Document:

<PAGE>

                                                                   EXHIBIT 10.17

                               AVANEX CORPORATION

                            DIRECTOR OPTION AGREEMENT

     Avanex Corporation, (the "Company"), has granted to Vinton Cerf (the
"Optionee"), an option to purchase a total of ten thousand (10,000) shares of
the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1999 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.

     1.   Nature of the Option. This Option is a nonstatutory option and is not
          --------------------
intended to qualify for any special tax benefits to the Optionee.

     2.   Exercise Price. The exercise price is $4.55 for each share of Common
          --------------
Stock.

     3.   Exercise of Option. This Option shall be exercisable during its term
          ------------------
in accordance with the provisions of Section 8 of the Plan as follows:

          (i)  Right to Exercise.
               -----------------

               (a) This Option shall vest and become exercisable as to
one-hundred percent (100%) of the Shares subject to the Option on the one year
anniversary of its date of grant, provided that the Optionee continues to serve
as a Director on such date; provided, however, that in no event shall any Option
be exercisable prior to the date the stockholders of the Company approve the
Plan.

               (b) This Option may not be exercised for a fraction of a share.

               (c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.

          (ii) Method of Exercise. This Option shall be exercisable by written
               ------------------
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.

     4.   Method of Payment. Payment of the exercise price shall be by any of
          -----------------
the following, or a combination thereof, at the election of the Optionee:

<PAGE>

          (i)   cash;

          (ii)  check; or

          (iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or

          (iv)  delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.

     5.   Restrictions on Exercise. This Option may not be exercised if the
          ------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

     6.   Non-Transferability of Option. This Option may not be transferred in
          -----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

     7.   Term of Option. This Option may not be exercised more than ten (10)
          --------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.

     8.   Taxation Upon Exercise of Option. Optionee understands that, upon
          --------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.

                                                                             -2-

<PAGE>

DATE OF GRANT:  October 19, 2001
                                              Avanex Corporation
                                              a Delaware corporation

                                              By: /s/ Paul Engle
                                                 ______________________________

     Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.

Dated: _________________

                                             /s/ Vinton Cerf
                                             _______________________________
                                             Optionee

                                                                             -3-

<PAGE>

                                    EXHIBIT A

                         DIRECTOR OPTION EXERCISE NOTICE

Avanex Corporation
40919 Encyclopedia Circle
Fremont, California  94538

     Attention: Corporate Secretary

     1.   Exercise of Option. The undersigned ("Optionee") hereby elects to
          ------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Avanex Corporation (the "Company") under and pursuant to the
Company's 1999 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").

     2.   Representations of Optionee. Optionee acknowledges that Optionee has
          ---------------------------
received, read and understood the Agreement.

     3.   Federal Restrictions on Transfer. Optionee understands that the Shares
          --------------------------------
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act"), or unless an exemption from such registration
is available, and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.

     4.   Tax Consequences. 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
consultant(s) 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.

     5.   Delivery of Payment. Optionee herewith delivers to the Company the
          -------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.

     6.   Entire Agreement. The Agreement is incorporated herein by reference.
          ----------------
This Exercise Notice and the Agreement 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. This
Exercise Notice and the Agreement are governed by California law except for that
body of law pertaining to conflict of laws.

<PAGE>

Submitted by:                              Accepted by:

OPTIONEE:                                  AVANEX CORPORATION

By: ________________________________       By:_________________________________
                                           Its:________________________________

Address:

Dated:______________________________       Dated:______________________________

                                                                             -2-

<PAGE>

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                             STOCK OPTION AGREEMENT

       Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

I.     NOTICE OF STOCK OPTION GRANT
       ----------------------------

       Vinton Cerf

       You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

       Date of Grant                            October 18 , 2001

       Vesting Commencement Date                October 18, 2001

       Exercise Price per Share                 $4.89

       Total Number of Shares Granted           7,500

       Total Exercise Price                     $36,675.00

       Type of Option:                          _____ Incentive Stock Option

                                                  X   Nonstatutory Stock Option
                                                -----

       Term/Expiration Date:                    October 17, 2011

       Vesting Schedule:
       ----------------

       This Option may be exercised, in whole or in part, in accordance with the
following schedule:

       This Option shall vest and become exercisable as to one-hundred percent
(100%) of the Shares subject to the Option on the one year anniversary of the
Vesting Commencement Date, provided that the Optionee continues to be a Director
on such date.

<PAGE>

       Termination Period:
       ------------------

       This Option may be exercised for three months after Optionee ceases to be
a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for twelve months after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.

II.    AGREEMENT
       ---------

       A.  Grant of Option.
           ---------------

               The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.

               If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").

       B.  Exercise of Option.
           -------------------

               (a)    Right to Exercise. This Option is exercisable during its
                      -----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.

               (b)    Method of Exercise. This Option is exercisable by delivery
                      ------------------
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.

                   No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.

                                                                             -2-

<PAGE>

       C.  Method of Payment.
           ------------------

               Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

               1. cash; or

               2. check; or

               3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or

               4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

       D.  Non-Transferability of Option.
           -----------------------------

               This Option may not be transferred in any manner otherwise than
by will or by the laws of descent or distribution and may be exercised during
the lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

       E.  Term of Option.
           ---------------

               This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.

       F.  Tax Consequences.
           ----------------

               Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

       G.  Exercising the Option.
           ---------------------

               1. Nonstatutory Stock Option. The Optionee may incur regular
                  -------------------------
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

                                                                             -3-

<PAGE>

               2. Incentive Stock Option. If this Option qualifies as an ISO,
                  ----------------------
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.

               3. Disposition of Shares.
                  ---------------------

                     (a) NSO. If the Optionee holds NSO Shares for at least one
                         ---
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

                     (b) ISO. If the Optionee holds ISO Shares for at least one
                         ---
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.

                     (c) Notice of Disqualifying Disposition of ISO Shares. If
                         -------------------------------------------------
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.

       H. Entire Agreement; Governing Law.
          -------------------------------

               The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

       I. NO GUARANTEE OF CONTINUED SERVICE.
          ----------------------------------

               OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR PURCHASING

                                                                             -4-

<PAGE>

SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT,
THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

       By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE:                                 AVANEX CORPORATION

/s/ Vinton Cerf                           /s/ Paul Engle
______________________________________    ______________________________________
Signature                                 By

Vinton Cerf
______________________________________    ______________________________________
Print Name                                Title

______________________________________
Residence Address

______________________________________

                                                                             -5-

<PAGE>

                                    EXHIBIT A
                                    ---------

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                                 EXERCISE NOTICE

Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538

Attention:  Secretary

       1.    Exercise of Option. Effective as of today, ________________, Vinton
             ------------------
Cerf, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of Avanex Corporation (the "Company")
under and pursuant to the 1998 Stock Plan (the "Plan") and the Stock Option
Agreement dated, _____ (the "Option Agreement"). The purchase price for the
Shares shall be $_____, as required by the Option Agreement.

       2.    Delivery of Payment. Purchaser herewith delivers to the Company the
             -------------------
full purchase price for the Shares.

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

       4.    Rights as Stockholder. Until the issuance (as evidenced by the
             ---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after 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 of issuance, except as provided in Section 13 of the
Plan.

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

<PAGE>

       6.    Entire Agreement; Governing Law. The Plan and Option Agreement are
             -------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

Submitted by:                            Accepted by:

PURCHASER:                               AVANEX CORPORATION

_______________________________________  _______________________________________
Signature                                By

_______________________________________  _______________________________________
Print Name

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

_______________________________________  AVANEX CORPORATION

                                         40919 Encyclopedia Circle
_______________________________________  Fremont, CA 94538

                                         _______________________________________
                                         Date Received

                                                                             -2-<PAGE>

                                                                   EXHIBIT 10.18

                               AVANEX CORPORATION

                            DIRECTOR OPTION AGREEMENT

     Avanex Corporation, (the "Company"), has granted to Federico Faggin (the
"Optionee"), an option to purchase a total of ten thousand (10,000) shares of
the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 1999 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.

     1.  Nature of the Option. This Option is a nonstatutory option and is not
         --------------------
intended to qualify for any special tax benefits to the Optionee.

     2.  Exercise Price. The exercise price is $4.55 for each share of Common
         --------------
Stock.

     3.  Exercise of Option. This Option shall be exercisable during its term in
         ------------------
accordance with the provisions of Section 8 of the Plan as follows:

         (i)  Right to Exercise.
              -----------------

              (a)  This Option shall vest and become exercisable as to
one-hundred percent (100%) of the Shares subject to the Option on the one year
anniversary of its date of grant, provided that the Optionee continues to serve
as a Director on such date; provided, however, that in no event shall any Option
be exercisable prior to the date the stockholders of the Company approve the
Plan.

              (b)  This Option may not be exercised for a fraction of a share.

              (c)  In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.

         (ii) Method of Exercise. This Option shall be exercisable by written
              ------------------
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.

     4.  Method of Payment. Payment of the exercise price shall be by any of the
         -----------------
following, or a combination thereof, at the election of the Optionee:

<PAGE>

          (i)   cash;

          (ii)  check; or

          (iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or

          (iv)  delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.

     5.   Restrictions on Exercise. This Option may not be exercised if the
          ------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

     6.   Non-Transferability of Option. This Option may not be transferred in
          -----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

     7.   Term of Option. This Option may not be exercised more than ten (10)
          --------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.

     8.   Taxation Upon Exercise of Option. Optionee understands that, upon
          --------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.

                                                                             -2-

<PAGE>

DATE OF GRANT:  October 19, 2001

                                           Avanex Corporation
                                           a Delaware corporation

                                           By: /s/ Paul Engle
                                              ------------------

     Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.

Dated: 12-14-01
---------------
                                            /s/ Federico Faggin
                                            -------------------
                                            Optionee

                                                                             -3-

<PAGE>

                                    EXHIBIT A

                         DIRECTOR OPTION EXERCISE NOTICE

Avanex Corporation
40919 Encyclopedia Circle
Fremont, California  94538

          Attention: Corporate Secretary

          1.   Exercise of Option. The undersigned ("Optionee") hereby elects to
               ------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Avanex Corporation (the "Company") under and pursuant to the
Company's 1999 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").

          2.   Representations of Optionee. Optionee acknowledges that Optionee
               ---------------------------
has received, read and understood the Agreement.

          3.   Federal Restrictions on Transfer. Optionee understands that the
               --------------------------------
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.

          4.   Tax Consequences. 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
consultant(s) 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.

          5.   Delivery of Payment. Optionee herewith delivers to the Company
               -------------------
the aggregate purchase price for the Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.

          6.   Entire Agreement. The Agreement is incorporated herein by
               ----------------
reference. This Exercise Notice and the Agreement 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. This Exercise Notice and the Agreement are governed by California law
except for that body of law pertaining to conflict of laws.

<PAGE>

Submitted by:                                 Accepted by:

OPTIONEE:                                     AVANEX CORPORATION

By: ___________________________________       By:  _____________________________

                                              Its: _____________________________

Address:

Dated: ________________________________       Dated: ___________________________

                                                                             -2-

<PAGE>

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                             STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.

I.   NOTICE OF STOCK OPTION GRANT
     ----------------------------

     Federico Faggin

     You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

     Date of Grant                       October 18, 2001

     Vesting Commencement Date           October 18, 2001

     Exercise Price per Share            $4.89

     Total Number of Shares Granted      7,500

     Total Exercise Price                $36,675.00

     Type of Option:                     ___ Incentive Stock Option

                                          X  Nonstatutory Stock Option
                                         ---

     Term/Expiration Date:               October 17, 2011

     Vesting Schedule:
     ----------------

     This Option may be exercised, in whole or in part, in accordance with the
following schedule:

     This Option shall vest and become exercisable as to one-hundred percent
(100%) of the Shares subject to the Option on the one year anniversary of the
Vesting Commencement Date, provided that the Optionee continues to be a Director
on such date.

<PAGE>

     Termination Period:
     ------------------

     This Option may be exercised for three months after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for twelve months after Optionee ceases to be a Service Provider.
In no event shall this Option be exercised later than the Term/Expiration Date
as provided above.

II.  AGREEMENT
     ---------

     A.  Grant of Option.
         ---------------

               The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.

               If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").

     B.  Exercise of Option.
         ------------------

               (a)  Right to Exercise. This Option is exercisable during its
                    -----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.

               (b)  Method of Exercise. This Option is exercisable by delivery
                    ------------------
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.

                 No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.

                                                                             -2-

<PAGE>

     C.  Method of Payment.
         -----------------

               Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

               1. cash; or

               2. check; or

               3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or

               4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

     D.  Non-Transferability of Option.
         -----------------------------

               This Option may not be transferred in any manner otherwise than
by will or by the laws of descent or distribution and may be exercised during
the lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

     E.  Term of Option.
         --------------

               This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.

     F.  Tax Consequences.
         ----------------

               Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

     G.  Exercising the Option.
         ---------------------

               1. Nonstatutory Stock Option. The Optionee may incur regular
                  -------------------------
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

                                                                             -3-

<PAGE>

               2.  Incentive Stock Option. If this Option qualifies as an ISO,
                   ----------------------
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.

               3.  Disposition of Shares.
                   ---------------------

                    (a)  NSO. If the Optionee holds NSO Shares for at least one
                         ---
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

                    (b)  ISO. If the Optionee holds ISO Shares for at least one
                         ---
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.

                    (c)  Notice of Disqualifying Disposition of ISO Shares. If
                         -------------------------------------------------
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.

     H.  Entire Agreement; Governing Law.
         -------------------------------

               The Plan is incorporated herein by reference. The Plan and this
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

     I.  NO GUARANTEE OF CONTINUED SERVICE.
         ---------------------------------

               OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR PURCHASING

                                                                             -4-

<PAGE>

SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT,
THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

     By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE:                               AVANEX CORPORATION

  /s/ Federico Faggin                   /s/ Paul Engle
---------------------------------       -------------------------------
Signature                               By

    Federico Faggin
---------------------------------       -------------------------------
Print Name                              Title

_________________________________
Residence Address

_________________________________

                                                                             -5-

<PAGE>

                                    EXHIBIT A
                                    ---------

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                                 EXERCISE NOTICE

Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538

Attention:  Secretary

     1.   Exercise of Option. Effective as of today, ________________, Federico
          ------------------
Faggin, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of Avanex Corporation (the "Company")
under and pursuant to the 1998 Stock Plan (the "Plan") and the Stock Option
Agreement dated, _____ (the "Option Agreement"). The purchase price for the
Shares shall be $_____, as required by the Option Agreement.

     2.   Delivery of Payment. Purchaser herewith delivers to the Company the
          -------------------
full purchase price for the Shares.

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

     4.   Rights as Stockholder. Until the issuance (as evidenced by the
          ---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after 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 of issuance, except as provided in Section 13 of the
Plan.

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

<PAGE>

     6.   Entire Agreement; Governing Law. The Plan and Option Agreement are
          -------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

Submitted by:                        Accepted by:

PURCHASER:                           AVANEX CORPORATION

_______________________________      _______________________________
Signature                            By

_______________________________      _______________________________
Print Name

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

_______________________________      AVANEX CORPORATION

_______________________________      40919 Encyclopedia Circle
                                     Fremont, CA 94538

                                     _______________________________
                                     Date Received

                                                                             -2-

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