UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)

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Oclaro, Inc.

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OCLARO, INC.
2560 Junction Avenue
San Jose, California 95134

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 26, 2011

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 Wednesday, October 26, 2011, at 8:00 a.m., local time, at our corporate headquarters, 2560 Junction Avenue, San Jose, California, for the purpose of considering and voting upon the following matters:

1.

To elect Edward Collins and Lori Holland as Class I 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 the Oclaro, Inc. 2011 Employee Stock Purchase Plan.

3.

To approve the Oclaro, Inc. Variable Pay Program.

4.

To conduct an advisory vote on the compensation of our named executive officers.

5.

To conduct an advisory vote on the frequency with which we will hold future stockholder advisory votes on the compensation of our named executive officers.

6.

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. Our board of directors recommends a vote “FOR” each of the nominees for director named in the proxy statement, a vote for “ONE YEAR” with respect to the advisory frequency vote and a vote “FOR” each of the other proposals.

We are enclosing a copy of our Annual Report on Form 10-K for the fiscal year ended July 2, 2011 with the proxy statement that accompanies this notice of meeting. The Annual Report on Form 10-K for the fiscal year ended July 2, 2011 contains consolidated financial statements and other information of interest to you. Holders of record of our common stock at the close of business on September 6, 2011 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,

Alain Couder
Chairman of the Board and Chief Executive Officer

September 9, 2011

OCLARO, INC.

Proxy Statement for the Annual Meeting of Stockholders
Table of Contents

		Page
Proxy Statement for the Annual Meeting of Stockholders			2
Voting Shares and Revocation of Proxies			2
Attendance at the Annual Meeting			4
Stockholders Entitled to Vote			4
Votes Required			4
Security Ownership of Certain Beneficial Owners and Management			5
PROPOSAL 1 — Election of Class I Directors			7
Compensation Committee Report			13
Executive Compensation — Compensation Discussion and Analysis			13
Compensation Committee Interlocks and Insider Participation			34
Corporate Governance			34
Policies and Procedures for Related Person Transactions			39
PROPOSAL 2 — Approval of the Oclaro, Inc. 2011 Employee Stock Purchase Plan			40
PROPOSAL 3 — Approval of the Oclaro, Inc. Variable Pay Program			47
PROPOSAL 4 —Advisory Vote on the Compensation of our Named Executive Officers			49
PROPOSAL 5 — Advisory Vote on the Frequency with which we will hold Future Stockholder Advisory Votes on the Compensation of our Named Executive Officers			51
PROPOSAL 6 — Ratification of the Selection of Independent Registered Public Accounting Firm			52
Audit Matters			52
Audit Committee Report			53
Pre-Approval Policies and Procedures			53
Stockholder Proposals for 2012 Annual Meeting			54
Householding of Proxy Statement			55
Financial Statements Available; Incorporation by Reference			55
Other Matters			55
Appendix A — Oclaro, Inc. 2011 Employee Stock Purchase Plan			A-1
Appendix B — Oclaro, Inc. Variable Pay Program			B-1

OCLARO, INC.

Proxy Statement for the Annual Meeting of Stockholders
To Be Held on October 26, 2011

This proxy statement is furnished to you in connection with the solicitation of proxies by our board of directors (the “Board”) for the 2011 annual meeting of stockholders (“Annual Meeting”) to be held on Wednesday, October 26, 2011 at 8 a.m., local time, at our corporate headquarters, 2560 Junction 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, 2011 (“2011 Annual Report”), which includes our audited financial statements for the fiscal year ended July 2, 2011 (“fiscal year 2011”), and the enclosed proxy card are first being mailed to stockholders on or about September 15, 2011.

We have elected to provide access to our proxy materials over the Internet. Accordingly, 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
2011 Annual Meeting of Stockholders to be Held on October 26, 2011

This proxy statement and our 2011 Annual Report are available for viewing, printing and downloading at www.proxyvote.com.

You can also find this proxy statement and our 2011 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 2011 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., 2560 Junction Avenue, San Jose, California, 95134, Attn: Stock Administrator. We will provide the 2011 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 preaddressed, 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 other nominee that includes instructions on how to vote your shares. Your broker, bank or nominee will 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 by following the instructions on the Notice provided by your broker.

The Internet and telephone voting facilities will close at 11:59 p.m. E.D.T. on October 25, 2011. 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.

Your vote is very important. You should submit your proxy even if you plan to attend the Annual Meeting.

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., 2560 Junction Avenue, San Jose, California 95134, Attention: Corporate Secretary. If your shares are held street name, you must follow the instructions of your broker or other 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 I directors for a three year term, the shares will be voted “FOR” the election of the two nominated Class I directors;

•

the approval of the Oclaro, Inc. 2011 Employee Stock Purchase Plan, the shares will be voted “FOR” the approval of the Oclaro, Inc. 2011 Employee Stock Purchase Plan;

•

the approval of the Oclaro, Inc. Variable Pay Program, the shares will be voted “FOR” the approval of the Oclaro, Inc. Variable Pay Program;

	•		the advisory vote on the compensation of our named executive officers, the shares will be voted “FOR” the approval of the compensation of our named executive officers;
	•		the advisory vote on the frequency with which we will hold future stockholder advisory votes on the compensation of our named executive officers, the shares will be voted “EVERY YEAR” with respect to such frequency; 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 the shares of our outstanding 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.

Stockholders Entitled to Vote

The Board has fixed September 6, 2011 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 6, 2011, there were 50,373,660 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 cannot be voted by the broker, although they will 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. Only 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 that proposal. Each of 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. Directors are elected by a plurality vote. Therefore, the nominees for the two director seats who receive the most affirmative votes of shares outstanding as of the record date that are present in person or represented by proxy at the Annual Meeting will be elected to serve as directors. With respect to the proposal regarding the election of our directors, neither “broker non-votes” nor abstentions are included in the tabulation of the voting results and, accordingly, they do not have the effect of votes “AGAINST” such proposal. The proposals to approve the Oclaro, Inc. 2011 Employee Stock Purchase Plan, to approve the Oclaro, Inc. Variable Pay Program, to approve the compensation of our named executive officers and to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the current fiscal year require the affirmative vote of the holders of a majority of the shares as of the record date that are present in person or represented by proxy at the Annual Meeting and voting on these 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.

The advisory vote on the frequency with which we will hold future stockholder advisory votes on the compensation of our named executive officers requires the affirmative vote of a majority of votes cast. Abstentions will have no effect on the proposal. Broker non-votes are not included in the tabulation of the voting results and, accordingly, they do not have the effect of votes “AGAINST” this proposal. If none of the frequency alternatives (EVERY YEAR, EVERY TWO YEARS or EVERY THREE YEARS) receives a majority of the shares present or represented by proxy and voting on the matter, we will consider the highest number of votes cast by stockholders to be the frequency that has been selected by our stockholders. Because this vote is advisory and not binding on us or the Board in any way, the Board may decide that it is in our and our stockholders’ best interests to hold an advisory vote on executive compensation more or less frequently than the option selected by our stockholders.

Security Ownership of Certain Beneficial Owners and Management

The following table shows the number of shares of our common stock beneficially owned as of August 6, 2011 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 2011 Summary Compensation Table below, and all directors and executive officers as a group.

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 August 6, 2011 are deemed to be beneficially owned by the person holding such options 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 50,351,970 shares of our common stock outstanding as of August 6, 2011. 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., 2560 Junction Avenue, San Jose, California 95134.

		Number				Percentage
Beneficial Owner		of Shares				of Total
5% Stockholders
FMR LLC (1) 82 Devonshire Street Boston, MA 02109			2,615,678				5.2	%
BlackRock, Inc. (2) 40 East 52nd Street New York, NY 10022			2,621,061				5.2	%
Executive Officers and Directors
Alain Couder (3)			448,561				*
Jerry Turin (4)			137,854				*
Jim Haynes (5)			158,864				*
Kate Rundle (6)			67,119				*
Scott Parker (7)			40,952				*
Edward Collins (8)			20,412				*
Giovanni Barbarossa (9)			214,878				*
Greg Dougherty (10)			24,300				*
Lori Holland (11)			32,209				*
Joel A. Smith, III (12)			33,321				*
Marissa Peterson (13)			1,481				*
All executive officers and directors as a group (14 persons) (14)			1,264,535				2.5	%

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 Item 1A of our Annual Report on Form 10-K for the year ended July 2, 2011 filed with the SEC, and actual results may vary materially.

PROPOSAL 1
ELECTION OF CLASS I 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 2011, 2012, and 2013 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. Edward Collins, Lori Holland and Giovanni Barbarossa are currently serving as Class I directors.

Upon the recommendation of our nominating and corporate governance committee, the Board has nominated Mr. Collins and Ms. Holland for re-election to serve as Class I directors. Dr. Barbarossa will not stand for re-election. If Mr. Collins and Ms. Holland are elected this year, they will be elected to serve as members of the Board until the 2014 annual meeting of stockholders, or until their successors are elected and qualified. Both Mr. Collins and Ms. Holland have indicated their willingness to serve on the Board, if elected; however, if either of them should be unable to serve, the person acting under the proxy may vote the proxy for a substitute nominee designated by the Board. The Board has no reason to believe that either Mr. Collins or Ms. Holland would be unable to serve if elected. If Mr. Collins and Ms. Holland are elected this year, the Board will consist of two Class I directors, two Class II directors and two Class III directors. The Board has passed a resolution reducing the number of authorized directors from seven to six, to be effective as of the conclusion of the Annual Meeting. 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. 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 Edward Collins and Lori Holland to serve as Class I directors is in the best interests of Oclaro and our stockholders and, therefore, unanimously recommends that the stockholders vote “FOR” the election of the nominees.

Class I Directors — Nominees for Election to the Board at the Annual Meeting

Edward Collins, 68, has served as a director since May 2008. From 1995 to present, Mr. Collins has served as the Managing Director and a Partner at ChinaVest Group, a private equity group investing in China. In addition, from 2007 to 2010, Mr. Collins has served as chairman, and is currently a director only, of California Bank of Commerce. He is also a member of its compensation committee. From 1999 to present, he has served as chairman of the audit committee of TFC — the Taiwan Greater China Fund, listed on the NYSE. 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 has been a member of the state bars of California and Texas. Mr. Collins also serves as non-executive chairman of Branded Spirits, Ltd., a privately held company that sells wine and branded spirits in China, Hong Kong and Macau. With his 15 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.

Lori Holland, 53, has served as a director since September 2004. Ms. Holland previously served as a director of Oclaro’s predecessor, Bookham Technology plc, from April 1999 until September 2004. Ms. Holland has more than 20 years of experience in senior finance leadership roles with high-technology companies. She served as the CFO of Read-Rite Corporation, a publicly-traded supplier of magnetic recording heads, from 1990 to 1995. She also served as the CFO of technology companies NeoMagic Corporation from 1995 to 1996 and Zaffire, Inc. from 1999 to 2000. Ms. Holland served as a director and audit committee member of Credence Systems Corporation, a publicly-traded test equipment supplier, from September 2004 until August 2008 when Credence merged with LTX Corporation. Ms. Holland currently serves as a director, audit committee member and nominating and corporate governance committee member of LTX-Credence Corporation. From June 2005 to December 2006, Ms. Holland served on the board of directors of WiderThan, a Korean company listed on the NASDAQ National Market. Ms. Holland received a B.S. in Economics from California Polytechnic State University and a M.B.A. from Stanford University. Ms. Holland brings significant financial management and financial disclosure experience, as well as significant knowledge of our history and experiences to the Board. Ms. Holland brings to the Board her extensive knowledge in the areas of accounting, financial reporting and controls, and experience as a leader of several technology companies. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Holland should serve as a director.

Class II Directors — Term Expiring 2012

Marissa Peterson, 49, has served as a director since July 2011. Ms. Peterson was formerly Executive Vice President, Worldwide Operations, Services and Customer Advocacy of Sun Microsystems Inc., until her retirement in 2005 after 17 years with the company. From August 2008 to present, Ms. Peterson has served as a director of Humana Inc., a healthcare provider, and is currently a member of their nominating and corporate governance and organization and compensation committees. From August 2006 to present, she has served as a director for Ansell Limited, a public company listed on the Australia Stock Exchange, where she is currently a member of the audit and risk committee and chairperson of the business transformation process committee. In addition, Ms. Peterson currently serves as a director of Quantros, Inc. and the Lucile Packard Children’s Hospital at Stanford. She previously served as a director of Supervalu Inc. and served on the board of trustees of Kettering University. Ms. Peterson earned a 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, complex and well-respected technology company. Ms. Peterson also brings to the Board significant experience in executive compensation matters, which gives her the ability to assist in compensation decisions. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Peterson should serve as a director.

Greg Dougherty, 51, has served as a director of Oclaro since April 2009. Prior to Oclaro, Mr. Dougherty served as a director of Avanex Corporation (“Avanex”) from April 2005 to April 2009, when Avanex and Bookham, Inc. (“Bookham”) merged to create Oclaro. Mr. Dougherty has served as a director of Picarro, Inc., a manufacturer of ultra-sensitive gas spectroscopy equipment using laser-based technology, since October 2002. He also has served on the board of directors of the Ronald McDonald House at Stanford since January 2004. From February 2001 until September 2002, Mr. Dougherty was the Chief Operating Officer of 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 of 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. Mr. Dougherty also brings to the Board significant experience in executive compensation matters, which gives him the ability to assist in compensation decisions. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Dougherty should serve as a director.

Class III Directors — Terms Expiring 2013

Alain Couder, 65, has served as Chairman of the Board and Chief Executive Officer since July 2011. He previously served as a director and our Chief Executive Officer since August 2007. Prior to joining Oclaro, Mr. Couder was the President and Chief Executive Officer of Solid Information Technology Inc., a supplier of database solutions, from March 2005 to August 2007. From May 2004 to February 2005, Mr. Couder was a Venture Advisor to Sofinnova Ventures, Inc., a venture capital company. From April 2003 to March 2004, Mr. Couder was the President and Chief Executive Officer of Confluent Software, Inc., a software company. From August 2002 to March 2003, Mr. Couder was President and Chief Executive Officer of IP Dynamics, Inc., a software company. From February 2000 to May 2002, Mr. Couder served as Chief Operating Officer of Agilent Technologies, Inc., a measurement and analysis company. Earlier in his career, Mr. Couder worked for Packard-Bell, NEC, Groupe Bull, Hewlett Packard and IBM, each a computer hardware company. Mr. Couder was a director at Sanmina-SCI, an electronic manufacturing services firm, from February 2005 to January 2011. Mr. Couder holds a master’s degree in electrical engineering from the Ecole Superieure d’Electricite in Paris. Mr. Couder brings significant leadership, operational and corporate governance experience to the Board, which enables him to aptly communicate the insight of Oclaro to members of the Board. Mr. Couder’s experience, through nearly eight years of executive officer service with companies in a high-growth phase, gives him a unique perspective on our business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Couder should serve as Chairman of the Board as well as Chief Executive Officer.

Joel A. Smith III, 66, has served as lead independent director since July 2011 and as a director since April 2009. Prior to Oclaro, Mr. Smith served as a director of Avanex 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 serves on the board of directors of First National Bancshares (and was formerly a director of Carolina National Corporation, prior to its acquisition by First National Bancshares). Mr. Smith received a B.A. degree from the University of the South in Sewanee, Tennessee. 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

Alain Couder, see “Class III Directors — Terms Expiring 2013” above.

Jerry Turin, 49, has served as our Chief Financial Officer since August 2008. From April 2008 to July 2008, Mr. Turin served as our Vice President of Finance. From July 2005 to July 2008, Mr. Turin served as our Corporate Controller. From 1999 to 2002, Mr. Turin served as Controller of Silicon Spice, Inc. (which was acquired by Broadcom Corporation in October 2000), a developer of gateway and carrier access chipsets, software and development tools. In addition, Mr. Turin was the Corporate Controller at Cirrus Logic, a publicly traded semiconductor company. Prior to his corporate finance experience, Mr. Turin spent 12 years with Deloitte & Touche, rising to the position of Senior Manager of Audit Services. A substantial portion of his time with Deloitte & Touche was in the firm’s Silicon Valley practice. Mr. Turin received his bachelor’s degree in Business Administration and Commerce from the University of Alberta in Alberta, Canada and is a member of the Canadian Institute of Chartered Accountants and the Institute of Chartered Accountants of Alberta.

James Haynes, 49, has served as President and General Manager, Photonic Components since January 2011. From March 2005 to January 2011 he served as our Chief Operating Officer. From August 2004 to March 2005, Mr. Haynes was the Officer Vice President, U.K. Operations, of Bookham Technology plc. From June 2003 to August 2004, Mr. Haynes served as Vice President Operations and Site Leader, Caswell for Bookham. 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 of Nortel Networks Corporation. Mr. Haynes received his B.Sc. (Hons) in materials science and technology from Swansea University, Wales.

Kate Rundle, 54, has served as our Executive Vice President, General Counsel and Corporate Secretary since November 2007. Prior to joining Oclaro, from February 2006 to May 2007, Ms. Rundle was Vice President, General Counsel and Corporate Secretary of MIPS, Inc., a publicly-traded semiconductor technology licensing company. Ms. Rundle also worked at Sun Microsystems from 1997 to 2006, holding a number of positions including Senior Director responsible for the worldwide legal support of the company’s marketing organization. Earlier in her career, Ms. Rundle was IP Counsel for The 3DO Company and worked at the law firm of Wilson, Sonsini, Goodrich & Rosati. Ms. Rundle earned her B.A., magna cum laude, in sociology and political science from the University of California, Berkeley and her J.D. from the University of California, Hastings College of the Law.

Scott Parker, 55, served as our Executive Vice President of Sales from February 2011 to July 2011 and served as our Executive Vice President of Sales and Marketing Communications from April 2009 to January 2011. He was previously with Avanex from November 2007 to April 2009, most recently serving as Avanex’s Senior Vice President of Sales. Mr. Parker resigned from his position as Executive Vice President of Sales effective July 11, 2011.

Yves LeMaitre, 47, has served as our Chief Commercial Officer since July 2011. He previously served as Executive Vice President, Strategy and Corporate Development from February 2011 to July 2011, Executive Vice President and General Manager of our Advanced Photonics Solutions division from April 2009 to January 2011 and prior to that served as our Vice President of Telecommunication Sales and Corporate Marketing since February 2008. 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.

Terry Unter, 59, has served as our President and General Manager, Optical Networks Solutions since February 2011. He previously served as Executive Vice President of our Transport Systems Solutions division from July 2010 to January 2011. From February 2004 to July 2010, Dr. Unter was President and CEO of Mintera Corporation, which was acquired by Oclaro in July 2010. Prior to joining Mintera, Dr. Unter was Chief Operating Officer at Corvis Corporation. Before joining Corvis, Dr. Unter held a number of executive management positions at companies in the communications industry including Alcatel where he was responsible for managing the creation of Alcatel’s “Optronics” subsidiary and for which he previously managed a semiconductor joint-venture in China. In the early part of his career, Dr. Unter held various engineering, management and operations positions with Northern Telecom, Alcatel Mietec and Sprague Electric. Dr. Unter holds B.Sc. (Honors) and Ph.D. degrees in electronic engineering from the University Southampton U.K.

Gray Williams, 57, has served as our Executive Vice President, Supply Chain Operations and Quality since January 2011. From January 2003 to December 2010, Mr. Williams led Logitech’s Worldwide Supply Chain, where he directed all aspects of demand management, supply planning, transportation, logistics, order fulfillment, and customer service. Prior to Logitech, he was a Vice President at 3Com and held various senior operations management positions at Hewlett-Packard, Motorola, NEC Electronics, AMD, and US Robotics. Mr. Williams currently serves on the Executive Advisory Board of the University of Wisconsin’s Grainger Center for Supply Chain Management. Mr. Williams holds a B.S. in industrial management from Purdue University’s School of Management.

Director Compensation

Fiscal Year 2011

The Board believes that providing competitive compensation is necessary to attract and retain qualified non-employee directors. In fiscal year 2011, each of our non-employee directors received an annual retainer of $40,000 and other compensation (as described below) for meetings in excess of five in-person meetings and four telephonic meetings per year. Additional compensation consisted of $1,000 for each additional in-person meeting during the year and $500 for each additional telephonic meeting lasting less than two hours and $1,000 for each additional telephonic meeting lasting two or more hours during the year. The Chairman of the Board received an additional annual retainer of $80,000. The chairman of the audit committee received an additional annual fee of $37,000, the chairman of the compensation committee received an additional annual fee of $18,000 and the chairman of the nominating and corporate governance committee received an additional annual fee of $16,500. Each member of the audit committee received an additional $10,000 for up to eight meetings and was entitled to receive additional compensation (as described above) for additional meetings during the per year. Each member of the compensation committee received an additional $7,000 for up to eight meetings and was entitled to receive additional compensation (as described above) for additional meetings during per year. Each member of the nominating and corporate governance committee received an additional $5,000 for up to six meetings and was entitled to receive additional compensation (as described above) for additional meetings during the year. We reimbursed directors for reasonable out-of-pocket expenses incurred in attending meetings of the Board and any meetings of its committees.

Pursuant to a resolution adopted by the Board, at our 2010 annual meeting of stockholders, each non-employee director was granted a nonstatutory stock option to acquire 3,898 shares of our common stock and was granted 2,412 shares of restricted stock, provided that the director was serving as a director both immediately before and immediately after the 2010 annual meeting of stockholders. Such options and restricted stock vest as to all of the underlying shares on the first anniversary of the date of grants, and will vest in full upon a change of control of Oclaro.

Fiscal Year 2012

At a meeting on July 27, 2011, the Board decided to retain our current non-employee director compensation arrangements for fiscal year 2012. In fiscal year 2012, the annual retainer for each of our non-employee directors will be $40,000, with the same additional compensation as in fiscal year 2011 described above, except that no additional compensation will be paid for serving as Chairman of the Board, as that role is now held by Mr. Couder, our Chief Executive Officer. Mr. Smith, who was appointed to serve as our lead independent director in connection with the combination of the Chairman of the Board and Chief Executive Officer positions, will receive an additional annual retainer of $10,000. At the Annual Meeting, each non-employee director will be granted a nonstatutory stock option to acquire a number of shares of our common stock with a value equal to $37,500 calculated based on our 30-day average stock price and Black-Scholes-Merton assumptions as of the grant date, and a restricted stock grant with a value equal to $37,500 calculated based on our 30-day average stock price at the grant date. The qualification and vesting terms of each such award will be the same as those for the options and restricted stock granted in fiscal year 2011. In our discretion, we may grant additional equity awards to our non-employee directors under our Amended and Restated 2004 Stock Incentive Plan.

Director Compensation Table

The following table sets forth information concerning the compensation of our non-employee directors for fiscal year 2011:

						Stock				Option				All Other
		Fees Earned or				Awards				Awards				Compensation
Name (1)		Paid in Cash ($)				($)(2)				($)(2)				($)				Total ($)
Bernard J. Couillaud (3)		$	130,000			$	32,996	(4)		$	37,134	(5)			—			$	200,130
Giovanni Barbarossa		$	42,000			$	32,996	(4)		$	37,134	(5)			—			$	112,130
Edward B. Collins		$	67,000			$	32,996	(4)		$	37,134	(5)			—			$	137,130
Greg Dougherty		$	80,000			$	32,996	(4)		$	37,134	(5)			—			$	150,130
Lori Holland		$	96,000			$	32,996	(4)		$	37,134	(5)			—			$	166,130
Joel A. Smith III		$	63,500			$	32,996	(4)		$	37,134	(5)			—			$	133,630

Outstanding Stock Options and Stock Awards Held by Directors

The following table summarizes the number of outstanding stock awards and option awards held by each of our non-employee directors as of the end of fiscal year 2011.

Name		Stock Awards (1)				Option Awards (2)
Bernard J. Couillaud (3)			—				20,898
Giovanni Barbarossa			2,412				15,232
Edward B. Collins			2,412				20,898
Greg Dougherty			2,412				23,913
Lori Holland			2,412				27,695
Joel A. Smith III			2,412				25,541

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 2011, 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.

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 2011 annual meeting of stockholders and in our Annual Report on Form 10-K for the year ended July 2, 2011.

Submitted by the compensation committee of the Board of Directors:

Greg Dougherty, Chairman
Lori Holland
Edward Collins
Marissa Peterson

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

In this section, we discuss the material elements of our executive compensation programs and policies, including program objectives, reasons why we pay each element and the specific amounts of our executives’ compensation for fiscal year 2011. Following this discussion, you will find a series of tables containing more specific details about the compensation earned by, or awarded to, the following individuals, whom we refer to as our named executive officers:

Name		Position
Alain Couder		Chairman of the Board and Chief Executive Officer
Jerry Turin		Chief Financial Officer
Jim Haynes		President and General Manager, Photonic Components
Scott Parker		Executive Vice President of Sales (1)
Kate Rundle		Executive Vice President, General Counsel and Corporate Secretary

This discussion focuses principally on compensation and practices relating to the named executive officers for our 2011 fiscal year. In addition, we discuss certain changes in our compensation programs and policies that we have implemented beginning with our 2012 fiscal year.

Executive Summary

Introduction

We are a top-tier provider of innovative optical communications and laser solutions. In fiscal year 2010, we transformed our company through a series of strategic initiatives, and in fiscal year 2011 we began structuring the integrated company to scale, while accelerating our investment in new product innovation. We believe this transformation has positioned us well for growth as the optical telecom market recovers.

We operate in a highly competitive and cyclical industry. One of our principal goals is to achieve significant levels of profitability by reducing expenses and increasing revenues. In fiscal year 2010, significant progress was made toward achieving these goals while at the same time we continued to integrate several major acquisitions. We believe that our executives directly contributed to this progress. The total compensation packages awarded to our named executive officers during fiscal year 2011 and reported in this proxy statement were intended not only to compensate them for past performance and services rendered but also to retain them over the long-term.

In fiscal year 2011, due to a volatile economic environment and industry conditions, coupled with our decision to invest in future growth and capabilities, we did not achieve our financial objectives. As a result, our executives’ actual total direct compensation was below the 25^th percentile of our peer group. Despite our operating results, however, we believe it is vital to retain and motivate our executive officers if we are to achieve our future business and financial goals. Therefore, for fiscal year 2012 we continue to use equity-based and performance-based compensation to align the interests of our executives with those of the stockholders and to provide a further retention incentive. Finally, our short-term incentives continue to support our overall compensation philosophy by linking the payment of cash variable pay to the achievement of overall company performance goals. Thus, we believe that our compensation program is designed to successfully achieve our objectives.

For fiscal year 2012, we have made some changes to our compensation policies to ensure that we can continue to retain the best executives while balancing this with the interests of our stockholders. We intend to continue monitoring the appropriate level of compensation of our executives through the use of third-party compensation consultants, review of the data included in surveys provided by Radford (a compensation and benchmarking consultant) and continued comparison to the compensation practices of our peer group.

Fiscal Year 2011 Business Results

During fiscal year 2011, we experienced the financial results of a company in mid-transformation of its core business, including:

•

Revenues were $466.5 million for fiscal year 2011, compared to $392.5 million in fiscal year 2010;

•

Gross margin was 27% for fiscal year 2011, compared to 28% in fiscal year 2010;

•

Operating loss was $33.6 million for fiscal year 2011, including $20.0 million of impairment charges following our annual review of goodwill, compared to operating income of $4.8 million in fiscal year 2010;

	•		During fiscal year 2011, we increased our investment in research and development by $24.0 million, compared to fiscal year 2010, and had $4.5 million more depreciation expense in fiscal year 2011 compared to fiscal year 2010, associated with capital investments in scaling Oclaro for long-term growth and new product introductions; and
	•		Net loss for fiscal year 2011 was $46.4 million, including $20.0 million of impairment charges following our annual review of goodwill, compared to net income of $12.4 million in fiscal year 2010.

Fiscal Year 2011 Compensation Decisions and Pay for Performance

During fiscal year 2011, although we continued a number of historical compensation practices and programs, we continued our redesign of our executive compensation program by employing the following pay for performance practices:

•

Eliminated single-trigger equity acceleration in our change of control arrangements and entered into an amended and restated two-year employment contract with our Chief Executive Officer;

•

Further refined our short-term variable pay program to take advantage of tax deductibility in accordance with Section 162(m);

•

Increased the amount of at-risk, performance-based compensation for executives though our short-term and long-term incentive programs to above 70 percent of total compensation;

•

Introduced performance-based restricted stock as an equity tool for rewarding our executives for longer term performance;

•

Awarded market-competitive merit increases in July 2010 to high-performing executives based on results from fiscal year 2010; and

•

Focused on improving overall motivation of our executives through competitive grants of long-term equity incentives which are directly linked to the share price of our stock and the creation of long-term stockholder value.

Fiscal year 2011 financial performance was below the 25^th percentile of our industry peer group in terms of overall market capitalization and net income. However, as a result of our focus on implementing pay for performance practices, total direct compensation for all of our named executive officers for fiscal year 2011 was also below the 25^th percentile of our peer companies.

For fiscal year 2012, we have adopted additional changes in our executive compensation programs in order to ensure we continue to pay for performance while remaining competitive with our market peers and ensuring sound governance. These changes are discussed further in “Fiscal Year 2012 Changes in Executive Compensation” below.

We expect to discuss our fiscal year 2012 executive compensation programs and rationale for our decisions more in next year’s proxy statement for our 2012 annual meeting of stockholders.

Fiscal Year 2011 Compensation Program Design

Compensation Committee

The compensation committee of the Board is the primary architect of our executive compensation program. The compensation committee annually assesses our compensation programs to assure that they are appropriately aligned with our business strategy and are achieving desired objectives. The compensation committee also reviews market trends and changes in competitive compensation practices, as further described below. Based on its review and assessment, the compensation committee from time to time recommends changes in our compensation programs to our Board. For fiscal year 2011, the compensation committee again recommended to our Board the compensation of our Chief Executive Officer and all other executive officers. The compensation committee also oversaw management’s decisions concerning the compensation of other company officers, administered our equity compensation plans, and evaluated the effectiveness of our overall executive compensation programs.

Independent Compensation Consultant

The compensation committee has the authority to retain and terminate any independent, third-party compensation consultants and to obtain advice and assistance from internal and external legal, accounting and other advisors. During our 2011 fiscal year, the compensation committee again engaged Compensia, Inc. (referred to in this discussion and analysis as Compensia) as its independent adviser for certain executive compensation matters. Compensia was engaged directly by the compensation committee to provide an independent review of our executive compensation programs, including an analysis of both the competitive market and the design of the programs. More specifically, Compensia furnished the compensation committee with reports on peer company practices relating to the following matters:

•

short- and long-term compensation program design;

•

annual share utilization and stockholder dilution levels resulting from equity plans; and

•

executive stock ownership and retention values.

As part of its reports to the compensation committee, Compensia recommended and evaluated our selected peer companies, and provided competitive compensation data and analysis relating to the compensation of our Chief Executive Officer and our other executives and officers. Compensia also assisted us with our risk assessment of our compensation programs. The compensation committee asked Compensia to prepare and present peer company benchmarking data in connection with fiscal year 2011 compensation decisions. Compensia provided no additional consulting services apart from executive and director compensation matters in fiscal year 2011.

The compensation committee has retained Compensia as its independent compensation consultant once again for fiscal year 2012 and intends to engage Compensia to review the elements listed above along with executive change of control and severance agreements. The compensation committee expects that it will continue to retain an independent compensation consultant in the future.

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, as described in more detail above, we seek to implement a pay for performance philosophy by designing our compensation programs to link a substantial component of our executives’ compensation to the achievement of performance goals that directly correlate to the enhancement of stockholder value. Finally, our compensation programs are designed to have the right balance of short- and long-term compensation elements to ensure an appropriate focus on operational objectives and the creation of long-term value.

To accomplish these objectives, the compensation committee has historically (including for fiscal year 2011) structured our compensation programs to include the following key features and compensation elements:

•

base salaries that are competitive with those paid by peer group companies, allowing us to attract and retain key executives;

•

at risk, variable pay earned twice per year based on pre-established performance goals related to our important financial objectives;

•

at risk, equity-based compensation which aligns our executives’ interests with those of our stockholders and promotes executive retention; and

•

change of control and severance benefits.

As a general matter, the compensation committee seeks to allocate a substantial portion of the named executive officers’ compensation to components that are at-risk and performance-based. The compensation committee also generally seeks to allocate a substantial portion of executive compensation to long-term equity awards. The compensation committee does not maintain fixed policies for allocating among current and long-term compensation or among cash and non-cash compensation. Instead, the compensation committee maintains flexibility and adjusts different elements of compensation based upon its evaluation of the key compensation goals set forth above.

While compensation levels may differ among named executive officers based on the role, responsibilities and performance of each specific executive, there are no material differences in the compensation philosophies, objectives or policies for our executives. We do not maintain a policy regarding internal pay equity.

Role of Executive Officers in Compensation Decisions

The compensation committee makes recommendations to our Board on all compensation actions relating to our executive officers, including our named executive officers. As part of its process, the compensation committee meets with our Chief Executive Officer and Executive Vice President of Human Resources to obtain recommendations with respect to the structure of our compensation programs, as well as an assessment of the performance of individual executives and recommendations on compensation for individual executives. As discussed in greater detail below under “Variable Pay Program / Cash Incentive Awards,” our Chief Executive Officer, Chief Financial Officer and Executive Vice President of Human Resources develop recommendations for performance measures and target and payout opportunities under our variable pay program based on management’s business forecast both at the company and business unit levels. These recommendations are reviewed and approved first by the compensation committee and then by our Board.

Peer Group and Competitive Positioning

In arriving at its determination of, and recommendations to our Board on, the amounts and components of compensation for our Chief Executive Officer and other executive officers for fiscal year 2011, the compensation committee relied on competitive compensation data prepared by Compensia. Peer companies were recommended by Compensia and approved by the compensation committee. In selecting peer companies, the compensation committee identified companies that were comparable to us on the basis of revenues, industry, global scope of operations, and market capitalization and that the compensation committee believes compete with us for executive talent. In particular, the peer group for fiscal year 2011 was determined based on the following criteria:

•

global communications equipment and semiconductor companies;

•

companies with revenues between $129 million and $1 billion (approximately 1/2 to 2 times our trailing 12 months revenues); and

•

companies with an average market capitalization of approximately $865 million.

In fiscal year 2011, Compensia recommended and the compensation committee approved the peer group set forth below. Compensia also recommended and the compensation committee approved the use of the Radford survey data for benchmarking executives’ compensation in fiscal year 2011. The peer group consisted of the following companies:

Coherent Inc.		MRV Communications Inc.
Cymer Inc.		Newport Corporation
ADC Telecommunications		Oplink Communications Inc.
EXFO Electro-Optical Engineering Inc.		Opnext Inc.
Extreme Networks		PMC-Sierra Inc.
Finisar Corporation		TriQuint Semiconductor Inc.
JDS Uniphase Corporation		Arris Group
Harmonic Inc.		ARM Holdings Ltd.*
II-VI Incorporated		Dialight Ltd.*
Infinera Corporation		Filtronic Plc*
IPG Photonics Corporation		Renishaw Plc*
ADTRAN, Inc.		Spirent Communications Plc*

Compared to our fiscal year 2010 peer group, this peer group removed Emcore Corporation, GSI Group Inc., Mindspeed Technologies Inc. and Zygo Corporation and added ADC Telecommunications, JDS Uniphase Corporation, ADTRAN, Inc. and Arris Group.

In connection with its compensation review process for fiscal year 2012, and based upon the recommendation of Compensia, the compensation committee approved certain changes to our peer group for use in making fiscal year 2012 compensation decisions. The peer group for fiscal year 2012 was determined based on the same criteria used to determine the fiscal year 2011 peer group, except that the fiscal year 2012 peer group excludes companies with revenues above $1 billion. We expect to discuss the peer group for fiscal year 2012 more in next year’s proxy statement for our 2012 annual meeting of stockholders.

In past years, the compensation committee generally sought to set total target direct compensation for our executives at the 50^th percentile of that provided by peer companies. Total target direct compensation is the sum of base salary, target annual incentive compensation and target long-term equity incentive awards. However, total target direct compensation, as well as individual components, have in the past varied by executive based on the executive’s experience, level of responsibility and performance. As a result of strong financial performance in fiscal year 2010, each executive was given a market competitive merit increase to their base salary, as further discussed and analyzed below. Additionally, the variable pay target participation rate was increased for Ms. Rundle to a market competitive level, as further discussed and analyzed below. However, as a direct result of our pay for performance practices, total actual direct compensation paid to our named executive officers for fiscal year 2011 was limited to a level below the 25^th percentile of our peer companies.

For fiscal year 2012 compensation, motivated primarily by our pay for performance philosophy, the compensation committee considered our performance and determined to recommend to our Board that, other than a modest market adjustment for Mr. Turin, no increases be made to base salaries and target annual incentive levels for fiscal year 2012.

Analysis of Fiscal Year 2011 Executive Compensation Decisions and Actions

Summary of Fiscal Year 2011 Compensation Decisions

Key executive compensation decisions for fiscal year 2011 were driven by our review and analysis of our business performance for fiscal year 2010 on a “look-back” basis. During fiscal year 2010, we were able to continue to increase margin expansion, rapidly integrate several acquisitions and achieve operational profitability with respect to GAAP financial metrics. Fiscal year 2010 was a strong year for Oclaro — our overall results for fiscal year 2010 were above the 50^th percentile of our peer group. As a result of our strong operational performance in fiscal year 2010, the following compensation amounts and elements were provided, and the following compensation decisions were made, by the compensation committee at the beginning of fiscal year 2011:

•

Each of our named executive officers received a market-based merit increase to their base salaries (ranging from 3 to 15 percent) based on individual performance during fiscal year 2010 in line with our peer group practices;

•

Target awards (as a percentage of base salary) and payout opportunities under the variable pay program generally were maintained at the same levels as prior years (with the exception of Ms. Rundle, whose target increased from 40% to 50% of base salary);

•

Each named executive received a grant of time-based stock options and time-based restricted stock, which grants roughly approximated the 75th percentile of the peer group levels. The allocation of these grants to the named executive officers was determined based on individual performance, criticality of skills, and retention risk, among other factors;

•

Single-trigger equity acceleration benefits were eliminated for Mr. Couder; and

•

Each named executive received a grant of performance-based restricted stock in March 2011 (with the exception of Mr. Couder, whose grant was made in April 2011), which grant is designed to vest upon achievement of certain company gross-margin targets for the three months ending December 31, 2011.

During fiscal year 2011, based on our failure to reach minimum revenue, minimum adjusted earnings before interest, taxes, depreciation and amortization (or EBITDA) and minimum net income goals, payouts under the variable pay program were not made for the six-month period ended January 1, 2011 or for the six-month period ended July 2, 2011. As a result, each named executive’s total actual direct compensation for fiscal year 2011 fell below the 25^th percentile of our peer group. Based on this result, the compensation committee believes that compensation levels for fiscal year 2011 for the variable pay program were commensurate with performance and were appropriate and consistent with the pay for performance philosophy and objectives underlying our compensation programs.

Elements of Fiscal Year 2011 Compensation

We allocated fiscal year 2011 compensation among the following components for our named executive officers:

Element		Objective		Details
Base Salary		Regular cash payments are designed to compensate each named executive based on the size and scope of his or her position, individual expertise, experience and performance.		• Base salaries for our named executives were targeted at the 50th percentile of our peer group. • Based on outstanding performance in fiscal year 2010, each named executive received modest merit increases to their base salaries.
Variable Pay Program		Semi-annual cash incentive awards are designed to incent executives to work to achieve short-term company financial performance.		• Target variable pay program opportunities were set at the 50th percentile of our peer group. • Two important short-term financial metrics (described further below) were set for each of the 6-month periods ended January 1, 2011 and July 2, 2011. • Payout opportunities for each component ranged from 50% of target, or the trigger amount, to a maximum of 150% of target, or the stretch amount. • If we failed to achieve the trigger level for either of the stated performance measures, no payout was awarded.
				• Based on our failure to achieve the minimum trigger level for both components in each of the six-month measurement periods, none of our named executive officers received any payment under this program for fiscal year 2011 performance.
Long-Term Incentives (LTI)		Equity awards are designed to incent executives to work to achieve outstanding long-term company performance. In addition to alignment with stockholder interests, the use of multiple vehicles for equity-based LTI awards supports our pay for performance philosophy: • Stock options provide a strong incentive for executives to work to achieve stock price appreciation; • Restricted stock facilitates retention of key executives and employees; and • Performance-based stock awards incent executives to work to achieve longer-term financial targets directly aligned with company financial performance.		• Target LTI awards were targeted at the 75th percentile of our peer group in fiscal year 2011. This was done in part to correct for low awards in the prior two years and to reward the team for performance for the prior year. • To emphasize stock price growth, in fiscal year 2011, approximately 50% of the LTI award value as of the grant date was delivered as time-based stock options. • To increase retention value and reorient named executive officers’ historically below market levels of compensation, 50% of the LTI award value as of the grant date was granted in the form of time-based restricted stock • To introduce performance-based restricted stock, 5,000 shares of performance-based restricted stock were granted to each named executive based on achieving certain gross margin targets for the three months ending December 31, 2011.

Element		Objective		Details
Severance and Change of Control		Termination payments and benefits are designed to help retain our leadership in the event of a change of control and also to provide them with financial security in case of a loss of employment.		• Agreement with our Chief Executive Officer was amended and restated in fiscal year 2011 to reflect double-trigger requirement for any change of control benefits. • For new awards, in fiscal year 2012, all named executives will have double-trigger requirements for any change of control benefits. • No tax gross-ups.

Fiscal Year 2011 Base Salaries

We generally seek to set our executives’ base salaries each year at levels which are competitive with our peer companies based on each individual executive’s role and the scope of his or her responsibilities, also taking into account the executive’s experience and the base salary levels of other executives within Oclaro. The compensation committee typically reviews base salaries every fiscal year and adjusts base salaries to take into account competitive market data, company and individual performance from the prior fiscal year and promotions or changes in responsibilities. For fiscal year 2011, we benchmarked base salaries at the 50^th percentile of our peer group.

As a result of our strong operational performance in fiscal year 2010 as described above, each of our named executive officers received a modest merit increase, as detailed in the chart below, to their base salary based on individual performance during fiscal year 2010 in line with our peer group practices.

														Fiscal Year 2011
		Fiscal Year				Fiscal Year								Base Salary as
		2010 Base				2011 Base				Percentage				Percentile of Peer
Named Executive Officer		Salary ($)				Salary ($)				Increase				Group
Alain Couder		$	500,000			$	575,000				15	%		50th
Jerry Turin		$	280,000			$	308,000				10	%		30th
Jim Haynes		$	310,000			$	341,000				10	%		60th
Kate Rundle		$	300,000			$	309,000				3	%		70th
Scott Parker		$	250,000			$	257,500				3	%		25th

In particular, Mr. Couder received a 15% base salary increase and Mr. Turin received a 10% base salary increase specifically to bring them closer to a market competitive level. The compensation committee also determined that it was appropriate for Mr. Parker, Mr. Haynes and Ms. Rundle to receive modest merit increases to their base salary. In February 2011, due to increased responsibilities and outstanding performance, an additional increase was provided to Ms. Rundle taking her base salary from $309,000 to $330,000.

Fiscal Year 2011 Variable Pay Program / Cash Incentive Awards

Through our variable pay program, we seek to provide pay for performance by linking cash incentive awards to company financial performance. In designing the variable pay program, our Chief Executive Officer, Chief Financial Officer and Executive Vice President of Human Resources develop and recommend performance metrics and targets, which are reviewed and are subject to adjustment by the compensation committee and our Board. Performance metrics and payout levels are determined based on management’s business forecast both at the company and business unit levels, as reviewed and approved by the Board. In fiscal year 2011, target levels for performance under the plan were set substantially above the levels included in our business forecast in order to challenge management.

For fiscal year 2011, performance measures were based on cumulative revenue and adjusted EBITDA targets for the six months ended January 1, 2011 and cumulative revenue and gross margin targets for the six months ended July 2, 2011. Both periods had a double-trigger requirement, which means that a threshold amount for each performance metric had to be achieved for each six month period before any award was earned for the performance period. We chose cumulative revenue, adjusted EBITDA and gross margin as our performance metrics for this program because we believe these were important indicators aligned with both our near and long-term financial goal of profitable growth.

The key features of the variable pay program for fiscal year 2011 were as follows:

•

For the six months ended January 1, 2011, the trigger, target and stretch cumulative revenue goals were $250 million, $270 million and $284 million, respectively. Adjusted EBITDA trigger, target and stretch goals were $27 million, $37 million, and $45 million, respectively, for this performance period;

•

For the six months ended July 2, 2011, the trigger, target and stretch cumulative revenue goals were $245 million, $265 million, and $285 million, respectively. Gross margin trigger, target and stretch goals were 29%, 31% and 33%, respectively, for this performance period;

•

Actual achievement against the performance goals was measured, and (if achieved) awards were to be paid out, on a six-month basis;

•

All non-GAAP adjustments were subject to approval by the audit committee to ensure that the non-GAAP adjustment effects on payout levels appropriately reflected company performance;

•

Payout opportunities were based entirely on relative achievement of the financial performance objectives; there was no individual performance component;

•

Each executive’s target variable pay award was set at a percentage of his or her base salary, based on both competitive benchmarking and the level of the executive’s responsibilities, as follows:

•

Mr. Couder’s target variable pay award was set at the benchmark, which was 100% of his base salary, while Mr. Haynes and Mr. Turin’s target variable pay awards were set at the benchmark, which was 60% of their respective base salaries;

•

For Ms. Rundle, the target variable pay award was set at the benchmark, which was 50% of her base salary;

•

Payout opportunities for each component ranged from 50% of target (which amount equaled the trigger amount) to a maximum of 150% of target (which amount equaled the stretch amount); and

•

If we failed to achieve the trigger level for either of the stated performance measures, no payout was awarded.

For each of the six-month periods in fiscal year 2011 described above, the minimum trigger levels were not achieved and, therefore, no variable pay awards were paid.

Sales Incentive Plan for Executive Vice President of Sales

Mr. Parker served as our Executive Vice President of Sales during fiscal year 2011. He resigned from the position effective July 11, 2011. In his sales role during fiscal year 2011, Mr. Parker participated in our sales incentive plan, and thus was not eligible to participate in our variable pay program. Mr. Parker’s participation in this quota-based plan was at a threshold level of 30%, a target level of 60%, and a maximum level of 150% of his annual base salary. Mr. Parker received a quarterly quota for company-wide sales revenue and quarter over quarter growth. Unless a minimum trigger of 60% of the target quota was achieved, there was no payout under this plan, and Mr. Parker’s payout under this plan was capped at 250% of his target level, which equaled 150% of his annual base salary. During fiscal year 2011, Mr. Parker achieved 131% of quota for the quarter ended October 2, 2010; 102% of quota for the quarter ended January 1, 2011; 91% of quota for the quarter ended April 2, 2011 and 80% of quota for the quarter ended July 2, 2011. Payments to Mr. Parker under our sales incentive plan are included in the Fiscal Year 2011 Summary Compensation Table on page 25.

We believe that disclosing our quarterly company-wide sales revenue goals, even on a historical basis, would cause us competitive harm by, among other things, providing our competitors with insight into our business strategy and anticipated sales capabilities within the fiscal year. For fiscal year 2011, we set quarterly company-wide sales revenue targets based on our Board-approved internal business plan at levels that were challenging, but not exceedingly difficult to achieve, relative to our historical performance and future expectations at the time the levels are set. To give context for the general degree of difficulty in achieving these undisclosed targets, we have achieved an average performance of 102% of quota per quarter during the last two years under the sales incentive plan. The compensation committee believes that incentives awarded under our variable pay program and sales incentive plan appropriately reflected our performance and appropriately rewarded the performance of the named executive officers.

Long-Term Incentive Programs

We believe consistent execution of our strategy over multi-year periods will lead to an increase in our stock price. Stock options, restricted stock and performance-based restricted stock are the variable equity instruments we use to align the interests of the named executive officers with those of our stockholders and provide each individual with a significant incentive to manage Oclaro from the perspective of an owner with an equity stake in the business. These awards are also intended to promote executive retention, as unvested stock options are generally forfeited if the executive voluntarily leaves us. Each stock option allows the executive officer to acquire our common stock at a fixed price per share (the market price on the grant date) over a period of seven to ten years, thus providing a return to the officer only if the market price of the shares appreciates over the option term. The actual compensation realized from stock options and (to some degree) restricted stock is directly dependent on increases in our stock price after the grant date.

The size of the equity award to each executive officer generally is set at a level that is intended to create a meaningful opportunity for share ownership based upon the individual’s current position with Oclaro, but the compensation committee and Board also take into account (1) the individual’s potential for future responsibility and promotion over the term of the award, (2) the individual’s performance in recent fiscal years, and (3) the number of awards held by the individual at the time of grant. In addition, the compensation committee and our Board consider competitive equity award data, and determine award size consistent with the compensation committee’s and our Board’s objective of setting long-term incentive compensation at a competitive level in relation to our peer companies, subject to individual variances. The compensation committee and our Board also consider annual share usage and overall stockholder dilution when determining the size of equity awards.

Administration of Equity Award Grants

The compensation committee grants options with exercise prices set at the market price on the date of grant based on the closing market price. Our current stock granting policy is that options and restricted stock awards granted to executive officers are only made during open trading windows. Awards are not timed in relation to the release of material information. Our current stock granting policy also provides that annual incentive grants to executives are made on August 15^th each year after approval from the Board. In accordance with our stock granting policy, all new-hire equity awards are granted on the 10th day of the month following the first date of employment. Annual equity awards to ongoing employees for fiscal year 2011 were granted on August 15^th, 2010. Any special grants (non-new hire or annual) made by the compensation committee are effective on the date of approval by the compensation committee.

Grants During Fiscal Year 2011

In determining the size of equity grants to our executives in fiscal year 2011, the compensation committee used the Black-Scholes-Merton valuation model and considered comparative share ownership of executives in our peer group identified above, Radford survey data, our company-level performance, the applicable executive’s performance, the amount of equity previously awarded to the executive, the vesting of such awards, the retention value of those awards and the recommendations of management. For fiscal year 2011, due to the lack of retention value in past grants and the strong performance of Oclaro in fiscal year 2010, the compensation committee awarded equity grants to our executives that were above the median for equity awards granted to comparable executives at companies in the peer group and those identified in the Radford survey.

For fiscal year 2011, the compensation committee’s policy was to target long-term incentive compensation generally at the 75^th percentile of our peer group. The compensation committee determined that equity awards for executive and other senior officers generally would be allocated approximately 50% to stock option awards and 50% to time-based restricted stock awards. The compensation committee chose this mix based on the recommendations of Compensia. The compensation committee determined to target the 75^th percentile and use this mix of equity awards for fiscal year 2011 not only to limit the dilutive effect of equity awards but to deliver equity at above-market grant levels in order to reorient executives historically compensated at below-market levels. For our Chief Executive Officer in particular, the above market equity award grant was intended to recognize the fact that in prior fiscal years his total direct compensation was significantly below the median compensation for the chief executive officers of the companies in our peer group. The compensation committee determined that is was in the best interests of us and our stockholders to link this long-term incentive compensation opportunity to the performance of our common stock over the next four years of the vesting period. We believe that the use of stock options created both upside potential if our stock price increases as well as retention value. The use of stock options and time-based restricted stock is a competitive practice among our direct peer group.

In addition, in fiscal year 2011, the compensation committee introduced performance-based restricted stock as a tool for rewarding our named executives for performance. Specifically, we granted to each named executive 5,000 shares of performance-based restricted stock to be earned at either a 50% level or 100% level depending on our achievement of certain gross margin performance targets for the three months ending December 31, 2011. We have determined that achieving these gross margin targets is not probable. For fiscal year 2011, we set these gross margin targets based on our Board-approved internal business plan at levels that were challenging relative to our historical performance and future expectations at the time the levels were set.

For fiscal year 2012, the compensation committee has determined that equity awards for executives and other senior officers generally will be allocated one third to stock option awards, one third to time-based restricted stock awards and one third to performance-based stock units. The compensation committee determined to use this mix of equity awards for fiscal year 2012 to reinforce our pay for performance philosophy. Time-based restricted stock awards will vest 25% after each year over four years. Stock option awards will vest 25% after one year and then monthly thereafter over the next three years. Performance-based stock units will be earned based on our two-year performance relative to a specific group of direct industry peers. We expect to discuss these fiscal year 2012 awards more in next year’s proxy statement for our 2012 annual meeting of stockholders.

Severance and Change of Control Arrangements

Each of the named executive officers other than Mr. Couder has entered into an Executive Severance and Retention Agreement. The Executive Severance and Retention Agreement provides, under certain circumstances, for payments upon termination of employment following a change of control of Oclaro or termination upon death or without “cause” or a resignation for “good reason,” each as defined in the Executive Severance and Retention Agreement. Mr. Couder’s Amended and Restated Employment Agreement provides for payments in similar circumstances, other than death. Change of control payments of salary and variable pay made under the agreements, and, in the case of Mr. Couder, acceleration of equity awards, are subject to a “double trigger,” meaning that both a change of control and either a subsequent termination or subsequent termination for “good reason” are required. In other words, the change of control does not by itself trigger benefits; rather, benefits are paid only if the employment of the executive is terminated (or the executive resigns for “good reason”) during a specified period after the change of control. We believe a “double trigger” benefit maximizes stockholder value because it prevents an unintended windfall to executives in the event of a change of control, while still providing them appropriate incentives to cooperate in negotiating any change of control in which they believe they may lose their jobs. We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the caption “Employment, Change of Control and Severance Arrangements” below. Under the current agreements, set to expire on December 31, 2011, acceleration of equity awards for executives other than Mr. Couder is subject to a single trigger, meaning only the change of control is required to trigger the acceleration of vesting of equity awards. Beginning January 1, 2012, all executive change of control and severance arrangements will contain double-trigger requirements for acceleration of equity awards.

We believe providing these benefits help us compete for and retain executive talent. After reviewing the practices of companies represented in the peer group, we believe that our severance and change of control benefits are generally comparable with severance packages offered to executives by the companies in the peer group.

Other Benefits

We maintain broad-based benefits that are provided to all employees, including health and medical insurance, life and disability insurance and a 401(k) plan or, for executives and employees residing outside the U.S., a similar retirement plan. All executives are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees depending on their geographic location. Under the 401(k) plan, employees, including our named executive officers, may receive a matching contribution from us of up to 4% of the employees’ pay (up to a $245,000 annual salary limit).

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended (referred to as the Code), generally disallows a tax deduction for compensation in excess of $1.0 million paid to our Chief Executive Officer and certain of our other officers whose compensation is required to be disclosed to our stockholders under the Exchange Act. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. The compensation committee periodically reviews the potential consequences of Section 162(m) and we generally intend to structure the performance-based portion of our executive compensation, where feasible, to comply with exemptions under Section 162(m) so that the compensation remains tax deductible to us. However, the compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions under Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

ASC 718 requires us to recognize in our consolidated statement of operations all share-based payments to employees, including grants of stock options and restricted stock to executives, based on their fair values. The application of ASC 718 involves significant amounts of judgment in the determination of inputs into the Black-Scholes-Merton valuation model that we use to determine the fair value of share-based awards. These inputs are based upon highly subjective assumptions as to the volatility of the underlying stock, risk free interest rates and the expected life of the options. Judgment is also required in estimating the number of share-based awards that are expected to be forfeited. As required under GAAP, we review our valuation assumptions at each grant date, and, as a result, our valuation assumptions used to value stock-based awards granted in future periods may vary from the valuation assumptions we have used previously. For performance-based grants, we also must apply judgment in determining the periods when, and if, the related performance targets become probable of being met.

Fiscal Year 2012 Executive Compensation Decisions

As a result of the compensation committee’s review of our compensation programs and peer company data and best practices in the executive compensation area, and our ongoing commitment to strengthen the pay for performance aspects of our executive compensation program, in July 2011 the compensation committee recommended and our Board approved various decisions with respect to our executive compensation program in order to ensure we are able to retain our key executive talent and remain competitive with our market peers while establishing a strong pay for performance culture. These decisions include the following:

•

base salary targeted at the 50th percentile of peer companies with no merit adjustments for fiscal year 2012;

•

short-term incentive pay targeted at the 50th percentile of peer companies with no increase in target participation levels for fiscal year 2012;

•

variable pay performance goals based on several important short-term financial metrics with a double-trigger requirement;

•

payout levels will continue to be capped at 150% of target under our variable pay program;

•

long-term incentive compensation will now be comprised of one-third performance-based stock options, one-third time-based restricted stock, and one-third performance-based restricted stock tied to our long-term performance as compared to our peers; and

•

new executive change of control agreements with double-trigger equity acceleration provisions, effective from January 1, 2012.

We expect to discuss our fiscal year 2012 executive compensation program more in next year’s proxy statement for our 2012 annual meeting of stockholders.

Compensation Risk Assessment

In April 2011, 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 executives to focus on the creation of long-term stockholder value. In its review, the compensation committee noted the following features:

•

payout levels under our variable pay and sales incentive plans are capped and payout opportunities may be achieved on a straight-line interpolation basis between trigger 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 executives’ compensation thereby focusing such individuals on enhancing long-term stockholder value.

Summary Compensation Table

The following table sets forth certain information concerning the compensation for fiscal years 2011, 2010 and 2009 for each individual who served as our principal executive officer (Mr. Couder) and our principal financial officer (Mr. Turin) during fiscal year 2011 and our three other most highly-compensated executive officers (Messrs. Haynes and Parker and Ms. Rundle) who received annual compensation in excess of $100,000 during fiscal year 2011. We refer to these officers collectively as our named executive officers.

Fiscal Year 2011 Summary Compensation Table

																						Non-Equity
														Stock				Option				Incentive Plan				All Other
										Bonus				Awards				Awards				Compensation				Compensation				Total
Name and Principal Position		Year (1)				Salary ($)				($)				($)(2)(3)				($)(2)				($)				($)				($)
Alain Couder			2011			$	575,000				—			$	834,400			$	585,664				—			$	9,800	(11)		$	2,004,864
Chairman of the Board and			2010			$	498,654				—				—			$	460,875			$	627,429			$	7,746	(11)		$	1,594,704
Chief Executive Officer (4)			2009			$	487,500			$	187,500				—			$	614,277			$	161,958			$	5,860	(11)		$	1,457,095
Jerry Turin			2011			$	308,000				—			$	269,094			$	188,877				—			$	8,444	(11)		$	774,415
Chief Financial Officer (5)			2010			$	266,223				—				—			$	204,832			$	210,816			$	5,593	(11)		$	687,464
			2009			$	253,500			$	39,000				—			$	158,360			$	33,687			$	4,793	(11)		$	489,340
Jim Haynes			2011			$	369,446	(9)			—			$	358,792			$	251,836				—			$	34,657	(9)(12)		$	1,014,731
President and General Manager, Photonic Components (6)			2010			$	314,371	(9)			—				—			$	286,765			$	245,713	(9)		$	29,812	(9)		$	876,661
			2009			$	283,231	(9)		$	49,051				—			$	167,320			$	47,048	(9)		$	42,454	(9)		$	589,104
Kate Rundle			2011			$	319,500				—			$	358,764			$	252,761				—			$	9,800	(11)		$	940,825
Executive V.P., General Counsel and Corporate Secretary (7)			2010			$	299,253				—				—			$	92,174			$	150,583			$	9,312	(11)		$	551,322
			2009			$	292,500			$	45,000				—			$	153,880			$	38,870			$	8,451	(11)		$	538,701
Scott Parker			2011			$	257,500				—			$	179,396			$	125,918			$	156,010	(10)		$	8,906	(11)		$	727,730
Executive V.P. of Sales (8)			2010			$	250,000				—				—			$	71,691			$	185,250			$	5,964	(11)		$	512,905

Fiscal Year 2011 Grants of Plan-Based Awards Table

The following table sets forth information regarding each grant of an award made to a named executive officer during fiscal year 2011 under any plan, contract, authorization or arrangement pursuant to which cash, securities, similar instruments or other property may be received.

																														All Other				All Other Option
																														Stock				Awards:
						Estimated Possible Payouts												Estimated Possible Payouts												Awards:				Number of				Exercise or				Grant Date
						Under Non-Equity Incentive												Under Equity Incentive												Number of				Securities				Base Price				Fair Value
						Plan Awards												Plan Awards												Shares of				Underlying				of Option				of Stock
		Grant				Thresh-								Max-				Thresh-								Max-				Stock				Options				Awards				and Option
Name		Date				hold				Target				imum				hold (1)				Target (1)				imum				or Units				(2)				($/Sh)				Awards (3)
Alain Couder			7/4/2010	(5)		$	143,750			$	287,500			$	431,250				—				—				—				—				—				—				—
			1/3/2011	(6)		$	143,750			$	287,500			$	431,250				—				—				—				—				—				—				—
			8/16/2010				—				—				—				—				—				—				—				80,000			$	10.43			$	585,664
			8/16/2010				—				—				—				—				—				—				80,000	(8)			—				—			$	834,400
			4/27/2011				—				—				—			$	29,400			$	58,800				—				—				—				—			$	0	(1)
Jerry Turin			7/4/2010	(5)		$	46,200			$	92,400			$	138,600				—				—				—				—				—				—				—
			1/3/2011	(6)		$	46,200			$	92,400			$	138,600				—				—				—				—				—				—				—
			8/16/2010				—				—				—				—				—				—				—				25,800			$	10.43			$	188,877
			8/16/2010				—				—				—				—				—				—				25,800	(8)			—				—			$	269,094
			3/10/2011				—				—				—			$	32,025			$	64,050				—				—				—				—			$	0	(1)
Jim Haynes(4)			7/4/2010	(5)		$	55,417			$	110,834			$	166,251				—				—				—				—				—				—				—
			1/3/2011	(6)		$	55,417			$	110,834			$	166,251				—				—				—				—				—				—				—
			8/16/2010				—				—				—				—				—				—				—				34,400			$	10.43			$	251,836
			8/16/2010				—				—				—				—				—				—				34,400	(8)			—				—			$	358,792
			3/10/2011				—				—				—			$	32,025			$	64,050				—				—				—				—			$	0	(1)
Kate Rundle			7/4/2010	(5)		$	38,625			$	77,250			$	115,875				—				—				—				—				—				—				—
			1/3/2011	(6)		$	49,500			$	99,000			$	148,500				—				—				—				—				—				—				—
			8/16/2010				—				—				—				—				—				—				—				25,800			$	10.43			$	188,877
			8/16/2010				—				—				—				—				—				—				25,800	(8)			—				—			$	269,094
			3/10/2011				—				—				—				—				—				—				—				7,000			$	12.81			$	63,884
			3/10/2011				—				—				—				—				—				—				7,000	(9)			—				—			$	89,670
			3/10/2011				—				—				—			$	32,025			$	64,050				—				—				—				—			$	0	(1)
Scott Parker			7/4/2010	(7)		$	77,250			$	154,500			$	386,250				—				—				—				—				—				—				—
			8/16/2010				—				—				—				—				—				—				—				17,200			$	10.43			$	125,918
			8/16/2010				—				—				—				—				—				—				17,200	(8)			—				—			$	179,396
			3/10/2011				—				—				—			$	32,025			$	64,050				—				—				—				—			$	0	(1)

In terms of the option awards for which disclosure is provided for fiscal year 2011 in the Fiscal Year 2011 Summary Compensation Table and Fiscal Year 2011 Grants of Plan-Based Awards Table above, the options vest as to 25% of the shares subject to the option on the first anniversary of the date of grant and 1/48 of the shares subject to the option monthly thereafter over the remaining 36 months. Each option has a term of ten years, and generally expires shortly following the termination of the executive’s employment.

Outstanding Equity Awards at Fiscal 2011 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 the named executive officers as of July 2, 2011.

						Option Awards																Stock Awards
																																		Equity
																																		Incentive
																														Equity				Plan
																														Incentive				Awards:
																														Plan				Market or
																														Awards:				Payout
																														Number of				Value of
																										Market				Unearned				Unearned
						Number of				Number of												Number of				Value of				Shares,				Shares,
						Securities				Securities												Shares or				Shares or				Units or				Units or
						Underlying				Underlying												Units of				Units That				Other Rights				Other Rights
		Option				Unexercised				Unexercised				Option				Option				Stock that				Have Not				That Have				That Have
		Grant				Options (#)				Options (#)				Exercise				Expiration				Have Not				Vested ($)				Not Vested				Not Vested
Name		Date				Exercisable				Unexercisable				Price ($)				Date				Vested (#)				(1)				(#)(2)				($)(3)
Alain Couder			8/13/2007				91,043				3,958	(4)		$	14.45				8/13/2017				—				—				—				—
			8/15/2008				66,584				27,417	(4)		$	8.90				8/15/2018				—				—				—				—
			5/13/2009				31,250				28,751	(4)		$	3.10				5/13/2019				—				—				—				—
			8/15/2009				82,500				97,501	(4)		$	3.50				8/15/2019				—				—				—				—
			8/16/2010				—				80,000	(4)		$	10.43				8/16/2020				—				—				—				—
			—				—				—				—				—				3,125	(7)		$	21,063				—				—
			—				—				—				—				—				80,000	(8)		$	539,200				—				—
			—				—				—				—				—				—				—				2,500			$	16,850
Jerry Turin			11/11/2005				26,000				—			$	24.55				11/11/2015				—				—				—				—
			6/12/2007				3,000				—			$	10.05				6/12/2017				—				—				—				—
			1/28/2008				2,050				350	(4)		$	8.75				1/28/2018				—				—				—				—
			8/15/2008				17,000				7,000	(4)		$	8.90				8/15/2018				—				—				—				—
			5/13/2009				8,333				7,667	(4)		$	3.10				5/13/2019				—				—				—				—
			8/15/2009				36,666				43,334	(4)		$	3.50				8/15/2019				—				—				—				—
			8/16/2010				—				25,800	(4)		$	10.43				8/16/2020				—				—				—				—
			—				—				—				—				—				150	(7)		$	1,011				—				—
			—				—				—				—				—				25,800	(8)		$	173,892				—				—
			—				—				—				—				—				—				—				2,500			$	16,850
Jim Haynes			8/7/2003				3,000				—			$	64.24	(6)			8/7/2013				—				—				—				—
			9/25/2003				1,500				—			$	108.60	(6)			9/25/2013				—				—				—				—
			6/2/2004				1,000				—			$	46.97	(6)			6/2/2014				—				—				—				—
			9/22/2004				2,800				—			$	33.65				9/22/2014				—				—				—				—
			11/11/2005				25,000				—			$	24.55				11/11/2015				—				—				—				—
			6/12/2007				5,000				—			$	10.05				6/12/2017				—				—				—				—
			1/28/2008				18,708				3,194	(4)		$	8.75				1/28/2018				—				—				—				—
			8/15/2008				17,000				7,000	(4)		$	8.90				8/15/2018				—				—				—				—
			5/13/2009				10,416				9,584	(4)		$	3.10				5/13/2019				—				—				—				—
			8/13/2009				15,333				60,667	(4)		$	3.50				8/13/2019				—				—				—				—
			8/16/2010				—				34,400	(4)		$	10.43				8/16/2020				—				—				—				—
			—				—				—				—				—				1,487	(7)		$	10,022				—				—
			—				—				—				—				—				34,400	(8)		$	231,856				—				—
			—				—				—				—				—				—				—				2,500			$	16,850
Kate Rundle			11/26/2007				7,167				833	(4)		$	12.00				11/26/2017				—				—				—				—
			8/15/2008				2,500				7,000	(4)		$	8.90				8/15/2018				—				—				—				—
			5/13/2009				1,458				6,709	(4)		$	3.10				5/13/2019				—				—				—				—
			8/13/2009				3,750				19,501	(4)		$	3.50				8/13/2019				—				—				—				—
			8/16/2010				—				25,800	(4)		$	10.43				8/16/2020				—				—				—				—
			3/10/2011				—				7,000	(4)		$	12.81				3/10/2021				—				—				—				—
			—				—				—				—				—				583	(7)		$	3,929				—				—
			—				—				—				—				—				25,800	(8)		$	173,892				—				—
			—				—				—				—				—				7,000	(9)		$	47,180				—				—
			—				—				—				—				—				—				—				2,500			$	16,850
Scott Parker			12/2/2009				1,922				6,534	(5)		$	6.80				12/2/2016				—				—				—				—
			11/20/2008				3,956				13,452	(4)		$	0.75				11/20/2018				—				—				—				—
			5/13/2009				1,458				6,709	(4)		$	3.10				5/13/2019				—				—				—				—
			8/15/2009				2,917				15,167	(4)		$	3.50				8/15/2019				—				—				—				—
			8/16/2010				—				17,200	(4)		$	10.43				8/16/2020				—				—				—				—
			—				—				—				—				—				1,989	(7)		$	13,406				—				—
			—				—				—				—				—				17,200	(8)		$	115,928				—				—
			—				—				—				—				—				—				—				2,500			$	16,850