EXHIBIT 99.4
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 Restoration Hardware, Inc. (the "Corporation") and
_________________ ("Optionee") evidencing the stock option (the "Option")
granted this date to Optionee under the terms of the Corporation's 1998 Stock
Incentive Plan, and such provisions shall be effective immediately with such
grant date. All capitalized terms in this Addendum, to the extent not otherwise
defined herein, shall have the meanings assigned to them in the Option
Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
(i) Optionee shall have the unconditional right,
exercisable at any time during the thirty (30)-day period immediately
following a Hostile Take-Over, to surrender the Option to the
Corporation, to the extent the Option is at the time exercisable for one
or more shares of Common Stock. In return for the surrendered Option,
Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock for which the surrendered option (or surrendered portion) is
at the time exercisable over (B) the aggregate Exercise Price payable for
such shares.
(ii) To exercise this limited stock appreciation right,
Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in
which there is specified the number of Option Shares as to which the
Option is being surrendered. Such notice must be accompanied by the
return of Optionee's copy of the Option Agreement, together with any
written amendments to such Agreement. The cash distribution shall be paid
to Optionee within five (5) business days following such delivery date.
The exercise of the limited stock appreciation right in accordance with
the terms of this Addendum is hereby approved by the Plan Administrator,
in advance of such exercise, and no further approval of the Plan
Administrator or the Board shall be required at the time of the actual
option surrender and cash distribution. Upon receipt of such cash
distribution, the Option shall be cancelled with respect to the Option
Shares for which the Option has been surrendered, and Optionee shall
cease to have any further right to acquire those Option Shares under the
Option Agreement. The Option shall, however, remain outstanding and
exercisable for the balance of the Option Shares (if any) in accordance
with the terms of the Option Agreement, and the Corporation shall issue a
replacement stock option agreement (substantially in the same form of the
surrendered Option Agreement) for those remaining Option Shares.
(iii) In no event may this limited stock appreciation right
be exercised when there is not a positive spread between the Fair Market
Value of the Option Shares subject to the surrendered option and the
aggregate Exercise Price payable for such shares. This limited stock
appreciation right shall in all events terminate upon the expiration or
sooner termination of the Option term and may not be assigned or
transferred by Optionee, except to the extent the Option is transferable in
accordance with the provisions of the Option Agreement.
2. For purposes of this Addendum, the following definitions shall be
in effect:
(i) A HOSTILE TAKE-OVER shall be deemed to occur upon 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 0000 Xxx) 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.
(ii) The TAKE-OVER PRICE per share shall be deemed to be
equal to the greater of (A) the Fair Market Value per Option Share on the
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option surrender date or (B) the highest reported price per share of
Common Stock paid by the tender offeror in effecting the Hostile Take-
Over. However, if the surrendered Option is designated as an Incentive
Option in the Grant Notice, then the Take-Over Price shall not exceed the
clause (A) price per share.
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IN WITNESS WHEREOF, Restoration Hardware, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
RESTORATION HARDWARE, INC.
By:___________________________________
Title:________________________________
EFFECTIVE DATE: ______________, 199__
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