Document:

<PAGE>   1

                                                                    EXHIBIT 10.1

                       ALLIANCE FIBER OPTICS PRODUCT, INC.

                                 1997 STOCK PLAN

SECTION 1. PURPOSE

        The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, to encourage such selected persons to remain in the employ of the
Company and to attract new employees by allowing such persons to purchase Shares
of the Company's Common Stock. The Plan provides for the grant of Options to
purchase Shares. Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options. Stock Purchase Rights may also be granted under
the Plan.

SECTION 2. DEFINITIONS

        (a) "Board" means the Board of Directors of the Company.

        (b) "Code" means the Internal Revenue Code of 1986, as amended.

        (c) "Committee" means a committee of the Board of Directors which is
authorized to administer the Plan under Section 4 herein. In the event the
Company becomes subject to Section 16 of the Exchange Act, the Committee shall
have a membership composition which will enable the Plan to qualify under Rule
16b-3 with regard to Options granted to persons who are subject to Section 16 of
the Exchange Act.

        (d) "Common Stock" means the Common Stock of the Company.

        (e) "Company" means Alliance Fiber Optics Product, Inc.

        (f) "Consultant" means any person, including an advisor, who is engaged
by the Company or Subsidiary to render consulting or advisory services and is
compensated for such services.

        (g) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: sick leave, military leave or any other leave of absence
approved by the Board, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or in the case of transfers between
locations of the Company or between the Company, its Subsidiaries or its
successor.

<PAGE>   2

        (h) "Employee" means any person, including officers and directors,
employed by the Company or Subsidiary of the Company. The payment of a
director's fee by the Company shall not be sufficient to constitute "employment"
by the Company.

        (i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

        (j) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:

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

             (ii) If the Common Stock is quoted on the Nasdaq System (but not on
        the Nasdaq National Market thereof) or regularly quoted by a recognized
        securities dealer but selling prices are not reported, its Fair Market
        Value shall be the mean between the high and low asked prices for the
        Common Stock; or

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

        (k) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

        (l) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.

        (m) "Option" means a stock option granted pursuant to the Plan that
entitles the holder to purchase Shares.

        (n) "Optioned Stock" means the Common Stock subject to an Option.

        (o) "Optionee" means an Employee or Consultant who receives an Option.

        (p) "Plan" means the Alliance Fiber Optics Product, Inc. 1997 Stock
Plan, as amended from time to time.

        (q) "Purchaser" means an Employee or Consultant who exercises a Stock
Purchase Right.

                                       2
<PAGE>   3

        (r) "Restricted Stock" means Shares purchased pursuant to the grant of a
Stock Purchase Right.

        (s) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 13 of the Plan.

        (t) "Stock Purchase Right" means the right to purchase Restricted Stock
granted pursuant to Section 11 of the Plan.

        (u) "Subsidiary" means any corporation of which the Company and/or one
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the plan shall be considered a Subsidiary commencing as of such date.

        (v) "Tax Date" means the date upon which the withholding tax obligation
is determined pursuant to Section 12(b) herein.

SECTION 3. STOCK SUBJECT TO THE PLAN

        Subject to the provisions of Section 13 of the Plan, the maximum
aggregate number of shares which may be optioned and sold under the Plan is
1,500,000(1) 3,000,000(2) 7,000,000 Shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option or Stock
Purchase Right should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.

SECTION 4. ADMINISTRATION.

        (a) Committee Membership. The Plan shall be administered by the
Committee, which shall consist of members of the Board. The members of the
Committee shall be appointed by the Board. If no Committee has been appointed,
the entire Board shall constitute the Committee.

        (b) Powers of the Committee. Subject to the provisions of the Plan and
the specific duties delegated by the Board, the Committee shall have full
authority and discretion to take the following actions:

---------------

(1) Increased to 3,000,000 shares as a result of the 2-1 split of the Company's
    capital stock, effective 4/12/99.

(2) Increased by 4,000,000 shares, effective January 18, 2000.

                                       3
<PAGE>   4

             (i) to determine the Fair Market Value of the Common Stock;

             (ii) to select the officers, Consultants and Employees to whom
        Options and Stock Purchase Rights may from time to time be granted under
        the Plan;

             (iii) to determine whether and to what extent Options and Stock
        Purchase Rights or any combination thereof, are granted under the Plan;

             (iv) to determine the number of Shares to be covered by each such
        award granted hereunder;

             (v) to approve forms of agreement for use under the Plan;

             (vi) to determine the terms and conditions, not inconsistent with
        the terms of the Plan, of any award granted hereunder including, but not
        limited to, the share price and any restriction or limitation, based in
        each case on such factors as the Committee shall determine in its sole
        discretion;

             (vii) to determine the terms and restrictions applicable to Stock
        Purchase Rights and the Restricted Stock purchased by exercising such
        Stock Purchase Rights; and

             (viii) to make any other such determinations with respect to awards
        under the Plan as it shall deem appropriate.

        (c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding on all Optionees and
Purchasers and any other holders of any Options or Stock Purchase Rights.

SECTION 5. ELIGIBILITY.

        (a) General Rule. Nonstatutory Stock Options and stock Purchase Rights
may be granted to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. An Employee or Consultant who has been granted an
Option or Stock Purchase Right may, if he is otherwise eligible, be granted an
additional Option, Options, Stock Purchase Right or Rights.

        (b) Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a stock option agreement between the Optionee and the Company.
All stock option agreements shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other terms and conditions
which are not inconsistent with the Plan

                                       4
<PAGE>   5

and which the Committee deems appropriate. The provisions of the various stock
option agreements entered into under the Plan are not required to be identical.

        (c) Incentive Stock Option Limitation. Each Option shall be designated
in the written option agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such designations, to the
extent that the aggregate Fair Market Value of the Shares with respect to which
Options designated as Incentive Stock Options are exercisable for the first time
by any Optionee during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.

        (d) Time of Granting Options The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

SECTION 6. TERM OF PLAN.

        The Plan shall become effective on the date of its adoption by the Board
subject to its approval by the shareholders of the Company as described in
Section 17 of the Plan. In the event that the shareholders fail to approve the
Plan within twelve (12) months after its adoption by the Board, any Options or
Stock Purchase Rights granted during such period shall be null and void. The
Plan shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.

SECTION 7. TERM OF OPTION.

        The term of each Option shall be the term stated in the Optionee's
option agreement; provided however, the term shall be no more than ten (10)
years from the date of grant thereof or such shorter term as may be provided in
the option agreement. However, in the case of an Option granted to an Optionee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the option agreement.

SECTION 8. EXERCISE PRICE AND CONSIDERATION.

        (a) Board Determination. With respect to each Option, the per share
exercise price for the Shares shall be determined by the Board.

                                       5
<PAGE>   6

        (b) Incentive Stock Options. In the case of an Incentive Stock Option,
the exercise price per Share shall be not less than 100% of the Fair Market
Value of such Share on the date of grant. Notwithstanding the above, if an
Incentive Stock Option is granted to an Employee who owns more than ten percent
of the total combined voting power of all classes of stock of the Company or any
Subsidiary, the exercise price per Share shall be not less than 110% of the Fair
Market Value of such Share on the date of grant.

        (c) Nonstatutory Stock Options. The exercise price per Share of a
Nonstatutory Stock Option shall not be less than 85% of the Fair Market Value of
such Share on the date of grant. Notwithstanding the above, if a Nonstatutory
Stock Option is granted to a person who owns more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any
Subsidiary, the exercise price per Share shall be not less than 110% of the Fair
Market Value of such Share on the date of grant.

        (d) Consideration. The consideration to be paid for Shares issued upon
the exercise of an Option and the method of payment for such Shares shall be
determined by the Committee and, in the case of an Incentive Stock Option, shall
be determined at the time of grant. The consideration to purchase Shares may
consist of, cash, check, recourse or nonrecourse promissory note, the surrender
of other Shares, or any combination of the foregoing methods of payment. In the
case where the exercise price is paid by the surrender of Shares, the Shares
surrendered must (i) have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the new Shares to be acquired.

SECTION 9. EXERCISE OF OPTION.

        (a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the Board
and as permissible under the terms of the Plan, but in no case at a rate of less
than 20% per year over five (5) years from the date of the Option is granted. An
Option may not be exercised for a fraction of a Share. An Option shall be deemed
to be exercised when written notice of such exercise has been given to the
Company in accordance with the terms of the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Until the issuance of the stock certificate evidencing such Shares, no
right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option, no adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 13 of the Plan.

        (b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company, such

                                       6
<PAGE>   7

Optionee may within ninety (90) days after the date of such termination (or such
other period as set forth in the Option Agreement, but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

        (c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, if an Optionee's Consulting relationship or Continuous Status as an
Employee is terminated as a result of disability (as determined by the Board in
accordance with the policies of the Company), Optionee may within six (6) months
from the date of such termination (or such other longer period as set forth in
the Option Agreement, but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.

        (d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised within twelve (12) months following the date of death,
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent the Optionee was entitled to exercise the Option at the date of
death. To the extent that Optionee was not entitled to exercise the Option at
the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.

        (e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

SECTION 10. RIGHT OF FIRST REFUSAL.

        (a) Right of First Refusal. Unless the Committee determines otherwise,
all Shares acquired under the Plan by an Optionee or Purchaser (both being
referred to herein as "Holder") shall be subject to the right of first refusal
set forth in this Section 10. Before any Shares may be sold or transferred
(including transfer by operation of law other than as excepted pursuant to
Section 10(e) hereof), Holder must first obtain the written consent of the
Company. If such written consent is not given, then the Company shall have a
right of first refusal to purchase all, but not less than all, of the Shares for
the same

                                       7
<PAGE>   8

price and, to the extent practicable, on substantially the same terms and
conditions offered to such prospective purchaser, in accordance with the
procedures set forth below.

        (b) Purchase Price. If the proposed price per share is to be other than
in cash, then an equivalent cash value shall be determined in good faith by the
Board. If a transfer other than a voluntary sale is proposed to be made, then
the price per Share for purposes of the right of first refusal shall be
determined by the mutual agreement of Holder and the Company or, if no agreement
can be reached, the price shall be the fair market value of such shares, as
determined in good faith by the Board.

        (c) Offer Notice. Prior to any sale or transfer of any Shares, Holder,
or the legal representative of Holder, shall promptly deliver to the Secretary
of the Company a written notice of the price and other terms and conditions of
the offer by the prospective purchaser, the identity of the prospective
purchaser, and, in the case of a sale, Holder's bona fide intention to sell or
dispose of such shares together with a copy of a written agreement between
Holder and the prospective purchaser conditioned only upon the satisfaction of
the procedures set forth in this right of first refusal. If the Company does not
give its written consent to such transfer, then the Company (or its assignees)
shall, for thirty (30) days after such notice from Holder, have the right under
this Section 10 to purchase all such Shares, as set forth herein.

        (d) Holder's Right to Transfer. After the expiration of the Rights of
First Refusal, or upon the written consent of the Company to the proposed
transfer, Holder may sell or transfer the Shares specified in the notice to the
Company, on the terms and conditions specified in such notice; provided,
however, that the sale must be consummated within three (3) months after the
date of the notice and that all Shares sold or transferred shall remain subject
to the applicable provisions and restrictions of this Plan, including
restrictions on further transfer as provided in this Section 10, and shall carry
a legend to that effect. If the right of first refusal under this Section 10 are
not exercised, but Holder fails to consummate such sale on the same terms and
conditions as set forth in the notice to the Company within three (3) months
after the date of the notice, then such right of first refusal shall be
reinstated.

        (e) Termination; Exceptions. The provisions of this Section 10 shall
terminate on the closing date of an underwritten public offering of Common Stock
of the Company. The provisions of Section 10(a) shall not apply to a transfer of
any Shares by Holder, either during his or her lifetime or on death to his or
her ancestors, descendants or spouse, or any custodian or trustee for the
account of Holder or Holder's ancestors, descendants or spouse; provided, in
each such case a transferee shall receive and hold such Shares subject to the
provisions and restrictions on transfer under this Section 10 and there shall be
no further transfer of such Shares except in accordance herewith.

                                       8
<PAGE>   9

        (f) Effect of Transfers Not in Compliance. The Company shall not be
required to transfer on its books any Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Section 10,
or to treat as owner of such Shares, or to accord the right to vote as such
owner or to pay dividends to, any transferee to whom such Shares shall have been
so transferred.

SECTION 11. STOCK PURCHASE RIGHTS AND REPURCHASE OPTION.

        (a) Rights to Purchase Restricted Stock. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the Committee
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of this offer, or, in the case of
a person owning stock representing more than ten percent (10%) the total
combined Voting Power of all classes of stock of the Company or any Subsidiary,
the price shall not be less than one hundred percent (100%) of the Fair Market
Value of the shares as of the date of the offer), and the time within which such
person must accept such offer, which shall in no event exceed thirty (30) days
from the date of grant of the Stock Purchase Right. The offer shall be accepted
by execution of a stock purchase agreement in the form determined by the
Committee.

        (b) Repurchase Option. Unless the Committee determines otherwise, the
stock purchase agreement shall grant the Company a repurchase option exercisable
upon the voluntary or involuntary termination of the Purchaser's employment with
the Company for any reason (including death or disability). The purchase price
for unvested Shares repurchased pursuant to the stock purchase agreement shall
be the original price paid by the Purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The repurchase option with
respect to the Restricted Stock shall lapse at such rate as the Committee may
determine, but in any event at a minimum rate of twenty percent (20%) per year.

        (c) Other Provisions. The stock purchase agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion. In addition, the provisions
of stock purchase agreements need not be the same with respect to each
Purchaser.

        (d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the Purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right

                                       9
<PAGE>   10

for which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 13 of the Plan.

SECTION 12. WITHHOLDING TAXES.

        (a) Obligation of Optionees and Purchasers. As a condition to the
exercise of an Option or Stock Purchase Right, the Optionees and Purchasers
shall make such arrangements as the Committee may require to the satisfaction of
any federal, state, local or foreign withholding tax obligations that may arise
in connection with exercise. The Optionees shall also make such arrangements as
the Committee may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.

        (b) Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Committee, Optionees or Purchasers may satisfy withholding
obligations as provided in this paragraph. When an Optionee or Purchaser incurs
a tax liability in connection with an Option or Stock Purchase Right, which tax
liability is subject to tax withholding under applicable tax laws, and the
Optionee or Purchaser is obligated to pay the Company an amount required to be
withheld under applicable tax laws, the Optionee or Purchaser may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option, or the Shares to be issued in
connection with the Stock Purchase Right, if any, that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").

All elections by an Optionee or Purchaser to have Shares withheld for this
purpose shall be made in writing in a form acceptable to the Committee and shall
be subject to the following restrictions:

             (i) the election must be made on or prior to the Tax Date;

             (ii) once made, the election shall be irrevocable as to the
        particular Shares of the Option or Stock Purchase Right as to which the
        election is made;

             (iii) all elections shall be subject to the consent or disapproval
        of the Committee;

             (iv) if the Optionee is subject to Rule 16b-3 of the Exchange Act,
        the election must comply with the applicable provisions of Rule 16b-3
        and shall be subject to such additional conditions or restrictions as
        may be required thereunder to qualify for the maximum exemption from
        Section 16 of the Exchange Act with respect to Plan transactions.

                                       10
<PAGE>   11

In the event the election to have Shares withheld is made by an Optionee or
Purchaser and no election is filed under Section 83(b) of the Code, the Optionee
or Purchaser shall receive the full number of Shares with respect to which the
Option or Stock Purchase Right is exercised, but such Optionee or Purchaser
shall be unconditionally obligated to tender back to the Company the proper
number of Shares at the time when the amount of withholding tax becomes due and
payable.

SECTION 13. ADJUSTMENT OF SHARES.

        (a) Changes in Capitalization or Merger. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option or Stock Purchase Right, and the number of Shares which have
been authorized for issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option or Stock Purchase Right, as well as
the price per Share covered by each such outstanding Option or Stock Purchase
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option or Stock Purchase Right. In
the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.

        (b) Dissolution, Liquidation or Other Merger. In the event of the
proposed dissolution or liquidation of the Company, or of a merger in which the
successor corporation does not agree to assume the Option or Stock Purchase
Right or substitute an equivalent Option or Stock Purchase Right, the Board
shall notify Optionees and Purchasers at least thirty (30) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
or Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.

SECTION 14. AMENDMENT AND TERMINATION OF PLAN.

        (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or

                                       11
<PAGE>   12

discontinuation shall be made which would impair the rights of any Optionee or
Purchaser under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.

        (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options and Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Purchaser and the Board, which
agreement must be in writing and signed by the Optionee or Purchaser and the
Company.

SECTION 15. NONTRANSFERABILITY.

All Options and Stock Purchase Rights granted under the Plan may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of the Optionee or Stock Purchase Rights Holder only by the
Optionee or Stock Purchase Rights Holder.

SECTION 16. ISSUANCE OF SHARES.

        (a) Legal Requirements. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

        (b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Committee may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

        (c) Regulatory Approval. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall

                                       12
<PAGE>   13

relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

SECTION 17. NO EMPLOYMENT RIGHTS.

No provision of the Plan, nor any Option or Stock Purchase Right granted under
the Plan shall confer upon any Optionee, Stock Purchaser Right Holder or
Purchaser any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his right
or the Company's right to terminate his employment or consulting relationship at
any time, with or without cause.

SECTION 18. SHAREHOLDER APPROVAL.

Continuance of the Plan shall be subject to approval by the shareholders of the
Company within twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law and the rules of any stock exchange upon
which the Common Stock is listed.

SECTION 19. INFORMATION TO HOLDER AND PURCHASERS.

The Company shall provide to each Holder and Purchaser, during the period for
which such Holder has one or more Options or Stock Purchase Rights outstanding,
and in the case of a Purchaser, during the period such individual owns such
Shares, annual financial statements of the Company. The Company shall not be
required to provide such information if the issuance of Options under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information.

                                       13
<PAGE>   14

                       ALLIANCE FIBER OPTICS PRODUCT, INC.

                                 1997 STOCK PLAN

                     STOCK OPTION AGREEMENT - EARLY EXERCISE

             Alliance Fiber Optics Product, Inc. (the "Company") hereby grants
an option to purchase Shares of its Common Stock to the optionee named below on
the terms and conditions set forth in this cover sheet, the Company's 1997 Stock
Plan, and all exhibits attached hereto (together, the "Stock Option Agreement"):

     Grant Number:                                <<Grant_No>>
     Date of Grant                                <<Grant_Date>>
     Vesting Commencement Date                    <<VCD>>
     Exercise Price Per Share                      US<<Ex_Price>>
     Total Number of Shares Granted               <<No_Shares>>
     Type of Option                                __ Incentive Stock Option
                                                   __ Nonqualified Stock Option
     Expiration Date                               <<Exp_Date>>

        Exercise and Vesting Schedule:

             The option granted hereunder may be exercised, in whole or in part,
based on the vesting schedule as set forth below.

             Twenty-five percent (25%) of the shares subject to the option shall
vest in the holder thereof on the one year anniversary of the Vesting
Commencement Date and an additional twenty-five percent (25%) of the shares
subject to the option shall vest in the holder thereof at the end of each full
year thereafter. The option is subject to special acceleration of vesting upon
the occurrence of certain circumstances, as further described on Attachment A to
this cover sheet.

             BY SIGNING THIS COVER SHEET, YOU AGREE THAT THIS STOCK OPTION
AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THIS COVER SHEET, THE 1997
STOCK PLAN AND EXHIBITS A-D, WHICH ARE ATTACHED HERETO AND MADE A PART OF THIS
DOCUMENT.

OPTIONEE:                                   ALLIANCE FIBER OPTICS PRODUCT, INC.
                                            a California corporation

                                            By
---------------------------------             ----------------------------------
<<Name>>                                      Peter C. Chang, President

<PAGE>   15

        1. In the event of any "Change of Control" (as defined below), one-half
(1/2) of the then unvested portion of the Option will immediately vest.

        2. For purposes of the foregoing a "Change of Control" shall be deemed
to have occurred if (i) the Company sells or otherwise disposes of all or
substantially all of its assets; (ii) there is a merger or consolidation of the
Company with any other corporation or corporations, if the shareholders of the
Company, as a group, do not hold, immediately after such event, more than 50% of
the voting power of the surviving or successor corporation; or (iii) a person or
entity (exclusive of persons who are now officers and directors of the Company),
including any "person" as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes the
"beneficial owner" (as defined in the Exchange Act) of capital stock of the
Company representing 40% or more of the combined voting power of the voting
securities of the Company.

<PAGE>   16

                                    EXHIBIT A

                             STOCK OPTION AGREEMENT

TYPE OF OPTION

The type of option which you have been granted is designated on the cover sheet.
If designated as an Incentive Stock Option, this option is intended to be an
incentive stock option under section 422 of the Internal Revenue Code (the
"Code") and will be interpreted accordingly.

VESTING

You may exercise this Option during its term in accordance with the exercise
schedule set out in the cover sheet and the applicable provisions of the Plan
and this Stock Option Agreement. In the event of your death, disability or other
termination of employment or consulting relationship, the exercisability of the
Option is governed by the applicable provisions of the Plan and this Stock
Option Agreement.

EARLY EXERCISE WITH RESTRICTED STOCK PURCHASE AGREEMENT

Notwithstanding the vesting schedule described in the coversheet or the
provisions of the foregoing paragraph, you may exercise this Option during its
term at any time as to shares that have not vested (the "Unvested Shares"),
provided that at the time of such exercise you deliver to the Company, in
addition to the other exercise documentation required hereby, an executed copy
of the Restricted Stock Purchase Agreement attached as Exhibit D, along with its
attachments, as applicable (the "Restricted Stock Agreement"), whereby, among
other things, you agree to grant to the Company certain repurchase rights, at
cost, with respect to the Unvested Shares, as more fully set forth therein,
which repurchase rights shall lapse over time with respect to the Unvested
Shares in accordance with the vesting schedule set forth on the coversheet (an
"Early Exercise with Repurchase Agreement").

TERM

Your option may be exercised only within the term set out in the cover sheet,
and may be exercised during such term only in accordance with the Plan and this
Stock Option Agreement. In any event, your Option will expire on the day before
the 10th anniversary of the Date of Grant, as shown on the cover sheet. It will
expire earlier if your Company service terminates, as described below.

<PAGE>   17

REGULAR TERMINATION

In the event of the termination of your consulting relationship or Continuous
Status as an Employee for any reason other than death or disability, you may, to
the extent otherwise so entitled at the date of such termination, exercise this
Option within 90 days after your termination. To the extent that you were not
entitled to exercise this Option at the date of such termination, or if you do
not exercise your Option within the 90 day period specified above, your Option
will terminate.

DEATH

In the event of your death, the Option may be exercised at any time within
twelve (12) months following the date of death by your estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that you could exercise the Option at the date of death.

DISABILITY

If your service with the Company (or any Subsidiary) terminates because of your
disability, you may, but only within six (6) months from the date of termination
of employment, exercise the Option to the extent otherwise so entitled at the
date of such termination.

RESTRICTIONS ON EXERCISE

The Company will not permit you to exercise this Option if the issuance of
Shares at that time would violate any law or regulation.

NOTICE OF EXERCISE

When you wish to exercise this Option, you must notify the Company by filing the
proper "Notice of Exercise" form (attached hereto as Exhibit C) at the address
given on the form. Your notice must specify how many Shares you wish to
purchase. Your notice must also specify how your Shares should be registered (in
your name only or in your and your spouse's names as community property or as
joint tenants with right of survivorship). The notice will be effective when it
is received by the Company. If someone else wants to exercise this Option after
your death, that person must prove to the Company's satisfaction that he or she
is entitled to do so. In the event of an Early Exercise with Repurchase
Agreement, you must also execute and deliver the Restricted Stock Purchase
Agreement in the form attached hereto as Exhibit D, along with Exhibits D-2, D-3
and D-4.

                                       2
<PAGE>   18

FORM OF PAYMENT

Your Notice of Exercise must be accompanied by payment of the aggregate purchase
price as to all Shares you wish to purchase. Payment of the purchase price shall
be by cash or personal check. Notwithstanding the foregoing, if you are an
Employee making an Early Exercise with Repurchase Agreement, and if permitted by
the Company, the exercise price may, at your election, be paid in cash, or by
way of promissory note (in the form attached as Exhibit D-6), or any combination
thereof.

TAX MATTERS; WITHHOLDING

The Company cannot possibly summarize or advise you regarding all of the
detailed potential tax implications that may arise in connection with an
exercise of this option or the sale of the shares. Accordingly, you are strongly
advised to consult a tax advisor before exercising this Option or disposing of
the shares. You will not be allowed to exercise this Option unless you make
acceptable arrangements to pay any withholding or other taxes that may be due as
a result of the Option exercise or the sale of shares acquired upon exercise of
this Option and the sale of the shares.

REPRESENTATIONS

If the Shares you intend to purchase have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised, the
Company may require you to (i) deliver to the Company your Investment
Representation Statement (attached as Exhibit B), which may contain, among other
things, an agreement to refrain from sales of the Shares for up to 180 days
immediately following an underwritten initial public offering, and (ii) read the
applicable rules of the Commissioner of Corporations attached to such Investment
Representation Statement, if applicable.

RIGHT OF FIRST REFUSAL

In the event that you propose to sell, pledge or otherwise transfer to a third
party any Shares acquired under this Stock Option Agreement, or any interest in
such Shares, the Company shall have the "Right of First Refusal" with respect to
all (and not less than all) of such Shares. If you desire to transfer Shares
acquired under this Agreement, you must give a written notice to the Company
describing fully the proposed transfer, including the number of Shares proposed
to be transferred, the proposed transfer price and the name and address of the
proposed transferee. The Company shall have the right to purchase all, and not
less than all, of the Shares on the terms of the proposal described in the
notice by delivery of a notice of exercise of the Right of First Refusal within
30 days after the date when the notice was received by the Company.

                                       3
<PAGE>   19

If the Company fails to exercise its Right of First Refusal within 30 days after
the date when it received the notice, you may, not later than three (3) months
following receipt of the notice by the Company, conclude a transfer of the
Shares on the terms and conditions described in the notice. If the Company
exercises its Right of First Refusal, the parties shall consummate the sale of
the Shares within 30 days after the date when the Company received the notice.
The Company's Right of First Refusal shall terminate in the event that Stock is
listed on an established stock exchange or is quoted regularly on the NASDAQ
National Market.

TRANSFER OF OPTION

Prior to your death, only you may exercise this Option. You cannot transfer or
assign this Option. For instance, you may not sell this Option or use it as
security for a loan. If you attempt to do any of these things, this option will
immediately become invalid. You may, however, dispose of this option in your
will.

Regardless of any marital property settlement agreement, the Company is not
obligated to honor a notice of exercise from your spouse or former spouse, nor
is the Company obligated to recognize such individual's interest in your Option
in any other way.

NO EMPLOYMENT RIGHTS

Your Option or this Agreement does not give you the right to be retained by the
Company (or any subsidiaries) in any capacity. The Company (and any
subsidiaries) reserves the right to terminate your service at any time and for
any reason.

SHAREHOLDER RIGHTS

You, or your estate or heirs, have no rights as a shareholder of the Company
until a certificate for your option Shares has been issued. No adjustments are
made for dividends or other rights if the applicable record date occurs before
your stock certificate is issued, except as described in the Plan.

ADJUSTMENTS

In the event of a stock split, a stock dividend or a similar change in the
Company stock, the number of Shares covered by this Option and the exercise
price per share may be adjusted pursuant to the Plan. In the event of the
proposed dissolution or liquidation of the Company, or of a merger in which the
successor corporation does not agree to assume the Option or Stock Purchase
Right or substitute an equivalent Option or Stock Purchase Right, the Board
shall notify Optionees and Purchasers at least thirty (30) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
or Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.

                                       4
<PAGE>   20

LEGENDS

All certificates representing the Shares issued upon exercise of this Option
shall, where applicable, have endorsed thereon the following legends:

        "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
        RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH
        IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR
        HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
        PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN
        REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE
        SHARES REPRESENTED BY THIS CERTIFICATE."

        "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
        OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
        SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
        COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."

APPLICABLE LAW

This Agreement will be interpreted and enforced under the laws of the State of
California.

THE PLAN AND OTHER AGREEMENTS

The text of the Plan is incorporated in this Stock Option Agreement by
reference. Certain capitalized terms used in this Agreement are defined in the
Plan.

This Stock Option Agreement (along with all exhibits and attachments) and the
Plan constitute the entire understanding between you and the Company regarding
this Option. Any prior agreements, commitments or negotiations concerning this
Option are superseded.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

                                       5
<PAGE>   21

                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE       :      <<Name>>

COMPANY        :      ALLIANCE FIBER OPTICS PRODUCT, INC.

SECURITY       :      COMMON STOCK

AMOUNT         :

DATE           :

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

             (a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities. Optionee
is acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

             (b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the

<PAGE>   22

Company, a legend prohibiting their transfer without the consent of the
Commissioner of Corporations of the State of California and any other legend
required under applicable state securities laws.

             (c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
the securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including among other
things: (1) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the Company,
and the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), if applicable.

        In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the resale occurring not less than one year after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, (2) the
availability of certain public information about the Company, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934), and (4) the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.

             (d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by Optionee (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
who own stock in the Company also agree to such restrictions.

                                       2
<PAGE>   23

             (e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.

             (f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.

                                       Signature of Optionee:

                                       ------------------------------------

                                       Date:
                                            -------------------------------

                                       3
<PAGE>   24

                                    EXHIBIT C

                               NOTICE OF EXERCISE

ALLIANCE FIBER OPTICS PRODUCT, INC.
735 N. Pastoria Avenue
Sunnyvale, CA 94086
Attention: Chief Financial Officer

        1. Exercise of Option. Effective as of today, ___________, 20__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of ALLIANCE FIBER OPTICS
PRODUCT, Inc. (the "Company") under and pursuant to the 1997 Stock Plan (the
"Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
<<Grant_Date>> (the "Option Agreement").

        2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

        3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan. Thereafter, Optionee
shall enjoy rights as a shareholder until such time as Optionee disposes of the
Shares.

        4. Company's Right of First Refusal. Optionee understands and
acknowledges that the Shares are subject to certain right of first refusal
provisions under the terms of the Plan and Option Agreement.

        5. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

        6. Restrictive Legends and Stop-Transfer Orders.

             (A) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:

<PAGE>   25

             THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
             INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
             1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
             ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
             ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES
             AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
             WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
             THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES
             OF THE CORPORATION.

             (B) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

             (C) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

        7. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

        8. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.

        9. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

                                       2
<PAGE>   26

        10. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

        11. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

        12. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

        13. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Notice, the Plan, the Option Agreement
(along with all other attachments to the Option Agreement that are executed and
delivered along with this Notice, if any) and the Investment Representation
Statement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and is governed by California law except
for that body of law pertaining to conflict of laws.

Submitted by:                          Accepted by:

OPTIONEE:                              ALLIANCE FIBER OPTICS PRODUCT, INC.
                                       a California corporation
<<Name>>

                                       By:
                                          -----------------------------------

                                       Its:
---------------------------------          ----------------------------------

---------------------------------      --------------------------------------
(address)                              (address)

---------------------------------      --------------------------------------

                                       3
<PAGE>   27

                                    EXHIBIT D

                       ALLIANCE FIBER OPTICS PRODUCT, INC.

                                 1997 STOCK PLAN

                       RESTRICTED STOCK PURCHASE AGREEMENT

        THIS AGREEMENT is made between <<Name>> (the "Purchaser") and Alliance
Fiber Optics Product, Inc., a California corporation (the "Company") as of
__________________, 20__.

                                    RECITALS

        (1) Pursuant to the exercise of the stock option (grant number
<<Grant_No>>) granted to Purchaser under the Company's 1997 Stock Plan (the
"Plan") and pursuant to the Stock Option Agreement (the "Option Agreement")
dated <<Grant_Date>> by and between the Company and Purchaser with respect to
such grant, which Plan and Option Agreement are hereby incorporated by
reference, Purchaser has elected to purchase _________ of those shares which
have not become vested under the vesting schedule set forth in the Option
Agreement (the "Unvested Shares"). The Unvested Shares and the shares subject to
the Option Agreement which have become vested are sometimes collectively
referred to herein as the "Shares".

        (2) As a condition to Purchaser's election to exercise the Option as to
the Unvested Shares, Purchase hereby executes and delivers this Restricted Stock
Purchase Agreement, which sets forth certain rights and obligations of the
parties with respect to the Unvested Shares acquired upon exercise of the
Option.

        (3) In accordance with the terms of the Option Agreement, the Purchaser,
if an Employee or director of the Company on the date of this Agreement, and if
permitted by the Company, has the right to pay all or a portion of the exercise
price for the Shares by way full recourse promissory note in the form attached
hereto as Exhibit D-6 (the "Note"). If none of the exercise price for the Shares
is paid by way of a Note, all references to the Note in this Agreement shall be
disregarded. If a Note is utilized, then by his or her execution below, the
Purchaser hereby grants a security interest to the Company in all of the Shares
to secure the payment obligations of the Purchaser to the Company under the
Note. To perfect the security interest granted hereby, the Purchaser hereby
agrees to pledge the Shares to the Company, by delivering or authorizing
delivery of the stock certificates representing such shares to the escrow agent
authorized in Section 2(b). Upon the occurrence of a default in the payment of
the Note when due, which default remains uncured for thirty (30) days

<PAGE>   28

following written thereof, the Company shall be entitled to the rights and
remedies of a secured party under the Commercial Code of the State of
California. In the event that the Purchaser prepays all or a portion of the
Note, in accordance with the provisions thereof, the Purchaser intends, unless
otherwise indicated in writing by the Purchaser at the time of payment or at any
time thereafter, that the shares represented by the portion of the Note so
repaid, including annual interest thereon, shall continue to be held in the
escrow provided for below, to serve as independent collateral for the
outstanding portion of the Note, for the purpose of commencing the holding
period set forth in Securities and Exchange Commission Rule 144(d).

        1. Repurchase Option.

             (a) If Purchaser's status as an Employee, Consultant or director,
as applicable, is terminated for any or no reason, including for cause or
without cause, death or disability, the Company shall have the right and option
to purchase from Purchaser, or Purchaser's personal representative, as the case
may be, all or any portion of the Purchaser's Then-Unvested Shares (as defined
below) as of the date of such termination at the original exercise price paid by
the Purchaser for such Shares (the "Repurchase Option"), which repurchase price
may be paid in cash, by cancellation of indebtedness under the Note, or a
combination. The term "Then-Unvested Shares" as used herein shall mean that
portion of the Unvested Shares that remain unvested on such termination date in
accordance with the vesting schedule set forth in the cover sheet to the Option
Agreement.

             (b) Upon the occurrence of a termination, the Company may exercise
its Repurchase Option by delivering personally or by registered mail, to
Purchaser (or his transferee or legal representative, as the case may be),
within ninety (90) days of the termination, a notice in writing indicating the
Company's intention to exercise the Repurchase Option and setting forth a date
for closing not later than thirty (30) days from the mailing of such notice. The
closing shall take place at the Company's office. At the closing, the holder of
the certificates for the Then-Unvested Shares being transferred shall deliver
the stock certificate or certificates evidencing the Then-Unvested Shares, and
the Company shall deliver the purchase price therefor.

             (c) At its option, the Company may elect to make payment for the
Then-Unvested Shares to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser stating the name and
address of the bank, date of closing, and waiving the closing at the Company's
office.

             (d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.

                                       2
<PAGE>   29

             (e) The Repurchase Option shall terminate in accordance with the
vesting schedule in Optionee's Option Agreement.

        2. Transferability of the Shares; Escrow.

             (a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the
Then-Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.

             (b) To insure the availability for delivery of Purchaser's Unvested
Shares upon repurchase by the Company pursuant to the Repurchase Option under
Section 1, and as security for the faithful performance of the terms of the
Note, if applicable, Purchaser hereby appoints the secretary, or any other
person designated by the Company as escrow agent, as its attorney-in-fact to
sell, assign and transfer unto the Company, such Unvested Shares, if any,
repurchased by the Company pursuant to the Repurchase Option and shall, upon
execution of this Agreement, deliver and deposit with the secretary of the
Company, or such other person designated by the Company, the share certificates
representing the Unvested Shares, together with the stock assignment duly
endorsed in blank, attached hereto as Exhibit D-2. The Unvested Shares and stock
assignment shall be held by the secretary in escrow, pursuant to the Joint
Escrow Instructions of the Company and Purchaser attached as Exhibit D-3 hereto,
until the Company exercises its purchase right as provided in Section 1, until
such Unvested Shares are vested (and, if applicable, the Note is paid in full),
or until such time as this Agreement no longer is in effect. As a further
condition to the Company's obligations under this Agreement, the spouse of the
Purchaser, if any, shall execute and deliver to the Company the Consent of
Spouse attached hereto as Exhibit D-4. Upon vesting of the Unvested Shares (and,
if applicable, the Note is paid in full), the escrow agent shall promptly upon
written request, or periodically without written request, deliver to the
Purchaser the certificate or certificates representing such Shares in the escrow
agent's possession belonging to the Purchaser, and the escrow agent shall be
discharged of all further obligations hereunder; provided, however, that the
escrow agent shall nevertheless retain such certificate or certificates as
escrow agent if so required pursuant to other restrictions imposed pursuant to
this Agreement.

             (c) The Company, or its designee, shall not be liable for any act
it may do or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.

             (d) Purchaser shall not sell, transfer, pledge, hypothecate or
otherwise dispose of any of the Shares while the Note remains outstanding, nor
any Unvested Shares which remain subject to the Company's Repurchase Option.
Notwithstanding the foregoing, upon prior written consent of the Company (which
consent shall not be unreasonably withheld), the Purchaser may assign or
transfer Unvested Shares for family planning, tax

                                       3
<PAGE>   30

planning or estate planning, or other such purposes, provided the transferee
agrees to be bound by all obligations of the Purchaser, and the Company is
reasonably secure that such obligations remain enforceable against the
transferee.

             (e) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and the
Exercise Notice executed by the Purchaser with respect to any Unvested Shares
purchased by Purchaser and shall acknowledge the same by signing a copy of this
Agreement.

        3. Ownership, Voting Rights, Duties. This Agreement shall not affect in
any way the ownership, voting rights or other rights or duties of Purchaser,
except as specifically provided herein.

        4. Legends. The share certificate evidencing the Shares issued hereunder
may be endorsed with the legend substantially to the following effect (in
addition to any legend required under applicable state securities laws):

        THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

        5. Adjustment for Stock Split. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.

        6. Notices. Notices required hereunder shall be given in person or by
registered mail to the address of Purchaser shown on the records of the Company,
and to the Company at their respective principal executive offices.

        7. Survival of Terms. This Agreement shall apply to and bind Purchaser
and the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.

        8. Section 83(b) Election. Purchaser hereby acknowledges that he or she
has been informed that, with respect to the exercise of an Option for unvested
Shares, an election may be filed by the Purchaser with the Internal Revenue
Service, within 30 days of the purchase of the Shares, electing pursuant to
Section 83(b) of the Code to be taxed currently on any difference between the
purchase price of the Shares and their Fair Market Value on the date of
purchase. In the case of a Nonstatutory Stock Option, this will result

                                       4
<PAGE>   31

in a recognition of taxable income to the Purchaser on the date of exercise,
measured by the excess, if any, of the fair market value of the Shares, at the
time the Option is exercised over the purchase price for the Shares. Absent such
an election, taxable income will be measured and recognized by Purchaser at the
time or times on which the Company's Repurchase Option lapses. In the case of an
Incentive Stock Option, such an election will result in a recognition of income
to the Purchaser for alternative minimum tax purposes on the date of exercise,
measured by the excess, if any, of the fair market value of the Shares, at the
time the option is exercised, over the purchase price for the Shares. Absent
such an election, alternative minimum taxable income will be measured and
recognized by Purchaser at the time or times on which the Company's Repurchase
Option lapses. Purchaser is strongly encouraged to seek the advice of his or her
own tax consultants in connection with the purchase of the Shares and the
advisability of filing of the Election under Section 83(b) of the Code. A form
of Election under Section 83(b) is attached hereto as Exhibit D-5 for reference.

        PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF
PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON
PURCHASER'S BEHALF.

        9. Representations. Purchaser has reviewed with his own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. Purchaser is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.

        10. Governing Law. This Agreement shall be governed by the internal
substantive laws, but not the choice of law rules, of California.

        Purchaser represents that he has read this Agreement and is familiar
with its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.

                                       5
<PAGE>   32

        IN WITNESS WHEREOF, this Agreement is deemed made as of the date first
set forth above.

                                       "COMPANY"

                                       ALLIANCE FIBER OPTICS PRODUCT, INC.

                                       By:
                                          ---------------------------------

                                       Title:
                                             ------------------------------

                                       "PURCHASER"

                                       ------------------------------------
                                       Signature

                                       ------------------------------------
                                       Printed Name

                                       ------------------------------------
                                       Soc. Sec. No.

                                       Address:

                                       ------------------------------------

                                       ------------------------------------

                                       6
<PAGE>   33

                                   EXHIBIT D-2

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

        FOR VALUE RECEIVED I, <<Name>>, hereby sell, assign and transfer unto
Alliance Fiber Optics Product, Inc. _________________________ (__________)
shares of the Common Stock of Alliance Fiber Optics Product, Inc. standing in my
name of the books of said corporation represented by Certificate No. _____
herewith and do hereby irrevocably constitute and appoint to transfer the said
stock on the books of the within named corporation with full power of
substitution in the premises.

        This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement by and between Alliance Fiber Optics Product, Inc. and
the undersigned dated ______________, _____.

Dated: _______________, ____

                                       Signature:
                                                 -------------------------------
                                                 <<Name>>

INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.

<PAGE>   34

                                   EXHIBIT D-3

                            JOINT ESCROW INSTRUCTIONS

                                                                 _________, 20__

The Law Office of Robert D. Cochran
2105 Woodside Road
Woodside, CA 94062
Attention: Robert D. Cochran, Esq.
Secretary

Dear Secretary:

        As Escrow Agent for both Alliance Fiber Optics Product, Inc. (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:

        1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the Company's
repurchase option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.

        2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, cancellation of indebtedness, if applicable, or some combination
thereof) for the number of shares of stock being purchased pursuant to the
exercise of the Company's repurchase option.

        3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities.

<PAGE>   35

Subject to the provisions of this paragraph 3, Purchaser shall exercise all
rights and privileges of a stockholder of the Company while the stock is held by
you.

        4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option. Notwithstanding the foregoing, none of the certificates representing the
shares of stock deposited under these escrow instructions shall be released to
the Purchaser if Purchaser's Note, if applicable, has not been paid in full,
unless the Company otherwise instructs you in writing. Subject to the provisions
of this Agreement, upon payment of the Note, in full, the certificates
representing the shares may be released and delivered to the Purchaser. In the
event Purchaser defaults in payment of the Note, as the case may be, when due,
and such default remains uncured for at least thirty (30) days following written
notice thereof by the Company, you shall, upon written request of the Company,
deliver the certificate evidencing the shares of stock and the stock assignments
to the Company to enable the Company to exercise any and all rights it may have
as a secured party under the Uniform Commercial Code of the State of California.

        5 If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.

        6 Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

        7 You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.

        8 You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,

                                       2
<PAGE>   36

judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.

        9 You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

        10 You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

        11 You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.

        12 Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each the Company. In the event of any such termination, the
Company shall have the right, in its sole discretion, to appoint a successor
Escrow Agent.

        13 If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

        14 It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

        15 Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.

           COMPANY:      Alliance Fiber Optics Product, Inc.
                         735 N. Pastoria Avenue
                         Sunnyvale, CA 94086
                         Attention: Chief Financial Officer

                                       3
<PAGE>   37

           PURCHASER:
                      ------------------------

                      ------------------------

                      ------------------------

           ESCROW AGENT: The Law Office of Robert D. Cochran
                         2105 Woodside Road
                         Woodside, CA 94062
                         Attention: Robert D. Cochran, Esq.

        16 By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.

        17 This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.

        18 These Joint Escrow Instructions shall be governed by the internal
substantive laws, but not the choice of law rules, of California.

                                       ALLIANCE FIBER OPTICS PRODUCT, INC.

                                       By:
                                          ---------------------------------

                                       Its:
                                           --------------------------------

                                       PURCHASER

                                       ------------------------------------
                                       Name

                                       ESCROW AGENT

                                       ------------------------------------
                                       Robert D. Cochran

                                       4
<PAGE>   38

                                   EXHIBIT D-4

                                CONSENT OF SPOUSE

        I, ____________________, spouse of <<Name>>, have read and approve the
foregoing Agreement. In consideration of granting of the right to my spouse to
purchase shares of Alliance Fiber Optics Product, Inc., as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.

Dated: _______________, ___

                                       ------------------------------------
                                       Signature of Spouse

                                       1
<PAGE>   39

                                   Exhibit D-5

                          ELECTION UNDER SECTION 83(b)

                      OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
or alternative minimum taxable income, as the case may be, for the current
taxable year the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:

1.      The name, address, taxpayer identification number and taxable year of
        the undersigned are as follows:

        Name of Taxpayer:        Name

        Name of Spouse:
                                 ------------------------------------

        Address:
                                 ------------------------------------

                                 ------------------------------------

        Tax I.D. No. of Taxpayer:
                                 ------------------------------------

        Tax I.D. No. of Spouse:
                                 ------------------------------------

        Taxable year:
                                 ------

2.      The property with respect to which the election is made is described as
        follows:__________ shares (the "Shares") of the Common Stock of Alliance
        Fiber Optics Product, Inc., a California corporation (the "Company").

3.      The date on which the property was transferred is:__________, ____.

4.      The property is subject to the following restrictions:

        The Shares may not be transferred and are subject to forfeiture under
        the terms of an agreement between the taxpayer and the Company. These
        restrictions lapse upon the satisfaction of certain conditions contained
        in such agreement.

5.      The fair market value at the time of transfer, determined without regard
        to any restriction other than a restriction which by its terms will
        never lapse, of such property is: $_______________________.

6.      The amount (if any) paid for such property is: $_______________________.

The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.

Dated:
      ---------------------------             ----------------------------------
                                              Taxpayer: Name
Dated:
      ---------------------------             ----------------------------------
                                              Spouse of Taxpayer

<PAGE>   40

                                   EXHIBIT D-6

                          FULL RECOURSE PROMISSORY NOTE

$_____________                                        ______________, California

                                                        ___________________,____

        FOR VALUE RECEIVED, the undersigned, <<Name>>, promises to pay to the
order of Alliance Fiber Optics Product, Inc., a California corporation (the
"Company"), the principal sum of _____________ ($_______) with interest from the
date hereof at a rate of_______ percent(1) (____%) per annum, compounded
annually, interest and principal payable on ____________, ____ (2) (or as
provided below). All money paid toward the satisfaction of this Note shall be
applied first to the payment of interest as required hereunder and then to the
retirement of the principal.

        This Note is secured by a pledge of shares of Common Stock of the
Company, and is subject to all of the terms and provisions of a Restricted Stock
Purchase Agreement between the undersigned and the Company (the "Agreement").
Notwithstanding such pledge, the undersigned understands that this is a full
recourse promissory note.

        The undersigned further agrees that, in the event that his employment by
or association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable within 30 days after such
termination.

        If an action is instituted for collection of this Note, the undersigned
agrees to pay court costs and reasonable attorneys' fees incurred by the holder
hereof.

        This Note may be prepaid at any time without penalty.

        This Note and the obligations hereunder shall be governed by and
construed and enforced in accordance with the laws of the State of California.

                                       ------------------------------------
                                       <<Name>>

--------------------
        (1) The interest rate shall be set by the Company at the time of an
Early Exercise with Repurchase Agreement at (a) the applicable minimum
Applicable Federal Rate as defined in the Code in effect on such date, rounded
up to the nearest 2 percentage point, or (b) any lower rate fixed by the Company
at such time.

        (2) The due date shall be the fourth anniversary of the Vesting
Commencement Date, or such later date fixed by the Company on the date of the
Note.

<PAGE>   41

                       ALLIANCE FIBER OPTICS PRODUCT, INC.
                                 1997 STOCK PLAN

                             STOCK OPTION AGREEMENT

             Alliance Fiber Optics Product, Inc. (the "Company") hereby grants
an option to purchase Shares of its Common Stock to the optionee named below on
the terms and conditions set forth in this cover sheet, the Company's 1997 Stock
Plan, and Exhibit A attached hereto (together, the "Stock Option Agreement"):

           Grant Number:                        <<Grant_No>>

           Date of Grant                        <<Grant_Date>>

           Vesting Commencement Date            <<VCD>>

           Exercise Price Per Share             US$<<Price>>

           Total Number of Shares Granted       <<Shares_No>>

           Type of Option                       __ Incentive Stock Option
                                                __ Nonqualified Stock Option

           Expiration Date                      <<Term>>

        Exercise Schedule:

             The option granted hereunder may be exercised, in whole or in part,
based on the vesting schedule as set forth below.

             Twenty-five percent (25%) of the shares subject to the option shall
vest in the holder thereof on the one year anniversary of the Vesting
Commencement Date and an additional twenty-five percent (25%) of the shares
subject to the option shall vest in the holder thereof at the end of each full
year thereafter.

                    BY SIGNING THIS COVER SHEET, YOU AGREE THAT THIS STOCK
OPTION AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THIS COVER SHEET, THE
1997 STOCK PLAN AND EXHIBIT A, WHICH IS ATTACHED HERETO AND MADE A PART OF THIS
DOCUMENT.

OPTIONEE:                              Alliance Fiber Optics Product, Inc.
                                       a California corporation

                                       By
---------------------------------        ---------------------------------------
<<First_Name>> <<Last_Name>>              Peter C. Chang, President

<PAGE>   42

                                    EXHIBIT A

                             STOCK OPTION AGREEMENT

TYPE OF OPTION

The type of option which you have been granted is designated on the cover sheet.
If designated as an Incentive Stock Option, this option is intended to be an
incentive stock option under section 422 of the Internal Revenue Code and will
be interpreted accordingly.

VESTING

You may exercise this Option during its term in accordance with the exercise
schedule set out in the cover sheet and the applicable provisions of the Plan
and this Stock Option Agreement. In the event of your death, disability or other
termination of employment or consulting relationship, the exercisability of the
Option is governed by the applicable provisions of the Plan and this Stock
Option Agreement.

TERM

Your option may be exercised only within the term set out in the cover sheet,
and may be exercised during such term only in accordance with the Plan and this
Stock Option Agreement. In any event, your Option will expire on the day before
the 10th anniversary of the Date of Grant, as shown on the cover sheet. It will
expire earlier if your Company service terminates, as described below.

REGULAR TERMINATION

In the event of the termination of your consulting relationship or Continuous
Status as an Employee for any reason other than death or disability, you may, to
the extent otherwise so entitled at the date of such termination, exercise this
Option within 90 days after your termination. To the extent that you were not
entitled to exercise this Option at the date of such termination, or if you do
not exercise your Option within the 90 day period specified above, your Option
will terminate.

DEATH

In the event of your death, the Option may be exercised at any time within
twelve (12) months following the date of death by your estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that you could exercise the Option at the date of death.

<PAGE>   43

DISABILITY

If your service with the Company (or any Subsidiary) terminates because of your
disability, you may, but only within six (6) months from the date of termination
of employment, exercise the Option to the extent otherwise so entitled at the
date of such termination.

RESTRICTIONS ON EXERCISE

The Company will not permit you to exercise this option if the issuance of
Shares at that time would violate any law or regulation.

NOTICE OF EXERCISE

When you wish to exercise this option, you must notify the Company by filing the
proper "Notice of Exercise" form (attached hereto as Exhibit C) at the address
given on the form. Your notice must specify how many Shares you wish to
purchase. Your notice must also specify how your Shares should be registered (in
your name only or in your and your spouse's names as community property or as
joint tenants with right of survivorship). The notice will be effective when it
is received by the Company. If someone else wants to exercise this option after
your death, that person must prove to the Company's satisfaction that he or she
is entitled to do so.

FORM OF PAYMENT

Your Notice of Exercise must be accompanied by payment of the aggregate purchase
price as to all Shares you wish to purchase. Payment of the purchase price shall
be by cash or personal check.

WITHHOLDING TAXES

You will not be allowed to exercise this option unless you make acceptable
arrangements to pay any withholding or other taxes that may be due as a result
of the option exercise or the sale of shares acquired upon exercise of this
option and the sale of the shares.

REPRESENTATIONS

If the Shares you intend to purchase have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised, the
Company may require you to (i) deliver to the Company your Investment
Representation Statement (attached as Exhibit B), which may contain, among other
things, an agreement to refrain from sales of the Shares for up to 180 days
immediately following an underwritten initial public offering), and (ii) read
the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.

                                       2
<PAGE>   44

RIGHT OF FIRST REFUSAL

In the event that you propose to sell, pledge or otherwise transfer to a third
party any Shares acquired under this Stock Option Agreement, or any interest in
such Shares, the Company shall have the "Right of First Refusal" with respect to
all (and not less than all) of such Shares. If you desire to transfer Shares
acquired under this Agreement, you must give a written notice to the Company
describing fully the proposed transfer, including the number of Shares proposed
to be transferred, the proposed transfer price and the name and address of the
proposed transferee. The Company shall have the right to purchase all, and not
less than all, of the Shares on the terms of the proposal described in the
notice by delivery of a notice of exercise of the Right of First Refusal within
30 days after the date when the notice was received by the Company.

If the Company fails to exercise its Right of First Refusal within 30 days after
the date when it received the notice, you may, not later than three (3) months
following receipt of the notice by the Company, conclude a transfer of the
Shares on the terms and conditions described in the notice. If the Company
exercises its Right of First Refusal, the parties shall consummate the sale of
the Shares within 30 days after the date when the Company received the notice.
The Company's Right of First Refusal shall terminate in the event that Stock is
listed on an established stock exchange or is quoted regularly on the Nasdaq
National Market.

TRANSFER OF OPTION

Prior to your death, only you may exercise this option. You cannot transfer or
assign this option. For instance, you may not sell this option or use it as
security for a loan. If you attempt to do any of these things, this option will
immediately become invalid. You may, however, dispose of this option in your
will.

Regardless of any marital property settlement agreement, the Company is not
obligated to honor a notice of exercise from your spouse or former spouse, nor
is the Company obligated to recognize such individual's interest in your option
in any other way.

NO EMPLOYMENT RIGHTS

Your option or this Agreement does not give you the right to be retained by the
Company (or any subsidiaries) in any capacity. The Company (and any
subsidiaries) reserves the right to terminate your service at any time and for
any reason.

SHAREHOLDER RIGHTS

You, or your estate or heirs, have no rights as a shareholder of the Company
until a certificate for your option Shares has been issued. No adjustments are
made for dividends or other

                                       3
<PAGE>   45

rights if the applicable record date occurs before your stock certificate is
issued, except as described in the Plan.

ADJUSTMENTS

In the event of a stock split, a stock dividend or a similar change in the
Company stock, the number of Shares covered by this option and the exercise
price per share may be adjusted pursuant to the Plan. In the event of the
proposed dissolution or liquidation of the Company, or of a merger in which the
successor corporation does not agree to assume the Option or Stock Purchase
Right or substitute an equivalent Option or Stock Purchase Right, the Board
shall notify Optionees and Purchasers at least thirty (30) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
or Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.

LEGENDS

All certificates representing the Shares issued upon exercise of this option
shall, where applicable, have endorsed thereon the following legends:

        "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
        RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH
        IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR
        HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
        PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN
        REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE
        SHARES REPRESENTED BY THIS CERTIFICATE."

        "THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
        OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
        SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
        COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."

APPLICABLE LAW

This Agreement will be interpreted and enforced under the laws of the State of
California.

                                       4
<PAGE>   46

THE PLAN AND OTHER AGREEMENTS

The text of the Plan is incorporated in this Stock Option Agreement by
reference. Certain capitalized terms used in this Agreement are defined in the
Plan.

This Stock Option Agreement and the Plan constitute the entire understanding
between you and the Company regarding this option. Any prior agreements,
commitments or negotiations concerning this option are superseded.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

                                       5
<PAGE>   47

                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE       :      <<First_Name>> <<Last_NamE>>

COMPANY        :      ALLIANCE FIBER OPTICS PRODUCT, INC.

SECURITY       :      COMMON STOCK

AMOUNT         :

DATE           :

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

             (a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities. Optionee
is acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

             (b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of

<PAGE>   48

Corporations of the State of California and any other legend required under
applicable state securities laws.

             (c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
the securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including among other
things: (1) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the Company,
and the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), if applicable.

        In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the resale occurring not less than one year after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, (2) the
availability of certain public information about the Company, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934), and (4) the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.

             (d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by Optionee (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
who own stock in the Company also agree to such restrictions.

             (e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act,

                                       2
<PAGE>   49

compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rules 144 and 701 are not
exclusive, the Staff of the Securities and Exchange Commission has expressed its
opinion that persons proposing to sell private placement securities other than
in a registered offering and otherwise than pursuant to Rules 144 or 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.

             (f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.

                                       Signature of Optionee:

                                       ------------------------------------

                                       Date:
                                            ----------------,  -----

                                       3
<PAGE>   50

                                    EXHIBIT C

                               NOTICE OF EXERCISE

Alliance Fiber Optics Product, Inc.
735 N. Pastoria Avenue
Sunnyvale, CA 94086
Attention: Chief Financial Officer

        1. Exercise of Option. Effective as of today, ___________, ____, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Alliance Fiber Optics
Product, Inc. (the "Company") under and pursuant to the 1997 Stock Plan, as
amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated <<Grant_Date>> (the "Option Agreement").

        2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

        3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan. Thereafter, Optionee
shall enjoy rights as a shareholder until such time as Optionee disposes of the
Shares.

        4. Company's Right of First Refusal. Optionee understands and
acknowledges that the Shares are subject to certain right of first refusal
provisions under the terms of the Plan and Option Agreement.

        5. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

<PAGE>   51

        6. Restrictive Legends and Stop-Transfer Orders.

             (A) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:

             THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
             INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
             1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
             ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
             ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES
             AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
             WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
             THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES
             OF THE CORPORATION.

             (B) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

             (C) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

        7. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

        8. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.

                                       2
<PAGE>   52

        9. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

        10. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

        11. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

        12. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

        13. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option Agreement
and the Investment Representation Statement constitute the entire agreement of
the parties and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by California law except for that body of law pertaining
to conflict of laws.

Submitted by:                          Accepted by:

OPTIONEE:                              ALLIANCE FIBER OPTICS PRODUCT, INC.,
                                       a California corporation

                                       By:
---------------------------------         ----------------------------------
<<First_Name>> <<Last_Name>>
                                       Its:
                                           ---------------------------------

---------------------------------         ----------------------------------
(address)                              (address)

---------------------------------         ----------------------------------

                                       3<PAGE>   1
                                                                    EXHIBIT 10.2

                            INDEMNIFICATION AGREEMENT

        This Indemnification Agreement (the "Agreement"), dated as of _________
___, 2000, between Alliance Fiber Optic Products, Inc., a Delaware corporation
(the "Corporation"), and _____________ ("Indemnitee"),

                              W I T N E S S E T H:

        WHEREAS, Indemnitee is either a member of the board of directors of the
Corporation (the "Board of Directors") or an officer of the Corporation, or
both, and in such capacity or capacities, or otherwise as an Agent (as
hereinafter defined) of the Corporation, is performing a valuable service for
the Corporation; and

        WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Corporation on the condition that
he or she be indemnified as herein provided; and

        WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein:

        NOW, THEREFORE, in consideration of the premises and the covenants in
this Agreement, and of Indemnitee continuing to serve the Corporation as an
Agent and intending to be legally bound hereby, the parties hereto agree as
follows:

        1. Services by Indemnitee. Indemnitee agrees to serve (a) as a director
or an officer of the Corporation, or both, so long as Indemnitee is duly
appointed or elected and qualified in accordance with the applicable provisions
of the Certificate of Incorporation and bylaws of the Corporation, and until
such time as Indemnitee resigns or fails to stand for election or is removed
from Indemnitee's position, or (b) otherwise as an Agent (as hereinafter
defined) of the Corporation. Indemnitee may from time to time also perform other
services at the request or for the convenience of, or otherwise benefiting the
Corporation. Indemnitee may at any time and for any reason resign or be removed
from such position (subject to any other contractual obligation or other
obligation imposed by operation of law), in which event the Corporation shall
have no obligation under this Agreement to continue Indemnitee in any such
position.

        2. Indemnification. Subject to the limitations set forth herein and in
Section 6 hereof, the Corporation hereby agrees to indemnify Indemnitee as
follows:

        The Corporation shall, with respect to any Proceeding (as hereinafter
defined) associated with Indemnitee's being an Agent of the Corporation,
indemnify Indemnitee to the fullest extent permitted by applicable law and the
Certificate of Incorporation of the Corporation in effect on the date hereof or
as such law or Certificate of Incorporation may from time to time be amended
(but, in the case of any such amendment, only to the extent such amendment
permits the Corporation to provide broader indemnification rights than the law
or Certificate of Incorporation permitted the Corporation to provide before such
amendment). The right to indemnification conferred herein and in the Certificate
of

<PAGE>   2

Incorporation shall be presumed to have been relied upon by Indemnitee in
serving or continuing to serve the Corporation as an Agent and shall be
enforceable as a contract right. Without in any way diminishing the scope of the
indemnification provided by this Section 2, the Corporation will indemnify
Indemnitee to the full extent permitted by law if and wherever Indemnitee is or
was a party or is threatened to be made a party to any Proceeding, including any
such Proceeding brought by or in the right of the Corporation, by reason of the
fact that Indemnitee is or was an Agent or by reason of anything done or not
done by Indemnitee in such capacity, against Expenses (as hereinafter defined)
and Liabilities (as hereinafter defined) actually and reasonably incurred by
Indemnitee or on his or her behalf in connection with the investigation,
defense, settlement or appeal of such Proceeding. In addition to, and not as a
limitation of, the foregoing, the rights of indemnification of Indemnitee
provided under this Agreement shall include those rights set forth in Sections 3
and 8 below. Notwithstanding the foregoing, the Corporation shall be required to
indemnify Indemnitee in connection with a Proceeding commenced by Indemnitee
(other than a Proceeding commenced by Indemnitee to enforce Indemnitee's rights
under this Agreement) only if the commencement of such Proceeding was authorized
by the Board of Directors.

        3. Advancement of Expenses; Letter of Credit.

        (a) Advancement of Expenses. All reasonable Expenses incurred by or on
behalf of Indemnitee (including costs of enforcement of this Agreement) shall be
advanced from time to time by the Corporation to Indemnitee within thirty (30)
days after the receipt by the Corporation of a written request for an advance of
Expenses, whether prior to or after final disposition of a Proceeding (except to
the extent that there has been a Final Adverse Determination (as hereinafter
defined) that Indemnitee is not entitled to be indemnified for such Expenses),
including without limitation any Proceeding brought by or in the right of the
Corporation. The written request for an advancement of any and all expenses
under this paragraph shall contain reasonable detail of the Expenses incurred by
Indemnitee. In the event that such written request shall be accompanied by an
affidavit of counsel to Indemnitee to the effect that such counsel has reviewed
such expenses and that such expenses are reasonable in such counsel's view, then
such expenses shall be deemed reasonable in the absence of clear and convincing
evidence to the contrary. By execution of this Agreement, Indemnitee shall be
deemed to have made whatever undertaking may be required by law at the time of
any advancement of Expenses with respect to repayment to the Corporation of such
Expenses. In the event that the Corporation shall breach its obligation to
advance Expenses under this Section 3, the parties hereto agree that
Indemnitee's remedies available at law would not be adequate and that Indemnitee
would be entitled to specific performance.

        (b) Letter of Credit. In order to secure the obligations of the
Corporation to indemnify and advance Expenses to Indemnitee pursuant to this
Agreement, the Corporation shall obtain at the time of any Change in Control (as
hereinafter defined) an irrevocable standby letter of credit naming Indemnitee
as the sole beneficiary (the "Letter of Credit"). The Letter of Credit shall be
in an appropriate amount not less than one million dollars ($1,000,000), shall
be issued by a commercial bank headquartered in the United States having assets
in excess of $10 billion and capital according to its most recent published
reports equal to or greater than the then applicable minimum capital standards
promulgated by such bank's primary federal regulator and shall contain terms and
conditions reasonably acceptable to

                                      -2-
<PAGE>   3

Indemnitee. The Letter of Credit shall provide that Indemnitee may from time to
time draw certain amounts thereunder, upon written certification by Indemnitee
to the issuer of the Letter of Credit that (i) Indemnitee has made written
request upon the Corporation for an amount not less than the amount Indemnitee
is drawing under the Letter of Credit and that the Corporation has failed or
refused to provide Indemnitee with such amount in full within thirty (30) days
after receipt of the request, and (ii) Indemnitee believes that he or she is
entitled under the terms of this Agreement to the amount that Indemnitee is
drawing upon under the Letter of Credit. The issuance of the Letter of Credit
shall not in any way diminish the Corporation's obligation to indemnify
Indemnitee against Expenses and Liabilities to the full extent required by this
Agreement.

        (c) Term of Letter of Credit. Once the Corporation has obtained the
Letter of Credit, the Corporation shall maintain and renew the Letter of Credit
or a substitute letter of credit meeting the criteria of Section 3(b) during the
term of this Agreement so that the Letter of Credit shall have an initial term
of five (5) years, be renewed for successive five-year terms, and always have at
least one (1) year of its term remaining.

        4. Presumptions and Effect of Certain Proceedings. Upon making a request
for indemnification, Indemnitee shall be presumed to be entitled to
indemnification under this Agreement and the Corporation shall have the burden
of proof to overcome that presumption in reaching any contrary determination.
The termination of any Proceeding by judgment, order, settlement, arbitration
award or conviction, or upon a plea of nolo contendere or its equivalent shall
not affect this presumption or, except as determined by a judgment or other
final adjudication adverse to Indemnitee, establish a presumption with regard to
any factual matter relevant to determining Indemnitee's rights to
indemnification hereunder. If the person or persons so empowered to make a
determination pursuant to Section 5 hereof shall have failed to make the
requested determination within ninety (90) days after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a plea of
nolo contendere or its equivalent, or other disposition or partial disposition
of any Proceeding or any other event that could enable the Corporation to
determine Indemnitee's entitlement to indemnification, the requisite
determination that Indemnitee is entitled to indemnification shall be deemed to
have been made.

        5. Procedure for Determination of Entitlement to Indemnification.

        (a) Whenever Indemnitee believes that Indemnitee is entitled to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Indemnitee for the determination of entitlement to indemnification. In any
event, Indemnitee shall submit Indemnitee's claim for indemnification within a
reasonable time, not to exceed five (5) years after any judgment, order,
settlement, dismissal, arbitration award, conviction, acceptance of a plea of
nolo contendere or its equivalent, or final termination, whichever is the later
date for which Indemnitee requests indemnification. The Secretary or other
appropriate officer shall, promptly upon receipt of Indemnitee's request for
indemnification, advise the Board of Directors in writing that Indemnitee has
made such request. Determination of Indemnitee's entitlement to indemnification
shall be made not later than ninety (90) days after the Corporation's receipt of

                                      -3-
<PAGE>   4

Indemnitee's written request for such indemnification, provided that any request
for indemnification for Liabilities, other than amounts paid in settlement,
shall have been made after a determination thereof in a Proceeding.

        (b) The Corporation shall be entitled to select the forum in which
Indemnitee's entitlement to indemnification will be heard; provided, however,
that if there is a Change in Control of the Corporation, Independent Legal
Counsel (as hereinafter defined) shall determine whether Indemnitee is entitled
to indemnification. The forum shall be any one of the following:

               (i) the stockholders of the Corporation;

               (ii) a majority vote of Disinterested Directors (as hereinafter
        defined), even though less than a quorum;

               (iii) Independent Legal Counsel, whose determination shall be
        made in a written opinion; or

               (iv) a panel of three arbitrators, one selected by the
        Corporation, another by Indemnitee and the third by the first two
        arbitrators; or if for any reason three arbitrators are not selected
        within thirty (30) days after the appointment of the first arbitrator,
        then selection of additional arbitrators shall be made by the American
        Arbitration Association. If any arbitrator resigns or is unable to serve
        in such capacity for any reason, the American Arbitration Association
        shall select such arbitrator's replacement. The arbitration shall be
        conducted pursuant to the commercial arbitration rules of the American
        Arbitration Association now in effect.

        6. Specific Limitations on Indemnification. Notwithstanding anything in
this Agreement to the contrary, the Corporation shall not be obligated under
this Agreement to make any payment to Indemnitee with respect to any Proceeding:

        (a) To the extent that payment is actually made to Indemnitee under any
insurance policy, or is made to Indemnitee by the Corporation or an affiliate
otherwise than pursuant to this Agreement. Notwithstanding the availability of
such insurance, Indemnitee also may claim indemnification from the Corporation
pursuant to this Agreement by assigning to the Corporation any claims under such
insurance to the extent Indemnitee is paid by the Corporation;

        (b) Provided there has been no Change in Control, for Liabilities in
connection with Proceedings settled without the Corporation's consent, which
consent, however, shall not be unreasonably withheld;

        (c) For an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Corporation within the meaning of section 16(b)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
similar provisions of any state statutory or common law; or

                                      -4-
<PAGE>   5

        (d) To the extent it would be otherwise prohibited by law, if so
established by a judgment or other final adjudication adverse to Indemnitee.

        7. Fees and Expenses of Independent Legal Counsel. The Corporation
agrees to pay the reasonable fees and expenses of Independent Legal Counsel or a
panel of three arbitrators should such Independent Legal Counsel or such
arbitrators be retained to make a determination of Indemnitee's entitlement to
indemnification pursuant to Section 5(b) of this Agreement, and to fully
indemnify such Independent Legal Counsel or arbitrators against any and all
expenses and losses incurred by any of them arising out of or relating to this
Agreement or their engagement pursuant hereto.

        8. Remedies of Indemnitee.

        (a) In the event that (i) a determination pursuant to Section 5 hereof
is made that Indemnitee is not entitled to indemnification, (ii) advances of
Expenses are not made pursuant to this Agreement, (iii) payment has not been
timely made following a determination of entitlement to indemnification pursuant
to this Agreement, or (iv) Indemnitee otherwise seeks enforcement of this
Agreement, Indemnitee shall be entitled to a final adjudication in the Court of
Chancery of the State of Delaware of the remedy sought. Alternatively, unless
(i) the determination was made by a panel of arbitrators pursuant to Section
5(b)(iv) hereof, or (ii) court approval is required by law for the
indemnification sought by Indemnitee, Indemnitee at Indemnitee's option may seek
an award in arbitration to be conducted by a single arbitrator pursuant to the
commercial arbitration rules of the American Arbitration Association now in
effect, which award is to be made within ninety (90) days following the filing
of the demand for arbitration. The Corporation shall not oppose Indemnitee's
right to seek any such adjudication or arbitration award. In any such proceeding
or arbitration Indemnitee shall be presumed to be entitled to indemnification
and advancement of Expenses under this Agreement and the Corporation shall have
the burden of proof to overcome that presumption.

        (b) In the event that a determination that Indemnitee is not entitled to
indemnification, in whole or in part, has been made pursuant to Section 5
hereof, the decision in the judicial proceeding or arbitration provided in
paragraph (a) of this Section 8 shall be made de novo and Indemnitee shall not
be prejudiced by reason of a determination that Indemnitee is not entitled to
indemnification.

        (c) If a determination that Indemnitee is entitled to indemnification
has been made pursuant to Section 5 hereof, or is deemed to have been made
pursuant to Section 4 hereof or otherwise pursuant to the terms of this
Agreement, the Corporation shall be bound by such determination in the absence
of a misrepresentation or omission of a material fact by Indemnitee in
connection with such determination.

        (d) The Corporation shall be precluded from asserting that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable. The Corporation shall stipulate in any such court or before any
such arbitrator that the Corporation is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary.

                                      -5-
<PAGE>   6

        (e) Expenses reasonably incurred by Indemnitee in connection with
Indemnitee's request for indemnification under, seeking enforcement of or to
recover damages for breach of this Agreement shall be borne by the Corporation
when and as incurred by Indemnitee irrespective of any Final Adverse
Determination (as hereinafter defined) that Indemnitee is not entitled to
indemnification.

        9. Contribution. To the fullest extent permissible under applicable law,
if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Corporation, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Corporation and Indemnitee
as a result of the event(s) and/or transaction(s) giving cause to such
Proceeding; and/or (ii) the relative fault of the Corporation (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).

        10. Maintenance of Insurance. Upon the Corporation's purchase of
directors' and officers' liability insurance policies covering its directors and
officers, then, subject only to the provisions within this Section 10, the
Corporation agrees that so long as Indemnitee shall have consented to serve or
shall continue to serve as a director or officer of the Corporation or both, or
as an Agent of the Corporation, and thereafter so long as Indemnitee shall be
subject to any possible Proceeding (such periods being hereinafter sometimes
referred to as the "Indemnification Period"), the Corporation will use all
reasonable efforts to maintain in effect for the benefit of Indemnitee one or
more valid, binding and enforceable policies of directors' and officers'
liability insurance providing, in all respects, coverage both in scope and
amount which is no less favorable than that provided by such pre-existing
policies. Notwithstanding the foregoing, the Corporation shall not be required
to maintain said policies of directors' and officers' liability insurance if
such insurance is not reasonably available or if it is in good faith determined
by the then directors of the Corporation either that:

               (i) The premium cost of maintaining such insurance is
        substantially disproportionate to the amount of coverage provided
        thereunder; or

               (ii) The protection provided by such insurance is so limited by
        exclusions, deductions or otherwise that there is insufficient benefit
        to warrant the cost of maintaining such insurance.

        Anything in this Agreement to the contrary notwithstanding, to the
extent that and for so long as the Corporation shall choose to continue to
maintain any policies of directors' and officers' liability insurance during the
Indemnification Period, the Corporation shall maintain similar and equivalent
insurance for the benefit of Indemnitee during the Indemnification Period
(unless such insurance shall be less favorable to Indemnitee than the
Corporation's existing policies).

                                      -6-
<PAGE>   7

        11. Modification, Waiver, Termination and Cancellation. No supplement,
modification, termination, cancellation 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 provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.

        12. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.

        13. Notice by Indemnitee and Defense of Claim. Indemnitee shall promptly
notify the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
matter, whether civil, criminal, administrative or investigative, but the
omission so to notify the Corporation will not relieve it from any liability
that it may have to Indemnitee if such omission does not prejudice the
Corporation's rights. If such omission does prejudice the Corporation's rights,
the Corporation will be relieved from liability only to the extent of such
prejudice; nor will such omission relieve the Corporation from any liability
that it may have to Indemnitee otherwise than under this Agreement. With respect
to any Proceeding as to which Indemnitee notifies the Corporation of the
commencement thereof:

        (a) The Corporation will be entitled to participate therein at its own
expense; and

        (b) The Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Indemnitee; provided, however, that the Corporation shall not be
entitled to assume the defense of any Proceeding if there has been a Change in
Control or if Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Corporation and Indemnitee with respect to such
Proceeding. After notice from the Corporation to Indemnitee of its election to
assume the defense thereof, the Corporation will not be liable to Indemnitee
under this Agreement for any Expenses subsequently incurred by Indemnitee in
connection with the defense thereof, other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the right to
employ Indemnitee's own counsel in such Proceeding, but the fees and expenses of
such counsel incurred after notice from the Corporation of its assumption of the
defense thereof shall be at the expense of Indemnitee unless:

               (i) the employment of counsel by Indemnitee has been authorized
        by the Corporation;

               (ii) Indemnitee shall have reasonably concluded that counsel
        engaged by the Corporation may not adequately represent Indemnitee; or

               (iii) the Corporation shall not in fact have employed counsel to
        assume the defense in such Proceeding or shall not in fact have assumed
        such defense and be

                                      -7-
<PAGE>   8

        acting in connection therewith with reasonable diligence; in each of
        which cases the fees and expenses of such counsel shall be at the
        expense of the Corporation.

        (c) The Corporation shall not settle any Proceeding in any manner that
would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; provided, however, that Indemnitee will not unreasonably
withhold his or her consent to any proposed settlement.

        14. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:

        (a)    If to Indemnitee, to:
               ___________________
               Alliance Fiber Optic Products, Inc.
               735 North Pastoria Avenue
               Sunnyvale, CA 94085

        (b)    If to the Corporation, to:
               Alliance Fiber Optic Products, Inc.
               735 North Pastoria Avenue
               Sunnyvale, CA 94085
               Attn: ___________________

or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.

        15. Nonexclusivity. The rights of Indemnitee hereunder shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
applicable law, the Corporation's Certificate of Incorporation or bylaws, or any
agreements, vote of stockholders, resolution of the Board of Directors or
otherwise, and to the extent that during the Indemnification Period the rights
of the then existing directors and officers are more favorable to such directors
or officers than the rights currently provided to Indemnitee thereunder or under
this Agreement, Indemnitee shall be entitled to the full benefits of such more
favorable rights.

        16. Certain Definitions.

        (a) "Agent" shall mean any person who is or was, or who has consented to
serve as, a director, officer, employee, agent, fiduciary, joint venturer,
partner, manager or other official of the Corporation or a subsidiary or an
affiliate of the Corporation, or any other entity (including without limitation,
an employee benefit plan) either at the request of, for the convenience of, or
otherwise to benefit the Corporation or a subsidiary of the Corporation.

                                      -8-
<PAGE>   9

        (b) "Change in Control" shall mean the occurrence of any of the
following:

               (i) Both (A) any "person" (as defined below) is or becomes the
        "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
        directly or indirectly, of securities of the Corporation representing at
        least 20% of the total voting power represented by the Corporation's
        then outstanding voting securities; and (b) the beneficial ownership by
        such person of securities representing such percentage has not been
        approved by a majority of the "continuing directors" (as defined below);

               (ii) Any "person" is or becomes the "beneficial owner" (as
        defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
        of securities of the Corporation representing at least 50% of the total
        voting power represented by the Corporation's then outstanding voting
        securities;

               (iii) A change in the composition of the Board occurs, as a
        result of which fewer than two-thirds of the incumbent directors are
        directors who either (A) had been directors of the Corporation on the
        "look-back date" (as defined below) (the "Original Directors") or (B)
        were elected, or nominated for election, to the Board with the
        affirmative votes of at least a majority in the aggregate of the
        Original Directors who were still in office at the time of the election
        or nomination and directors whose election or nomination was previously
        so approved (the "continuing directors");

               (iv) The stockholders of the Corporation approve a merger or
        consolidation of the Corporation with any other corporation, if such
        merger or consolidation would result in the voting securities of the
        Corporation outstanding immediately prior thereto representing (either
        by remaining outstanding or by being converted into voting securities of
        the surviving entity) 50% or less of the total voting power represented
        by the voting securities of the Corporation or such surviving entity
        outstanding immediately after such merger or consolidation; or

               (v) The stockholders of the Corporation approve (A) a plan of
        complete liquidation of the Corporation or (B) an agreement for the sale
        or disposition by the Corporation of all or substantially all of the
        Corporation's assets.

        For purposes of Subsection (i) above, the term "person" shall have the
same meaning as when used in sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary of the
Corporation or (y) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as their
ownership of the common stock of the Corporation.

        For purposes of Subsection (iii) above, the term "look-back date" shall
mean the later of (x) __________ [date of incorporation done in connection with
reincorporation] or (y) the date 24 months prior to the date of the event that
may constitute a "Change in Control."

        Any other provision of this Section 17(b) notwithstanding, the term
"Change in Control" shall not include a transaction, if undertaken at the
election of the Corporation, the result of which is to sell all or substantially
all of the assets of the Corporation to another

                                      -9-
<PAGE>   10

corporation (the "surviving corporation"); provided that the surviving
corporation is owned directly or indirectly by the stockholders of the
Corporation immediately following such transaction in substantially the same
proportions as their ownership of the Corporation's common stock immediately
preceding such transaction; and provided, further, that the surviving
corporation expressly assumes this Agreement.

        (c) "Disinterested Director" shall mean a director of the Corporation
who is not or was not a party to or otherwise involved in the Proceeding in
respect of which indemnification is being sought by Indemnitee.

        (d) "Expenses" shall include all direct and indirect costs (including,
without limitation, attorneys' fees, retainers, court costs, transcripts, fees
of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, all other
disbursements or out-of-pocket expenses and reasonable compensation for time
spent by Indemnitee for which Indemnitee is otherwise not compensated by the
Corporation or any third party) actually and reasonably incurred in connection
with either the investigation, defense, settlement or appeal of a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.

        (e) "Final Adverse Determination" shall mean that a determination that
Indemnitee is not entitled to indemnification shall have been made pursuant to
Section 5 hereof and either (1) a final adjudication in the Court of Chancery of
the State of Delaware or decision of an arbitrator pursuant to Section 8(a)
hereof shall have denied Indemnitee's right to indemnification hereunder, or (2)
Indemnitee shall have failed to file a complaint in a Delaware court or seek an
arbitrator's award pursuant to Section 8(a) for a period of one hundred twenty
(120) days after the determination made pursuant to Section 5 hereof.

        (f) "Independent Legal Counsel" shall mean a law firm or a member of a
firm selected by the Corporation and approved by Indemnitee (which approval
shall not be unreasonably withheld) or, if there has been a Change in Control,
selected by Indemnitee and approved by the Corporation (which approval shall not
be unreasonably withheld), that neither is presently nor in the past five (5)
years has been retained to represent: (i) the Corporation or any of its
subsidiaries or affiliates, or Indemnitee or any corporation of which Indemnitee
was or is a director, officer, employee or agent, or any subsidiary or affiliate
of such a corporation, in any material matter, or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding
the foregoing, the term "Independent Legal Counsel" shall not include any person
who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Corporation or
Indemnitee in an action to determine Indemnitee's right to indemnification under
this Agreement.

        (g) "Liabilities" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
Proceeding.

                                      -10-
<PAGE>   11

        (h) "Proceeding" shall mean any threatened, pending or completed action,
claim, suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative, that is associated with Indemnitee's being an
Agent of the Corporation.

        17. Binding Effect; Duration and Scope of Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns (including any direct
or indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Corporation), spouses, heirs
and personal and legal representatives. This Agreement shall continue in effect
during the Indemnification Period, regardless of whether Indemnitee continues to
serve as an Agent.

        18. Severability. If any provision or provisions of this Agreement (or
any portion thereof) shall be held to be invalid, illegal or unenforceable for
any reason whatsoever:

        (a) the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and

        (b) to the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any provision
held invalid, illegal or unenforceable.

        19. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within the State of Delaware, without regard to conflict of laws rules.

        20. Consent to Jurisdiction. The Corporation and Indemnitee each
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding that arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.

        21. Entire Agreement. This Agreement represents the entire agreement
between the parties hereto, and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein or as provided in
Section 15 hereof.

        22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.

                                      -11-
<PAGE>   12

        Executed as of the ____ day of _________, 2000.

                                        ALLIANCE FIBER OPTIC PRODUCTS, INC.,
                                        a Delaware corporation

                                        By
                                          --------------------------------------

                                        INDEMNITEE

                                        ----------------------------------------

                                      -12-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]