day on NASDAQ if such 10 th day or other date so determined is not a trading day).

All equity awards other than equity awards granted in connection with new hires or promotions will be approved by the Board, the Compensation Committee, or, if so delegated, the Chairman of the Compensation Committee. The grant date of such equity awards is (i) the 10th day of the month in which award approval occurs (if such approval occurs on or prior to the 8th day of such month), (ii) the 10th day of the following month (if such approval occurs after such 8th day) or (iii) such other date as the Compensation Committee (or, if authority has been delegated, the Chairman of the Compensation Committee) determines, after giving due consideration to the purposes of the policy (or the next succeeding trading day on NASDAQ if such 10th day or other date so determined is not a trading day). However, if the award is an option to purchase shares of our common stock and the tentative grant date falls on a date on which the Company’s trading window is closed, the grant date of such option will be the date on which the trading window reopens.

The Compensation Committee grants options to purchase shares of our common stock with exercise prices at least equal to the closing market price of our common stock on the date of grant.

Director Stock Ownership Policy
 
In August 2016, we adopted a Director Stock Ownership Policy that applies to our non-employee directors and our Chief Executive Officer. Each of our non-employee directors must attain a stock ownership target of five times his or her annual cash board service retainer, and our Chief Executive Officer must attain a stock ownership target of three times his annual base salary. Compliance for any fiscal year is measured on the first day of such fiscal year. Only vested shares directly owned by the individual (including joint ownership with a spouse or held in a permitted trust) and vested shares subject to a deferral election count toward the stock ownership target. Unexercised options (even if vested) and unvested compensatory equity awards do not count toward the stock ownership target. Until his or her stock ownership target is achieved, each affected individual must retain 50% of his or her shares received on vesting or exercise of compensatory equity awards (determined after reduction for shares used to pay for taxes or the exercise price). As of the first day of fiscal year 2017, each of our continuing non-employee directors and our Chief Executive Officer was in compliance with the Director Stock Ownership Policy. Ms. Haylor is required to achieve her stock ownership target by August 26, 2021 - the fifth anniversary of her appointment to the Board.
Derivatives Trading and Hedging Policy
The Board has adopted a policy regarding the trading of derivatives or the hedging of our equity securities by our employees, including our executive officers, and members of the Board. This policy provides that all employees and members of the Board are prohibited from engaging in certain forms of hedging or monetization transactions, such as zero-cost collars and forward sales contracts, that allow the employee or director to continue to own the covered securities, but without the full risks and rewards of ownership.
In addition to the foregoing, our executive officers and members of the Board are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan.
Compensation Recovery Policy
Currently, we have not implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to our executive officers and other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement. We intend to adopt a general compensation recovery (“clawback”) policy covering our incentive-based compensation arrangements once the SEC adopts final rules implementing the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.


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Tax and Accounting Considerations
Deductibility of Executive Compensation

The Compensation Committee considers the deductibility of executive compensation as just one of many factors when determining the form, size and terms of executive compensation elements. However, given our recent financial history, our applicable tax rates, and the loss of flexibility that arises when trying to comply with the requirements for full deductibility of executive compensation under Section 162(m) of the Code, the Compensation Committee has not prioritized deductibility over the other goals of our executive compensation program. Instead, the Compensation Committee reserves the discretion, in its judgment, to authorize compensation payments that do not comply with an exemption from the deduction limit when it believes that such payments are in the best interests of the Company.
Taxation of “Parachute” Payments
Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of the Company that exceeds certain prescribed limits, and that the Company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We are not obligated to provide any Named Executive Officer with a “gross-up” or other reimbursement payment for any tax liability that he may owe as a result of the application of Sections 280G or 4999 in the event of a change in control of the Company. While the Compensation Committee considers deductibility of compensation as one of many factors when determining the form, size and terms of executive compensation elements, the Compensation Committee retains the discretion, in its judgment, to authorize compensation payments that may not be fully deductible under Section 280G of the Code when it believes that such payments are in the best interests of the Company.
Accounting for Stock-Based Compensation
The Compensation Committee considers the accounting impact of equity awards when designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”), the standard which governs the accounting treatment of stock-based compensation awards. However, accounting cost is just one factor considered when designing such compensation plans and arrangements for our executive officers and other employees.
COMPENSATION-RELATED RISKS
In April 2016, the Compensation Committee reviewed our compensation policies and practices applicable to all employees and determined that our compensation programs do not encourage excessive or inappropriate risk-taking. The Compensation Committee believes that the design and mix of our compensation programs appropriately encourage our executive officers and employees to focus on the creation of long-term stockholder value. In its review, the Compensation Committee noted the following features:
payout levels under our annual cash incentive and sales incentive plans are capped and payout opportunities may be achieved on a straight-line interpolation basis between threshold and target levels, and between the target and stretch levels;
non-GAAP adjustments are made to align achievement of performance measures with our business strategy;
all non-GAAP adjustments are subject to Audit Committee approval to assure that actual payout levels appropriately reflect company and business unit performance; and
long-term performance-based incentive compensation constitutes an increasingly significant portion of our executive officers’ compensation thereby focusing such individuals on enhancing long-term stockholder value.

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COMPENSATION TABLES
Summary Compensation Table
The following table sets forth certain information concerning the compensation for fiscal years 2016, 2015 and 2014 for our principal executive officer (Mr. Dougherty), our principal financial officer (Mr. Mangan), and our three other most highly-compensated executive officers (Mr. Haynes, Mr. LeMaitre and Mr. Teichmann) who served in that capacity at the end of fiscal year 2016. We refer to these officers collectively as our Named Executive Officers.
Fiscal Year 2016 Summary Compensation Table
 
Year (1)
 Salary ($)
 
 Bonus
 ($)(8)
Stock Awards
 ($)(2)
 Option
Awards
($)(2)
 Non-Equity
Incentive Plan
Compensation
 ($)
  All Other Compensation
($)
 
 Total
 ($)
Greg Dougherty
2016
$
550,000

 

$
1,359,260


$
975,000

$
10,600

(9)
$
2,894,860

Chief Executive Officer and
2015
$
500,000

 

$
633,150


$
432,000

$
10,400

(9)
$
1,575,550

Director
2014
$
536,539

 
$
400,000

$
2,024,000


300,000

10,200

(9)
$
3,270,739

Pete Mangan
2016
$
325,000

 

$
522,480


$
288,750

$
10,600

(9)
$
1,146,830

Chief Financial Officer (3)
2015
$
289,568

 

$
236,250


$
151,200

$
10,400

(9)
$
687,418

 
2014
$
299,231

 
$
250,000

$
425,180

$
104,688

$
105,000

$
10,200

(9)
$
1,194,299

Jim Haynes
2016
$
291,603

(7)

$
413,680


$
260,048

$
21,277

(7) (10)
$
986,608

Chief Operating Officer (4)
2015
$
317,175

(7)

$
189,000


$
160,743

$
33,575

(7) (10)
$
700,493

 
2014
$
364,402

(7)
$
260,830

$
215,680


$
120,984

$
37,096

(7) (10)
$
998,992

Yves LeMaitre
2016
$
325,000

 

$
522,480


$
288,750

$
6,346

(9)
$
1,142,576

President,
2015
$
300,000

 

$
189,000


$
151,200


 
$
640,200

Optical Connectivity Business (5)
2014
$
350,428

 
$
250,000

$
271,180


$
79,880


 
$
951,488

David Teichmann
2016
$
311,539

 

$
516,315


$
261,000

$
10,600

(9)
$
1,099,454

Executive Vice President, General Counsel and Corporate Secretary (6)
2015
$
300,000

 

$
189,000


$
129,600

$
10,400

(9)
$
629,000

 
2014
$
147,692

 

$
226,500

$
131,697


$
5,077

(9)
$
510,966

 
(1)
The years in this column refer to the fiscal years ended July 2, 2016, June 27, 2015 and June 28, 2014.
(2)
The amounts reported in these columns reflect the grant date fair value, computed in accordance with ASC 718, of time-based stock options, time-based restricted stock awards, performance-based restricted stock awards, time-based restricted stock unit awards, and performance-based restricted stock unit awards granted during each fiscal year. There can be no assurance that the ASC 718 amounts will ever be realized. The assumptions we used to calculate these amounts are included in Note 11 to our audited consolidated financial statements included in our 2016 Annual Report filed with the SEC on August 26, 2016. With respect to the performance-based awards granted in fiscal year 2016, the amounts above reflect the probable payout percentage for the awards, which is based on the highest level of performance that can be achieved, calculated in accordance with ASC 718. For more information about these awards, see the discussion above under “Compensation Discussion and Analysis” and the narrative below.
(3)
Mr. Mangan was appointed our Chief Financial Officer effective November 11, 2013. Mr. Mangan previously served as our Vice President of Corporate Finance from May 2012 to November 2013.
(4)
Mr. Haynes was appointed our Chief Operating Officer effective as of May 2014. Mr. Haynes previously served as our President, Integrated Photonics Business from November 2013 to April 2014, our President, Global Business from May 2012 until October 2013, our President and General Manager, Photonics Components from January 2011 until May 2012, and our Chief Operating Officer from March 2005 until January 2011.
(5)
Mr. LeMaitre was appointed our President, Optical Connectivity Business effective October 22, 2013. Mr. LeMaitre previously served as our Chief Commercial Officer from July 2011 to September 2013, our Executive Vice President, Strategy and Corporate Development from February 2011 to July 2011, and our Executive Vice President and General Manager of Advanced Photonic Solutions from April 2009 to January 2011.
(6)
Mr. Teichmann was appointed our Executive Vice President, General Counsel and Corporate Secretary effective January 1, 2014.
(7)
Converted from U.K. pounds sterling to U.S. dollars using the noon buying rate of exchange of U.S. dollars to U.K. pounds sterling of $1.33 on July 1, 2016, $1.57 on June 26, 2015, and $1.70 on June 27, 2014.
(8)
These amounts include the retention bonuses granted in fiscal year 2013, which amounts were accrued and earned for fiscal year 2014, but paid in July 2015.
(9)
The amount reported in this column includes Company matching contributions to our Named Executive Officers’ 401(k) plan accounts for fiscal 2016, fiscal 2015 and fiscal 2014.
(10)
The amounts reported in this column include pension contributions paid by the Company.

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Table of Contents


Fiscal 2016 Grants of Plan-Based Awards Table
The following table sets forth information regarding each grant of an award made to our Named Executive Officers during fiscal year 2016 under any plan, contract, authorization or arrangement pursuant to which cash, securities, similar instruments or other property may be received.
Grants of Plan-Based Awards For Fiscal 2016  
 
 
 
 
  Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards ($)
 
Estimated Possible Payouts
Under Equity Incentive
Plan Awards in Shares of Stock
 
All Other
Stock
Awards:
Number of
Shares of
Stock
or Units
 
All Other
Option Awards:
Number of
Securities Underlying Awards
 
 Exercise or Base Price
of Option
Awards
($/Sh)
 
 Grant Date
Fair Value
 of Stock
 and Option
Awards ($)(2)
Name
 
Grant
Date
 
 Thresh-
old
 
 Target
 
 Max-
imum
 
Thresh-
old (1)
 
Target (1)
 
Max-
imum (1)
 
 
 
 
Greg Dougherty
 
7/1/2015(4)
 
$
150,000

 
$
300,000

 
$
600,000

 
 
 
 

 

 
 

 
 
1/1/2016(5)
 
$
150,000

 
$
300,000

 
$
600,000

 
 
 
 

 

 
 

 
 
8/10/2015
 

 

 

 
 
 
 
175,000

 

 
 
$
476,000

 
 
8/10/2015
 

 

 

 
 
225,000
 
 

 

 
 
$
612,000

 
 
2/10/2016
 

 

 

 
 
 
 
66,000

 

 
 
$
271,260

Pete Mangan
 
7/1/2015(4)
 
$
52,500

 
$
105,000

 
$
157,500

 
 
 
 

 

 
 

 
 
1/1/2016(5)
 
$
52,500

 
$
105,000

 
$
157,500

 
 
 
 

 

 
 

 
 
8/10/2015
 

 

 

 
 
 
 
90,000

 

 
 
$
244,800

 
 
8/10/2015
 

 

 

 
 
90,000
 
 

 

 

 
$
244,800

 
 
2/10/2016
 

 

 

 
 
 
 
8,000

 

 

 
$
32,880

Jim Haynes(3)
 
7/1/2015(4)
 
$
47,282

 
$
94,563

 
$
141,845

 
 
 
 

 

 

 

 
 
1/1/2016(5)
 
$
47,282

 
$
94,563

 
$
141,845

 
 
 
 

 

 

 

 
 
8/10/2015
 

 

 

 
 
 
 
70,000

 

 

 
$
190,400

 
 
8/10/2015
 

 

 

 
 
70,000
 
 

 

 

 
$
190,400

 
 
2/10/2016
 

 

 

 
 
 
 
8,000

 

 

 
$
32,880

Yves LeMaitre
 
7/1/2015(4)
 
$
52,500

 
$
105,000

 
$
157,500

 
 
 
 

 

 
 

 
 
1/1/2016(5)
 
$
52,500

 
$
105,000

 
$
157,500

 
 
 
 

 

 
 

 
 
8/10/2015
 

 

 

 
 
 
 
90,000

 

 
 
$
244,800

 
 
8/10/2015
 

 

 

 
 
90,000
 
 

 

 
 
$
244,800

 
 
2/10/2016
 

 

 

 
 
 
 
8,000

 

 
 
$
32,880

David Teichmann
 
7/1/2015(4)
 
$
45,000

 
$
90,000

 
$
135,000

 
 
 
 

 

 

 

 
 
1/1/2016(5)
 
$
49,500

 
$
99,000

 
$
148,500

 
 
 
 

 

 

 

 
 
8/10/2015
 

 

 

 
 
 
 
90,000

 

 

 
$
244,800

 
 
8/10/2015
 

 

 

 
 
90,000
 
 

 

 

 
$
244,800

 
 
2/10/2016
 

 

 

 
 
 
 
6,500

 

 

 
$
26,715

 
(1)
On August 10, 2015, each of Messrs. Dougherty, Mangan, Haynes, LeMaitre, and Teichmann received a performance-based restricted stock unit award. These performance-based restricted stock unit awards will be earned at a 100% target level, based upon the achievement of positive free cash flow (defined as adjusted EBITDA less capital expenditure) in any fiscal quarter ending prior to June 30, 2018. Vesting of these PSUs is contingent upon service conditions being met through August 10, 2018. The Compensation Committee certified that this performance condition was achieved during the quarter ended September 26, 2015. As a result, these PSUs will cliff vest with respect to 33.4 percent of the underlying shares on August 10, 2016, and with respect to 8.325 percent of the underlying shares each subsequent quarter over the following two years, subject to continuous service.
(2)
The amounts reported in this column reflect the grant date fair value of the stock awards computed in accordance with ASC 718. With respect to the performance-based awards granted in fiscal year 2016, the amounts above reflect the probable payout percentage for the awards, which is based on the highest level of performance that can be achieved, calculated in accordance with ASC 718. There can be no assurance that the ASC 718 amounts will ever be realized. The assumptions we used to calculate these amounts are included in Note 11 to our audited consolidated financial statements included in our 2016 Annual Report filed with the SEC on August 26, 2016.

24


Table of Contents

(3)
For Mr. Haynes, “threshold,” “target” and “maximum” estimated future payouts under non-equity incentive plan awards are converted from U.K. pounds sterling to U.S. dollars using the noon buying rate of exchange of U.S. dollars to U.K. pounds sterling of $1.33 on July 1, 2016.
(4)
For the first half of fiscal year 2016, the annual cash incentive plan was based on achieving a VPP Adjusted EBITDA target for the six months ended December 26, 2015. Performance had to at least meet the threshold level for any amounts to be paid under this plan. For more information, see the discussion above under “Compensation Discussion and Analysis.”
(5)
For the second half of fiscal year 2016, the annual cash incentive plan was based on achieving an operating income target for the six months ended July 2, 2016. Performance had to at least meet the threshold level for any amounts to be paid under this plan. For more information, see the discussion above under “Compensation Discussion and Analysis.”
Narrative Disclosure to Fiscal 2016 Summary Compensation Table and Fiscal 2016 Grants of Plan Based Awards Table
A discussion of 2016 base salaries, bonuses, incentive plans, awards and employment agreements is set forth in “Compensation Discussion and Analysis,” including a discussion of the material terms and conditions of the fiscal year 2016 equity awards.
Fiscal 2016 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information concerning stock options that have not been exercised and unvested restricted stock awards and performance-based stock awards for each of our Named Executive Officers as of July 2, 2016.

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Table of Contents

Fiscal 2016 Outstanding Equity Awards at Fiscal Year-End
 
 
Option Awards
 
Stock Awards
Name
Option/Award Grant
Date
 Number of Securities Underlying Unexer-
cised Options (#) Exercisable
 
 Number of Securities Underlying Unexercised Options (#) Unexercisable
 
 Option Exercise Price ($)
 
Option Expiration Date
 
 Number of Shares or Units of Stock that Have Not Vested (#)
 
 Market Value of Shares or Units of Stock That Have Not Vested ($) (1)
 Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
 
 Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1)
Greg Dougherty
11/3/2006
1,447

 

 
$
21.05

 
11/2/2016

 

 




 
11/15/2007
1,447

 

 
$
21.75

 
11/14/2017

 

 




 
11/13/2008
1,447

 

 
$
1.50

 
11/12/2018

 

 




 
5/13/2009
3,334

 

 
$
3.10

 
5/13/2019

 

 




 
10/21/2009
8,000

 

 
$
5.80

 
10/21/2019

 

 




 
10/27/2010
3,898

 

 
$
13.68

 
10/27/2021

 

 




 
10/26/2011
14,881

 

 
$
3.54

 
10/26/2021

 

 




 
8/11/2014

 

 

 

 
83,334

(2
)
$
399,170


 

 
8/10/2015

 

 

 

 
175,000

(3
)
$
838,250


 

 
2/10/2016

 

 

 

 
66,000

(4
)
$
316,140


 

 
8/10/2015

 

 

 

 
225,000

(5
)
$
1,077,750


 

Pete Mangan
6/11/2012
12,000

 

 
$
2.56

 
6/11/2022

 

 




 
1/14/2014
36,250

 
23,750

(6
)
$
2.55

 
1/14/2024

 

 




 
7/10/2013

 

 

 

 
12,500

(7
)
$
59,875


 

 
1/14/2014

 

 

 

 
22,500

(8
)
$
107,775


 

 
3/10/2014

 

 

 

 
14,000

(9
)
$
67,060


 

 
8/11/2014

 

 

 

 
41,667

(2
)
$
199,585


 

 
8/10/2015

 

 

 

 
90,000

(3
)
$
431,100


 

 
2/10/2016

 

 

 

 
8,000

(4
)
$
38,320


 

 
8/10/2015

 

 

 

 
90,000

(5
)
$
431,100


 

Jim Haynes
6/12/2007
5,000

 

 
$
10.05

 
6/12/2017

 

 




 
1/28/2008
21,902

 

 
$
8.75

 
1/28/2018

 

 




 
8/15/2008
24,000

 

 
$
8.90

 
8/15/2018

 

 




 
5/13/2009
20,000

 

 
$
3.10

 
5/13/2019

 

 




 
8/15/2009
76,000

 

 
$
3.50

 
8/15/2019

 

 




 
8/16/2010
34,400

 

 
$
10.43

 
8/16/2020

 

 




 
8/15/2011
20,000

 

 
$
4.33

 
8/15/2021

 

 




 
8/15/2012

 

 

 

 
3,750

(10
)
17,963


 

 
3/10/2014

 

 

 

 
14,000

(9
)
67,060


 

 
8/11/2014

 

 

 

 
33,334

(2
)
159,670


 

 
8/10/2015

 

 

 

 
70,000

(3
)
335,300


 

 
2/10/2016

 

 

 

 
8,000

(4
)
38,320


 

 
8/10/2015

 

 

 

 
70,000

(5
)
$
335,300


 

Yves LeMaitre
3/10/2008
4,875

 

 
$
6.15

 
3/10/2018

 

 


 

 
8/15/2008
6,000

 

 
$
8.90

 
8/15/2018

 

 


 

 
5/13/2009
7,876

 

 
$
3.10

 
5/13/2019

 

 


 

 
8/15/2009
25,876

 

 
$
3.50

 
8/15/2019

 

 


 

 
8/16/2010
13,947

 

 
$
10.43

 
8/16/2020

 

 


 

 
8/16/2010
3,253

 

 
$
10.43

 
8/16/2020

 

 


 

 
8/15/2011
3,513

 

 
$
4.33

 
8/15/2021

 

 


 

 
8/15/2011
16,487

 

 
$
4.33

 
8/15/2021

 

 


 

 
8/15/2012

 

 

 

 
3,750

(10
)
17,963


 

 
11/11/2013

 

 

 

 
9,375

(11
)
44,906


 

 
3/10/2014

 

 

 

 
14,000

(9
)
67,060


 

 
8/11/2014

 

 

 

 
33,334

(2
)
159,670


 

 
8/10/2015

 

 

 

 
90,000

(3
)
431,100


 

 
2/10/2016

 

 

 

 
8,000

(4
)
38,320


 

 
8/10/2015

 

 

 

 
90,000

(5
)
$
431,100


 

David Teichmann
2/10/2014
35,000

 
25,000

(12
)
$
2.53

 
2/10/2024

 

 


 

 
5/12/2014
13,020

 
11,980

(13
)
$
1.78

 
5/12/2024

 

 


 

 
2/10/2014

 

 

 

 
26,250

(14
)
125,738


 

 
3/10/2014

 

 

 

 
2,188

(9
)
10,481


 

 
5/12/2014

 

 

 

 
12,500

(15
)
59,875


 

 
8/11/2014

 

 

 

 
33,334

(2
)
159,670


 

 
8/10/2015

 

 

 

 
90,000

(3
)
431,100


 

 
2/10/2016

 

 

 

 
6,500

(4
)
31,135


 

 
8/10/2015

 

 

 

 
90,000

(5
)
$
431,100


 

 


26


Table of Contents

(1)
Calculated by multiplying the number of unvested shares of our common stock by $4.79, the closing market price per share of our common stock on the NASDAQ Global Select Market on July 1, 2016.
(2)
These restricted stock unit awards will vest as to 33.33% of the number of shares subject to each award on August 11, 2015; 33.33% of the number of shares subject to each award on August 11, 2016; and 8.33% of the number of shares subject to each such award shall vest on the November 11th, February 11th, May 11th, and August 11th following August 11, 2016 over the following year.
(3)
These restricted stock unit awards will vest as to 33.33% of the number of shares subject to each award on August 10, 2016; and 8.33% of the number of shares subject to each such award shall vest on the November 10th, February 10th, May 10th, and August 10th following August 10, 2016 over the following two years.
(4)
These restricted stock unit awards will vest as to 100% of the number of shares subject to each award on February 10, 2017.
(5)
On August 10, 2015, each of Messrs. Dougherty, Mangan, Haynes, LeMaitre, and Teichmann received a performance-based restricted stock unit award. These performance-based restricted stock unit awards will be earned at a 100% target level, based upon the achievement of positive free cash flow (defined as EBITDA less capital expenditures) in any fiscal quarter ending prior to June 30, 2018. Vesting of these PSUs is contingent upon service conditions being met through August 10, 2018. The Compensation Committee certified that this performance condition was achieved during the quarter ended September 26, 2015. As a result, these PSUs will vest as to 33.33% of the number of shares subject to each award on August 10, 2016; and 8.33% of the number of shares subject to each such award shall vest on the November 10th, February 10th, May 10th, and August 10th following August 10, 2016 over the following two years.
(6)
The options vest as to 25% of the shares subject to the option on the first anniversary of the date of grant and 1/48th of the shares subject to the option monthly thereafter over the remaining 36 months.
(7)
The restricted stock awards vested as to 25% of the number of shares subject to each restricted stock award on May 10, 2014; and 6.25% of the number of shares subject to each such award shall vest on the August 10th, November 10th, February 10th, and May 10th following May 10, 2014 over the following three years.
(8)
The restricted stock awards vested as to 25% of the number of shares subject to each restricted stock award on January 10, 2015; and 6.25% of the number of shares subject to each such award shall vest on the February 10th, May 10th, August 10th, and November 10th following January 10, 2015 over the following three years.
(9)
The restricted stock units vested as to 25% of the number of shares subject to each restricted stock unit on February 10, 2015; and 6.25% of the number of shares subject to each such unit shall vest on the May 10th, August 10th, November 10th, and February 10th following February 10, 2015 over the following three years.
(10)
The restricted stock awards vested as to 25% of the number of shares subject to each restricted stock award on August 15, 2013; and 6.25% of the number of shares subject to each such award shall vest on the November 15th, February 15th, May 15th, and August 15th following August 15, 2013 over the following three years.
(11)
The restricted stock award vested as to 25% of the number of shares subject to the restricted stock award on November 10, 2014; and 6.25% of the number of shares subject to each such award shall vest on the February 10th, May 10th, August 10th, and November 10th following November 10, 2014 over the following three years.
(12)
The options vest as to 25% of the shares subject to the option on the first anniversary of the date of grant and 1/48th of the shares subject to the option monthly thereafter over the remaining 36 months.
(13)
The options vest as to 25% of the shares subject to the option on the first anniversary of the date of grant and 1/48th of the shares subject to the option monthly thereafter over the remaining 36 months.
(14)
The restricted stock awards vested as to 25% of the number of shares subject to each restricted stock award on February 10, 2015; and 6.25% of the number of shares subject to each such award shall vest on the May 10th, August 10th, November 10th, and February 10th following February 10, 2015 over the following three years.
(15)
The restricted stock awards vested as to 25% of the number of shares subject to each restricted stock award on May 12, 2015; and 6.25% of the number of shares subject to each such award shall vest on the August 10th, November 10th, February 10th, and May 10th following May 12, 2015 over the following three years.

27


Table of Contents

Fiscal 2016 Option Exercises and Stock Vested Table
The following table sets forth information regarding options exercised and the vesting of restricted stock awards held by our Named Executive Officers during the fiscal year ended July 2, 2016.
 
Fiscal 2016 Option Exercises and Stock Vested
 
 
 
 
 
 
 
 
 
 
 
 Option Awards
 
Stock Awards
Name
 
 Number of Shares Acquired on Exercise (#)
 
 Value Realized on Exercise ($)
 
 Number of Shares Acquired on Vesting (#)(1)
 
 Value Realized on Vesting ($)(2)
Greg Dougherty
 
 
 
251,666

 
$
883,198

Pete Mangan
 
 
 
122,833

 
$
431,729

Jim Haynes
 
 
 
94,979

 
$
330,182

Yves LeMaitre
 
 
 
101,229

 
$
353,714

David Teichmann
 
 
 
89,166

 
$
313,211

______________
(1)
The amounts reported in this column represent the number of shares of our common stock acquired with respect to full value awards that vested in fiscal year 2016.
(2)
The amounts reported in this column represent the number of shares of our common stock that vested during fiscal year 2016 multiplied by the closing market price of our common stock as quoted on the NASDAQ Global Select Market on each corresponding vesting date.
Potential Payments Upon Termination or Change in Control
Employment, Change in Control and Severance Arrangements

Our employment agreement with Mr. Dougherty provides that if we terminate his employment without “cause” or if he resigns his employment with “good reason” (a “Qualifying Termination”), then he will be eligible to receive the following payments and benefits:

A cash payment equal to the sum of twice his annual base salary and twice his target annual cash incentive award opportunity;
Accelerated vesting of all outstanding and unvested or unearned restricted stock and/or restricted stock unit awards which vest based on his continued employment; and
A monthly payment in the amount of $6,000 for 24 months in lieu of continuing other benefits, such as health and welfare benefits.

In addition, if Mr. Dougherty’s employment is terminated as the result of a Qualifying Termination in connection with a change in control of the Company, then the payments and benefits to which he would be eligible would include, in addition to those set forth above for a Qualifying Termination, accelerated vesting of all outstanding and unvested or unearned restricted stock and/or restricted stock unit awards, whether or not vesting is based on his continued employment.
For purposes of the employment agreement for Mr. Dougherty, the term “cause” means (a) a good faith finding by the Board (excluding the employee) that the employee has engaged in dishonesty, gross negligence or misconduct, or (b) the conviction of the employee of, or the entry of a pleading of guilty or nolo contendere by the employee to, any crime involving moral turpitude or any felony. Further, the term “good reason” means the following acts or omissions by the Company, taken without the employee’s written consent: (i) any material diminution in the employee’s base salary, (ii) a material diminution in the employee’s authority, duties or responsibilities or a material adverse change in reporting structure which means that the employee no longer reports directly to the Board of the Company or any successor company’s board, (iii) a material breach by the Company of the terms of the employment Agreement or (iv) a material adverse change by the Company in the location at which the employee performs employee’s principal duties for the Company to a new location that is both (a) outside a radius of 35 miles from the employee’s principal residence immediately prior to such change and (b) more than 20 miles from the location at

28


Table of Contents

which the employee performed employee’s principal duties for the Company immediately prior to such change without the prior consent of the employee.
Mr. Haynes has an employment agreement which generally provides for three months’ notice in the case of a “no just cause” termination. Mr. Haynes may be paid out in lieu of notice under the terms of his employment agreement. In addition, Mr. Haynes receives financial protection in the amount of three months’ base salary plus pay in lieu of notice (three months) in the case of a termination. Mr. Haynes’ employment agreement also provides non-compete and non-solicit covenants for a period of six months following his termination of employment. In certain situations, as defined in Mr. Haynes’ employment agreement, Mr. Haynes may receive continuation of his monthly base salary during the period of his non-compete (up to a maximum of 6 months).
Other Named Executive Officers . Each of our Named Executive Officers (other than Mr. Dougherty) is party to a Retention Agreement. The Retention Agreement provides that if an executive officer dies or his employment with the Company is terminated without “cause” (and not due to Disability, as defined in the Retention Agreement) prior to a “change in control” of the Company, the executive officer will be eligible to receive the following payments and benefits, in addition to accrued benefits: