Exhibit 10.5

 

AVANEX CORPORATION

 

1998 STOCK PLAN

 

STOCK OPTION AGREEMENT

 

Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.

 

I. NOTICE OF STOCK OPTION GRANT

 

[OPTIONEE]

 

[OPTIONEE’S ADDRESS]

 

You have been granted an option to purchase Common Stock of the Company, subject
to the terms and conditions of the Plan and this Option Agreement, as follows:

 

Date of Grant

  

________

 

Vesting Commencement Date

  

________

 

Exercise Price per Share

  

$_______

 

Total Number of Shares Granted

  

________shares

 

Total Exercise Price

  

$________

 

Type of Option:

  

Incentive / Nonstatutory Stock Option

 

Term/Expiration Date:

  

________[Ten Years]

 

Vesting Schedule:

 

This Option may be exercised, in whole or in part, in accordance with the
following schedule:

 

1/24th of the Shares subject to the Option shall vest on the same date of each
month after the Vesting Commencement Date provided that the Shares will actually
vest on any such date only if the Optionee remains a Service Provider through
such date.

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Termination Period:

 

This Option may be exercised by the Optionee or his assignees, and in the event
of his death, by his spouse or heirs, through the Term/Expiration Date. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.

 

II. AGREEMENT

 

A. Grant of Option.

 

The Plan Administrator of the Company hereby grants to the Optionee named in the
Notice of Grant attached as Part I of this Agreement (the “Optionee”) an option
(the “Option”) to purchase the number of Shares, as set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
“Exercise Price”), subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 15(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and the terms
and conditions of this Option Agreement, the terms and conditions of the Plan
shall prevail.

 

B. Exercise of Option.

 

(a) Right to Exercise. This Option is exercisable during its term in accordance
with the Vesting Schedule set out in the Notice of Grant and the applicable
provisions of the Plan and this Option Agreement.

 

(b) Method of Exercise. This Option is exercisable by the terms and conditions
set forth by Company policy. The exercise may be facilitated by one of the
Company’s captive brokers. In such case the broker will facilitate the exercise
by providing notification of exercise of the option, the number of Shares in
respect of which the Option is being exercised (the “Exercised Shares”), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The exercise must be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by the Company of notification of
exercise by one of the Company’s pre-selected captive brokers and accompanied by
such aggregate Exercise Price.

 

No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with Applicable Laws. Assuming such compliance,
for income tax purposes the Exercised Shares shall be considered transferred to
the Optionee on the date the Option is exercised with respect to such Exercised
Shares.

 

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C. Method of Payment.

 

Payment of the aggregate Exercise Price shall be by any of the following, or a
combination thereof, at the election of the Optionee:

 

1. cash; or

 

2. check; or

 

3. consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan; or

 

4. surrender of other Shares which (i) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six (6)
months on the date of surrender, and (ii) have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares.

 

D. Transferability of Option.

 

This Option may be assigned by the Optionee to his immediate family members and
to a trust for the benefit of such immediate family members. In addition, the
Option may be transferred by will or by the laws of descent or distribution and
may be exercised by the Optionee and his assignees, and upon his death, by the
Optionee’s spouse or heirs. The terms of the Plan and this Option Agreement
shall be binding upon the executors, administrators, heirs, successors and
assigns of the Optionee.

 

E. Term of Option.

 

This Option may be exercised only within the term set out in the Notice of
Grant, and may be exercised during such term only in accordance with the Plan
and the terms of this Option Agreement.

 

F. Tax Consequences.

 

Some of the federal tax consequences relating to this Option, as of the date of
this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

 

G. Exercising the Option.

 

1. Nonstatutory Stock Option. The Optionee may incur regular federal income tax
liability upon exercise of a NSO. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If the Optionee is an Employee or
a former Employee, the Company will be required to withhold from his or her
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in

 

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cash equal to a percentage of this compensation income at the time of exercise,
and may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.

 

2. Disposition of Shares. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

 

H. Entire Agreement; Governing Law.

 

The Plan is incorporated herein by reference. The Plan and this Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee’s interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

 

I. NO GUARANTEE OF CONTINUED SERVICE.

 

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT
THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED
AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.

 

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By your signature and the signature of the Company’s representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

 

OPTIONEE:  

AVANEX CORPORATION

 

 

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Signature

 

By

 

 

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Print Name

 

Title

 

 

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Residence Address

   

 

 

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EXHIBIT A

 

AVANEX CORPORATION

 

1998 STOCK PLAN

 

EXERCISE NOTICE

 

Avanex Corporation

40919 Encyclopedia Circle

Fremont, CA 94538

 

Attention: General Counsel

 

1. Exercise of Option. Effective as of today,                     , or his
respective heirs or assigns, the undersigned (“Purchaser”) hereby elects to
purchase                      shares (the “Shares”) of the Common Stock of
Avanex Corporation (the “Company”) under and pursuant to the 1998 Stock Plan
(the “Plan”) and the Stock Option Agreement dated,                      (the
“Option Agreement”). The purchase price for the Shares shall be $        , as
required by the Option Agreement.

 

2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price for the Shares.

 

3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

 

4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company) of the Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date of issuance, except as provided in Section 13 of the Plan.

 

5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser’s purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted with any tax consultants
Purchaser deems advisable in connection with the purchase or disposition of the
Shares and that Purchaser is not relying on the Company for any tax advice.

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6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser’s interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

 

Submitted by:

  

Accepted by:

PURCHASER:

  

AVANEX CORPORATION

 

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Signature

  

By

 

 

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Print Name

  

Its

      

Address:

  

Address:

 

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AVANEX CORPORATION

 

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40919 Encyclopedia Circle

Fremont, CA 94538

    

 

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Date Received

 

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