Document:

Avanex Corporation Incentive Compensation Plan

 Exhibit 10.5 
  
 

 
  
 We deliver products on time
that satisfy our customers 
  
 AVANEX CORPORATION

  
 INCENTIVE COMPENSATION PLAN 
  

 1 of 4 

 AVANEX CORPORATION 
 INCENTIVE COMPENSATION PLAN 
  
 Summary Description 
  
 The Avanex Corporation Incentive
Compensation Plan (“ICP”) is designed to provide to eligible employees the opportunity to be rewarded when Avanex Corporation (the “Company”) accomplishes business goals and achieves financial success. The ICP allows employees to
share in the Company’s success. 
  
 ICP at Various Avanex Locations

  
 Avanex intends to utilize incentive compensation globally. Each fiscal
year senior management, with the approval of the Board, will determine for each location: 
  

	 	•	Eligibility criteria 

  

	 	•	Factors to be measured 

  

	 	•	Amount of incentive targets 

  

	 	•	Timing of payment 

  

	 	•	Method of payment (e.g., cash, stock, stock options) 

  
 Eligibility Criteria 
  
 Eligibility criteria will be established for each Avanex location. At a given location, the established criteria will be used to determine which positions (and,
therefore, which employees) are eligible for the ICP. Once eligible employees have been determined, the following criteria must be met for any employee to participate in a given fiscal year: 
  

	 	•	Be hired as a regular employee of Avanex prior to April 1 of the current fiscal year, 

  

	 	•	Not participate in another Avanex incentive plan, and 

  

	 	•	Be an employee in “good standing” with the Company (i.e., not on a performance improvement plan of any kind) at the time of payment. (“Good standing” is
determined at the sole discretion of the Company). 

  
 Company
Financial Achievement 
  
 Factors to be Measured: ICP payments
will be made if and when the Company achieves certain financial targets. Specific targets may vary from year to year. Each fiscal year the Avanex Board and senior management will determine the specific business factors against which Company
performance will be measured and set targets for achievement. Examples of factors that may be used to measure Company performance include (but are not limited to) revenue, gross margin, net income and earnings per share. Either one or more factors
will be measured. In the event that several factors are measured, some may be “weighted” more heavily than others. 
  

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 Threshold and Maximum Payments: At the end of the fiscal year, achievement of financial targets will be
calculated, and an overall achievement percent will be established. Each fiscal year, the Company must reach an achievement percent of at least 80.0% for any ICP payments to be made for that fiscal year. If the overall Company achievement is less
than 80%, no ICP payments will be made to any participant for that fiscal year. The maximum possible ICP payout is 150% of target. 
  
 Calculation of ICP Payments 
  
 ICP calculations will be made annually following the close of the fiscal year. Using the predetermined weighting and metrics for company performance, a determination of
“Company percent achievement” will be made and approved by senior management and the Board of Directors. Employee ICP payments will be based on this Company percent achievement. If the Company achievement is less than 100%, a factor will
be used to reduce the actual bonus payments. The level of Company achievement will determine the factor to be applied in the calculation, as shown below. 
  

				
	 Company Achievement Percent

	  	Factor to be Applied
to Bonus Calculation

	 
	 0% through 79.9%
	  	0	%
	 80.0% through 89.9%
	  	50	%
	 90.0% through 99.9%
	  	75	%
	 100.1% or greater
	  	100	%

  
 Examples A through G below show how
Company achievement percent determines the bonus payment of a hypothetical participant with an annual bonus opportunity of US$10,000. 
  

																
	 Example

	  	Participant
Bonus
Opportunity

	  	Company
Achievement
Percent

	 	 	Participant $
Actual Times
Company %

	  	Factor to
be Applied

	 	 	 Actual
 Bonus
Payment

	 A
	  	$	10,000	  	78	%	 	$	7,800	  	0	%	 	$	0
	 B
	  	$	10,000	  	85	%	 	$	8,500	  	50	%	 	$	4,250
	 C
	  	$	10,000	  	95	%	 	$	9,500	  	75	%	 	$	7,125
	 D
	  	$	10,000	  	100	%	 	$	10,000	  	100	%	 	$	10,000
	 E
	  	$	10,000	  	105	%	 	$	10,500	  	100	%	 	$	10,500
	 F
	  	$	10,000	  	125	%	 	$	12,500	  	100	%	 	$	12,500
	 G
	  	$	10,000	  	150	%	 	$	15,000	  	100	%	 	$	15,000

  
 Financial Target Setting and
Communication with Employees 
  
 After the Board approves the Avanex
Annual Operating Plan (“AOP”), senior management will communicate to employees the Company financial factors to be measured, the weighting of the factors and target performance for each factor for that fiscal year. At various points during
the fiscal year senior management will provide to employees interim, year-to-date measures of the factors where such interim measurement is appropriate and meaningful. 
  

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 Other Forms of Payment 
  
 For any given fiscal year Avanex senior management may, at its sole discretion, recommend that the Board award stock or stock options in
lieu of cash payments. The target number of shares (or options) to be awarded if the Company and the individual achieve targets, along with the vesting schedule, will be determined by senior management. 
  
 Prorated Payments 
  
 ICP payments will be prorated in the following circumstances: 
  
 New Hire: An employee hired during the current fiscal year (but prior to April 1) will
have his or her payment prorated based on the portion of the fiscal year he or she is a regular Avanex employee. 
  
 Leave of Absence: An employee on a leave of absence of longer than 30 calendar days during the fiscal year will have his or her payment prorated based on the
portion of the fiscal year as an active employee. 
  
 Employment Status:
For participants whose employment status changes from full-time to part-time (or the reverse) during the fiscal year, special calculations will be done to determine the participant’s bonus opportunity. 
  
 Terminations 
  
 ICP payments will be made only to employees who are actively employed on the last day of the fiscal year (June 30). Employees who terminate
their employment prior to the end of the fiscal year will not be eligible for any ICP payment; this applies to voluntary and involuntary terminations. Employees who were active on June 30 but subsequently terminate their employment after the end of
the fiscal year will receive the calculated payment to which they were entitled based on their employment during the fiscal year. 
  
 Plan Modifications 
  
 Avanex management may, at its sole discretion, modify or terminate this Incentive Compensation Plan at any time. 
  

 4 of 4Offer of Employment between Giovanni Barbarossa and the Registrant

 Exhibit 10.12 
  
 

 
  
 November 20,
2002 
  
 Giovanni Barbarossa 
  

	RE:	PROMOTION 

  
 Dear Giovanni: 
  
 I am pleased to confirm certain
matters related to your promotion to the position of CTO and Senior Vice President, Product Development, which was effective May 20, 2002. This is a full-time, regular, exempt position of considerable responsibility, integral to our continued
business development and success. In this position you will be expected to devote your full business time, attention and energies to the performance of your duties with Avanex (“the Company”). 
  
 The specific terms of your new position are as follows: 
  
 Base Salary: Your base pay compensation is a bi-weekly rate of $9,615.39, paid every
other Friday, in accordance with the Company’s normal payroll procedures. (This represents an equivalent annual rate of pay of $250,000.00). The effective date of your base salary change in connection with this promotion is July 1, 2002.

  
 Your base salary and the Executive Incentive Bonus outlined below constitute
your entire cash compensation package and shall replace any prior bonus and/or incentive payments which you may have been eligible to receive in your prior position. 
  
 Executive Incentive Bonus: For fiscal year 2003, there is no formal incentive bonus program for senior executives and to the extent
that any such bonuses are awarded for FY2003 and subsequent years, it will be at the discretion of the Board of Directors (the “Board”). You will be considered along with the other senior executives for any such discretionary bonuses based
on the criteria established by the Board. 
  
 Notwithstanding the foregoing, in
recognition of your contributions and of your promotion to this position, in November, 2002 you will be paid a special bonus of $25,000.00, less applicable withholding and in accordance with the Company’s standard payroll procedures.
Additionally, provided you remain in continuous active employment with the Company as of June 30, 2003, you will be eligible to receive a second special bonus of $25,000.00, less applicable withholding and in accordance with the Company’s
standard payroll procedures. This second special bonus will be paid on July 1, 2003. 
  

 

 
  
 Giovanni
Barbarossa 
 November 20, 2002 
 Page 2 
  

 Work Location: Your place of work will continue to be our offices in Fremont, California. Business travel,
including international travel, is expected in connection with your job duties and responsibilities. You will be reimbursed for reasonable business travel expenses as approved by the President and CEO and in accordance with the Company’s travel
and expense reimbursement policies. 
  
 Reporting: You report to Walter
Alessandrini, President and CEO. 
  
 Benefits: As a fulltime, regular
Company employee, you will continue to be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other employees of the Company, including, without limitation, the
Company’s group medical, dental, vision, disability, life insurance, and flexible-spending account plans, subject to the terms of those plans. You should note that the Company reserves the right to cancel or change the benefit plans and
programs it offers to its employees at any time. 
  
 At-Will Employment:
You should be aware that your employment with the Company will continue to be “at-will” employment. As you know, this means that your employment relationship with the Company may be terminated at any time with or without notice, with
or without good cause or for any or no cause, at either party’s option. You understand and agree that neither your job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis
for modification, amendment, or extension, by implication or otherwise, of your at-will employment with the Company. 
  
 Conflict of Interest: As a condition of your promotion, you will continue to be subject to the Company’s policies, including the conflict of interest policy.
As you are aware, the conflict of interest policy requires that, during the term of your employment with the Company, you will not engage in any other employment, occupation, consulting or other business activity directly related to the business in
which the Company is now involved or becomes involved during the term of your employment, nor will you engage in any other activities that conflict with your obligations to the Company. 
  
 In accepting this promotion, you are reaffirming your representation to us that (a) you are not a party to any employment agreement or other
contract or arrangement which prohibits your full-time employment with the Company, (b) you do not know of any conflict which would restrict your employment with the Company and (c) you have not and will not bring with you to your employment with
the Company any documents, records or other confidential information 

  

 

 
  
 Giovanni
Barbarossa 
 November 20, 2002 
 Page 3 
  

 
belonging to former employers. We ask that, if you have not already done so, you disclose to the Company any and all agreements or understandings that may
affect your eligibility to continue to be employed by the Company or limit the manner in which you may be employed. 
  
 Employment, Confidential Information, Invention Assignment and Arbitration Agreement: As a condition of your promotion, you will continue to be subject to your
Employment, Confidential Information, Invention Assignment and Arbitration Agreement including any amendments to the arbitration provision therein. As you are aware, such agreements require, among other provisions, the assignment of patent rights to
any invention made during your employment at Avanex and non-disclosure of proprietary information, as well as the arbitration of certain employment-related disputes. You will also be required to sign an acknowledgment that you have read and
understand the Company policies and procedures (as set forth on the Company’s Outlook “Public Files” system or other similar electronic system that the Company may designate), and you will be expected to abide by all Company policies
and procedures. 
  
 Indemnification Agreement: The Company has previously
offered you the opportunity to become a party to its standard form of indemnification agreement for officers and directors. The Indemnification Agreement dated May 24, 2001 between you and the Company shall remain in effect pursuant to the terms and
conditions set forth therein. 
  
 General: This letter, along with the
other aforementioned employment-related agreements and any stock option agreements between you and the company issued in connection with prior stock option grants, set forth the terms of your employment with the Company and supersede in their
entirety any and all prior agreements and understandings concerning your promotion and your continued employment relationship with the Company, whether written or oral. The terms of this letter may only be amended, canceled or discharged in writing
signed by an authorized representative of the Company and by you. 
  
 Governing
Law: This letter shall be governed by the internal substantive laws, but not the choice of law rules, of the State of California. You hereby agree to exclusive personal jurisdiction and venue in the state and federal courts of the state of
California. 
  
 Severability: In the event that any provision hereof
becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this letter shall continue in full force and effect without such provision. 
  

 

 
  
 Giovanni
Barbarossa 
 November 20, 2002 
 Page 4 
  

 To indicate your acceptance of the terms of your promotion, please sign and date this letter in the space provided
below and return it to Human Resources. A duplicate original is enclosed for your records. 
  
 Giovanni, congratulations again on your promotion. We sincerely feel that your promotion can provide you with the opportunity to achieve rewarding results for both you and the Company, and we look forward to your
contributions. 
  

	
	 Sincerely,

	
	/s/    MARGARET QUINN        
	Margaret Quinn
	Vice President,
	Human Resources and Administration

  

							
				
	Accepted: 	 	/s/    GIOVANNI BARBAROSSA        	 	Date: 	 	11/20/02

  
 Enclosures 
 Duplicate Promotion Letter

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