Sample Business Contracts


1999 Stock Option Plan - Finisar Corp.


                               FINISAR CORPORATION
                             1999 STOCK OPTION PLAN


    1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

         1.1  ESTABLISHMENT. The Finisar Corporation 1999 Stock Option Plan
(the "PLAN") is hereby established effective as of April 20, 1999 (the
"EFFECTIVE DATE").

         1.2  PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an
incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to
the growth and profitability of the Participating Company Group.

         1.3  TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the
shares of Stock available for issuance under the Plan have been issued and
all restrictions on such shares under the terms of the Plan and the
agreements evidencing Options granted under the Plan have lapsed. However,
all Options shall be granted, if at all, within ten (10) years from the
earlier of the date the Plan is adopted by the Board or the date the Plan is
duly approved by the shareholders of the Company.

    2.   DEFINITIONS AND CONSTRUCTION.

         2.1  DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:

              (a)  "BOARD" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the
Plan, "BOARD" also means such Committee(s).

              (b)  "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.

              (c)  "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend
or terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.

              (d)  "COMPANY" means Finisar Corporation, a California
corporation, or any successor corporation thereto.

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              (e)  "CONSULTANT" means a person engaged to provide consulting
or advisory services (other than as an Employee or a Director) to a
Participating Company, provided that the identity of such person, the nature
of such services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person
pursuant to the Plan in reliance on either the exemption from registration
provided by Rule 701 under the Securities Act or, if the Company is required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act,
registration on a Form S-8 Registration Statement under the Securities Act.

              (f)  "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.

              (g)  "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.

              (h)  "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in
the records of a Participating Company and, with respect to any Incentive
Stock Option granted to such person, who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.

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

              (j)  "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its
discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

                   (i)  If, on such date, the Stock is listed on a national
or regional securities exchange or market system, the Fair Market Value of a
share of Stock shall be the closing price of a share of Stock (or the mean of
the closing bid and asked prices of a share of Stock if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap
Market or such other national or regional securities exchange or market
system constituting the primary market for the Stock, as reported in THE WALL
STREET JOURNAL or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be
determined by the Board, in its discretion.

                   (ii) If, on such date, the Stock is not listed on a
national or

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regional securities exchange or market system, the Fair Market Value of a
share of Stock shall be as determined by the Board in good faith without
regard to any restriction other than a restriction which, by its terms, will
never lapse.

              (k)  "INCENTIVE STOCK OPTION" means an Option intended to be
(as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.

              (l)  "INSIDER" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.

              (m)  "NONSTATUTORY STOCK OPTION" means an Option not intended
to be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.

              (n)  "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.

              (o)  "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee and any shares acquired upon the
exercise thereof. An Option Agreement may consist of a form of "Notice of
Grant of Stock Option" and a form of "Stock Option Agreement" incorporated
therein by reference, or such other form or forms as the Board may approve
from time to time.

              (p)  "OPTIONEE" means a person who has been granted one or more
Options.

              (q)  "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

              (r)  "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

              (s)  "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.

              (t)  "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.

              (u)  "SECURITIES ACT" means the Securities Act of 1933, as
amended.

              (v)  "SERVICE" means an Optionee's employment or service with
the Participating Company Group, whether in the capacity of an Employee, a
Director or a

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Consultant. An Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders
Service to the Participating Company Group or a change in the Participating
Company for which the Optionee renders such Service, provided that there is
no interruption or termination of the Optionee's Service. Furthermore, an
Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the one hundred
eighty-first (181st) day following the commencement of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and instead shall be treated thereafter as a
Nonstatutory Stock Option unless the Optionee's right to return to Service
with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for
purposes of determining vesting under the Optionee's Option Agreement. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.

              (w)  "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

              (x)  "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

              (y)  "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock
of a Participating Company within the meaning of Section 422(b)(6) of the
Code.

         2.2  CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context
clearly requires otherwise.

    3.   ADMINISTRATION.

         3.1  ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan or of any Option shall
be determined by the Board, and such determinations shall be final and
binding upon all persons having an interest in the Plan or such Option.

         3.2  AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have

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the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election which is the responsibility of
or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation,
determination or election.

         3.3  POWERS OF THE BOARD. In addition to any other powers set forth
in the Plan and subject to the provisions of the Plan, the Board shall have
the full and final power and authority, in its discretion:

              (a)  to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be
subject to each Option;

              (b)  to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;

              (c)  to determine the Fair Market Value of shares of Stock or
other property;

              (d)  to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares
acquired upon the exercise thereof, including, without limitation, (i) the
exercise price of the Option, (ii) the method of payment for shares purchased
upon the exercise of the Option, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with the Option or such shares,
including by the withholding or delivery of shares of stock, (iv) the timing,
terms and conditions of the exercisability of the Option or the vesting of
any shares acquired upon the exercise thereof, (v) the time of the expiration
of the Option, (vi) the effect of the Optionee's termination of Service with
the Participating Company Group on any of the foregoing, and (vii) all other
terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;

              (e)  to approve one or more forms of Option Agreement;

              (f)  to amend, modify, extend, cancel or renew any Option or to
waive any restrictions or conditions applicable to any Option or any shares
acquired upon the exercise thereof;

              (g)  to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an
Optionee's termination of Service with the Participating Company Group;

              (h)  to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted

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Options; and

                   (i)  to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make
all other determinations and take such other actions with respect to the Plan
or any Option as the Board may deem advisable to the extent not inconsistent
with the provisions of the Plan or applicable law.

         3.4  ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if
any, of Rule 16b-3.

         3.5  INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually
and necessarily incurred in connection with the defense of any action, suit
or proceeding, or in connection with any appeal therein, to which they or any
of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan, or any right granted hereunder, and against
all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such person is liable for gross negligence,
bad faith or intentional misconduct in duties; provided, however, that within
sixty (60) days after the institution of such action, suit or proceeding,
such person shall offer to the Company, in writing, the opportunity at its
own expense to handle and defend the same.

    4.   SHARES SUBJECT TO PLAN.

         4.1  MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be seven million (7,000,000) and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or if shares of Stock are acquired upon the exercise
of an Option subject to a Company repurchase option and are repurchased by
the Company at the Optionee's exercise price, the shares of Stock allocable
to the unexercised portion of such Option or such repurchased shares of Stock
shall again be available for issuance under the Plan. Notwithstanding the
foregoing, at any such time as the offer and sale of securities pursuant to
the Plan is subject to compliance with Section 260.140.45 of Title 10 of the
California Code of Regulations ("SECTION 260.140.45"), the total number of
shares of Stock issuable upon the exercise of all outstanding Options
(together with options outstanding under any other stock option plan of the
Company) and the total number of shares provided for under any stock bonus or
similar plan of the Company shall not exceed thirty percent (30%) (or such
other higher

<PAGE>

percentage limitation as may be approved by the shareholders of the Company
pursuant to Section 260.140.45) of the then outstanding shares of the Company
as calculated in accordance with the conditions and exclusions of Section
260.140.45.

         4.2  ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of
the Company, appropriate adjustments shall be made in the number and class of
shares subject to the Plan and to any outstanding Options and in the exercise
price per share of any outstanding Options. If a majority of the shares which
are of the same class as the shares that are subject to outstanding Options
are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event, as defined in Section 8.1) shares of
another corporation (the "NEW SHARES"), the Board may unilaterally amend the
outstanding Options to provide that such Options are exercisable for New
Shares. In the event of any such amendment, the number of shares subject to,
and the exercise price per share of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in its
discretion. Notwithstanding the foregoing, any fractional share resulting
from an adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise price of any Option be
decreased to an amount less than the par value, if any, of the stock subject
to the Option. The adjustments determined by the Board pursuant to this
Section 4.2 shall be final, binding and conclusive.

    5.   ELIGIBILITY AND OPTION LIMITATIONS.

         5.1  PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "Employees," "Consultants" and "Directors" shall include
prospective Employees, prospective Consultants and prospective Directors to
whom Options are granted in connection with written offers of an employment
or other service relationship with the Participating Company Group. Eligible
persons may be granted more than one (1) Option.

         5.2  OPTION GRANT RESTRICTIONS. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted
only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences Service
with a Participating Company, with an exercise price determined as of such
date in accordance with Section 6.1.

         5.3  FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans
of the Participating Company Group, including the Plan) become exercisable by
an Optionee for the first time during any calendar year for stock having a
Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the
portions of such options which exceed such amount shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair

<PAGE>

Market Value of stock shall be determined as of the time the option with
respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and
with respect to such Options as required or permitted by such amendment to
the Code. If an Option is treated as an Incentive Stock Option in part and as
a Nonstatutory Stock Option in part by reason of the limitation set forth in
this Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Separate certificates representing each such portion shall be
issued upon the exercise of the Option.

    6.   TERMS AND CONDITIONS OF OPTIONS.

         Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall
from time to time establish. No Option or purported Option shall be a valid
and binding obligation of the Company unless evidenced by a fully executed
Option Agreement. Option Agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

         6.1  EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) the exercise price per share for a Nonstatutory Stock Option
shall be not less than eighty-five percent (85%) of the Fair Market Value of
a share of Stock on the effective date of grant of the Option, and (c) no
Option granted to a Ten Percent Owner Optionee shall have an exercise price
per share less than one hundred ten percent (110%) of the Fair Market Value
of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option
or a Nonstatutory Stock Option) may be granted with an exercise price lower
than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.

         6.2  EXERCISABILITY AND TERM OF OPTIONS. Options shall be
exercisable at such time or times, or upon such event or events, and subject
to such terms, conditions, performance criteria and restrictions as shall be
determined by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such
Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee
shall be exercisable after the expiration of five (5) years after the
effective date of grant of such Option, (c) no Option granted to a
prospective Employee, prospective Consultant or prospective Director may
become exercisable prior to the date on which such person commences Service
with a Participating Company, and (d) with the exception of an Option granted
to an officer, Director or Consultant, no Option shall become exercisable at
a rate less than twenty percent (20%) per year over a period of five (5)
years from the effective date of grant of such Option, subject to the
Optionee's

<PAGE>

continued Service. Subject to the foregoing, unless otherwise specified by
the Board in the grant of an Option, any Option granted hereunder shall
terminate ten (10) years after the effective date of grant of the Option,
unless earlier terminated in accordance with its provisions.

         6.3  PAYMENT OF EXERCISE PRICE.

         (a)  FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise provided
below, payment of the exercise price for the number of shares of Stock being
purchased pursuant to any Option shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the
assignment to the Company of the proceeds of a sale or loan with respect to
some or all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv)
provided that the Optionee is an Employee and in the Company's sole
discretion at the time the Option is exercised, by delivery of the Optionee's
promissory note in a form approved by the Company for the aggregate exercise
price, provided that, if the Company is incorporated in the State of
Delaware, the Optionee shall pay in cash that portion of the aggregate
exercise price not less than the par value of the shares being acquired, (v)
by such other consideration as may be approved by the Board from time to time
to the extent permitted by applicable law, or (vi) by any combination
thereof. The Board may at any time or from time to time, by approval of or by
amendment to the standard forms of Option Agreement described in Section 7,
or by other means, grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.

         (b)  LIMITATIONS ON FORMS OF CONSIDERATION.

              (i)   TENDER OF STOCK. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided
by the Board, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either
have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company.

              (ii)  CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.

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              (iii) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject
to the regulations promulgated by the Board of Governors of the Federal
Reserve System or any other governmental entity affecting the extension of
credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the
unpaid principal and accrued interest, if any, to the extent necessary to
comply with such applicable regulations.

         6.4  TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company,
equal to all or any part of the federal, state, local and foreign taxes, if
any, required by law to be withheld by the Participating Company Group with
respect to such Option or the shares acquired upon the exercise thereof.
Alternatively or in addition, in its discretion, the Company shall have the
right to require the Optionee, through payroll withholding, cash payment or
otherwise, including by means of a Cashless Exercise, to make adequate
provision for any such tax withholding obligations of the Participating
Company Group arising in connection with the Option or the shares acquired
upon the exercise thereof. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall
not exceed the amount determined by the applicable minimum statutory
withholding rates. The Company shall have no obligation to deliver shares of
Stock or to release shares of Stock from an escrow established pursuant to
the Option Agreement until the Participating Company Group's tax withholding
obligations have been satisfied by the Optionee.

         6.5  REPURCHASE RIGHTS. Shares issued under the Plan may be subject
to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its discretion at
the time the Option is granted. The Company shall have the right to assign at
any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on such
certificates of appropriate legends evidencing any such transfer restrictions.

         6.6  EFFECT OF TERMINATION OF SERVICE.

              (a)  OPTION EXERCISABILITY. Subject to earlier termination of
the Option as otherwise provided herein and unless otherwise provided by the
Board in the grant of an Option and set forth in the Option Agreement, an
Option shall be exercisable after an Optionee's

<PAGE>

termination of Service only during the applicable time period determined in
accordance with this Section 6.6 and thereafter shall terminate:

                   (i)   DISABILITY. If the Optionee's Service with the
Participating Company Group terminates because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date
on which the Optionee's Service terminated, may be exercised by the Optionee
(or the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's
Service terminated, but in any event no later than the date of expiration of
the Option's term as set forth in the Option Agreement evidencing such Option
(the "OPTION EXPIRATION DATE").

                   (ii)  DEATH. If the Optionee's Service with the
Participating Company Group terminates because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which
the Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option
by reason of the Optionee's death at any time prior to the expiration of
twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date. The Optionee's
Service shall be deemed to have terminated on account of death if the
Optionee dies within thirty (30) days (or such longer period of time as
determined by the Board, in its discretion) after the Optionee's termination
of Service.

                   (iii) TERMINATION AFTER CHANGE IN CONTROL. The Board may,
in its discretion, provide in any Option Agreement that if the Optionee's
Service with the Participating Company Group ceases as a result of
"Termination After Change in Control" (as defined in such Option Agreement),
then (1) the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date, and
(2) the exercisability and vesting of the Option and any shares acquired upon
the exercise thereof shall be accelerated effective as of the date on which
the Optionee's Service terminated to such extent, if any, as shall have been
determined by the Board, in its discretion, and set forth in the Option
Agreement. Notwithstanding the foregoing, if it is determined that the
provisions or operation of this Section 6.6(a)(iii) would preclude treatment
of a Change in Control as a "pooling-of-interests" for accounting purposes
and provided further that in the absence of the preceding sentence such
Change in Control would be treated as a "pooling-of-interests" for accounting
purposes, then this Section 6.6(a)(iii) shall be void AB INITIO, and the
vesting and exercisability of the Option shall be determined under any other
applicable provision of the Plan or the Option Agreement evidencing such
Option.

                   (iv)  OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason,
except Disability, death or Termination After Change in Control, the Option,
to the extent unexercised and exercisable by the Optionee on the date on
which the Optionee's Service terminated, may be exercised by the

<PAGE>

Optionee at any time prior to the expiration of thirty (30) days (or such
longer period of time as determined by the Board, in its discretion) after
the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date.

              (b)  EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of an Option within the applicable time
periods set forth in Section 6.6(a) is prevented by the provisions of Section
10 below, the Option shall remain exercisable until thirty (30) days (or such
longer period of time as determined by the Board, in its discretion) after
the date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

              (c)  EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods
set forth in Section 6.6(a) of shares acquired upon the exercise of the
Option would subject the Optionee to suit under Section 16(b) of the Exchange
Act, the Option shall remain exercisable until the earliest to occur of (i)
the tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of Service, or (iii)
the Option Expiration Date.

         6.7  TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an Option shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Board, in its discretion, and set forth in the Option Agreement evidencing
such Option, a Nonstatutory Stock Option shall be assignable or transferable
subject to the applicable limitations, if any, described in Section
260.140.41 of Title 10 of the California Code of Regulations, Rule 701 under
the Securities Act, and the General Instructions to Form S-8 Registration
Statement under the Securities Act.

    7.   STANDARD FORMS OF OPTION AGREEMENT.

         7.1  OPTION AGREEMENT. Unless otherwise provided by the Board at the
time the Option is granted, an Option shall comply with and be subject to the
terms and conditions set forth in the appropriate form of Option Agreement
approved by the Board concurrently with its adoption of the Plan and as
amended from time to time.

         7.2  AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any standard form of Option Agreement
described in this Section 7 either in connection with the grant or amendment
of an individual Option or in connection with the authorization of a new
standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Option Agreement
are not inconsistent with the terms of the Plan.

    8.   CHANGE IN CONTROL.

<PAGE>

         8.1  DEFINITIONS.

              (a)  An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the shareholders of the Company of more than fifty percent
(50%) of the voting stock of the Company; (ii) a merger or consolidation in
which the Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.

              (b)  A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting
stock immediately before the Transaction, direct or indirect beneficial
ownership of more than fifty percent (50%) of the total combined voting power
of the outstanding voting stock of the Company or the corporation or
corporations to which the assets of the Company were transferred (the
"TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one
or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or
through one or more subsidiary corporations. The Board shall have the right
to determine whether multiple sales or exchanges of the voting stock of the
Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.

         8.2  EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. In the event the
Acquiring Corporation elects not to assume or substitute for outstanding
Options in connection with a Change in Control, any unexercisable or unvested
portions of outstanding Options and any shares acquired upon the exercise
thereof held by Optionees whose Service has not terminated prior to such date
shall be immediately exercisable and vested in full as of the date ten (10)
days prior to the date of the Change in Control. The exercise or vesting of
any Option and any shares acquired upon the exercise thereof that was
permissible solely by reason of this Section 8.2 shall be conditioned upon
the consummation of the Change in Control. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with
the Change in Control nor exercised as of the date of the Change in Control
shall terminate and cease to be outstanding effective as of the date of the
Change in Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if

<PAGE>

the corporation the stock of which is subject to the outstanding Options
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent
(50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding
Options shall not terminate unless the Board otherwise provides in its
discretion.

    9.   PROVISION OF INFORMATION.

         At least annually, copies of the Company's balance sheet and income
statement for the just completed fiscal year shall be made available to each
Optionee and purchaser of shares of Stock upon the exercise of an Option. The
Company shall not be required to provide such information to key employees
whose duties in connection with the Company assure them access to equivalent
information.

    10.  COMPLIANCE WITH SECURITIES LAW.

         The grant of Options and the issuance of shares of Stock upon
exercise of Options shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such
securities. Options may not be exercised if the issuance of shares of Stock
upon exercise would constitute a violation of any applicable federal, state
or foreign securities laws or other law or regulations or the requirements of
any stock exchange or market system upon which the Stock may then be listed.
In addition, no Option may be exercised unless (a) a registration statement
under the Securities Act shall at the time of exercise of the Option be in
effect with respect to the shares issuable upon exercise of the Option or (b)
in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities
Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to
be necessary to the lawful issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to the exercise of any Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and
to make any representation or warranty with respect thereto as may be
requested by the Company.

    11.  TERMINATION OR AMENDMENT OF PLAN.

         The Board may terminate or amend the Plan at any time. However,
subject to changes in applicable law, regulations or rules that would permit
otherwise, without the approval of the Company's shareholders, there shall be
(a) no increase in the maximum aggregate number of shares of Stock that may
be issued under the Plan (except by operation of the provisions of Section
4.2), (b) no change in the class of persons eligible to receive Incentive
Stock Options, and (c) no other amendment of the Plan that would require
approval of the Company's

<PAGE>

shareholders under any applicable law, regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding Option unless
expressly provided by the Board. In any event, no termination or amendment of
the Plan may adversely affect any then outstanding Option without the consent
of the Optionee, unless such termination or amendment is required to enable
an Option designated as an Incentive Stock Option to qualify as an Incentive
Stock Option or is necessary to comply with any applicable law, regulation or
rule.

    12.  SHAREHOLDER APPROVAL.

         The Plan or any increase in the maximum aggregate number of shares
of Stock issuable thereunder as provided in Section 4.1 (the "AUTHORIZED
SHARES") shall be approved by the shareholders of the Company within twelve
(12) months of the date of adoption thereof by the Board. Options granted
prior to shareholder approval of the Plan or in excess of the Authorized
Shares previously approved by the shareholders shall become exercisable no
earlier than the date of shareholder approval of the Plan or such increase in
the Authorized Shares, as the case may be.

    IN WITNESS WHEREOF, the undersigned President of the Company certifies
that the foregoing sets forth the Finisar Corporation 1999 Stock Option Plan
as duly adopted by the Board on April 20, 1999.


                                         /s/ Jerry S. Rawls
                                         ------------------------------------
                                         President

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