Document:

<PAGE>

                                                                    EXHIBIT 4.13

                             SUBSCRIPTION AGREEMENT

     This Subscription Agreement (the "Agreement") is made as of March 27, 2000
between Optical Networks, Incorporated, a California corporation, with its
principal office at 166 Baypointe Parkway, San Jose, California 95134 and
Internet Initiative Japan Inc., a Japanese corporation, with its principal
office at Takebashi Yasuda Bldg., 3-13 Kanda Nishiki-cho, Chiyoda-ku, Tokyo 101-
0054 (the "Purchaser").

1.  SUBSCRIPTION

     The Purchaser hereby irrevocably subscribes for and agrees to purchase, on
and subject to the terms and conditions set forth herein, from Optical Networks,
Incorporated, a California corporation, or its successor corporation upon a
reincorporation into Delaware (hereinafter, collectively referred to as the
"Company"), and the Company agrees to sell to the Purchaser, a number of shares
of its Common Stock (the "Shares") equal to $4,000,000 divided by the per share
price to the public in the Company's initial public offering (the "IPO")
(rounded down to the nearest whole share) at a price per share equal to the per
share price to the public in the IPO.  Purchaser hereby acknowledges that the
Company is currently incorporated in California and may undertake a
reincorporation in Delaware and in conjunction therewith may change its name.

2.  PAYMENT

     At the Closing, as defined below, the aggregate purchase price for the
Shares (the "Subscription Price"), shall be paid by wire transfer to the account
of the Company pursuant to instructions and account information to be provided.

3.  DOCUMENTS TO BE PROVIDED BY PURCHASER

     Contemporaneously herewith, the Purchaser and the Company are entering the
Restated and Amended Investors' Rights Agreement attached hereto as Exhibit A
                                                                    ---------
(the "Rights Agreement").

4.  CLOSING AND DELIVERY OF SHARE CERTIFICATES

     Delivery and payment for the Shares will be completed in one closing (the
"Closing") at the offices of Fenwick & West LLP, Two Palo Alto Square, Palo
Alto, California at 9:00 a.m. Pacific Time (the "Closing Time") on the closing
date of the IPO or at such earlier date and time as the Company and the
Purchaser may agree in writing (the "Closing Date").

     A certificate representing the Shares (the "Certificate") will be delivered
at Closing against payment to the Company of the Subscription Price in the
manner specified in Section 2 above.
<PAGE>

5.  CONDITIONS TO CLOSING BY THE PURCHASER

     The Purchaser's obligation to purchase the Shares at the Closing is subject
to fulfillment on or prior to the Closing Date of each of the following
conditions (any of which may be waived by the Purchaser in its sole discretion):

     5.1  Rights Agreement.  The Company shall have executed and delivered to
          ----------------
the Purchaser the Rights Agreement.

     5.2  Registration Statement.  The registration statement filed with the
          ----------------------
Securities and Exchange Commission in connection with the Company's initial
public offering of its common stock to the public shall have been declared
effective.

     5.3  Representations and Warranties.  The representations and warranties
          ------------------------------
made by the Company in Section 7 hereof shall be true and correct when made, and
shall be true and correct on the Closing Date (unless provided otherwise in
Section 7) with the same force and effect as if such representations had been
made on and as of said date. The representation in Section 7.3, other than as
updated by the Registration Statement referred to in Section 5.2 as of the
Closing Date, shall also be true and correct on the Closing Date with the same
force and effect as if such representations had been made on and as of said
date.

     5.4  Opinion as to Shares.  The Purchaser shall have received a customary
          --------------------
opinion of Fenwick & West as to the validity of the Shares being purchased.

6.  CONDITIONS TO CLOSING BY THE COMPANY

     The Company's obligation to issue and sell the Shares to the Purchaser at
the Closing is subject to the fulfillment of the following conditions (any of
which may be waived by the Company in its sole discretion):

     6.1  Representations and Warranties.  The representations and warranties
          ------------------------------
made by the Purchaser in Section 9 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date with the same force and effect
as if such representations had been made on and as of said date.

     6.2  Payment.  The Company shall have received from the Purchaser payment
          -------
in full for the Subscription Price.

7.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to the Purchaser that, except as
otherwise set forth on the Schedule of Exceptions attached as Exhibit B  hereto,
                                                              ---------
the following will be true and correct as of the Closing Date (except for the
representations contained in Section 7.1 and 7.3, which are true only as of the
date hereof):

     7.1  Organization and Standing.  The Company is a corporation duly
          -------------------------
organized and validly existing under the laws of the State of California and is
in good standing under such laws.
<PAGE>

The Company has all requisite corporate power to own and operate its properties
and assets, and to carry on its business as presently conducted and as proposed
to be conducted.

     7.2  Corporate Power.  The Company has all requisite power to execute and
          ---------------
deliver this Agreement and the Rights Agreement, to sell and issue the Shares
hereunder and to carry out and perform its obligations under the terms of this
Agreement and the Rights Agreement.

     7.3  Financial Statements.  The Company  has delivered to the Purchaser the
          --------------------
audited financial statements of the Company as of December 31, 1999 (the
"Financial Statements"). The Financial Statements, together with the notes
thereto, are complete and correct in all material respects, have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods covered thereby, and present fairly the financial
position of the Company as of their respective dates.  The Company has no
liabilities which are, individually or in the aggregate, material to the
business or financial condition of the Company (of the type required to be
included in a balance sheet prepared in accordance with generally accepted
accounting principles), except for (i) liabilities disclosed in the Financial
Statements, (ii) liabilities that have been incurred by the Company since
December 31, 1999 in the ordinary course of business, and (iii) liabilities that
have not had a material adverse effect on the Company's business or financial
condition.

     7.4  Authorization.  All corporate action on the part of the Company, its
          -------------
directors, and its shareholders that is necessary for the authorization,
execution, delivery, and performance of this Agreement and the Rights Agreement
by the Company, for the authorization, sale, issuance, and delivery of the
Shares, and for the performance by the Company of all of its obligations
hereunder (except for the performance of its covenants to be performed after
Closing) will have been taken prior to the Closing.  This Agreement and the
Rights Agreement, when executed and delivered by the Company, will constitute
valid and legally binding obligations of the Company, enforceable in accordance
with their respective terms, subject to (i) laws of general application relating
to bankruptcy, insolvency, and the relief of debtors, (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies,
and (iii) the extent that the indemnification provisions of Section 2.9 of the
Rights Agreement may be limited by principles of public policy.  The Shares,
when issued in accordance with this Agreement, will be duly authorized, validly
issued, fully paid, and nonassessable; provided, however, that the Shares may be
subject to certain restrictions on transfer under applicable state and Federal
securities laws.

     7.5  Governmental Consents, etc.  No consent, approval, or authorization
          ---------------------------
of, or designation, declaration, or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution and
delivery of this Agreement, or for the offer, sale, or issuance of the Shares,
or for the consummation of any other transaction contemplated hereby, except
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Shares under the
California Corporate Securities Law of 1968, as amended, and other applicable
blue sky laws, which filing and qualification, if required, will be accomplished
in a timely manner prior to or promptly after the Closing.

     7.6  Brokers or Finders.  The Company has not incurred, and will not incur,
          ------------------
directly or indirectly, as a result of any action taken by the Company, any
liability for brokerage or finders'
<PAGE>

fees or agents' commissions, or any similar charges, in connection with this
Agreement or any transaction contemplated hereby.

     7.7  No Conflict.  The execution, delivery, and performance of, and
          -----------
compliance with, this Agreement and the Rights Agreement, and the issuance of
the Shares, (i) have not resulted in and will not result in any violation of, or
conflict with, or constitute a default under, any term of its Articles or
Certificate of Incorporation or Bylaws, or result in the creation of any
mortgage, pledge, lien, encumbrance, or charge upon any of the properties or
assets of the Company, and (ii) will not result in the suspension, revocation,
impairment, forfeiture, or non-renewal of any material permit, license,
authorization, or approval applicable to the Company, its business, or any of
its properties or assets.

8.  MATTERS RELATING TO THE OFFER AND SALE OF THE SHARES

     The Purchaser acknowledges and agrees that: (i) it has received no
registration statement, prospectus or any similar document in connection with
its purchase of the Shares, (ii) its decision to execute this Agreement and the
Rights Agreement and to purchase the Shares has not been based upon any verbal
or written representations made by or on behalf of the Company, and (iii) its
decision to purchase the Shares is based upon the information, representations
and covenants of the Company contained in this Agreement, its own review of
Company documents and records, and publicly available information concerning the
Company.

9.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser hereby represents, warrants, and covenants to the Company
(which representations, warranties, and covenants shall survive the Closing) as
of the date hereof and as of the Closing Date, as follows:

     9.1  Purchaser Qualifications.  The Purchaser is an "accredited investor"
          ------------------------
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and has substantial
experience in evaluating and investing in private placement transactions, and as
such is capable of evaluating the merits and risks of its investment in the
Company.  The Purchaser, by reason of its business or financial experience or
the business or financial experience of its professional advisors who are not
directly or indirectly affiliated with the Company or any affiliate or selling
agent of the Company, has the capacity to protect its own interests in
connection with its purchase of the Shares.

     9.2  Investment.  The Purchaser is acquiring the Shares for investment for
          ----------
the Purchaser's own account, not as a nominee or agent, and not with the view to
or for resale in connection with any distribution thereof.  The Purchaser
understands that the offer and sale of the Shares have not been, and will not
be, registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Purchaser's representations as expressed herein.

     9.3  Rule 144.  The Purchaser acknowledges that the Shares must be held
          --------
indefinitely unless the resale of the Shares is subsequently registered under
the Securities Act or an exemption from such registration is available.  The
Purchaser is aware of the provisions of Rule
<PAGE>

144 promulgated under the Securities Act which permit limited resales of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, (i) the existence of a public market
for the shares, (ii) the availability of certain current public information
about the Company, (iii) the resale occurring not less than one year after a
party has purchased and fully paid for the shares to be sold, (iv) the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" and (v) the number of shares being sold during any three-month
period not exceeding specified limitations.

     9.4  No Public Market.  The Purchaser understands that no public market now
          ----------------
exists for any of the securities issued by the Company and that there is no
assurance that a public market will ever exist for the Shares.

     9.5  Access to Data.  The Purchaser and its representatives, if any, has
          --------------
had an opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the Company and the terms and the
conditions of this transaction, as well as to obtain any information requested
by the Purchaser or its representatives.  Any questions raised by the Purchaser
or its representatives were answered to the satisfaction of the Purchaser or its
representatives.  The Purchaser understands that such discussions, as well as
any written information issued by the Company, were intended to describe certain
aspects of the Company's business and prospects but were not a thorough or
exhaustive description.  The Purchaser's decision to enter into the transaction
contemplated hereby is based in part on the answers to such questions as the
Purchaser and its representatives have raised and on the Purchaser's own
evaluation of the risks and merits of the transaction and the Company's proposed
business activities.  The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 7 of this Agreement or
the right of the Purchaser to rely thereon.

     9.6  Authorization.  This Agreement and the Rights Agreement, when executed
          -------------
and delivered by the Purchaser, will constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their respective
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, (ii) rules of law governing specific
performance, injunctive relief, or other equitable remedies, and (iii) the
extent that the indemnification provisions of Section 2.9of the Rights Agreement
may be limited by principles of public policy.

     9.7  Brokers or Finders.  The Company has not incurred, and will not incur,
          ------------------
directly or indirectly, as a result of any action taken by the Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this agreement or any transaction contemplated
hereby.9.8  Tax Consequences.  The Purchaser has reviewed with its own tax
       ---  ----------------
advisors the federal, state, local and, if necessary, foreign tax consequences
of this investment and the transactions contemplated by this Agreement.  The
Purchaser is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents and understands that the
Purchaser (and not the Company) shall be responsible for its own tax liability
that may arise as a result of this investment or the transactions contemplated
by this Agreement.

10.  RESTRICTIONS ON TRANSFER
<PAGE>

     10.1  Restrictions on Transfer.  The Shares shall not be sold, assigned,
           ------------------------
transferred, or pledged except upon the conditions specified in this Section,
the Restated Articles, and the Bylaws, which conditions are intended, among
other things, to ensure compliance with the provisions of the Securities Act.
Any proposed transferee of the Shares held by the Purchaser must agree (prior to
transfer) to take and hold such securities subject to the provisions and upon
the conditions specified in this Article.

     10.2  Restrictive Legend.  Each stock certificate representing the Shares
           ------------------
any other securities issued in respect of the Shares upon any stock split, stock
dividend, merger, consolidation, recapitalization, or similar event, shall be
stamped or otherwise imprinted with legends in substantially the following form
(in addition to any legend required under applicable state securities laws):

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").  THESE SECURITIES
                                                        ---
     HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
     WITH, THE DISTRIBUTION THEREOF.  THESE SECURITIES MAY NOT BE OFFERED, SOLD,
     PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT
     IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL,
     SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION THEREFROM IS AVAILABLE.

     COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND
     RESTRICTING THEIR TRANSFER, THE CERTIFICATE OF INCORPORATION OF THE COMPANY
     CONTAINING SUCH RESTRICTIONS, AND THE COMPANY'S BYLAWS, MAY BE OBTAINED AT
     NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
     TO THE SECRETARY OF THE ISSUER AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
     ISSUER.

     The Purchaser  of Shares and any permitted transferees consent to the
Company making a notation on its records and giving instructions to any transfer
agent of the Shares in order to implement the restrictions on transfer described
in this Section.

     10.3  Notice of Proposed Transfers.  Prior to any proposed transfer of any
           ----------------------------
Shares, unless there is in effect a registration statement under the Securities
Act covering the proposed transfer, the holder thereof shall give written notice
(the "Notice") to the Company of such holder's intention to make such transfer.
The Notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail.  If reasonably requested by the Company prior to the
transfer being effected, the holder shall provide to the Company a written
opinion of legal counsel who shall be reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act.  Each stock certificate evidencing the Restricted Securities so transferred
shall bear the appropriate restrictive legends set forth in Section 10.2.
<PAGE>

11.  RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS

     The Purchaser acknowledges that the representations, warranties and
covenants contained in this Agreement are made with the intent that they may be
relied upon by the Company to, among other things, determine its eligibility to
purchase the Shares. The Purchaser further agrees that by accepting the Shares,
the Purchaser shall be representing and warranting that the foregoing
representations and warranties are true as of the Closing with the same force
and effect as if they had been made by the Purchaser at the Closing.

     The Company acknowledges that the representations, warranties and covenants
contained in this Agreement are made with the intent that they may be relied
upon by the Purchaser.  The Company further agrees that by selling the Shares,
the Company shall be representing and warranting that the foregoing
representations and warranties are true as of the Closing with the same force
and effect as if they had been made by the Company at the Closing.

12.  TERMINATION

     This Agreement shall terminate and be of no further force and effect, and
the rights of the Purchaser and the Company hereunder shall terminate if the
registration statement filed in connection with the Company's IPO shall not have
been declared effective by the Securities and Exchange Commission on or before
July 31, 2000.  In such event, the Company shall offer the Purchaser the right
to purchase up to $4,000,000 of the Company's preferred or common stock offered
in the next private round of financing occurring after July 31, 2000 at a
valuation to be determined by the Company.

     In addition, the Company shall have the right to terminate this Agreement,
and the rights of the Purchaser hereunder, if the following have not occurred by
March 31, 2000: (i) execution of a Test Plan Agreement between the parties (as
further described in a Memorandum of Understanding between the parties executed
contemporaneously herewith) and (ii) the Purchaser's purchase and acceptance of
delivery of the Company's products totaling a minimum of  $400,000.

     Further, the Company shall have the right to terminate this Agreement, and
the rights of the Purchaser hereunder, if the U.S. Securities and Exchange
Commission should determine that the sale of the Company securities hereunder
should be integrated with the IPO.

13.  GENERAL PROVISIONS

     13.1  Governing Law.  This Agreement shall be governed by and construed
           -------------
exclusively in accordance with the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, excluding that body of law relating to
conflict of laws and choice of law.

     13.2  Survival.  The representations, warranties, and covenants of the
           --------
parties made herein shall survive the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
parties.
<PAGE>

     13.3  Successors and Assigns.  Except as otherwise expressly limited
           ----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto, provided, however, that the rights of the Purchaser to purchase
Shares shall not be assignable without the written consent of the Company.

     13.4  Entire Agreement; Amendment and Waiver.  This agreement and the other
           --------------------------------------
documents delivered herewith constitute the full and entire understanding and
agreement between the parties with regard to the subject matters hereof and
thereof.  Any term of this agreement may be amended and the observance of any
term hereof may be waived (either prospectively or retroactively and either
generally or in a particular instance) only with the written consent of the
Purchaser and the Company.

     13.5  Notices, etc.  All notices and other communications required or
           -------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (i) if to the Purchaser, at its address set forth on Exhibit A, or at
                                                               ---------
such other address as the Purchaser shall have furnished to the Company in
writing, and another copy to special counsel to the Purchaser,  Takebashi Yasuda
Bldg., 3-13 Kanda Nishiki-cho, Chiyoda-ku, Tokyo 101- 0054, attention: MrAkihisa
Watai, Manager, Corporate Planning Department (by fax at +813-5259-6131 or
mail), or (ii) if to any other holder of the Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such Shares who has so furnished an address to the Company, or (iii)
if to the Company, one copy to its address set forth on the first page of this
agreement and addressed to the attention of the President, or at such other
address as the Company shall have furnished to the Purchaser, and another copy
to the Company's legal counsel to the attention of Michael Dillon, General
Counsel, 166 Baypointe Parkway, San Jose, CA 95134 .

     13.6  Delays or Omissions.  No delay or omission to exercise any right,
           -------------------
power, or remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.

     13.7  Severability.  If any provision of this Agreement is held to be
           ------------
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.  The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.

     13.8  California Corporate Securities Law.  THE SALE OF THE SECURITIES
           -----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
<PAGE>

ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.

     13.9  Headings.  The headings and captions used in this Agreement are used
           --------
for convenience only and are not to be considered in construing or interpreting
this Agreement.  All references in this Agreement to articles, sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
articles, sections and paragraphs hereof and exhibits and schedules attached
hereto, all of which exhibits and schedules are incorporated herein by this
reference.

     13.10  Third Parties.  Nothing in this Agreement, express or implied, is
            -------------
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.

     13.11  Costs.  The Purchaser acknowledges and agrees that all costs and
            -----
expenses incurred by the Purchaser (including any fees and disbursements of any
counsel retained by the Purchaser) relating to the offer and sale of the Shares
to the Purchaser shall be paid by the Purchaser.
<PAGE>

     13.12  Counterparts.  This agreement may be executed in any number of
            ------------
counterparts, each of which shall be deemed an original and enforceable against
the parties actually executing such counterpart, and all of which together shall
constitute one and the same instrument.

     Effective as of the date first set forth above.

OPTICAL NETWORKS, INCORPORATED

By:/s/ Terrence J. Schmid
   ---------------------------------------
Name: Terrence J. Schmid
     -------------------------------------
Title: CEO
      ------------------------------------

INTERNET INITIATIVE JAPAN INC.

By:/s/ Koichi Suzuki
   ---------------------------------------
Name:  Koichi   Suzuki
     -------------------------------------
Title:  President and CEO
       -----------------------------------

                   [Signature Page to Subscription Agreement]

<PAGE>

                        Optical Networks, Incorporated

                  Regulation S Investor Representation Letter
                  -------------------------------------------

     To:  Optical Networks, Incorporated, a California corporation, or its
     successor corporation upon a reincorporation into Delaware (the "Company")

          The undersigned (the "Purchaser") proposes to acquire securities
issued by the Company.   United States federal and state securities laws require
that the Company issue its securities only to purchasers that meet certain
qualifications.  Purchaser agrees that the representations and agreements made
by it in this Representation Letter will be used and relied upon by the Company
in issuing the Company's securities to Purchaser without registration under
federal and state securities laws.

          Purchaser has agreed to purchase shares of the Company's Common Stock
(the "Shares") under that certain Subscription Agreement dated as of  April ___,
2000 (the "Agreement").  In addition to the agreements, representations and
warranties made by Purchaser under the Agreement, Purchaser hereby agrees,
represents and warrants as follows:

          1.  Business or Financial Experience.  By reason of Purchaser's
              --------------------------------
business or financial experience or the business or financial experience of
Purchaser's professional advisors who are unaffiliated with and who are not
compensated, directly or indirectly, by the Company or any affiliate or selling
agent of the Company, Purchaser has the capacity to protect its own interests in
connection with its investment in the Shares.

          2.  Offshore Transaction.  The offer to Purchaser to acquire the
              --------------------
Shares was not made to any person within the United States (which, for purposes
of this Representation Letter, includes the territories and possessions of the
United States, any State of the United States and the District of Columbia),
and, at the time Purchaser initiated its order to buy the Shares, Purchaser was
outside the United States.  Purchaser certifies that it is not a U.S. person and
that it is not acquiring the Shares for the account or benefit of any U.S.
person.

          3.  Offering Restrictions.  Purchaser acknowledges and agrees that the
              ---------------------
Shares (i) have not been registered under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), will be issued under an exemption from
registration under the Securities Act provided for in Regulation S promulgated
under the Securities Act ("Regulation S") and (ii) in addition to any other
restrictions set forth herein, may not be offered or sold in the United States
or to any U.S. person (other then distributors) unless the Shares are registered
under the Securities Act or an exemption from the registration requirements of
the Securities Act is available.

          4.  Resale Restrictions.  Purchaser acknowledges and agrees that
              -------------------
hedging transactions involving the Shares may not be conducted unless in
compliance with the Securities Act.  Purchaser acknowledges and agrees that
during the one year period beginning on the date of Purchaser's acquisition of
the Shares (the "Restriction Period"):  (i) Purchaser may resell the Shares only
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act; (ii) Purchaser may not engage
in hedging transactions with regard to the Shares prior to the end of the
Restriction Period; and (iii) (A) any offer or sale of the Shares shall not be
to a U.S. person or for the account or benefit of a U.S. person; (B) prior to
such purchase, the purchaser of such Shares

                                      -1-
<PAGE>

shall certify that (1) it not a U.S. person and is not acquiring such Shares for
the account or benefit of any U.S. person or (2) it is a U.S. person who
purchased such Shares in a transaction that did not require registration under
the Securities Act; (C) prior to such purchase, the purchaser of such Shares
shall agree to resell during the Restrictive Period such Shares only in
accordance with the provisions of Regulation S, pursuant to registration under
the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act; and (D) prior to such purchase, the
purchaser of such Shares shall agree that hedging transactions including such
Shares may not be conducted unless in compliance with the Securities Act.

          5.  No Directed Selling Efforts.  Purchaser acknowledges and agrees
              ---------------------------
that it is not aware of any activity initiated for the purpose or with the
effect of conditioning the market in the United States for the Shares offered to
it.

          6.  Stop Transfer Instructions and Legends.   Purchaser understands
              ---------------------------------------
that the Company will issue, and Purchaser consents to the issuing of, stop
transfer instructions to the Company's transfer agent with respect to the Shares
to assure compliance with the Securities Act.  Purchaser consents to the
placement of the following legend, in substantially the form below, on each
certificate representing the Shares, in addition to any legends described in the
Agreement:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE COMPANY DOES
NOT INTEND TO REGISTER THEM.  THE SHARES MAY NOT BE OFFERED, TRANSFERRED OR SOLD
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECRUITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIRMENTS OF THE SECURITIES ACT.
HEDGING TRANSACTIONS INVOLVING THE SHARES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT."

          7.  Definition of U.S. Person.  A "U.S. person", as used in this
              -------------------------      -----------
Representation Letter, means (i) any natural person resident in the United
States; (ii) any partnership or corporation organized or incorporated under the
laws of the United States; (iii) any estate of which any executor or
administrator is a U.S. person; (iv) any trust of which any trustee is a U.S.
person; (v) any agency or branch of a foreign entity located in the United
States; (vi) any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. person; (vii) any discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary organized, incorporated
or (if an individual) resident in the United States; and (viii) any partnership
or corporation if: (A) organized or incorporated under the laws of any foreign
jurisdiction; and (B) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) under the Securities Act) who are not natural persons, estates or
trusts.

          8.  Conflict with Agreement.  To the extent that any provision herein
              -----------------------
conflicts with any provision of the Agreement, Purchaser agrees that the
provision herein will govern and control.

                                      -2-
<PAGE>

     In Witness Whereof, the undersigned Purchaser has executed this Investor
Representation Letter as of the date set forth below.

Dated as of April ___, 2000      Purchaser:

                                 [name of investor]

                                 By:/s/ Koichi Suzuki
                                    -----------------------------------------
                                 Name: Koichi Suzuki
                                      ---------------------------------------
                                 Title: President and CEO
                                       --------------------------------------

Agreed to and Accepted:

Optical Networks, Incorporated

By:/s/ Hugh C. Martin
   ----------------------------------
Name: Hugh C. Martin
     --------------------------------
Title: President and CEO
      -------------------------------

                                      -3-<PAGE>

                                                                  EXHIBIT 10.01

                              INDEMNITY AGREEMENT

     This Indemnity Agreement (this "Agreement"), dated as of __________, 2000,
is made by and between ONI Systems Corp., a Delaware corporation (the
"Company"), and _________ a director and/or officer of the Company (the
"Indemnitee").

                                    RECITALS

     A.  The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;

     B.  Based on their experience as business managers, the Board of Directors
of the Company (the "Board") has concluded that, to retain and attract talented
and experienced individuals to serve as officers and directors of the Company,
and to encourage such individuals to take the business risks necessary for the
success of the Company, it is necessary for the Company contractually to
indemnify officers and directors and to assume for itself maximum liability for
expenses and damages in connection with claims against such officers and
directors in connection with their service to the Company;

     C.  Section 145 of the Delaware General Corporation Law (the "DGCL")
empowers the Company to indemnify by agreement its officers, directors,
employees and agents, and persons who serve, at the request of the Company, as
directors, officers, employees or agents of other corporations or enterprises,
and expressly provides that the indemnification provided by the DGCL is not
exclusive; and

     D.  The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:

     1.   Definitions.
          -----------

          1.1  "Agent" of the Company means any person who is or was a director
or officer of the Company or a subsidiary of the Company; or is or was serving
at the request of, for the convenience of, or to represent the interest of the
Company or a subsidiary of the Company as a director or officer of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise or an affiliate of the Company; or was a director or officer of a
foreign or domestic corporation which was a predecessor corporation of the
Company, including, without limitation, Optical Networks, Incorporated, a
California corporation, or was a director or officer of another enterprise or
affiliate of the Company at the request of, for the convenience of, or to
represent the interests of such predecessor corporation.  The term "enterprise"
includes any employee benefit plan of the Company, its subsidiaries, affiliates
and predecessor corporations.

                                      -1-
<PAGE>

          1.2  "Expenses" includes all direct and indirect costs of any type or
nature whatsoever (including, without limitation, all attorneys' fees and
related disbursements and other out-of-pocket costs) actually and reasonably
incurred by the Indemnitee in connection with the investigation, defense or
appeal of a proceeding or establishing or enforcing a right to indemnification
or advancement of expenses under this Agreement, Section 145 or otherwise;
provided, however, that expenses shall not include any judgments, fines, ERISA
--------  -------
excise taxes or penalties or amounts paid in settlement of a proceeding.

          1.3  "Proceeding" means any threatened, pending or completed action,
suit or other proceeding, whether civil, criminal, administrative, investigative
or any other type whatsoever.

          1.4  "Subsidiary" means any corporation of which more than fifty
percent (50%) of the outstanding voting securities is owned directly or
indirectly by the Company, by the Company and one or more of its subsidiaries or
by one or more of the Company's subsidiaries.

     2.  Agreement to Serve.  The Indemnitee agrees to serve and/or continue to
         ------------------
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of the Company, faithfully and to the best of his ability, so
long as he is duly appointed or elected and qualified in accordance with the
applicable provisions of the charter documents of the Company or any subsidiary
of the Company; provided, however, that the Indemnitee may at any time and for
                --------  -------
any reason resign from such position (subject to any contractual obligation that
the Indemnitee may have assumed apart from this Agreement), and the Company or
any subsidiary shall have no obligation under this Agreement to continue to
indemnify the Indemnitee in any such position.

     3.  Directors' and Officers' Insurance.  The Company shall, to the extent
         ----------------------------------
that the Board determines it to be economically reasonable, maintain a policy of
directors' and officers' liability insurance ("D&O Insurance"), on such terms
and conditions as may be approved by the Board.

     4.  Mandatory Indemnification.  Subject to Section 9 below, the Company
         -------------------------
shall indemnify the Indemnitee:

          4.1  Third Party Actions.  If the Indemnitee is a person who was or is
               -------------------
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties and amounts paid in settlement) actually and reasonably incurred by
him in connection with the investigation, defense, settlement or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; and

          4.2  Derivative Actions.  If the Indemnitee is a person who was or is
               ------------------
a party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was an agent of the Company, or by

                                      -2-
<PAGE>

reason of anything done or not done by him in any such capacity, against any
amounts paid in settlement of any such proceeding and all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of such proceeding if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Company; except that no indemnification under this subsection shall be made
             ------
in respect of any claim, issue or matter as to which such person shall have been
finally adjudged to be liable to the Company by a court of competent
jurisdiction due to willful misconduct of a culpable nature in the performance
of his duty to the Company, unless and only to the extent that the Court of
Chancery or the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the Court of Chancery or such other court shall
deem proper; and

          4.3  Exception for Amounts Covered by Insurance.  Notwithstanding the
               ------------------------------------------
foregoing, the Company shall not be obligated to indemnify the Indemnitee for
expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) to the extent such have been paid directly to the Indemnitee by D&O
Insurance.

     5.  Partial Indemnification and Contribution.
         ----------------------------------------

          5.1  Partial Indemnification.  If the Indemnitee is entitled under any
               -----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but is not entitled, however, to indemnification for all
of the total amount thereof, then the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to indemnification.

          5.2  Contribution.  If the Indemnitee is not entitled to the
               ------------
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the DGCL, then in respect of any threatened, pending or
completed proceeding in which the Company is jointly liable with the Indemnitee
(or would be if joined in such proceeding), the Company shall contribute to the
amount of expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred and paid or payable by the
Indemnitee in such proportion as is appropriate to reflect (a) the relative
benefits received by the Company on the one hand and the Indemnitee on the other
hand from the transaction from which such proceeding arose, and (b) the relative
fault of the Company on the one hand and of the Indemnitee on the other hand in
connection with the events which resulted in such expenses, judgments, fines or
settlement amounts, as well as any other relevant equitable considerations.  The
relative fault of the Company on the one hand and of the Indemnitee on the other
hand shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts.  The Company agrees that it would not be just and equitable
if contribution pursuant to this Section 5 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.

                                      -3-
<PAGE>

     6.   Mandatory Advancement of Expenses.
          ---------------------------------

          6.1  Advancement.  Subject to Section 9 below, the Company shall
               -----------
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity.  The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the DGCL or otherwise.
The advances to be made hereunder shall be paid by the Company to the Indemnitee
within thirty (30) days following delivery of a written request therefor by the
Indemnitee to the Company.

          6.2  Exception.  Notwithstanding the foregoing provisions of this
               ---------
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith.  If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith.  The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control.  For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups increasing their beneficial ownership interest in the Company by at least
twenty (20) percentage points without advance Board approval.

     7.   Notice and Other Indemnification Procedures.
          -------------------------------------------

          7.1  Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.

          7.2  If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 7.1 hereof, the Company has D&O Insurance in
effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies.  The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such D&O Insurance policies.

          7.3  In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume

                                      -4-
<PAGE>

the defense of such proceeding, with counsel approved by the Indemnitee (which
approval shall not be unreasonably withheld), upon the delivery to the
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by the Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to the Indemnitee under
this Agreement for any fees of counsel subsequently incurred by the Indemnitee
with respect to the same proceeding, provided that: (a) the Indemnitee shall
                                     --------
have the right to employ his own counsel in any such proceeding at the
Indemnitee's expense; (b) the Indemnitee shall have the right to employ his own
counsel in connection with any such proceeding, at the expense of the Company,
if such counsel serves in a review, observer, advice and counseling capacity and
does not otherwise materially control or participate in the defense of such
proceeding; and (c) if (i) the employment of counsel by the Indemnitee has been
previously authorized by the Company, (ii) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and the
Indemnitee in the conduct of any such defense or (iii) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of the Indemnitee's counsel shall be at the expense of the
Company.

     8.   Determination of Right to Indemnification.
          -----------------------------------------

          8.1  To the extent the Indemnitee has been successful on the merits or
otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this
Agreement or in the defense of any claim, issue or matter described therein, the
Company shall indemnify the Indemnitee against expenses actually and reasonably
incurred by him in connection with the investigation, defense or appeal of such
proceeding, or such claim, issue or matter, as the case may be.

          8.2  In the event that Section 8.1 is inapplicable, or does not apply
to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee
unless the Company shall prove by clear and convincing evidence to a forum
listed in Section 8.3 below that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to such indemnification.

          8.3  The Indemnitee shall be entitled to select the forum in which the
validity of the Company's claim under Section 8.2 hereof that the Indemnitee is
not entitled to indemnification will be heard from among the following, except
                                                                        ------
that the Indemnitee can select a forum consisting of the stockholders of the
Company only with the approval of the Company:

               (a) A quorum of the Board consisting of directors who are not
  parties to the proceeding for which indemnification is being sought;

               (b) The stockholders of the Company;

               (c) Legal counsel mutually agreed upon by the Indemnitee and the
  Board, which counsel shall make such determination in a written opinion;

               (d) A panel of three arbitrators, one of whom is selected by the
  Company, another of whom is selected by the Indemnitee and the last of whom is
  selected by the first two arbitrators so selected; or

                                      -5-
<PAGE>

               (e) The Court of Chancery of Delaware or other court having
  jurisdiction of subject matter and the parties.

          8.4  As soon as practicable, and in no event later than thirty (30)
days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.

          8.5  If the forum selected in accordance with Section 8.3 hereof is
not a court, then after the final decision of such forum is rendered, the
Company or the Indemnitee shall have the right to apply to the Court of Chancery
of Delaware, the court in which the proceeding giving rise to the Indemnitee's
claim for indemnification is or was pending or any other court of competent
jurisdiction, for the purpose of appealing the decision of such forum, provided
                                                                       --------
that such right is executed within sixty (60) days after the final decision of
such forum is rendered.  If the forum selected in accordance with Section 8.3
hereof is a court, then the rights of the Company or the Indemnitee to appeal
any decision of such court shall be governed by the applicable laws and rules
governing appeals of the decision of such court.

          8.6  Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds
that each of the material claims and/or defenses of the Indemnitee in any such
proceeding was frivolous or not made in good faith.

     9.   Exceptions.  Any other provision herein to the contrary
          ----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

          9.1  Claims Initiated by Indemnitee.  To indemnify or advance expenses
               ------------------------------
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, except with respect to
                                                         ------
proceedings specifically authorized by the Board or brought to establish or
enforce a right to indemnification and/or advancement of expenses arising under
this Agreement, the charter documents of the Company or any subsidiary or any
statute or law or otherwise, but such indemnification or advancement of expenses
may be provided by the Company in specific cases if the Board finds it to be
appropriate; or

          9.2  Unauthorized Settlements.  To indemnify the Indemnitee hereunder
               ------------------------
for any amounts paid in settlement of a proceeding unless the Company consents
in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or

          9.3  Securities Law Actions.  To indemnify the Indemnitee on account
               ----------------------
of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or

                                      -6-
<PAGE>

          9.4  Unlawful Indemnification.  To indemnify the Indemnitee if a final
               ------------------------
decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful.  In this respect, the Company and the Indemnitee
have been advised that the Securities and Exchange Commission takes the position
that indemnification for liabilities arising under the federal securities laws
is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication.

     10.  Non-Exclusivity.  The provisions for indemnification and advancement
          ---------------
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements or otherwise, both as
to action in the Indemnitee's official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.

     11.  General Provisions.
          ------------------

          11.1  Interpretation of Agreement.  It is understood that the parties
                ---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification and advancement of expenses to the Indemnitee to the fullest
extent now or hereafter permitted by law, except as expressly limited herein.

          11.2  Severability.  If any provision or provisions of this Agreement
                ------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
then:  (a) the validity, legality and enforceability of the remaining provisions
of this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 11.1 hereof.

          11.3  Modification and Waiver.  No supplement, modification or
                -----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto.  No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.

          11.4  Subrogation.  In the event of full payment under this Agreement,
                -----------
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary or desirable to secure such rights
and to enable the Company effectively to bring suit to enforce such rights.

                                      -7-
<PAGE>

          11.5  Counterparts.  This Agreement may be executed in one or more
                ------------
counterparts, which shall together constitute one agreement.

          11.6  Successors and Assigns.  The terms of this Agreement shall bind,
                ----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.

          11.7  Notice.  All notices, requests, demands and other communications
                ------
under this Agreement shall be in writing and shall be deemed duly given:  (a) if
delivered by hand and signed for by the party addressee; or (b) if mailed by
certified or registered mail, with postage prepaid, on the third business day
after the mailing date.  Addresses for notice to either party are as shown on
the signature page of this Agreement or as subsequently modified by written
notice.

          11.8  Governing Law.  This Agreement shall be governed exclusively by
                -------------
and construed according to the laws of the State of California, as applied to
contracts between California residents entered into and to be performed entirely
within California.

          11.9  Consent to Jurisdiction.  The Company and the Indemnitee each
                -----------------------
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.

          11.10  Attorneys' Fees.  In the event Indemnitee is required to bring
                 ---------------
any action to enforce rights under this Agreement (including, without
limitation, the expenses of any Proceeding described in Section 3), the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing and
pursuing such action, unless a court of competent jurisdiction finds each of the
material claims of the Indemnitee in any such action was frivolous and not made
in good faith.

                                      -8-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity
Agreement effective as of the date first written above.

ONI Systems Corp.                     INDEMNITEE:

Signature:
          --------------------------  ------------------------------------
Printed Name:                         Printed Name:
             -----------------------               -----------------------
Title:                                Title:
      ------------------------------        ------------------------------
Address:                              Address:
        ----------------------------          ----------------------------

                                      -9-

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