EXHIBIT 10.8
AVANEX CORPORATION
1998 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
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Xxxx Xxxxx
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 April 30, 2001
Vesting Commencement Date April 30, 2001
Exercise Price per Share $13.19
Total Number of Shares Granted 1,600,000
Total Exercise Price $21,104,000.00
Type of Option X Incentive Stock Option
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_____ Nonstatutory Stock Option
Term/Expiration Date: April 29, 2011
Exercise and Vesting Schedule:
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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:
The Option shall vest over a four-year period from the date of grant with
15% of the shares vesting at the end of six months and 1/42/nd/ of the
shares remaining vesting at the end of each month thereafter, subject to
the Optionee continuing to be a Service Provider on such dates.
Acceleration Upon Termination of Employment. Notwithstanding the
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foregoing, in the event of a Change of Control of the Company during the option
term, the vesting of the options shall be accelerated so that, when aggregated
with any Shares previously exercised, at least 50% of the total Shares are
vested upon the date the Change of Control is consummated. The remaining
unvested
Shares shall vest 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 are
vested, then this Option shall have accelerated vesting as to an additional 25%
and the remaining unvested Shares shall continue to vest in accordance with the
same schedule (i.e., the same number of shares shall vest each month) as existed
prior to the Change of Control. If a Change of Control occurs after more than
50% of the Shares have vested, then there will be no acceleration of vesting
under this provision.
In addition, upon an Involuntary Termination of the Optionee's employment
other than for Cause upon or within 12 months after a Change of Control, this
Option shall be fully (i.e. 100%) vested.
In the event that the Company terminates the Optionee's employment
without "Cause", or in the event the Optionee resigns as a result of
"Constructive Termination", after the Optionee has reported to the Company but
prior to the consummation of a Change of Control, the Company will provide the
Optionee with a settlement of acceleration of vesting of the options to be
granted to the Optionee equal to the greater of (A) six months of additional
vesting or (B) vesting through the first year cliff of the Optionee's vesting
schedule. The settlement is subject to a non-compete/non-solicit agreement and
provided that the Optionee 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 Optionee's willful
failure to substantially perform his material duties (other than as a failure
resulting from the Optionee'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 Optionee by the Board
that specifically identifies the manner in which the Board believes that the
Optionee 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 Optionee that constitutes gross
misconduct and which is injurious to the Company. No act, or failure to act, by
the Optionee 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
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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 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 4(f) below.
(a) Constructive Termination. "Constructive Termination"
means the Optionee terminates employment with the Company as a result of one or
more of the following events: (i) a reduction in the Optionee's annualized base
salary; (ii) without the Optionee's express written consent, 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; and (iii)
without the Optionee's express written consent, the Company substantially
reduces the Optionee's authority or responsibility as President and Chief
Operating Officer.
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Termination Period:
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This Option may be exercised for three months after Optionee ceases to be
a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for twelve months after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
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X. Xxxxx of Option.
---------------
The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
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(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.
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C. Method of Payment.
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Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
D. Non-Transferability of Option.
-----------------------------
This Option may not be transferred in any manner otherwise than
by will or by the laws of descent or distribution and may be exercised during
the lifetime of Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
E. Term of Option.
---------------
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. Tax Consequences.
----------------
Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
G. Exercising the Option.
---------------------
1. Nonstatutory Stock Option. The Optionee may incur regular
-------------------------
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to
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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.
(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.
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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.
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I. NO GUARANTEE OF CONTINUED SERVICE.
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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 upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: AVANEX CORPORATION
/s/ Xxxx Xxxxx By /s/ Xxxxxx Xxxxxxxxxxxx
-------------------------------------- -------------------------------------
Signature
Chairman & Chief Executive Officer
-------------------------------------- ---------------------------------------
Print Name Title
______________________________________
Residence Address
______________________________________
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EXHIBIT A
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AVANEX CORPORATION
1998 STOCK PLAN
EXERCISE NOTICE
Avanex Corporation
00000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
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 Shareholder. 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 shareholder 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.
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
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TO: Xxxx Xxxxx
FROM: Xxxxx Xxxx, Vice President, Finance and CFO
DATE: January 24, 2002
RE: Important Change to your Options under the 1998 Stock Plan
________________________________________________________________________________
I am pleased to inform you of an important change, as approved by the
Compensation Committee on October 18, 2001, to the options previously granted to
you, dated April 30, 2001 under the Avanex Corporation 1998 Stock Plan (the
"Plan").
As explained more fully below, you now will have up to twenty-four (24)
months to exercise any vested options if your employment with the Company
terminates due to an Involuntary Termination without Cause within twelve (12)
months after a Change of Control. (However, in no event may you exercise your
options after the Term/Expiration Date of your option). Previously, the maximum
time to exercise following your Involuntary Termination without Cause was three
(3) months. Please refer to your stock option agreements (the "Agreements")
and/or the Plan for the definition of capitalized terms (such as "Involuntary
Termination" and "Cause") that are used but not defined in this memo.
Before the change described in this memo, the applicable portion of each
of your Agreements read as follows:
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.
The applicable portion of each of your Agreements now will be deemed to
read as follows:
Termination Period: This Option may be exercised for three months
------------------
after Optionee ceases to be a Service Provider, except as follows. If
Optionee ceases to be a Service Provider within 12 months after a Change
of Control and due to an Involuntary Termination other than for Cause,
this Option may be exercised for twenty-four (24) 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.
If your options originally were intended to be Incentive Stock Options
("ISOs"), those options instead now may be nonstatutory stock options ("NSOs").
The reason for this is that Internal Revenue Service rules state that an ISO may
not be "modified" after it is granted. Under current IRS rules, a change (such
as the above extension of post-termination of employment exercisability) will be
considered to have "modified" your ISOs (thus turning them into NSOs) if the
exercise price of the option is less than $4.55 per share. Any ISOs that have an
exercise price of at least $4.55 per share will remain ISOs even after the
change described in this memo. In any case, there is no immediate tax effect to
you of converting an ISO to an NSO; it merely affects the tax treatment upon
exercise of the option. Please refer to the prospectus for the Plan (dated
February 16, 2002) for more information about the tax effects of receiving and
exercising stock options under the Plan. If you need another copy of the
prospectus, please do not hesitate to call or email Xxxxxxxx Xxxxx as indicated
below. You should consult with your personal tax advisor before exercising or
selling shares of Avanex stock to make sure that you understand all of the
potential state and federal tax consequences of any such transactions.
Please acknowledge your receipt and understanding of this memo by signing
one copy of this memo and returning it to Xxxxxxxx Xxxxx in Human Resources.
Please keep the enclosed copy of this memo for your records.
Again, I am very pleased that we are able to provide you with this
important change to your options.
If you have any questions or comments, please do not hesitate to contact
me or Xxxxxxxx Xxxxx, Vice President, Human Resources and Administration by
phone at (000) 000-0000 or by e-mail at Xxxxxxxx_Xxxxx@xxxxxx.xxx.
-------------------------
Sincerely,
Xxxxx Xxxx
Vice President, Finance and CFO
EMPLOYEE SIGNATURE:
I have read and understand the change to my options that is described in
this memo.
/s/ Xxxx Xxxxx
------------------------------------- ------------------------------------
Signature Date
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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
----------------------------
Xxxx Xxxxx
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 1,400,000
Total Exercise Price $6,860,000.00
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 Termination of Employment. Notwithstanding the
-------------------------------------------
foregoing, in the event of a Change of Control of the Company during the option
term, the vesting of the Option shall be accelerated so that, when aggregated
with any Shares previously exercised, at least 50% of the total
Shares subject to the Option shall be vested upon the date the Change of Control
is consummated. The remaining unvested Shares shall vest 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 are vested, then this Option shall have
accelerated vesting as to an additional 25% of the Shares subject to the Option
and the remaining unvested Shares shall continue to vest in accordance with the
same schedule (i.e., the same number of shares shall vest each month) as existed
prior to the Change of Control. If a Change of Control occurs after more than
50% of the Shares subject to the Option have vested, then there will be no
acceleration of vesting under this provision.
In addition, upon an Involuntary Termination of the Optionee's
employment other than for Cause upon or within 12 months after a Change of
Control, this Option shall be fully (i.e. 100%) vested.
In the event that the Company terminates the Optionee's employment
without "Cause," or in the event the Optionee resigns as a result of
"Constructive Termination," after the Optionee has reported to the Company but
prior to the consummation of a Change of Control, then vesting of the Option
shall be accelerated equal to the greater of (A) six months of additional
vesting or (B) vesting through the first year cliff of the Optionee's vesting
schedule. The acceleration shall be subject to the Optionee entering into a
non-compete/non-solicit agreement and a general waiver of claims in favor of the
Company, both agreements to be in a form acceptable to the Company.
The following terms referred to in this Agreement shall have the
following meanings:
(i) Cause. "Cause" shall mean (i) the Optionee's willful
failure to substantially perform his material duties (other than as a failure
resulting from the Optionee'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 Optionee by the Board
that specifically identifies the manner in which the Board believes that the
Optionee 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, or (iii) a willful act by the Optionee that constitutes gross
misconduct and which is injurious to the Company. No act, or failure to act, by
the Optionee 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 stockholders
of the Company of all or substantially all of the stock of
the Company;
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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 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.
(v) Constructive Termination. "Constructive Termination"
means the Optionee terminates employment with the Company as a result of one or
more of the following events: (i) a reduction in the Optionee's annualized base
salary; (ii) without the Optionee's express written consent, 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; and (iii)
without the Optionee's express written consent, the Company substantially
reduces the Optionee's authority or responsibility as President and Chief
Executive Officer.
-3-
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
---------
X. Xxxxx of Option.
----------------
The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
-------------------
(a) Right to Exercise. This Option is exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery
------------------
of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
completed by the Optionee and delivered to the Company. The Exercise Notice
shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax
-4-
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.
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
-5-
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.
(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.
-6-
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 upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: AVANEX CORPORATION
/s/ Xxxx Xxxxx /s/ Xxxxx Xxxx
____________________________________ By__________________________________
Signature
Xxxx Xxxxx Vice President, Finance and CFO
____________________________________ ------------------------------------
Print Name Title
____________________________________
Residence Address
____________________________________
-7-
EXHIBIT A
---------
AVANEX CORPORATION
1998 STOCK PLAN
EXERCISE NOTICE
Avanex Corporation
00000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
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.
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
______________________________________ 00000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
___________________________________
Date Received
-2-
