Document:

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                                                                    EXHIBIT 10.6

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                             STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the 1998 Stock Plan,
as amended (the "Plan") shall have the same defined meanings in this Option
Agreement.

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

     Jessy Chao

     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                         November 5, 2001

     Vesting Commencement Date             November 5, 2001

     Exercise Price per Share              $4.90

     Total Number of Shares Granted        150,000

     Total Exercise Price                  $735,000.00

     Type of Option                        _____ Incentive Stock Option

                                             X   Nonstatutory Stock Option
                                           -----

     Term/Expiration Date:                 November 4, 2011

     Exercise and Vesting Schedule:
     -----------------------------

     Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance to the following vesting schedule:

     25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter on the same day of the month as the Vesting
Commencement Date, subject to the Optionee continuing to be a Service Provider
on such dates.

     Acceleration Upon a Change of Control. Notwithstanding the foregoing, upon
     -------------------------------------
a Change of Control, as defined below, that occurs while Optionee provides
services to the Company, this Option shall become vested and exercisable as to
fifty percent (50%) of the shares subject to this Option on the date the event
constituting a Change of Control is consummated. The balance of the shares
subject to this Option shall continue to vest on the same schedule (i.e., the
same number of shares

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shall vest each month) as existed prior to the Change of Control. For example,
if a Change of Control occurs on a date when 25% of Optionee's shares have
vested, then an additional 25% of the shares shall be vested pursuant to this
paragraph. The remaining 50% of the shares subject to this Option shall vest at
the rate of 1/48/th/ of the shares per month thereafter, such that all shares
are fully vested after an additional 24-month period. If a Change of Control
occurs on a date where more than 50% of Optionee's shares have already vested,
then no additional Shares shall vest pursuant to this paragraph.

     Acceleration Upon a Change of Control and Termination of Employment.
     -------------------------------------------------------------------
Notwithstanding the foregoing, in the event the Optionee's employment with the
Company terminates as a result of an Involuntary Termination other than for
Cause upon or within 12 months after a Change of Control, this Option shall be
fully (i.e. 100%) vested and this Option may be exercised, in whole or in part,
upon the date of such termination.

     The following terms referred to in this Agreement shall have the following
meanings:

                    (i)   Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Optionee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Optionee, (ii) conviction of a felony that is injurious to the Company, and
(iii) a willful act by the Optionee which constitutes gross misconduct and which
is injurious to the Company.

                    (ii)  Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:

                    Any "person" (as such term is used in Sections 13(d) and
                    14(d) of the Securities Exchange Act of 1934, as amended) is
                    or becomes the "beneficial owner" (as defined in Rule 13d-3
                    under said Act), directly or indirectly, of securities of
                    the Company representing 50% or more of the total voting
                    power represented by the Company's then outstanding voting
                    securities other than in a private financing transaction
                    approved by the Board of Directors;

                    the direct or indirect sale or exchange by the stockholders
                    of the Company of all or substantially all of the stock of
                    the Company;

                    a merger or consolidation in which the Company is a party
                    and in which the stockholders of the Company before such
                    merger or consolidation do not retain, directly or
                    indirectly, at a least majority of the beneficial interest
                    in the voting stock of the Company after such transaction;

                    or the sale or disposition by the Company of all or
                    substantially all the Company's assets.

                    (iii) Disability. "Disability" shall mean that the Optionee
has been unable to substantially perform his duties as the result of his
incapacity due to physical or mental illness, and such inability, at least 26
weeks after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to

                                       -2-

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the Optionee or the Optionee's legal representative (such agreement as to
acceptability not to be unreasonably withheld).

                    (iv) Involuntary Termination. "Involuntary Termination"
shall mean (i) without the Optionee's express written consent, the significant
reduction of the Optionee's duties or responsibilities relative to the
Optionee's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Optionee's express written consent, a substantial reduction, without
good business reasons, of the facilities and perquisites (including office space
and location) available to the Optionee immediately prior to such reduction;
(iii) without the Optionee's express written consent, a material reduction by
the Company in the base compensation of the Optionee as in effect immediately
prior to such reduction, or the ineligibility of the Optionee to continue to
participate in any long-term incentive plan of the Company; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Optionee is entitled immediately prior to such reduction with the result that
the Optionee's overall benefits package is significantly reduced; (v) the
relocation of the Optionee to a facility or a location more than 50 miles from
the Optionee's then present location, without the Optionee's express written
consent; (vi) any purported termination of the Optionee by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section I.(ii) above.

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

     This Option may be exercised for three months after Optionee ceases to be a
Service Provider. 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.

     In addition, upon an Involuntary Termination of the Optionee's employement
other than for Cause upon or within 12 months after a Change of Control, this
Option may be exercised for twenty-four months after Optionee ceases to be a
Service Provider.

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

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

         The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of 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

                                       -3-

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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.

     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.

                                       -4-

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     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.

          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.

                                       -5-

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               (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 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

                                       -6-

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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.

                                       -7-

<PAGE>

OPTIONEE:                                  AVANEX CORPORATION

/s/ Jessy Chao                             By /s/ Paul Engle
-----------------------------------          ----------------------------------
Signature

Jessy Chao                                  President & Chief Executive Officer
-----------------------------------        ------------------------------------
Print Name                                 Title

-----------------------------------
Residence Address

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

<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, ________________, _____,
          ------------------
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 10.7

                               AVANEX CORPORATION

                                1998 STOCK PLAN

                        RESTRICTED STOCK AWARD AGREEMENT

     Unless otherwise defined herein, the terms defined in the 1998 Stock Plan
shall have the same defined meanings in this Restricted Stock Award Agreement
(the "Agreement").

I.   NOTICE OF GRANT OF STOCK AWARD
     ------------------------------

     Paul Engle

     You have been granted this stock award of Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:

     Date of Grant                              September 19, 2000

     Vesting Commencement Date:                 September 19, 2000

     Total Number of Shares Subject             50,000
     to This Stock Award

II.  AGREEMENT

     1.   Grant. The Company hereby grants to the individual named in the Notice
          -----
of Grant of Stock Award (the "Employee") under the Plan for services and as a
separate incentive in connection with his employment and not in lieu of any
salary or other compensation for his services, an award of 50,000 shares of
Restricted Stock on the date hereof, subject to all of the terms and conditions
in this Agreement and the Plan, which is incorporated herein by reference.
Subject to Section 14(c) of the Plan, in the event of a conflict between the
terms and conditions of the Plan and this Agreement, the terms and conditions of
the Plan shall prevail.

     2.   Forfeiture Option. In the event the Employee's continuous status as a
          -----------------
Service Provider terminates for any or no reason (including death or
Disability), the Employee shall, unless otherwise notified by the Company in
writing within sixty (60) days of such termination (as reasonably fixed and
determined by the Company), forfeit up to that number of shares which constitute
the Unreleased Shares (as defined in Section 3) (the "Forfeiture Option"). The
Forfeiture Option shall occur automatically. Unless the Company provides written
notice to Employee that some or all of the Unreleased Shares are not forfeited
pursuant to the Forfeiture Option, the Company shall become the legal and
beneficial owner of the Unreleased Shares being forfeited and all rights and
interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Unreleased Shares forfeited to
the Company.

<PAGE>

     3.   Release of Shares From Forfeiture Option.
          -----------------------------------------

          (a)   As of the date of this Agreement, all of the Shares shall be
subject to the Company's Forfeiture Option. The Shares shall be released from
the Forfeiture Option as follows:

                (i)  One quarter (1/4) of the Shares shall be released from the
Forfeiture Option on September 19, 2001; and

                (ii) One forty-eighth (1/48) of the Shares shall be released
from the Forfeiture Option each full calendar month elapsing thereafter during
all of which Employee was a full time employee of the Company.

          (b)   Any of the Shares which, from time to time, have not yet been
released from the Forfeiture Option are referred to herein as "Unreleased
                                                               ----------
Shares."
------

          (c)   The Shares which have been released from the Forfeiture Option
shall be delivered to the Employee at the Employee's request (see Section 7).

          (d)   The Shares which have been released from the Company's
Forfeiture Option shall be delivered to the Employee at the Employee's request.

     4.   Restriction on Transfer. Except for the escrow described in Section 5
          -----------------------
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Forfeiture Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.

     5.   Escrow of Shares.
          ----------------

          (a)   To ensure the availability for delivery of the Employee's
Unreleased Shares upon exercise of the Forfeiture Option by the Company, the
Employee shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
                   -----------
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Employee attached as Exhibit A-2 hereto, until such time as the
                                 -----------
Company's Forfeiture Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Employee, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
                                                                    -----------

          (b)   The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgment and the Company shall
hold Escrow Holder harmless from any and all such liability, including
attorney's fees and other expenses of defending against the assertion of any
such claim.

                                       2

<PAGE>

          (c)  If the Company exercises its Forfeiture Option hereunder, the
Escrow Holder, upon receipt of written notice of such option exercise from the
proposed transferee, shall take all steps necessary to accomplish such transfer.

          (d)  When the Forfeiture Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Forfeiture
Option, upon Employee's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Employee, as the case may be.

          (e)  Subject to the terms hereof, the Employee shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Forfeiture Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Employee is entitled by reason
of the Employee's ownership of the Shares shall be immediately subject to this
escrow, deposited with the Escrow Holder and included thereafter as "Shares" for
purposes of this Agreement and the Company's Forfeiture Option.

     6.   Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
          --------------------------------------------------------------

          (a)  Employee 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 the Company or by applicable state or
federal securities laws:

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
          CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A FORFEITURE
          OPTION HELD BY THE ISSUER AS SET FORTH IN THE RESTRICTED
          STOCK AWARD AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
          HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
          THE PRINCIPAL OFFICE OF THE ISSUER. SUCH FORFEITURE OPTION
          IS BINDING ON TRANSFEREES OF THESE SHARES.

          (b)  Stop-Transfer Notices. Employee 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 Employee
or other transferee to whom such Shares shall have been transferred.

                                       3

<PAGE>

     7.   Tax Consequences. Set forth below is a brief summary as of the date of
          ----------------
grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE.

          (a)  Receipt of Stock Award. As the Company's Forfeiture Option
               ----------------------
lapses, Employee will recognize compensation income in an amount equal to the
Fair Market Value of the stock at the time the Company's Forfeiture right lapses
(the "Spread"). The Spread will be subject to tax withholding by the Company,
and the Company will be entitled to a tax deduction in the amount at the time
the Employee recognizes ordinary income with respect to a Stock Award.

          (b)  Disposition of Shares. Upon disposition of the Shares, any gain
               ---------------------
or loss is treated as capital gain or loss. If the Shares are held for at least
one year, any gain realized on disposition of the shares will be treated as
long-term capital gains are grouped and netted with any long term capital losses
and any net short term capital losses. Net long term capital gains are taxed at
a maximum of 20%. Capital losses are allowed in full against capital gains, and
up to $3,000 against other income.

     8.   No Guarantee of Continued Service. EMPLOYEE ACKNOWLEDGES AND AGREES
          ---------------------------------
THAT THE RELEASE OF SHARES FROM THE FORFEITURE OPTION OF THE COMPANY PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING OR PURCHASING SHARES
HEREUNDER). EMPLOYEE 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 EMPLOYEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
EMPLOYEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

     9.   Notices. Any notice, demand or request required or permitted to be
          -------
given by either the Company or the Employee pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the Company at its principal place of business and the Employee at
the address in the Company records or such other address as a party may request
by notifying the other in writing.

     Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party not sending the notice.

     10.  No Waiver. Either party's failure to enforce any provision or
          ---------
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The

                                       4

<PAGE>

rights granted both parties herein are cumulative and shall not constitute a
waiver of either party's right to assert all other legal remedies available to
it under the circumstances.

     11.  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
Employee and his or her heirs, executors, administrators, successors and
assigns.

     12.  Interpretation. Any dispute regarding the interpretation of this
          --------------
Agreement shall be submitted by Employee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

     13.  Governing Law; Severability. This Agreement is governed by the
          ---------------------------
internal substantive laws but not the choice of law rules, of California.

     14.  Entire Agreement. The Plan is incorporated herein by reference. This
          ----------------
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertaking and agreements of the Company and Employee with
respect to the subject matter hereof, and may not be modified adversely to the
Employee's interest except by means of a writing signed by the Company and
Employee.

                                       5

<PAGE>

     By Employee's signature below, Employee represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Employee has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Employee agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Employee further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Award.

EMPLOYEE:                                AVANEX CORPORATION

/s/ Paul Engle                           By: /s/ Walter Alessandrini
-----------------------                      -----------------------
Signature

PAUL ENGLE                               Title: CEO
-----------------------                         --------------------
Print Name

Date: September 19, 2000

                                       6

<PAGE>

                                  EXHIBIT A-1
                                  -----------

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I, Paul Engle, hereby sell, assign and transfer unto
______________________________ (_______________) shares of the Common Stock of
Avanex Corporation 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
Award Agreement between Avanex Corporation and the undersigned dated September
19, 2000.

Dated:_________________, _____                    Signature: /s/ Paul Engle
                                                             -------------------

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
Forfeiture Option as set forth in the Agreement, without requiring additional
signatures on the part of the Employee.

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                           JOINT ESCROW INSTRUCTIONS

                               September 19, 2000

Assistant Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436

Dear Sir:

     As Escrow Agent for both Avanex Corporation, a Delaware corporation (the
"Company"), and the undersigned Employee of stock of the Company (the
"Employee)", you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Award
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
forfeiture option set forth in the Agreement (the "Forfeiture Option"), the
Company shall give to Employee 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. Employee 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, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Forfeiture Option.

     3.   Employee 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. Employee
does hereby irrevocably constitute and appoint you as Employee'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 transfer of,
the securities. Subject to the provisions of this paragraph 3, Employee shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.

     4.   Upon written request of the Employee, but no more than once per
calendar year, unless the Company's Forfeiture Option has been exercised, you
will deliver to Employee a

<PAGE>

certificate or certificates representing so many shares of stock as are not then
subject to the Company's Forfeiture Option.  Within ninety (90) days after
cessation of Employee's continuous employment by or services to the Company, or
any parent or subsidiary of the Company, you will deliver to Employee a
certificate of 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 Forfeiture Option.

     5.   If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Employee,
you shall deliver all of the same to Employee 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 Employee 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,
judgement 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 party.  In the event of any such termination, the Company
shall appoint a successor Escrow Agent.

                                       2

<PAGE>

     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
(10) days' advance written notice to each of the other parties hereto.

     COMPANY:       Avanex Corporation
                    40919 Encyclopedia Circle
                    Fremont, CA 94538-2436

     EMPLOYEE:      Paul Engle
                    ________________________________
                    ________________________________

     ESCROW AGENT:  Assistant Corporate Secretary
                    Avanex Corporation
                    40919 Encyclopedia Circle
                    Fremont, CA 94538-2436

     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.    The Restricted Stock Award Agreement is incorporated herein by
reference. These joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Award Agreement (including the exhibits referenced therein)
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 Escrow Agent, the Employee and the Company with respect to the
subject matter hereof, and may not be modified except by means of a writing
signed by the Escrow Agent, the Employee and the Company.

                                        3

<PAGE>

     19. These Joint Escrow Instructions shall be governed by, and construed and
enforced in accordance with, the laws of the State of California.

                                      Very truly yours,

                                      AVANEX CORPORATION

                                      By: /s/ Walter Alessandrini
                                         ---------------------------
                                      Title: Chairman and CEO
                                            ------------------------

                                      EMPLOYEE

                                      /s/ Paul Engle
                                      ------------------------------
                                      (Signature)

                                          Paul Engle
                                      ------------------------------
                                      (Typed or Printed Name)

                                      ESCROW AGENT:

                                      /s/ Brian Kinard
                                      ------------------------------
                                      Assistant Corporate Secretary

                                        4

<PAGE>

                                  EXHIBIT A-3
                                  -----------

                               CONSENT OF SPOUSE

     I, Tanya Engle, spouse of Paul Engle, have read and approve the foregoing
Restricted Stock Award Agreement (the "Agreement"). In consideration of granting
of the right to my spouse to purchase shares of Avanex Corporation, 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: September 19, 2000                     Signature: /s/ Tanya Engle
                                                         ----------------------

<PAGE>

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                        RESTRICTED STOCK AWARD AGREEMENT

                               (Amendment No. 1)

     Unless otherwise defined herein, the terms defined in the 1998 Stock Plan
(the "Plan") and the Restricted Stock Award Agreement, dated September 19, 2000
(the "Agreement") shall have the same defined meanings in this Amendment No. 1
to the Restricted Stock Award Agreement (the "Amendment").

     Pursuant to an action of the Compensation Committee of the Company, Article
I, "Vesting Commencement Date" of the Agreement is changed from "September 19,
2002" to August 19, 2000."

     Pursuant to an action of the Compensation Committee of the Company, Article
II, Section 3 of the Agreement is deleted and replaced in its entirety with the
following:

     II.  Agreement

3.   Release of Shares From Forfeiture Option.
     ----------------------------------------

          (a)   As of the Date of Grant, the total number of shares subject to
this Award (the "Shares") shall be subject to the Company's Forfeiture Option.
The Shares shall be released from the Forfeiture Option as follows:

                (i)    Subject to accelerated vesting as set forth below, one
quarter (1/4) of the Shares shall be released from the Forfeiture Option on
August 19, 2001; and

                (ii)   Subject to accelerated vesting as set forth below, three
forty-eighths (3/48) of the Shares shall be released from the Forfeiture Option
each full calendar quarter elapsing thereafter during all of which Employee was
a full time employee of the Company.

          (b)   Any of the Shares which, from time to time, have not yet been
released from the Forfeiture Option are referred to herein as "Unreleased
                                                               ----------
Shares."
------

          (c)   The Shares which have been released from the Forfeiture Option
shall be delivered to the Employee at the Employee's request (see Section 7 of
the Agreement).

          (d)   The Shares which have been released from the Company's
Forfeiture Option shall be delivered to the Employee at the Employee's request.

<PAGE>

                 (e)  Notwithstanding the foregoing, in the event of a Change of
Control of the Company during the term in which these Shares are being released
from the Forfeiture Option, the release of the Shares from the Forfeiture Option
shall be accelerated so that, when aggregated with any Shares previously
released, at least 50% of the total Shares are released from the Forfeiture
Option upon the date the Change of Control is consummated. The remaining
Unreleased Shares shall be released on the same schedule as existed prior to the
Change of Control. For example, if a Change of Control occurs when 25% of the
Shares have been released from the Forfeiture Option, then this Award shall be
accelerated as to the release of an additional 25% of the Shares, and the
remaining Unreleased Shares shall be released as to 3/48/ths/ of the total
Shares each quarter thereafter in accordance with the release schedule of this
Award. If a Change of Control occurs after more than 50% of the Shares have been
released from the Forfeiture Option, there will be no release of Unreleased
Shares under this provision.

           In addition, upon an Involuntary Termination of the Employee's
employment other than for Cause upon or within 12 months after a Change of
Control, all of the Shares shall be released from the Forfeiture Option.

           In the event that the Company terminates the Employee's employment
without "Cause", or in the event the Employee resigns as a result of
"Constructive Termination", after the Employee has reported to the Company but
prior to the consummation of a Change of Control, the Company will provide the
Employee with a settlement of release of Unreleased Shares equal to the greater
of (A) six months of additional vesting or (B) vesting through the first year
cliff of the Employee's release schedule. The settlement is subject to a
non-compete/non-solicit agreement and provided that the Employee executes a
general waiver of claims in favor of the Company.

           The following terms referred to in this Agreement shall have the
following meanings:

                      (i)  Cause. "Cause" shall mean (i) the Employee's willful
failure to substantially perform his material duties (other than as a failure
resulting from the Employee's complete or partial incapacity due to physical or
mental illness or impairment) for a period of ninety (90) days after a written
demand for substantial performance is delivered to the Employee by the Board
that specifically identifies the manner in which the Board believes that the
Employee has not substantially performed his duties, (ii) a material and willful
violation of a federal or state law or regulation applicable to the business of
the Company, and (iii) a willful act by the Employee that constitutes gross
misconduct and which is injurious to the Company. No act, or failure to act, by
the Employee shall be considered "willful" unless committed without good faith
and without a reasonable belief that the act or omission was in the Company's
best interests.

                      (ii) Change or Control. "Change of Control" shall mean the
occurrence of any of the following events:

                      Any "person" (as such term is used in Sections 13(d) and
                      14(d) of the Securities Exchange Act of 1934, as amended)
                      is or becomes the "beneficial owner" (as defined in Rule
                      13d-3 under said Act), directly or indirectly, of

                                                                             -2-

<PAGE>

                securities of the Company representing 50% or more of the total
                voting power represented by the Company's then outstanding
                voting securities other than in a private financing transaction
                approved by the Board of Directors;

                the direct or indirect sale or exchange by the shareholders of
                the Company of all or substantially all of the stock of the
                Company;

                a merger or consolidation in which the Company is a party and in
                which the shareholders of the Company before such merger or
                consolidation do not retain, directly or indirectly, at least
                a majority of the beneficial interest in the voting stock of the
                Company after such transaction; or

                the sale or disposition by the Company of all or substantially
                all the Company's assets.

                (iii) Disability. "Disability" shall mean that the Employee has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such agreement as to acceptability not to be
unreasonably withheld)

                (iv)  Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Employee's express written consent, the significant
reduction of the Employee's duties or responsibilities relative to the
Employee's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the Chief Financial Officer of the
acquiring corporation) shall not constitute an "Involuntary Termination"; (ii)
without the Employee's express written consent, a substantial reduction, without
good business reasons, of the facilities and perquisites (including office space
and location) available to the Employee immediately prior to such reduction;
(iii) without the Employee's express written consent, a material reduction by
the Company in the base compensation of the Employee as in effect immediately
prior to such reduction, or the ineligibility of the Employee to continue to
participate in any long-term incentive plan of the Company; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Employee is entitled immediately prior to such reduction with the result that
the Employee's overall benefits package is significantly reduced; (v) the
relocation of the Employee to a facility or a location more than 50 miles from
the Employee's then present location, without the Employee's express written
consent; (vi) any purported termination of the Employee by the Company which is
not effected for death or Disability or for Cause, or any purported termination
for which the grounds relied upon are not valid; or (vii) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Section 4(f) below.

                                                                             -3-

<PAGE>

          (v) Constructive Termination. "Constructive Termination" means the
Employee terminates employment with the Company as a result of one or more of
the following events: (i) a reduction in the Employee's annualized base salary;
(ii) without the Employee's express written consent, a material reduction by the
Company in the kind or level of employee benefits to which the Employee is
entitled immediately prior to such reduction with the result that the Employee's
overall benefits package is significantly reduced; and (iii) without the
Employee's express written consent, the Company substantially reduces the
Employee's authority or responsibility as President and Chief Operating Officer.

     All other terms and conditions of the Agreement shall remain in full force
and effect and as applicable are incorporated herein by reference.

                     [THIS SPACE INTENTIONALLY LEFT BLANK]

                                                                             -4-

<PAGE>

     By Employee's signature below, Employee represents that he is familiar with
the terms and provisions of the Plan, the Agreement and this Amendment, and
hereby accepts this Amendment subject to all of the terms and provisions
thereof. Employee has reviewed the Plan, the Agreement and this Amendment in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Amendment and fully understands all provisions of this Amendment.
Employee agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions arising under the Plan,
the Agreement or this Amendment. Employee further agrees to notify the Company
upon any change in the residence indicated in the Notice of Grant of Stock
Award.

EMPLOYEE:                                    AVANEX CORPORATION:

/s/ Paul Engle                               By: /s/ Walter Alessandrini
-----------------------------------              -------------------------------
Signature

PAUL ENGLE                                   Title: Chairman and CEO
-----------------------------------                 ----------------------------
Print Name

Date: March 22, 2001

                                                                             -5-

<PAGE>

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                        RESTRICTED STOCK AWARD AGREEMENT

      Unless otherwise defined herein, the terms defined in the 1998 Stock Plan
shall have the same defined meanings in this Restricted Stock Award Agreement
(the "Agreement").

I.    NOTICE OF GRANT OF STOCK AWARD
      ------------------------------

      Paul Engle

      You have been granted this stock award of Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:

      Date of Grant                    February 14, 2001

      Vesting Commencement Date:       February 14, 2001

      Total Number of Shares Subject
      to This Stock Award              40,000

      Purchase Price                   $0.001 per share ($40.00 total)

II.   Agreement
      ---------

      1.   Grant. The Company hereby grants to the individual named in the
           -----
Notice of Grant of Stock Award (the "Employee") under the Plan for services and
as a separate incentive in connection with his employment and not in lieu of any
salary or other compensation for his services, an award of 40,000 shares of
Restricted Stock on the date hereof, subject to all of the terms and conditions
in this Agreement and the Plan, which is incorporated herein by reference.
Subject to Section 14(c) of the Plan, in the event of a conflict between the
terms and conditions of the Plan and this Agreement, the terms and conditions of
the Plan shall prevail.

      2.   Forfeiture Option. In the event the Employee's continuous status as a
           -----------------
Service Provider terminates for any or no reason (including death or
Disability), the Employee shall, unless otherwise notified by the Company in
writing within sixty (60) days of such termination (as reasonably fixed and
determined by the Company), forfeit up to that number of shares which constitute
the Unreleased Shares (as defined in Section 3) (the "Forfeiture Option"). The
Forfeiture Option shall occur automatically. Unless the Company provides written
notice to Employee that some or all of the Unreleased Shares are not forfeited
pursuant to the Forfeiture Option, the Company shall become the legal and
beneficial owner of the Unreleased Shares being forfeited and all rights and
interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Unreleased Shares forfeited to
the Company.

<PAGE>

       3.     Release of Shares From Forfeiture Option.
              ----------------------------------------

              (a) As of the date of this Award, the total number of shares
subject to this Award (the "Shares") shall be subject to the Company's
Forfeiture Option. The Shares shall be released from the Forfeiture Option as
follows:

                      Subject to accelerated vesting as set forth below, 5,000
shares shall be released from the Forfeiture Option at the end of each period
ending on May 14, 2001; August 14, 2001; November 14, 2001; February 14, 2002;
May 14, 2002; August 14, 2002; November 14, 2002; and February 14, 2003;
provided that during all of the time in each period Employee was a full time
employee of the Company.

               (b) Any of the Shares which, from time to time, have not yet been
released from the Forfeiture Option are referred to herein as "Unreleased
                                                               ----------
Shares."
------

               (c) The Shares which have been released from the Forfeiture
Option shall be delivered to the Employee at the Employee's request (see Section
7).

               (d) The shares which have been released from the Company's
Forfeiture Option shall be delivered to the Employee at the Employee's request.

               (e) Notwithstanding the foregoing, in the event of a Change of
Control of the Company during the term in which these Shares are being released
from the Forfeiture Option, the release of the Shares from the Forfeiture Option
shall be accelerated so that, when aggregated with any Shares previously
released, at least 50% of the total Shares are released from the Forfeiture
Option upon the date the Change of Control is consummated. The remaining
Unreleased Shares shall be released on the same schedule as existed prior to the
Change of Control (i.e. 5,000 shares released in each three month period after
the Change of Control). For example, if a Change of Control occurs when 25% of
the Shares have been released from the Forfeiture Option, then this Award shall
be accelerated as to the release of an additional 25% of the Shares, and the
remaining Unreleased Shares shall be released as to 5,000 shares each
three-month period thereafter in accordance with the release schedule of this
Award. If a Change of Control occurs after more than 50% of the Shares have been
released from the Forfeiture Option, there will be no release of Unreleased
Shares under this provision.

        In addition, upon an Involuntary Termination of the Employee's
employment other than for Cause upon or within 12 months after a Change of
Control, all of the Shares shall be released from the Forfeiture Option.

        In the event that the Company terminates the Employee's employment
without "Cause", or in the event the Employee resigns as a result of
"Constructive Termination", after the Employee has reported to the Company but
prior to the consummation of a Change of Control, the Company will provide the
Employee with a settlement of release of Unreleased Shares equal to the greater
of (A) two three-month periods of additional vesting or (B) vesting through the
first four three-month

                                                                               2

<PAGE>

periods of vesting. The settlement is subject to a non-compete/non-solicit
agreement and provided that the Employee executes a general waiver of claims in
favor of the Company

    The following terms referred to in this Agreement shall have the following
meanings:

            (i)     Cause. "Cause" shall mean (i) the Employee's willful failure
to substantially perform his material duties (other than as a failure resulting
from the Employee's complete or partial incapacity due to physical or mental
illness or impairment) for a period of ninety (90) days after a written demand
for substantial performance is delivered to the Employee by the Board that
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed his duties, (ii) a material and willful
violation of a federal or state law or regulation applicable to the business of
the Company, and (iii) a willful act by the Employee that constitutes gross
misconduct and which is injurious to the Company. No act, or failure to act, by
the Employee shall be considered "willful" unless committed without good faith
and without a reasonable belief that the act or omission was in the Company's
best interests.

            (ii)    Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:

            Any "person" (as such term is used in Sections 13(d) and 14(d) of
            the Securities Exchange Act of 1934, as amended) is or becomes the
            "beneficial owner" (as defined in Rule 13d-3 under said Act),
            directly or indirectly, of securities of the Company representing
            50% or more of the total voting power represented by the Company's
            then outstanding voting securities other than in a private financing
            transaction approved by the Board of Directors;

            the direct or indirect sale or exchange by the shareholders of the
            Company of all or substantially all of the stock of the Company;

            a merger or consolidation in which the Company is a party and in
            which the shareholders of the Company before such merger or
            consolidation do not retain, directly or indirectly, at least a
            majority of the beneficial interest in the voting stock of the
            Company after such transaction; or

            the sale or disposition by the Company of all or substantially all
            the Company's assets.

            (iii)   Disability. "Disability" shall mean that the Employee has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such agreement as to acceptability not to be
unreasonably withheld).

            (iv)    Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Employee's express written consent, the significant
reduction of the Employee's duties or responsibilities relative to the
Employee's duties or responsibilities in effect immediately prior to

                                                                               3

<PAGE>

such reduction; provided, however, that a reduction in duties or
responsibilities solely by virtue of the Company being acquired and made part
of a larger entity (as, for example, when the Chief Financial Officer of Company
remains as such following a Change of Control and is not made the Chief
Financial Officer of the acquiring corporation) shall not constitute an
"Involuntary Termination"; (ii) without the Employee's express written consent,
a substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) without the Employee's express
written consent, a material reduction by the Company in the base compensation of
the Employee as in effect immediately prior to such reduction, or the
ineligibility of the Employee to continue to participate in any long-term
incentive plan of the Company; (iv) a material reduction by the Company in the
kind or level of employee benefits to which the Employee is entitled immediately
prior to such reduction with the result that the Employee's overall benefits
package is significantly reduced; (v) the relocation of the Employee to a
facility or a location more than 50 miles from the Employee's then present
location, without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company which is not effected for death or
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; or (vii) the failure of the Company to obtain the
assumption of this agreement by any successors contemplated in Section 4(f)
below.

                        (v) Constructive Termination. "Constructive Termination"
means the Employee terminates employment with the Company as a result of one or
more of the following events: (i) a reduction in the Employee's annualized base
salary; (ii) without the Employee's express written consent, a material
reduction by the Company in the kind or level of employee benefits to which the
Employee is entitled immediately prior to such reduction with the result that
the express written consent, the Company substantially reduces the Employee's
authority or responsibility as President and Chief Operating Officer.

     4.    Restriction on Transfer. Except for the escrow described in Section 5
           -----------------------
or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Forfeiture Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.

     5.    Escrow of Shares.
           ----------------

           (a) To ensure the availability for delivery of the Employee's
Unreleased Shares upon exercise of the Forfeiture Option by the Company, the
Employee shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
                   -----------
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Employee attached as Exhibit A-2 hereto, until such time as the
                                 -----------
Company's Forfeiture Option expires. As a further conditions to the

                                                                               4

<PAGE>

Company's obligations under this Agreement, the spouse of Employee, if any,
shall execute and deliver to the Company the Consent of Spouse attached hereto
as Exhibit A-3.
   -----------

          (b)  The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow and while
acting in good faith and in the exercise of its judgement and the Company shall
hold Escrow Holder harmless from any and all such liability, including
attorney's fees and other expenses of defending against the assertion of any
such claim.

          (c)  If the Company exercises its Forfeiture Option hereunder, the
Escrow Holder, upon receipt of written notice of such option exercise from the
proposed transferee, shall take all steps necessary to accomplish such transfer.

          (d)  When the Forfeiture Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Forfeiture
Option, upon Employee's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Employee, as the case may be.

          (e)  Subject to the terms hereof, the Employee shall have all the
rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's Forfeiture Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Employee is entitled by reason
of the Employee's ownership of the Shares shall be immediately subject to this
escrow, deposited with the Escrow Holder and included thereafter as "Shares" for
purposes of this Agreement and the Company's Forfeiture Option.

     6.   Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
          --------------------------------------------------------------

          (a)  Employee 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 the Company or by applicable state or
federal securities laws:

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
          CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A FORFEITURE
          OPTION HELD BY THE ISSUER AS SET FORTH IN THE RESTRICTED
          STOCK AWARD AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
          HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
          THE PRINCIPAL OFFICE OF THE ISSUER. SUCH FORFEITURE OPTION
          IS BINDING ON TRANSFEREES OF THESE SHARES.

                                                                               5

<PAGE>

          (b)  Stop-Transfer Notices. Employee 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 Employee
or other transferee to whom such Shares shall have been so transferred.

     7.   Tax Consequences. Set forth below is a brief summary as of the date of
          ----------------
grant of this Stock Purchase Right of some of the federal tax consequences of
exercise of this Stock Purchase Right and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.

          (a)  Receipt of Stock Award. As the Company's Forfeiture Option
               ----------------------
lapses, Employee will recognize compensation income in an amount equal to the
Fair Market Value of the stock at the time the Company's Forfeiture right lapses
(the "Spread"). The Spread will be subject to tax withholding by the Company,
and the Company will be entitled to a tax deduction in the amount at the time
the Employee recognizes ordinary income with respect to a Stock Award.

          (b)  Disposition of Shares. Upon disposition of the Shares, any gain
               ---------------------
or loss is treated as capital gain or loss. If the Shares are held 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. Long-term capital gains
are grouped and netted with any long term capital losses and any net short term
capital losses. Net long term capital gains are taxed at a maximum of 20%.
Capital losses are allowed in full against capital gains, and up to $3,000
against other income.

     8.   No Guarantee of Continued Service. EMPLOYEE ACKNOWLEDGES AND AGREES
          ---------------------------------
THAT THE RELEASE OF SHARES FROM THE FORFEITURE OPTION OF THE COMPANY PURSUANT TO
SECTION 3 HEREOF IS EARNED BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). EMPLOYEE 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 EMPLOYEES'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
EMPLOYEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

     9.   Notices. Any notice, demand or request required or permitted to be
          -------
given by either the Company or the Employee pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the Company at its principal place of business and the Employee at
the

                                                                               6

<PAGE>

address in the Company records or such other address as a party may request by
notifying the other in writing.

     Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party not sending the notice.

     10.  No waiver. Either party's failure to enforce any provision or
          ---------
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.

     11.  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
Employee and his or her heirs, executors, administrators, successors and
assigns.

     12.  Interpretation. Any dispute regrading the interpretation of this
          --------------
Agreement shall be submitted by Employee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

     13.  Governing Law; Severability. This Agreement is governed by the
          ---------------------------
internal substantive laws but not the choice of law rules, of California.

     14.  Entire Agreement. The Plan is incorporated herein by reference. This
          ----------------
Agreement (including the exhibits referenced herein), the Plan, and the
Investment Representation Statement 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 Employee with
respect to the subject matter hereof, and may not be modified adversely to the
Employee's interest except by means of a writing signed by the Company and
Employee.

                     [THIS SPACE INTENTIONALLY LEFT BLANK]

                                                                               7

<PAGE>

     By Employee's signature below, Employee represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Employee has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Employee agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan of this Agreement.
Employee further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Award.

EMPLOYEE:                                   AVANEX CORPORATION

/s/ Paul Engle                              By: /s/ Walter Alessandrini
-----------------------------------             -------------------------------
Signature

PAUL ENGLE                                  Title: Chairman and CEO
-----------------------------------                ---------------------------
Print Name

Date: March 22, 2001

                                                                               8

<PAGE>

                                  EXHIBIT A-1
                                  -----------

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I, Paul Engle, hereby sell, assign and transfer unto
_______________________ (__________) shares of the Common Stock of Avanex
Corporation 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 in 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
Award Agreement between Avanex Corporation and the undersigned dated February
__, 2001.

Dated: _____________, ____                 Signature: /s/ Paul Engle
                                                     ---------------------------

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
Forfeiture Option as set forth in the Agreement, without requiring additional
signatures on the part of the Employee.

<PAGE>

                                  EXHIBIT A-2
                                  -----------

                           JOINT ESCROW INSTRUCTIONS

                               February __, 2001

Corporate Assistant Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436

Dear Sirs:

          As Escrow Agent for both Avanex Corporation, a Delaware corporation
(the "Company"), and the undersigned Employee of stock of the Company (the
"Employee"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Award
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 forfeiture option set forth in the Agreement (the "Forfeiture
Option"), the Company shall give to Employee 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. Employee 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, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Forfeiture Option.

          3.   Employee 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. Employee
does hereby irrevocably constitute and appoint you as Employee'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. Subject to the provisions of this paragraph 3, Employee shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.

          4.   Upon written request of the Employee, but no more than once per
calendar year, unless the Company's Forfeiture Option has been exercised, you
will deliver to Employee a

<PAGE>

certificate or certificates representing so many shares of stock as are not then
subject to the Company's Forfeiture Option. Within ninety (90) days after
cessation of Employee's continuous employment by or services to the Company, or
any parent or subsidiary of the Company, you will deliver to Employee 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 Forfeiture Option.

        5.   If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Employee, you shall deliver all of the same to Employee 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 Employee 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,
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 party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.

                                                                               2

<PAGE>

       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
(10) days' advance written notice to each of the other parties hereto.

       COMPANY:        Avanex Corporation
                       40919 Encyclopedia Circle
                       Fremont, CA 94538-2436

       EMPLOYEE:       Paul Engle
                       ________________________________________

                       ________________________________________

       ESCROW AGENT:   Corporate Assistant Secretary
                       Avanex Corporation
                       40919 Encyclopedia Circle
                       Fremont, CA 94538-2436

       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. The Restricted Stock Award Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Award Agreement (including the exhibits referenced therein)
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 Escrow Agent, the Employee and the Company with respect to the
subject matter hereof, and may not be modified except by means of a writing
signed by the Escrow Agent, the Employee and the Company.

                                                                               3

<PAGE>

       19.   These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.

                                                Very truly yours,

                                                AVANEX CORPORATION

                                                By: /s/ Walter Alessandrini
                                                   -----------------------------

                                                Title: Chairman and CEO
                                                      --------------------------

                                                EMPLOYMENT

                                                    /s/ Paul Engle
                                                --------------------------------
                                                (Signature)

                                                        Paul Engle
                                                --------------------------------
                                                (Typed or Printed Name)

                                                ESCROW AGENT:

                                                    /s/ Brian Kinard
                                                --------------------------------
                                                Corporate Assistant Secretary

                                                                               4

<PAGE>

                                  EXHIBIT A-3
                                  -----------

                               CONSENT OF SPOUSE

       I, Tanya Engle, spouse of Paul Engle, have read and approve the foregoing
Restricted Stock Award Agreement (the "Agreement"). In consideration of granting
of the right to my spouse to purchase shares of Avanex Corporation, 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: March 22, 2001                       Signature:  /s/ Tanya Engle
                                                     ---------------------------

<PAGE>

                               AVANEX CORPORATION

                                 1998 STOCK PLAN

                        RESTRICTED STOCK AWARD AGREEMENT

     Unless otherwise defined herein, the terms defined in the 1998 Stock Plan
shall have the same defined meanings in this Restricted Stock Award Agreement
(the "Agreement").

I.   NOTICE OF GRANT OF STOCK AWARD
     ------------------------------

     Paul Engle

     You have been granted this stock award of Common Stock of the Company,
subject to the terms and conditions of the Plan and this Agreement, as follows:

     Date of Grant                           August 16, 2001

     Vesting Commencement Date:              August 16, 2001

     Total Number of Shares Subject          1,000,000
     to This Stock Award

     Purchase Price                          $0.001 per share ($1,000.00 total)

II.  AGREEMENT .

     1.  Grant. In exchange for services rendered to the Company and as a
         -----
separate incentive in connection with his employment and not in lieu of any
salary or other compensation for services, the Company hereby grants to the
individual named in the Notice of Grant of Stock Award (the "Employee") an award
of 1,000,000 shares of Restricted Stock on the date hereof, subject to all of
the terms and conditions in this Agreement and 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 this Agreement, the
terms and conditions of the Plan shall prevail.

     2.  Forfeiture Option. In the event the Employee's continuous status as a
         -----------------
Service Provider terminates for any or no reason (including death or
Disability), the Employee shall, unless otherwise notified by the Company in
writing within sixty (60) days of such termination (as reasonably fixed and
determined by the Company), forfeit up to that number of shares which constitute
the Unreleased Shares (as defined in Section 3) (the "Forfeiture Option"). The
Forfeiture Option shall occur automatically. Unless the Company provides written
notice to Employee that some or all of the Unreleased Shares are not forfeited
pursuant to the Forfeiture Option, the Company shall become the legal and
beneficial owner of the Unreleased Shares being forfeited and all rights and
interests therein or relating thereto, and the Company shall have the right to
retain and transfer to its own name the number of Unreleased Shares forfeited to
the Company.

<PAGE>

     3.  Release of Shares From Forfeiture Option.
         ----------------------------------------

               (a) As of the date of this Agreement, all of the Shares shall be
subject to the Company's Forfeiture Option. The Shares shall be released from
the Forfeiture Option as follows:

                    (i)  One quarter (1/4) of the Shares shall be released from
the Forfeiture Option on August 16, 2001; and

                    (ii) Three forty-eighths (3/48) of the remaining 750,000
Shares shall be released from the Forfeiture Option at the end of each three
month period thereafter; provided that Employee was a full time employee of the
Company at all times during the applicable three month period.

               (b) Any of the Shares which, from time to time, have not yet been
released from the Forfeiture Option are referred to herein as "Unreleased
Shares."

               (c) The Shares which have been released from the Forfeiture
Option shall be delivered to the Employee at the Employee's request (see Section
5).

               (d) Notwithstanding the foregoing, in the event of a Change of
Control of the Company during the term in which these Shares are being released
from the Forfeiture Option, the release of the Shares from the Forfeiture Option
shall be accelerated so that, when aggregated with any Shares previously
released, at least 50% of the total Shares are released from the Forfeiture
Option upon the date the Change of Control is consummated. The remaining
Unreleased Shares shall be released on the same schedule as existed prior to the
Change of Control. For example, if a Change of Control occurs when 25% of the
Shares have been released from the Forfeiture Option, then this Award shall be
accelerated as to the release of an additional 25% of the Shares, and the
remaining Unreleased Shares shall be released as to 3/48ths of the total Shares
each three-month period thereafter in accordance with the release schedule of
this Award. If a Change of Control occurs after more than 50% of the Shares have
been released from the Forfeiture Option, there will be no release of Unreleased
Shares under this provision.

     In addition, upon an Involuntary Termination of the Employee's employment
other than for Cause upon or within 12 months after a Change of Control, all of
the Shares shall be released from the Forfeiture Option.

     In the event that the Company terminates the Employee's employment without
"Cause", or in the event the Employee resigns as a result of "Constructive
Termination", after the Employee has reported to the Company but prior to the
consummation of a Change of Control, the Company will provide the Employee with
a settlement of release of Unreleased Shares equal to six months of additional
vesting. The settlement is subject to a non-compete/non-solicit agreement and
provided that the Employee executes a general waiver of claims in favor of the
Company.

     The following terms referred to in this Agreement shall have the following
meanings:

                                       2

<PAGE>

               (i)   Cause. "Cause" shall mean (i) the Employee's willful
failure to substantially perform his material duties (other than as a failure
resulting from the Employee's complete or partial incapacity due to physical or
mental illness or impairment) for a period of ninety (90) days after a written
demand for substantial performance is delivered to the Employee by the Board
that specifically identifies the manner in which the Board believes that the
Employee has not substantially performed his duties, (ii) a material and willful
violation of a federal or state law or regulation applicable to the business of
the Company, and (iii) a willful act by the Employee that constitutes gross
misconduct and which is injurious to the Company. No act, or failure to act, by
the Employee shall be considered "willful" unless committed without good faith
and without a reasonable belief that the act or omission was in the Company's
best interests.

               (ii)  Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:

               Any "person" (as such term is used in Sections 13(d) and 14(d) of
               the Securities Exchange Act of 1934, as amended) is or becomes
               the "beneficial owner" (as defined in Rule l3d-3 under said Act),
               directly or indirectly, of securities of the Company representing
               50% or more of the total voting power represented by the
               Company's then outstanding voting securities other than in a
               private financing transaction approved by the Board of Directors;

               the direct or indirect sale or exchange by the shareholders of
               the Company of all or substantially all of the stock of the
               Company;

               a merger or consolidation in which the Company is a party and in
               which the shareholders of the Company before such merger or
               consolidation do not retain, directly or indirectly, at least a
               majority of the beneficial interest in the voting stock of the
               Company after such transaction; or

               the sale or disposition by the Company of all or substantially
               all the Company's assets.

               (iii) Disability. "Disability" shall mean that the Employee has
been unable to substantially perform his duties as the result of his incapacity
due to physical or mental illness, and such inability, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such agreement as to acceptability not to be
unreasonably withheld).

               (iv)  Involuntary Termination. "Involuntary Termination" shall
mean (i) without the Employee's express written consent, the significant
reduction of the Employee's duties or responsibilities relative to the
Employee's duties or responsibilities in effect immediately prior to such
reduction; provided, however, that a reduction in duties or responsibilities
solely by virtue of the Company being acquired and made part of a larger entity
(as, for example, when the Chief Financial Officer of Company remains as such
following a Change of Control and is not made the

                                        3

<PAGE>

Chief Financial Officer of the acquiring corporation) shall not constitute an
"Involuntary Termination"; (ii) without the, Employee's express written consent,
a substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) without the Employee's express
written consent, a material reduction by the Company in the base compensation of
the Employee as in effect immediately prior to such reduction, or the
ineligibility of the Employee to continue to participate in any long-term
incentive plan of the Company; (iv) a material reduction by the Company in the
kind or level of employee benefits to which the Employee is entitled immediately
prior to such reduction with the result that the Employee's overall benefits
package is significantly reduced; (v) the relocation of the Employee to a
facility or a location more than 50 miles from the Employee's then present
location, without the Employees express written consent; (vi) any purported
termination of the Employee by the Company which is not effected for death or
Disability or for Cause, or any purported termination for which the grounds
relied upon are not valid; or (vii) the failure of the Company to obtain the
assumption of this agreement by any successors contemplated in Section
II.3.(d)(ii) above.

                  (v) Constructive Termination. "Constructive Termination" means
the Employee terminates employment with the Company as a result of one or more
of the following events: (i) a reduction in the Employee's annualized base
salary, (ii) without the Employee's express written consent, a material
reduction by the Company in the kind or level of employee benefits to which the
Employee is entitled immediately prior to such reduction with the result that
the Employee's overall benefits package is significantly reduced; and (iii)
without the Employee's express written consent, the Company substantially
reduces the Employee's authority or responsibility as President and Chief
Executive Officer.

         4. Restriction on Transfer. Except for the escrow described in Section
            -----------------------
5 or transfer of the Shares to the Company or its assignees contemplated by this
Agreement, none of the Shares or any beneficial interest therein shall be
transferred, encumbered or otherwise disposed of in any way until the release of
such Shares from the Company's Forfeiture Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.

         5. Escrow of Shares.
            ----------------

                (a) To ensure the availability for delivery of the Employee's
Unreleased Shares upon exercise of the Forfeiture Option by the Company, the
Employee shall, upon execution of this Agreement, deliver and deposit with an
escrow holder designated by the Company (the "Escrow Holder") the share
certificates representing the Unreleased Shares, together with the Assignment
Separate from Certificate (the "Stock Assignment") duly endorsed in blank,
attached hereto as Exhibit A-1. The Unreleased Shares and Stock Assignment shall
                   -----------
be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the
Company and Employee attached as Exhibit A-2 hereto, until such time as the
                                 -----------
Company's Forfeiture Option expires. As a further condition to the Company's
obligations under this Agreement, the spouse of Employee, if any, shall execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-3.
                                                                    -----------

                                       4

<PAGE>

         (b) The Escrow Holder shall not be liable for any act it may do or omit
to do with respect to holding the Unreleased Shares in escrow and while acting
in good faith and in the exercise of its judgment and the Company shall hold
Escrow Holder harmless from any and all such liability, including attorney's
fees and other expenses of defending against the assertion of any such claim.

         (c) If the Company exercises its Forfeiture Option hereunder, the
Escrow Holder, upon receipt of written notice of such option exercise from the
proposed transferee, shall take all steps necessary to accomplish such transfer.

         (d) When the Forfeiture Option has been exercised or expires
unexercised or a portion of the Shares has been released from such Forfeiture
Option, upon Employee's request the Escrow Holder shall promptly cause a new
certificate to be issued for such released Shares and shall deliver such
certificate to the Company or the Employee, as the case may be.

         (e) Subject to the terms hereof, the Employee shall have all the rights
of a shareholder with respect to such Shares while they are held in escrow,
including without limitation, the right to vote the Shares and receive any cash
dividends declared thereon. If, from time to time during the term of the
Company's Forfeiture Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Employee is entitled by reason
of the Employee's ownership of the Shares shall be immediately subject to this
escrow, deposited with the Escrow Holder and included thereafter as "Shares" for
purposes of this Agreement and the Company's Forfeiture Option.

6.  Restrictive Legends; Stop-Transfer Orders; Refusal to Transfer.
    --------------------------------------------------------------

         (a) Employee 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 the Company or by applicable state or
federal securities laws:

         THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
         TO CERTAIN RESTRICTIONS ON TRANSFER, INCLUDING A
         FORFEITURE OPTION HELD BY THE ISSUER AS SET FORTH IN THE
         RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE ISSUER AND
         THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
         BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
         FORFEITURE OPTION IS BINDING ON TRANSFEREES OF THESE
         SHARES.

         (b) Stop-Transfer Notices. Employee 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.

                                        5

<PAGE>

         (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 Employee
or other transferee to whom such Shares shall have been so transferred.

     7. Tax Consequences. Set forth below is a brief summary of some of the
        ----------------
federal tax consequences with respect to this stock award and disposition of the
Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE.

         (a) Receipt of Stock Award. As the Company's Forfeiture Option lapses,
             ----------------------
Employee will recognize compensation income in an amount equal to the Fair
Market Value of the stock at the time the Company's Forfeiture right lapses (the
"Spread"). The Spread will be subject to tax withholding by the Company, and the
Company will be entitled to a tax deduction in the amount at the time the
Employee recognizes ordinary income with respect to a Stock Award.

         (b) Disposition of Shares. Upon disposition of the Shares, any gain or
             ---------------------
loss is treated as capital gain or loss. If the Shares are held 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. Long-term capital gains
are grouped and netted with any long term capital losses and any net short term
capital losses. Net long term capital gains are taxed at a maximum of 20%.
Capital losses are allowed in full against capital gains, and up to $3,000
against other income.

     8. No Guarantee of Continued Service. EMPLOYEE ACKNOWLEDGES AND AGREES THAT
        ---------------------------------
THE RELEASE OF SHARES FROM THE FORFEITURE OPTION OF THE COMPANY PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS SERVICE PROVIDER AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). EMPLOYEE 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 EMPLOYEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
EMPLOYEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

     9. Notices. Any notice, demand or request required or permitted to be given
        -------
by either the Company or the Employee pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally or
deposited in the U.S. mail, First Class with postage prepaid, and addressed to
the Company at its principal place of business and the Employee at the address
in the Company records or such other address as a party may request by notifying
the other in writing.

     Any notice to the Escrow Holder shall be sent to the Company's address with
a copy to the other party not sending the notice.

                                       6

<PAGE>

     10. No Waiver. Either party's failure to enforce any provision or
         ---------
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party from thereafter
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.

     11. 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
Employee and his or her heirs, executors, administrators, successors and
assigns.

     12. Interpretation. Any dispute regarding the interpretation of this
         --------------
Agreement shall be submitted by Employee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

     13. Governing Law; Severability. This Agreement is governed by the internal
         ---------------------------
substantive laws but not the choice of law rules, of California.

     14. Entire Agreement. The Plan is incorporated herein by reference. This
         ----------------
Agreement (including the exhibits referenced herein) and the Plan 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 Employee with respect to the subject matter hereof, and may not be modified
adversely to the Employee's interest except by means of a writing signed by the
Company and Employee.

                                        7

<PAGE>

     By Employee's signature below, Employee represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Employee has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Employee agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Employee further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant of Stock Award.

EMPLOYEE:                               AVANEX CORPORATION

/s/ Paul Engle                           By: /s/ Jessy Chao
-------------------------------------       ------------------------------------
Signature

Paul Engle                               Title: CFO
-------------------------------------          ---------------------------------
Print Name

Date: August 16, 2001

                                        8

<PAGE>

                                   EXHIBIT A-1
                                   -----------

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR VALUE RECEIVED I, Paul Engle, hereby sell, assign and transfer unto
_________________________ (__________) shares of the Common Stock of Avanex
Corporation 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
Award Agreement between Avanex Corporation and the undersigned dated August 16,
2001.

Dated: _______________, _____           Signature: /s/ Paul Engle
                                                  ------------------------------

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
Forfeiture Option as set forth in the Agreement, without requiring additional
signatures on the part of the Employee.

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                            JOINT ESCROW INSTRUCTIONS

                                 August 16, 2001

Corporate Secretary
Avanex Corporation
40919 Encyclopedia Circle
Fremont, CA 94538-2436

Dear Sirs:

     As Escrow Agent for both Avanex Corporation, a Delaware corporation (the
"Company"), and the undersigned Employee of stock of the Company (the
"Employee"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Award
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
forfeiture option set forth in the Agreement (the "Forfeiture Option"), the
Company shall give to Employee and you a written notice specifying the number of
shares of stock to be forfeited, the purchase price (if any), and the date that
the forfeiture will become effective. Employee 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, or some combination thereof), if any, for the number of shares of
stock being forfeited pursuant to the exercise of the Company's Forfeiture
Option.

     3.  Employee 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. Employee
does hereby irrevocably constitute and appoint you as Employee'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. Subject to the provisions of this paragraph 3, Employee shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.

     4.  Upon written request of the Employee, unless the Company's Forfeiture
Option has been exercised, you will deliver to Employee a certificate or
certificates representing so many shares

<PAGE>

of stock as are not then subject to the Company's Forfeiture Option. Within
ninety (90) days after cessation of Employee's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Employee a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not forfeited to
the Company or its assignees pursuant to exercise of the Company's Forfeiture
Option.

     5.   If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Employee,
you shall deliver all of the same to Employee 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 Employee 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,
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 party. In the event of any such termination, the Company
shall appoint a successor Escrow Agent.

                                       2

<PAGE>

     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
(10) days' advance written notice to each of the other parties hereto.

     COMPANY:       Avanex Corporation
                    40919 Encyclopedia Circle
                    Fremont, CA 94538-2436

     EMPLOYEE:      Paul Engle

                    ___________________________________

                    ___________________________________

     ESCROW AGENT:  Corporate Secretary
                    Avanex Corporation
                    40919 Encyclopedia Circle
                    Fremont, CA 94538-2436

     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.  The Restricted Stock Award Agreement is incorporated herein by
reference. These Joint Escrow Instructions, the 1998 Stock Plan, and the
Restricted Stock Award Agreement (including the exhibits referenced therein)
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 Escrow Agent, the Employee and the Company with respect to the
subject matter hereof, and may not be modified except by means of a writing
signed by the Escrow Agent, the Employee and the Company.

                                       3

<PAGE>

     19.  These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California.

                                     Very truly yours,

                                     AVANEX CORPORATION

                                     By: /s/ Jessy Chao
                                        ----------------------------------------

                                     Title: CFO
                                           -------------------------------------

                                     EMPLOYEE

                                     /s/ Paul Engle
                                     -------------------------------------------
                                     (Signature)

                                     Paul Engle
                                     -------------------------------------------
                                     (Typed or Printed Name)

                                     ESCROW AGENT:

                                     ___________________________________________
                                     Corporate Secretary

                                       4

<PAGE>

                                   EXHIBIT A-3
                                   -----------

                                CONSENT OF SPOUSE

     I, _________________________, spouse of Paul Engle, have read and approve
the foregoing Restricted Stock Award Agreement (the "Agreement"). In
consideration of granting of the right to my spouse to purchase shares of Avanex
Corporation, 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: August 16, 2001                   Signature: /s/ Tanya Engle
                                                   -----------------------------

<PAGE>

TO:   Paul Engle

FROM: Margaret Quinn

DATE: February 1, 2002

RE:   Important change to your Restricted Stock Awards under the 1998 Stock Plan

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

     As you know, the Compensation Committee recently approved a change to the
vesting schedule applicable to various restricted stock awards made to you under
the Company's 1998 Stock Plan (the "Plan"). If you agree to the change, it will
apply to your restricted stock award agreements dated September 19, 2000,
February 14, 2001 and August 16, 2001 (collectively, your "Agreements").

     Your Agreements currently provide for quarterly vesting. The change is to
provide for monthly vesting beginning April 5, 2002. The specific change to each
of your Agreements is shown below. Please refer to your Agreements and/or the
Plan for the definition of capitalized terms that are used but not defined in
this memo. Also, the Administrator has the power and discretion to adjust the
number of shares that will vest on a particular date to take account of any
fractional shares that otherwise would have been issued in accordance with the
vesting schedules applicable to your Agreements.

September 19, 2000 Agreement
----------------------------

     Section 3(a)(ii) of your September 19, 2000 Agreement currently reads as
follows:

          Subject to accelerated vesting as set forth below, three forty-eighths
     (3/48) of the Shares shall be released from the Forfeiture Option each full
     calendar quarter elapsing thereafter during all of which Employee was a
     full time employee of the Company.

     Section 3(a)(ii) of your September 19, 2000 Agreement now will be deemed to
read as follows:

          On November 19, 2001, 3,125 of the Shares shall be released from the
     Forfeiture Option. On January 5, 2002, 2,084 of the Shares shall be
     released from the Forfeiture Option. On the fifth day of each month
     thereafter, an additional one forty-eighth (1/48) of the Shares shall be
     released from the Forfeiture Option until the Shares are fully vested. The
     vesting described in the preceding two sentences is subject to the
     accelerated vesting as described in (e) below.

<PAGE>

February 14, 2001 Agreement
---------------------------

     Section 3(a) of your February 14, 2001 Agreement currently reads as
follows:

          As of the date of this Award, the total number of shares subject to
     this Award (the "Shares") shall be subject to the Company's Forfeiture
     Option. The Shares shall be released from the Forfeiture Option as follows:

          Subject to accelerated vesting as set forth below, 5,000 shares shall
     be released from the Forfeiture Option at the end of each period ending on
     May 14, 2001; August 14, 2001; November 14, 2001; February 14, 2002; May
     14, 2002; August 14, 2002; November 14, 2002 and February 14, 2003;
     provided that during all of the time in each period Employee was a full
     time employee of the Company.

     Section 3(a) of your February 14, 2001 Agreement now will be deemed to read
as follows:

          As of the date of this Award, the total number of shares subject to
     this Award (the "Shares") shall be subject to the Company's Forfeiture
     Option. The Shares shall be released from the Forfeiture Option as follows:

          5,000 Shares shall be released from the Forfeiture Option on each of
     May 14, 2001, August 14, 2001 and November 14, 2001. On January 5, 2002,
     3,636 Shares shall be released from the Forfeiture Option. On the fifth day
     of each month thereafter, an additional 1,818 of the Shares shall be
     released from the Forfeiture Option until the Shares are fully vested.
     Shares actually will be released from the Forfeiture Option on any such
     date only if the Employee is a full-time employee of the Company on the
     date in question, subject to the accelerated vesting described in (e)
     below.

August 16, 2001 Agreement
-------------------------

     Section 3(a)(ii) of your August 16, 2001 Agreement currently reads as
follows:

          Three forty-eighths (3/48) of the remaining 750,000 Shares shall be
     released from the Forfeiture Option at the end of each three month period
     thereafter; provided that Employee was a full time employee of the Company
     at all times during the applicable three month period.

     Section 3(a)(ii) of your August 16, 2001 Agreement now will be deemed to
read as follows:

          46,875 Shares shall be released from the Forfeiture Option on November
     16, 2001 (i.e., 3/48 based on 750,000 Shares remaining unvested). On
     January 5, 2002, 31,250 Shares shall be released from the Forfeiture
     Option. On the fifth day of each month thereafter, one forty-eighth (1/48)
     of the remaining Shares (i.e., 1/48 of 750,000 Shares) shall vest until the
     Shares are fully vested. Shares actually will be released from the
     Forfeiture Option on any such date only if the Employee is a full-time
     employee of the Company on the date in question, subject to the accelerated
     vesting as described in (d) below.

                                       -2-

<PAGE>

Release of Shares from Forfeiture Option
----------------------------------------

     Any shares that are otherwise scheduled to be released from the Forfeiture
Option during the time period from December 2001 until the effective date of
your Company-approved Rule 10b5-1 trading plan for the sale of shares of Company
stock (the "Trading Plan") will not be released from the Forfeiture Option on
the scheduled dates. Instead, these shares will accumulate and be released in
six equal weekly installments as discussed below.

     The first installment will be released on the fifth day of the calendar
month that immediately follows the calendar month in which the results are
announced for the quarter in which you first adopt the Trading Plan. For
example, if you first adopt a Company-approved Rule 10b5-1 trading plan in April
2002, and the results of the April-June quarter are announced in July 2002, then
the first installment will be released on August 5, 2002. The second installment
will be released on the one week anniversary of the release of the first
installment, the third installment will be released on the two week anniversary
and so on, until all of the accumulated shares have been released.

     Notwithstanding the preceding paragraph, on each of the six installment
dates, shares actually will be released from the Forfeiture Option on that date
only if prior to that date, you do not voluntarily resign your position as a
full-time employee of the Company and your employment with the Company has not
been terminated for "cause" (as defined in your August 16, 2001 Agreement). If
you terminate employment due to death or permanent disability, you will not be
considered to have voluntarily resigned nor been terminated for cause. Also, you
remain entitled to the benefit of any accelerated vesting provision contained in
the applicable Agreement.

                                      o O o

     Please do not hesitate to contact me by phone at (510) 897-4212 or by
e-mail at Margaret_Quinn@avanex.com with any questions or comments.

     Please acknowledge your acceptance of these changes by signing, dating and
returning this memo. Please keep the enclosed copy of this memo for your
records.

Employee Acknowledgment
-----------------------

I agree to the changes described above in this memo.

/s/ Paul Engle                                                  February 1, 2002
---------------------------------
Paul Engle

                                       -3-

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