Company representing 50% ormore of the total voting power represented by the Company’s then outstanding votingsecurities other than in a private financing transaction approved by the Board ofDirectors;    the direct or indirect sale or exchange by the stockholders of the Company of all orsubstantially all of the stock of the Company;    a merger or consolidation in which the Company is a party and in which the stockholders ofthe Company before such merger or consolidation do not retain, directly or indirectly, at aleast majority of the beneficial interest in the voting stock of the Company after suchtransaction; or    the sale or disposition by the Company of all or substantially all the Company’s assets.(iii) Disability. “Disability” shall mean that the Optionee has been unable to substantiallyperform his duties as the result of his incapacity due to physical or mental illness, andsuch inability, at least 26 weeks after its commencement, is determined to be total andpermanent by a physician selected by the Company or its insurers and acceptable to theOptionee or the Optionee’s legal representative (such agreement as to acceptability not to beunreasonably withheld). (iv) Involuntary Termination. “Involuntary Termination” shall mean (i) without the Optionee’sexpress written consent, the significant reduction of the Optionee’s duties orresponsibilities relative to the Optionee’s duties or responsibilities in effect immediatelyprior to such reduction; provided, however, that a reduction in duties or responsibilitiessolely by virtue of the Company being acquired and made part of a larger entity (as, forexample, when the Chief Financial Officer of Company remains as such following a Change ofControl and is not made the Chief Financial Officer of the acquiring corporation) shall notconstitute an “Involuntary Termination”; (ii) without the Optionee’s express written consent,a substantial reduction, without good business reasons, of the facilities and perquisites(including office space and location) available to the Optionee immediately prior to suchreduction; (iii) without the Optionee’s express written consent, a material reduction by theCompany in the base compensation of the Optionee as in effect immediately prior to suchreduction, or the ineligibility of the Optionee to continue to participate in any long-termincentive plan of the Company; (iv) a material reduction by the Company in the kind or levelof employee benefits to which the Optionee is entitled immediately prior to such reductionwith the result that the Optionee’s overall benefits package is significantly reduced; (v)the relocation of the Optionee to a facility or a location more than 50 miles from theOptionee’s then present location, without the Optionee’s express written consent; (vi) anypurported termination of the Optionee by the Company which is not effected for death orDisability or for Cause, or any purported termination for which the grounds relied upon arenot valid; or (vii) the failure of the Company to obtain the assumption of this agreement byany successors contemplated in Section I.(ii) above.Termination Period:This Option may be exercised for three months after Optionee ceases to be a Service Provider. Uponthe death or Disability of the Optionee, this Option may be exercised for twelve months afterOptionee ceases to be a Service Provider. In no event shall this Option be exercised later thanthe Term/Expiration Date as provided above.In addition, upon an Involuntary Termination of the Optionee’s employment other than for Cause uponor within 12 months after a Change of Control, this Option may be exercised for twenty-four monthsafter Optionee ceases to be a Service Provider.**II.****AGREEMENT**A. Grant of Option.The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grantattached as Part I of this Agreement (the “Optionee”) an option (the “Option”) to purchase thenumber of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth inthe Notice of Grant (the “Exercise Price”), subject to the terms and conditions of the Plan, whichis incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of aconflict between the terms and conditions of the Plan and the terms and conditions of this OptionAgreement, the terms and conditions of the Plan shall prevail.If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intendedto qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option isintended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of CodeSection 422(d) it shall be treated as a Nonstatutory Stock Option (“NSO”).B. Exercise of Option.(a) Right to Exercise. This Option is exercisable during its term in accordancewith the Vesting Schedule set out in the Notice of Grant and the applicable provisions ofthe Plan and this Option Agreement.
 

 
(b) Method of Exercise. This Option is exercisable by delivery of an exercisenotice, in the form attached as Exhibit A (the “Exercise Notice”), which shall state theelection to exercise the Option, the number of Shares in respect of which the Option isbeing exercised (the “Exercised Shares”), and such other representations and agreements asmay be required by the Company pursuant to the provisions of the Plan. The Exercise Noticeshall be completed by the Optionee and delivered to the Company. The Exercise Notice shallbe accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. ThisOption shall be deemed to be exercised upon receipt by the Company of such fully executedExercise Notice accompanied by such aggregate Exercise Price.No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercisecomplies with Applicable Laws. Assuming such compliance, for income tax purposes the ExercisedShares shall be considered transferred to the Optionee on the date the Option is exercised withrespect to such Exercised Shares.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 programimplemented by the Company in connection with the Plan; or  4. surrender of other Shares which (i) in the case of Shares acquired uponexercise of an option, have been owned by the Optionee for more than six (6) monthson the date of surrender, and (ii) have a Fair Market Value on the date of surrenderequal to the aggregate Exercise Price of the Exercised Shares.D. Non-Transferability of Option.          This Option may not be transferred in any manner otherwise than by will or by the laws ofdescent or distribution and may be exercised during the lifetime of Optionee only by the Optionee.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 Noticeof Grant, and may be exercised during such term only in accordance with the Plan and the terms ofthis Option Agreement.F. Tax Consequences. Some of the federal tax consequences relating to this Option, as ofthe date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAXLAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFOREEXERCISING THIS OPTION OR DISPOSING OF THE SHARES.G. Exercising the Option. 1. Nonstatutory Stock Option. The Optionee may incur regular federal income taxliability upon exercise of a NSO. The Optionee will be treated as having receivedcompensation income (taxable at ordinary income tax rates) equal to the excess, if any, ofthe Fair Market Value of the Exercised Shares on the date of exercise over their aggregateExercise Price. If the Optionee is an Employee or a former Employee, the Company will berequired to withhold from his or her compensation or collect from Optionee and pay to theapplicable taxing authorities an amount in cash equal to a percentage of this compensationincome at the time of exercise, and may refuse to honor the exercise and refuse to deliverShares if such withholding amounts are not delivered at the time of exercise.  2. Incentive Stock Option. If this Option qualifies as an ISO, the Optionee willhave no regular federal income tax liability upon its exercise, although the excess, ifany, of the Fair Market Value of the Exercised Shares on the date of exercise over theiraggregate Exercise Price will be treated as an adjustment to alternative minimum taxableincome for federal tax purposes and may subject the Optionee to alternative minimum tax inthe year of exercise. In the event that the Optionee ceases to be an Employee but remainsa Service Provider, any Incentive Stock Option of the Optionee that remains unexercisedshall cease to qualify as an Incentive Stock Option and will be treated for tax purposes asa Nonstatutory Stock Option on the date three (3) months and one (1) day following suchchange of status.  3. Disposition of Shares. (a) NSO. If the Optionee holds NSO Shares for at least one year, anygain realized on disposition of the Shares will be treated as long-term capitalgain for federal income tax purposes.  (b) ISO. If the Optionee holds ISO Shares for at least one year afterexercise and two years after the grant date, any gain realized on disposition ofthe Shares will be treated as long-term capital gain for federal income taxpurposes. If the Optionee disposes of ISO Shares within one year after exerciseor two years after the grant
 

 
   date, any gain realized on such disposition will betreated as compensation income (taxable at ordinary income rates) to the extentof the excess, if any, of the lesser of (A) the difference between the FairMarket Value of the Shares acquired on the date of exercise and the aggregateExercise Price, or (B) the difference between the sale price of such Shares andthe aggregate Exercise Price. Any additional gain will be taxed as capital gain,short-term or long-term depending on the period that the ISO Shares were held.  (c) Notice of Disqualifying Disposition of ISO Shares. If the Optioneesells or otherwise disposes of any of the Shares acquired pursuant to an ISO onor before the later of (i) two years after the grant date, or (ii) one year afterthe exercise date, the Optionee shall immediately notify the Company in writingof such disposition. The Optionee agrees that he or she may be subject to incometax withholding by the Company on the compensation income recognized from suchearly disposition of ISO Shares by payment in cash or out of the current earningspaid to the Optionee.H. Entire Agreement; Governing Law.The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute theentire agreement of the parties with respect to the subject matter hereof and supersede in theirentirety all prior undertakings and agreements of the Company and Optionee with respect to thesubject matter hereof, and may not be modified adversely to the Optionee’s interest except by meansof a writing signed by the Company and Optionee. This agreement is governed by the internalsubstantive 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 HEREOFIS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THEACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHERACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THEVESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUEDENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOTINTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS ASERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.By your signature and the signature of the Company’s representative below, you and the Companyagree that this Option is granted under and governed by the terms and conditions of the Plan andthis 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 andfully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees toaccept as binding, conclusive and final all decisions or interpretations of the Administrator uponany questions relating to the Plan and Option Agreement. Optionee further agrees to notify theCompany upon any change in the residence address indicated below.       OPTIONEE: AVANEX CORPORATION          Signature By      PrintName   Title    ResidenceAddress      **EXHIBIT A — AVANEX CORPORATION 1998 STOCK PLAN EXERCISE NOTICE**Avanex Corporation