Severance Agreement - Charles Mao



 
Exhibit 10.5

 
EXECUTION COPY 
 
SEPARATION AGREEMENT AND RELEASE 
 
This Separation Agreement and Release (the
“Agreement”) is made by and between Avanex Corporation (the “Company”) and Charles Mao (“Employee”). 
 
WHEREAS, Employee is employed by the Company; 
 
WHEREAS, Employee signed an Employment, Confidential Information, Invention Assignment and Arbitration Agreement with the Company on
December 30, 1998 (the “Confidentiality Agreement”); 
 
WHEREAS, the Company and Employee have entered into stock option agreements dated January 14, 1999, November 12, 1999, December 24, 1999, July 23, 2000, April 17, 2001 and November 5, 2001, granting Employee options (the
“Options”) to purchase shares of the Company’s common stock subject to the terms and conditions of the Company’s 1998 Stock Plan and the stock option agreements, including any amendments thereto and the Holografix 2000 Stock
Plan, as applicable (collectively, the “Stock Option Agreements”), which Options are further described on Exhibit A attached hereto; 
 
WHEREAS, Employee has been provided with WARN (Workers’ Adjustment and Retraining Notification) Act notice on October 2, 2002, that
Employee’s employment with the Company shall be terminated effective December 3, 2002, due to business necessity as part of a permanent reduction in force (the “Termination Date”); 
 
NOW THEREFORE, in consideration of the mutual promises made
herein subsequent to the Termination Date, the Company and Employee (jointly referred to as “the Parties”) hereby agree as follows: 
 
1. Employment. Employee’s employment with the Company shall terminate as of the end of the day on the Termination Date. The
Company may choose to terminate Employee’s employment prior to the Termination Date, provided that the Company continues to pay Employee his bi-weekly salary of $7,692.13 and benefits at current levels through the Termination Date.

 
2. Consideration. 
 

	  	 a.	  	 Severance Payment. In consideration for the execution by Employee of this Agreement, the Company agrees to pay Employee the following consideration:



	  	


	  	 (1)	  	 within ten (10) days of the Effective Date of this Agreement, the sum of Eighty Thousand Dollars and No Cents ($80,000.00); and 

 

	  	 (2)	  	  the sum of Ten Thousand Dollars ($10,000.00) per month, less applicable withholding, paid monthly in arrears, for the period of twelve (12) months OR
until Employee secures other employment with a passive or active optical component or subsystem company, OR until Employee becomes a paid consultant for a passive or active optical component or subsystem company other than the Company
(irrespective of the means of compensation), whichever occurs first. Employee agrees to notify the Company immediately upon either securing new employment or accepting a position as a paid consultant with a 



 










	 	  
	 
	passive or active optical component or subsystem company other than the Company (irrespective of the means of compensation). If Employee fails to inform the
Company of the new employment or consultant relationship and the Company continues to pay Employee under this section, the Company reserves the right to seek reimbursement of such payments from Employee. 
 

  

	 	  
	 
	The first compensation installment payment under this subsection (2) will be made by the Company on the first regular pay date following the Effective Date of
this Agreement, as defined below. The Company, in its sole discretion, reserves the right to discontinue these payments if Employee secures other employment with a passive or active optical component or subsystem company OR becomes a paid consultant
to a passive or active optical component or subsystem company other than the Company (irrespective of the means of compensation). 
 

  

	 	b.
	 
	Employer COBRA Payments. Employee’s health insurance benefits with the Company shall cease on December 31, 2002, subject to Employee’s right to
continue his health insurance under COBRA. If Employee elects to continue his group health insurance coverage pursuant to COBRA after the Termination Date, Employee must continue to pay that portion of the premium for his group health insurance
coverage that he was required to pay as an active employee before the termination of his employment. However, the Company agrees to pay for the remaining portion of COBRA coverage (excluding Employee’s portion) for a period of twelve (12)
months beginning the first day of the new month after the Termination Date, provided Employee timely elects and pays his portion of COBRA coverage and otherwise remains eligible for COBRA Coverage. 
 

  

	 	c.
	 
	Options. 
 

  
 i. Option Acceleration. One hundred percent (100%) of the outstanding shares subject to Employee’s Option granted on January 14, 1999 and one hundred percent (100%) of the outstanding shares subject to Employee’s
Option granted on November 12, 1999 will accelerate and vest as of Employee’s Termination Date; provided, however, that no such accelerated shares may be exercised by the Employee until five (5) days following the Effective Date of this
Agreement. 
  
 ii. Extension of Post-Termination Period of Exercisability. Employee’s outstanding Option
granted on January 14, 1999 will remain exercisable for twenty-four (24) months following his Termination Date (but in no event later than the expiration of the term of the Option as set forth in the related Stock Option Agreement). The Employee
acknowledges and agrees that (i) the extension of the post-termination period to exercise such Option will cause a “modification” of the unexercised Option within the meaning of Section 424(h) of the Internal Revenue Code of 1986, as
amended, and (ii) the Option will be converted into a nonstatutory stock option (“NSO”). Upon exercise of an NSO, Employee will be treated as having received compensation income equal to the excess, if any, of the fair market value of the
exercised shares over the aggregate exercise price of such Option shares. Prior to the delivery of any shares or cash pursuant to exercise of an NSO, the Company shall have the power and the right to deduct or withhold, or require Employee to remit
to the Company, an amount sufficient to satisfy federal, state, and local taxes required to be withheld with respect to the exercise of the NSO. 

 
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	 	d.
	 
	Severance Plan. Employee shall be a participant in the Avanex Corporation Severance Plan (the “Severance Plan”). In that regard, this Agreement
shall constitute a “Supplement” (as defined in the Severance Plan) and the benefits and payments payable under the Severance Plan shall be limited to the payments and benefits set forth in this Agreement. 
 


 
 3. Stock. The Parties agree that the information set forth on Exhibit A is true and correct. The exercise of
Employee’s vested shares shall continue to be governed by the terms and conditions of the Company’s 1998 Stock Plan and the Stock Option Agreements. 
  
 4. Benefits. Except as provided in this Agreement, all benefits and incidents of employment shall cease on the Termination Date. 
  
 5. Payment of Salary. Employee acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued PTO, interest, outplacement costs, fees,
stock, stock options, vesting, commissions and any and all other benefits and compensation due to Employee as of the Effective Date of this Agreement. Employee acknowledges and represents that Company will have paid all severance pay and benefits
due to Employee once the benefits outlined in Section 2(a) through (c) have been provided to Employee. 
  
 6.
Indemnification and Exoneration. 
  
 a. To the extent it is consistent with the Company’s treatment of
other similarly situated employees, the Company shall indemnify Employee for any suit, investigation, or proceeding brought against him by reason of the fact that the Employee is or was a director, officer, employee, or agent of, or is was serving
at the request of the Company as a director, officer, employee, or agent of another entity, if Employee’s act or omission was in good faith. Notwithstanding the foregoing, Employee agrees that the Company’s tender of a defense through
Company counsel shall satisfy the Company’s obligations pursuant to this section. 
  
 b. In the event the
Company is obligated to indemnify Employee, and subject to Section 6(a) above, the Company shall advance Employee reasonable attorneys’ fees and costs. Notwithstanding the foregoing, Employee agrees that in the event that it is subsequently
determined that Employee is found liable any suit, investigation, or proceeding or otherwise not entitled to indemnification, Employee shall be obligated to reimburse the Company for any reasonable attorneys’ fees and costs advanced.

  
 c. The Employee will not be liable to the Company or any entity for which Employee serves or has served at the
request of the Company as a director, officer, employee or agent, for any act or omission in the Employee’s capacity as a director, officer, employee, or agent of the Company or such other entity if the Employee’s act or omission was in
good faith. 
  
 7. Release of Claims. Employee agrees that the foregoing consideration represents settlement
in full of all outstanding obligations owed to Employee by the Company and its current and former: officers, directors, employees, agents, investors, attorneys, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and
successor corporations and assigns (the “Releasees”). Employee hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute or pursue, any claim, complaint, charge, duty,
obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess against any of the Releasees arising from any omissions, acts or facts that have occurred up
until and including the Effective Date of this Agreement including, without limitation, 
  

 
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 a. any and all claims relating to or arising out of Employee’s employment
relationship with the Company and the termination of that relationship; 
  
 b. any and all claims relating to, or
arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate
law, and securities fraud under any state or federal law; 
  
 c. any and all claims for wrongful discharge of
employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander;
negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits; 
  
 d. any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Americans with Disabilities Act of 1990; the
Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act;
the California Fair Employment and Housing Act; the California Labor Code; the Texas Commission on Human Rights and the Texas Labor Code; 
  
 e. any and all claims for violation of the federal, or any state, constitution; 
  
 f. any
and all claims arising out of any other laws and regulations relating to employment or employment discrimination; 
  
 g. any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and 
  
 h. any and all claims for attorneys’ fees and costs, except as otherwise provided in this Agreement. 
  
 The Company, on behalf of itself and its officers, directors, shareholders and employees, hereby acknowledges full and complete satisfaction of and releases and
discharges, and covenants not to sue, Employee from and with respect to any and all claims, agreements, obligations, losses, damages, injuries, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way
connected with Employee’s employment with or termination from the Company, or any other occurrences, actions, omissions or claims whatever, known or unknown, suspected or unsuspected, which the Company now possesses, owns or holds or has at any
time heretofore possessed, owned or held as against Employee. 
  
 The foregoing releases do not abrogate either party’s rights or
obligations under applicable law to defend or indemnify the other party against a claim filed by a third party. 
  
 The parties acknowledge
and agree that any breach of any provision of this Agreement or the Confidentiality Agreement shall constitute a material breach of this Agreement. 

 
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 The parties agree that the releases set forth in this section shall be and remain in effect in all
respects as a complete general release as to the matters released, to the maximum extent provided by law. These releases do not extend to any obligations incurred under this Agreement. 
  
 8. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in
Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the Effective
Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he has been advised by
this writing that: 
  
 (a) he should consult with an attorney prior to executing this Agreement; 

 
 (b) he has up to forty-five (45) days within which to consider this Agreement; 
  
 (c) he has been advised in writing by the Company of the class, unit, or group of individuals covered by the severance program, any
eligibility factors for the program, any time limits applicable to the program, and the job titles and ages of all individuals who participated and did not participate in the program, as reflected in Exhibits B and C, attached hereto;

  
 (d) he has seven (7) days following his execution of this Agreement to revoke the Agreement; 

 
 (e) this Agreement shall not be effective until the revocation period has expired; and 
  
 (f) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law. 
  
 9. Civil Code Section 1542/ Unknown Claims. Employee represents that he is not aware of any claim by him other than the claims that are released by this Agreement. Employee acknowledges that he
has had the opportunity to be advised by legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provides as follows: 
  
 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR. 
  
 Employee, being aware of said code section, agrees to expressly waive any rights he may have thereunder,
as well as under any other statute or common law principles of similar effect, including those of the state of Texas. 
  
 10. No Pending or Future Lawsuits. Employee represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against any of the Releasees. Employee also represents that he
does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein. 
  

 
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 11. Application for Employment. Except as provided in Section 1 of this
Agreement, Employee understands and agrees that, as a condition of this Agreement, he shall not be entitled to any employment with the Company, and he hereby waives any right, or alleged right, of employment or re-employment with the Company.
Employee further agrees that he will not apply for employment with the Company. 
  
 12. Confidentiality.
Employee agrees to maintain in complete confidence the existence of this Agreement, the contents and terms of this Agreement and the consideration for this Agreement (hereinafter collectively referred to as “Separation Information”).
Except as required by law, Employee may disclose Separation Information only to his immediate family members, the Court in any proceedings to enforce the terms of this Agreement, Employee’s legal counsel, his accountant and any professional tax
advisor to the extent that they need to know the Separation Information in order to provide advice on tax treatment or to prepare tax returns, and must prevent disclosure of any Separation Information to all other third parties. Employee agrees that
he will not publicize, directly or indirectly, any Separation Information. 
  
 Employee acknowledges and agrees that
the confidentiality of the Separation Information is of the essence. Employee hereby agrees to be responsible in liquidated damages, as set forth below, if he breaches any of the foregoing terms or in any way divulges any part of the
Separation Information to any unauthorized third party. Any such individual breach or disclosure shall not excuse Employee from his obligations hereunder, nor permit him to make additional disclosures. Employee warrants that he has not to date
disclosed, orally or in writing, directly or indirectly, any of the Separation Information to any unauthorized party. 
  
 13. [intentionally omitted] 
  
 14. Trade Secrets and Confidential Information/Company
Property. Except as otherwise provided in this Agreement and provided that Employee’s obligation under Section 2(a) of the Confidentiality Agreement shall terminate thirty-six (36) months following the Termination Date, Employee reaffirms
and agrees to observe and abide by the terms of the Confidentiality Agreement, specifically including the provisions therein regarding nondisclosure of the Company’s trade secrets and confidential and proprietary information, and
non-solicitation of Company employees. 
  
 Employee’s signature below constitutes his certification under
penalty of perjury that he will return all documents and other items provided to Employee by the Company, developed or obtained by Employee as a result of his employment with the Company, or otherwise belonging to the Company. 

 
 15. No Cooperation. Employee agrees that he will not knowingly counsel or assist any attorneys or their clients in the
presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so. Employee agrees both to immediately notify
the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or court order to the Company. If approached by anyone for counsel or assistance in the presentation
or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Employee shall state no more than that he cannot provide counsel or assistance. 
  
 16. Non-Disparagement. Employee agrees to refrain from any defamation, libel or slander of the Releasees, and any tortious
interference with the contracts, relationships and prospective economic advantage of the Releasees. Employee agrees that he shall direct all inquiries by potential future employers to the Vice President of Human Resources. 

 
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 17. No Admission of Liability. Employee understands and acknowledges that
this Agreement constitutes a compromise and settlement of any and all potential disputed claims. No action taken by the Company hereto, either previously or in connection with this Agreement, shall be deemed or construed to be: (a) an admission of
the truth or falsity of any potential claims; or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Employee or to any third party. 
  
 18. Costs. The Parties shall each bear their own costs, attorneys’ fees and other fees incurred in connection with the preparation of this Agreement.

  
 19. ARBITRATION. THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT,
THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN RELEASED, SHALL BE SUBJECT TO ARBITRATION IN COLLIN COUNTY, TEXAS, BEFORE THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES AND TEXAS LAW. THE
ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES. THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES TO THE ARBITRATION. THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION SHALL BE
ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD. THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY. 

 
 20. Tax Consequences. The Company makes no representations or warranties with respect to the tax consequences of the
payments provided to Employee or made on his behalf under the terms of this Agreement. 
  
 21. Authority. The
Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Employee represents and warrants that he
has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law
or equity or otherwise of or against any of the claims or causes of action released herein. 
  
 22. No
Representations. Employee represents that he has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Employee has not relied upon any representations
or statements made by the Company which are not specifically set forth in this Agreement. 
  
 23.
Severability. In the event that any provision or any portion of any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect
without said provision or portion of provision. 
  
 24. Attorneys’ Fees. In the event that the Company
brings an action to enforce or effect its rights under this Agreement, the Company shall promptly pay, as and when incurred (or, at Employee’s request, make advances to Employee for) Employee’s costs and reasonable attorneys’ fees;
provided, however, that in the event that the Company is the prevailing party, Employee shall be obligated to reimburse the Company for any reasonable attorneys’ fees and costs advanced. 
  
 25. Entire Agreement. This Agreement represents the entire agreement and understanding between the Company and Employee concerning
Employee’s employment with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning Employee’s relationship with the
Company, with the exception of the Confidentiality Agreement, the Company’s 1998 Stock Plan and the Stock Option Agreements. 

 
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 26. No Oral Modification. This Agreement may only be amended in writing signed by Employee and the Company’s
Chief Executive Officer. 
  
 27. Governing Law. This Agreement shall be governed by the laws of the State of
Texas without regard for choice of law provisions. 
  
 28. Effective Date. This Agreement will become
effective after it has been signed by both Parties and after seven days have passed since Employee signed the Agreement. Each Party has seven days after that Party signs the Agreement to revoke it. 
  
 29. Counterparts. This Agreement may be executed in counterparts and by facsimile, and each counterpart and facsimile shall have
the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. 
  
 30. Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The
Parties acknowledge that: 
  

	 	(a)
	 
	They have read this Agreement; 
 

  

	 	(b)
	 
	They(a) They have read this Agreement; have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own
choice or have elected not to retain legal counsel; 
 

  

	 	(c)
	 
	They understand the terms and consequences of this Agreement and of the releases it contains; and 
 

  

	 	(d)
	 
	They are fully aware of the legal and binding effect of this Agreement. 
 


 
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IN WITNESS
WHEREOF, the Parties have executed this Agreement on the respective dates set forth below. 
 

	  	  	  	  	  AVANEX CORPORATION

	
	  Dated:
	  	  12/2/02

	  	  	  	  By:
	  	      /s/ Walter Alessandrini


	  	  	  	  	  	  	  	  	      Walter Alessandrini, President and CEO

	
	  	  	  	  	  CHARLES MAO, an individual

	
	  Dated:
	  	  12/2/02

	  	  	  	                          /s/ Charles Mao        


	  	  	  	  	  	  	  Charles Mao


 

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 Exhibit A 
  
 Schedule of Employee Stock Options 

 
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 Exhibit B 
  
 Job Titles by Classification/Organizational Unit of Individuals not Selected for Reduction in Force 

 
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 Exhibit C 
  
 Job Titles by Classification/Organizational Unit of Individuals Selected for Reduction in Force 

 
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