EXHIBIT 99.5
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement (the "Option Agreement") by
and between Advanced Fibre Communications, Inc. (the "Corporation") and
____________________ ("Optionee") evidencing the stock option (the "Option")
granted on _____________________, 199__ to Optionee under the terms of the
Corporation's 1996 Stock Incentive Plan, and such provisions shall be effective
immediately. All capitalized terms in this Addendum, to the extent not
otherwise defined herein, shall have the meanings assigned to them in the Option
Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CHANGE IN CONTROL
1. The Option shall not accelerate upon the occurrence of a Change
in Control, and the Option shall, over Optionee's continued period of Service
after the Change in Control, continue to become exercisable for the Option
Shares in accordance with the provisions of the Option Agreement. However,
immediately upon an Involuntary Termination of Optionee's Service within
eighteen (18) months following the Change in Control, the Option, to the extent
outstanding at the time but not otherwise fully exercisable, shall automatically
accelerate so that the Option shall become immediately exercisable for all the
Option Shares at the time subject to the Option and may be exercised for any or
all of those Option Shares as fully vested shares. The Option shall remain so
exercisable until the EARLIER of (i) the Expiration Date or (ii) the expiration
of the one (1)-year period measured from the date of the Involuntary
Termination.
2. For purposes of this Addendum, a CHANGE IN CONTROL shall be
deemed to occur in the event of a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be
comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.
3. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall
mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces Optionee's level of responsibility, (B)
a reduction in Optionee's level of compensation (including base salary,
fringe benefits and participation in any corporate-performance based bonus
or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of Optionee's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected by
the Corporation without Optionee's consent.
4. The provisions of Paragraph 1 of this Addendum shall govern the
period for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the Change
in Control and shall supersede any provisions to the contrary in Paragraph 5 of
the Option Agreement.
2.