1
EXHIBIT 99.4
PAIRGAIN TECHNOLOGIES, INC.
STOCK OPTION ASSUMPTION AGREEMENT
OPTIONEE:
STOCK OPTION ASSUMPTION AGREEMENT issued as of the __ day of
_____, 1997 by PairGain Technologies, Inc., a Delaware corporation ("PairGain").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Avidia
Systems, Inc., a Delaware corporation ("Avidia"), which were granted to Optionee
under the Avidia, Systems, Inc. 1996 Stock Plan (the "Plan") and are evidenced
by a Stock Option Agreement (the "Option Agreement") between Avidia and
Optionee.
WHEREAS, Avidia has this day been acquired by PairGain through
merger of a wholly-owned PairGain subsidiary ("Acquisition Corporation") with
and into Avidia (the "Merger") pursuant to the Agreement and Plan of Merger
dated February 19, 1997 by and among PairGain, Avidia and Acquisition
Corporation (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require PairGain
to assume all obligations of Avidia under all options outstanding under the Plan
at the consummation of the Merger and to issue to the holder of each outstanding
option an agreement evidencing the assumption of such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio in effect for the Merger is 0.397478397 of a share of PairGain
common stock ("PairGain Stock") for each outstanding share of Avidia Stock (the
"Exchange Ratio").
WHEREAS, this Agreement is to become effective immediately upon
the consummation of the Merger (the "Effective Time") in order to reflect
certain adjustments to Optionee's outstanding options under the Plan which have
become necessary by reason of the assumption of those options by PairGain in
connection with the Merger.
2
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Avidia common stock ("Avidia Stock")
subject to the stock options held by Optionee under the Plan immediately prior
to the Effective Time (the "Avidia Options") and the exercise price payable per
share are set forth in Exhibit A hereto. PairGain hereby assumes, as of the
Effective Time, all the duties and obligations of Avidia under each of the
Avidia Options. In connection with such assumption, the number of shares of
PairGain Stock purchasable under each Avidia Option hereby assumed and the
exercise price payable thereunder have been adjusted to reflect the Exchange
Ratio at which shares of Avidia Stock were converted into shares of PairGain
Stock in consummation of the Merger. Accordingly, the number of shares of
PairGain Stock subject to each Avidia Option hereby assumed shall be as
specified for that option in attached Exhibit B, and the adjusted exercise price
payable per share of PairGain Stock under the assumed Avidia Option shall be as
indicated for that option in attached Exhibit B.
2. The intent of the foregoing adjustments to each assumed Avidia
Option is to assure that the spread between the aggregate fair market value of
the shares of PairGain Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this agreement will,
immediately after the consummation of the Merger, equal the spread which
existed, immediately prior to the Merger, between the then aggregate fair market
value of the Avidia Stock subject to the Avidia Option and the aggregate
exercise price in effect at such time under the Option Agreement. Such
adjustments are also designed to preserve, immediately after the Merger, on a
per share basis, the same ratio of exercise price per option share to fair
market value per share which existed under the Avidia Option immediately prior
to the Merger.
3. The following provisions shall govern each Avidia Option
hereby assumed by PairGain:
(a) Unless the context otherwise requires, all
references to the "Company" in each Option Agreement and in the
Plan (as incorporated into such Option Agreement) shall mean
PairGain, all references to "Common Stock" shall mean shares of
PairGain Stock, and all references to the "Board of Directors"
shall mean the Compensation Committee of the PairGain Board of
Directors.
(b) The grant date and the expiration date of each
assumed Avidia Option and all other provisions which govern
either the exercisability or the termination of the assumed
Avidia Option shall remain the same as set forth in the Option
Agreement applicable to that option and shall accordingly govern
and control Optionee's rights under this Agreement to purchase
PairGain Stock.
(c) Each assumed Avidia Option shall remain
exercisable in accordance with the same installment exercise
schedule in effect under the applicable Option Agreement
immediately prior to the Effective Time, with the number of
shares of PairGain Stock subject to each such installment
adjusted to reflect the Exchange Ratio. Accordingly, no
accelerated vesting of the Avidia
2
3
Options shall be deemed to automatically occur by reason of the
Merger, and the grant date for each assumed Avidia Option shall
accordingly remain the same as in effect under the applicable
Option Agreement immediately prior to the Merger.
(d) For purposes of applying any and all provisions
of the Option Agreement relating to Optionee's status as an
employee with the Company, Optionee shall be deemed to continue
in such employee status for so long as Optionee renders services
as an employee to PairGain or any present or future PairGain
subsidiary, including (without limitation) Avidia. Accordingly,
the provisions of the Option Agreement governing the termination
of the assumed Avidia Option upon Optionee's cessation of
employee status with Avidia shall hereafter be applied on the
basis of Optionee's cessation of employee status with PairGain
and its subsidiaries, and each assumed Avidia Option shall
accordingly terminate, within the designated time period in
effect under the Option Agreement for that option, following such
cessation of employment with PairGain and its subsidiaries.
(e) The adjusted exercise price payable for the
PairGain Stock subject to each assumed Avidia Option shall be
payable in any of the forms authorized under the Option Agreement
applicable to that option. For purposes of determining the
holding period of any shares of PairGain Stock delivered in
payment of such adjusted exercise price, the period for which
such shares were held as Avidia Stock prior to the Merger shall
be taken into account.
(f) In order to exercise each assumed Avidia
Option, Optionee must deliver to PairGain a written notice of
exercise in which the number of shares of PairGain Stock to be
purchased thereunder must be indicated. The exercise notice must
be accompanied by payment of the adjusted exercise price payable
for the purchased shares of PairGain Stock and should be
delivered to PairGain at the following address:
PairGain Technologies, Inc.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: ________________
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
3
4
IN WITNESS WHEREOF, PairGain Corporation has caused this Stock
Option Assumption Agreement to be executed on its behalf by its duly-authorized
officer as of the ___ day of _____, 1997.
PAIRGAIN TECHNOLOGIES, INC.
By:_______________________________
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock
Option Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Avidia Options hereby assumed by PairGain
Technologies, Inc. are as set forth in the Option Agreement, the Plan and such
Stock Option Assumption Agreement.
______________________________
OPTIONEE
DATED: __________________, 199_
4
5
EXHIBIT A
Optionee's Outstanding Options to Purchase Shares of Avidia Systems, Inc.
Common Stock (Pre-Merger)
6
EXHIBIT B
Optionee's Outstanding Options to Purchase Shares of PairGain
Technologies, Inc.
Common Stock (Post-Merger)
