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 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.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
- 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 vested 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 which are at the time vested under the surrendered Option
(or surrendered portion) over (B) the aggregate Exercise Price payable for such
shares.
- 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) 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. No further approval of the Plan
Administrator 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 new stock option
agreement (substantially in the same form of the surrendered Option Agreement)
for those remaining Option Shares.
- 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 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.
2. For purposes of this Addendum, the following definitions shall be
in effect:
- A HOSTILE TAKE-OVER shall be deemed to occur in the
event 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)
directly or indirectly acquires 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.
- 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 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.
2.
