Exhibit 10.5

AVANEX CORPORATION

1999 DIRECTOR OPTION PLAN

(as amended and restated effective November 3, 2006*)

1. Purposes of the Plan. The purposes of this 1999 Director Option Plan are to
attract and retain the best available personnel for service as Outside Directors
(as defined herein) of the Company, to provide additional incentive to the
Outside Directors of the Company to serve as Directors, and to encourage their
continued service on the Board.

All options granted hereunder shall be nonstatutory stock options. Restricted
Stock Units may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Award” means, individually or collectively, a grant under the Plan of
Options or Restricted Stock Units.

(b) “Award Agreement” means the written or electronic agreement setting forth
the terms and provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the Plan.

(c) “Awarded Stock” means the Common Stock subject to an Award.

(d) “Beneficial Owner” shall mean a “beneficial owner” (as defined in Rule 13d-3
of the Securities Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company representing 1% or more of the total voting power
represented by the Company’s outstanding voting securities on the date of any
grant hereunder.

(e) “Board” means the Board of Directors of the Company.

(f) “Change of Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting securities who is not already such as of the
Effective Date; or

(ii) The consummation of the sale or disposition by the Company of all or
substantially all the Company’s assets; or

(iii) The consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining out-standing or by being converted
into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation; or

(iv) A change in the composition of the Board occurring within a two-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either
(A) are directors of the Company as of the Effective Date, or (B) are elected,
or nominated for election, to the Board with the affirmative votes of at least a
majority of those directors whose election or nomination was not in connection
with any transaction described in subsections (i), (ii), or (iii) above, or in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company. Notwithstanding the foregoing, in no event shall
the initial public offering of the Company’s securities pursuant to a
registration statement filed under Section 12 of the Exchange Act constitute a
Change of Control.

(g) “Code” means the Internal Revenue Code of 1986, as amended.

(h) “Common Stock” means the common stock of the Company or, in the case of
certain Restricted Stock Units, the cash equivalent thereof.

(i) “Company” means Avanex Corporation, a Delaware corporation.

(j) “Director” means a member of the Board.

(k) “Disability” means total and permanent disability as defined in section
22(e)(3) of the Code.

(l) “Employee” means any person, including officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. The payment of a
Director’s fee by the Company shall not be sufficient in and of itself to
constitute “employment” by the Company.

(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n) “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Board.

(o) “Inside Director” means a Director who is an Employee.

(p) “Option” means a stock option granted pursuant to the Plan.

(q) “Optionee” means a Director who holds an Option.

 

* Following the close of market on August 12, 2008, Avanex Corporation effected
a fifteen-for-one reverse stock split of its common stock. Accordingly, each
fifteen shares of issued and outstanding Avanex common stock and equivalents as
of the close of market on August 12, 2008 was converted into one share of common
stock, and the reverse stock split was reflected in the trading price of
Avanex’s common stock at the opening of market on August 13, 2008. All share
amounts and per share prices appearing in this 1999 Director Option Plan reflect
the reverse stock split.

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(r) “Outside Director” means a Director who is not an Employee and who is not
the Beneficial Owner.

(s) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

(t) “Participant” means a Director who holds of an outstanding Award granted
under the Plan.

(u) “Plan” means this 1999 Director Option Plan, as it may be amended from time
to time.

(v) “Restricted Stock Unit” means a bookkeeping entry representing an amount
equal to the Fair Market Value of one Share, granted pursuant to the Plan Each
(and therefore shall be the equivalent of one Share for purposes of determining
the number of Shares subject to an Award). Each Restricted Stock Unit represents
an unfunded and unsecured obligation of the Company.

(w) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 10 of the Plan.

(x) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Internal Revenue Code of 1986.

3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the
Plan, the maximum aggregate number of Shares which may be awarded and sold under
the Plan is 20,000 Shares (the “Pool”), plus an annual increase to be added on
the first day of the Company’s fiscal year beginning on January 1, 2001, equal
to the lesser of (i) 10,000 shares, (ii)  1/4 of 1% of the outstanding shares on
such date or (iii) a lesser amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.

If an Award expires or becomes unexercisable without having been exercised in
full, or, with respect to Restricted Stock Units, is forfeited back to or
repurchased by the Company, the unpurchased, forfeited or repurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). Shares that have actually been issued
under the Plan shall not be returned to the Plan and shall not become available
for future distribution under the Plan.

4. Administration and Grants of Awards under the Plan.

(a) Procedure for Grants. All grants of Awards to Outside Directors under this
Plan shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:

(i) No person shall have any discretion to select which Outside Directors shall
be granted Awards or to determine the number of Shares to be covered by Awards.

(ii) Each Outside Director shall be automatically granted an Option to purchase
5,333 Shares (the “First Option”) on the date on which the later of the
following events occurs: (A) the effective date of this Plan, as determined in
accordance with Section 6 hereof, or (B) the date on which such person first
becomes an Outside Director, whether through election by the shareholders of the
Company or appointment by the Board to fill a vacancy; provided, however, that
an Inside Director or Beneficial Owner who ceases to be an Inside Director or
Beneficial Owner but who remains a Director shall not receive a First Option.

(iii) Each Outside Director shall be automatically granted an Option to purchase
1,333 Shares (a “Subsequent Option”) on the date of the Company’s annual
stockholder’s meeting each year provided he or she is then an Outside Director
and if as of such date, he or she shall have served on the Board for at least
the preceding six (6) months.

(iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof, any
exercise of an Option granted before the Company has obtained shareholder
approval of the Plan in accordance with Section 16 hereof shall be conditioned
upon obtaining such shareholder approval of the Plan in accordance with
Section 16 hereof.

(v) The terms of a First Option granted hereunder shall be as follows:

(1) the term of the First Option shall be ten (10) years.

(2) the First Option shall be exercisable only while the Outside Director
remains a Director of the Company, except as set forth in Sections 8 and 10
hereof.

(3) the exercise price per Share shall be 100% of the Fair Market Value per
Share on the date of grant of the First Option.

(4) subject to Section 10 hereof, the First Option shall vest and become
exercisable as to twenty-five percent (25%) of the Shares subject to the First
Option on each anniversary of its date of grant, provided that the Optionee
continues to serve as a Director on such dates.

(vi) The terms of a Subsequent Option granted hereunder shall be as follows:

(1) the term of the Subsequent Option shall be ten (10) years.

(2) the Subsequent Option shall be exercisable only while the Outside Director
remains a Director of the Company, except as set forth in Sections 8 and 10
hereof.

(3) the exercise price per Share shall be 100% of the Fair Market Value per
Share on the date of grant of the Subsequent Option.

(4) subject to Section 10 hereof, the Subsequent Option shall vest and become
exercisable as to one-hundred percent (100%) of the Shares subject to the
Subsequent Option on the one-year anniversary of its date of grant, provided
that the Optionee continues to serve as a Director on such date.

(vii) Each Outside Director shall be automatically granted 666 Restricted Stock
Units (a “Restricted Stock Unit Grant”) on the date of the Company’s annual
stockholder’s meeting each year provided he or she is then an Outside Director
and if as of such date, he or she shall have served on the Board for at least
the preceding six (6) months.

(viii) The terms of a Restricted Stock Unit Grant granted hereunder shall be as
follows:

(1) Subject to Section 10 hereof, the Restricted Stock Unit Grant shall vest as
to one-hundred percent (100%) of the Shares subject to the Restricted Stock Unit
Grant on the one-year anniversary of its date of grant, provided that the
Participant continues to serve as a Director on such date.

(2) Upon vesting, the Shares subject to the vested portion of the Restricted
Stock Unit Grant shall be deemed earned and the Participant shall be entitled to
receive a payout as specified in the Award Agreement. Earned Restricted Stock
Units shall be paid in Shares.

(3) Payment of earned Restricted Stock Units shall be made as soon as
practicable after vesting.

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(4) Subject to Section 10 hereof, in the event a Participant’s status as a
Director terminates for any reason, all unearned Restricted Stock Units shall be
forfeited to the Company.

(ix) In the event that any Award granted under the Plan would cause the number
of Shares subject to outstanding Awards plus the number of Shares previously
purchased under Options or issued pursuant to Restricted Stock Units to exceed
the Pool, then the remaining Shares available for Award grant shall be granted
under Awards to the Outside Directors on a pro rata basis. No further grants
shall be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the shareholders to increase
the number of Shares which may be issued under the Plan or through cancellation
or expiration, forfeiture or repurchase of Awards previously granted hereunder.

5. Eligibility. Awards may be granted only to Outside Directors. All Awards
shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.

The Plan shall not confer upon any Participant any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director’s relationship with the Company at any time.

6. Term of Plan. The Plan shall become effective upon the earlier to occur of
its adoption by the Board or its approval by the shareholders of the Company as
described in Section 16 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 11 of the Plan.

7. Form of Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) 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 (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.

8. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times as are set forth in Section 4
hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may consist of any consideration and method of payment allowable under
Section 7 of the Plan. 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 stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Awarded Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option. No adjustment shall be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 10 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

(b) Termination of Continuous Status as a Director. Subject to Section 10
hereof, in the event an Optionee’s status as a Director terminates (other than
upon the Optionee’s death or Disability), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination
(unless otherwise provided in the Optionee’s option agreement), and only to the
extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

(c) Disability of Optionee. In the event Optionee’s status as a Director
terminates as a result of Disability, the Optionee may exercise his or her
Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.

(d) Death of Optionee. In the event of an Optionee’s death, the Optionee’s
estate or a person who acquired the right to exercise the Option by bequest or
inheritance may exercise the Option, but only within twelve (12) months
following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee’s estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

9. Non-Transferability of Awards. The Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during the lifetime of
the Participant, only by the Participant.

10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.

(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Award, the number of Shares which have been authorized for issuance under the
Plan but as to which no Awards have yet been granted or which have been returned
to the Plan upon cancellation, forfeiture or expiration of an Award, as well as
the price per Share covered by each such outstanding Award, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Award.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, to the extent that an Option has not been previously
exercised or a Restricted Stock Unit has not vested, it shall terminate
immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company with or into
another corporation or the sale of all or substantially all of the assets of the
Company, outstanding Awards may be assumed or equivalent awards may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
“Successor Corporation”). If an Award is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable and the Restricted Stock
Unit or an equivalent award shall continue to vest, as provided in Section 4
hereof for so long as the Participant serves as a Director or a director of the
Successor Corporation. Thereafter, the Option or option shall remain exercisable
in accordance with Sections 8(b) through (d) above, and the Restricted Stock
Unit shall terminate in accordance with Section 4. If the Successor Corporation
does not assume an outstanding Award or substitute for it an equivalent award,
the Award shall become fully

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vested and, in the case of an Option, exercisable, including as to Shares for
which it would not otherwise be vested or exercisable. In such event the Board
shall notify the Participant that (i) the Option shall be fully exercisable for
a period of thirty (30) days from the date of such notice, and upon the
expiration of such period the Option shall terminate, and (ii) the Restricted
Stock Unit shall be paid out immediately prior to the merger or sale of all or
substantially all of the assets.

For the purposes of this Section 10(c), an Award shall be considered assumed if,
following the merger or sale of assets, the Award confers the right to purchase
or receive, for each Share of Awarded Stock subject to the Award immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares). If
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Award, for each Share of Awarded Stock subject
to the Award, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

Notwithstanding the foregoing, in the event of a Change of Control, (i) each
outstanding Option shall accelerate and become fully vested and exercisable
immediately prior to such Change of Control with respect to one hundred percent
(100%) of the Shares then subject to each outstanding Option, and (ii) each
outstanding Restricted Stock Unit Grant shall accelerate and become fully vested
and earned immediately prior to such Change of Control with respect to one
hundred percent (100%) of the Shares then subject to each outstanding Restricted
Stock Unit Grant.

11. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend,
or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Participant
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable law, regulation
or stock exchange rule, the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.

(b) Effect of Amendment or Termination. Any such amendment or termination of the
Plan shall not affect Awards already granted and such Awards shall remain in
full force and effect as if this Plan had not been amended or terminated.

12. Time of Granting Awards. The date of grant of an Award shall, for all
purposes, be the date determined in accordance with Section 4 hereof.

13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option or the vesting of Restricted Stock Units unless the
exercise or vesting, as applicable, of such Award and the issuance and delivery
of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, state securities
laws, and the requirements of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

As a condition to the exercise of an Award, the Company may require the person
exercising such Award or receiving Shares subject to a Restricted Stock Unit
Grant to represent and warrant at the time of any such exercise or receipt that
the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.

14. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

15. Award Agreement. Awards shall be evidenced by written Award Agreements in
such form as the Board shall approve.

16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.