Document:

Dated this 31st May 2000

                                      Deed

                                     between

                              RICHARD JOHN PIROUET

                                       and

                          CLIVE AUBREY CHARLES CHAPLIN

                                       and

                              RONALD WILLIAM GREEN

                                       and

                             VICTOR ALOYSIUS HEBERT

                                       and

                                CHRISTOPHER BYRNE

<PAGE>

THIS DEED is made the 31st day of May 2000

BETWEEN

1.       RICHARD  JOHN PIROUET of La Colline,  Le Mont  Cambrai,  St.  Lawrence,
         Jersey, (the "Retiring Trustee")

2.       CLIVE  AUBREY  CHARLES  CHAPLIN of Whiteley  Chambers,  Don Street,  St
         Helier,  Jersey  and RONALD  WILLIAM  GREEN of Minden  House,  6 Minden
         Place,  St  Helier,  Jersey,  and  VICTOR  ALOYSIUS  HEBERT of 333 Bush
         Street,  San Francisco,  California  94104-2878,  USA (the  "Continuing
         Trustees" and, together with the Retiring Trustee, the "Trustees"); and

3.       CHRISTOPHER BYRNE of Whiteley Chambers,  Don Street, St Helier,  Jersey
         (the "Additional Trustee").

SUPPLEMENTAL TO:-

1.       A settlement of trust dated 16 February 1990 and made between  Berkeley
         Govett & Company Limited and John Gerald Patrick Wheeler and Ian Walter
         Stanley Strang and known as the Berkeley  Govett & Company Limited 1990
         Employee Share Option Trust (the "Settlement").

2.       A Deed dated 14 April 1992 made by John Gerald Patrick  Wheeler and Ian
         Walter Stanley Strang resolving to change the name of the Settlement to
         THE GOVETT & COMPANY EMPLOYEE SHARE OPTION TRUST.

3.       An Instrument  dated 18 March 1994 between John Gerald Patrick Wheeler,
         Ian Walter Stanley Strang and Richard John Pirouet  whereby John Gerald
         Patrick  Wheeler  retired as  Trustee  and  Richard  John  Pirouet  was
         appointed as a new Trustee.
<PAGE>

4.       An  Instrument  dated 27  September  1994  between  Ian Walter  Stanely
         Strang,  Richard John Pirouet and Clive Aubrey Charles  Chaplin whereby
         Clive Aubrey Charles Chaplin was appointed as a new Trustee.

5.       An  Instrument  dated 3 March 1995 between Ian Walter  Stanley  Strang,
         Richard  John  Pirouet and Clive  Aubrey  Charles  Chaplin  whereby Ian
         Walter Stanley Strang retired as a trustee.

6.       A Deed dated 29 December  1995 made by Richard  John  Pirouet and Clive
         Aubrey Charles  Chaplin  resolving to change the name of the Settlement
         to THE LONDON PACIFIC GROUP 1990 EMPLOYEE SHARE OPTION TRUST.

7.       A Deed dated 22 August 1996 made by Richard John Pirouet,  Clive Aubrey
         Charles  Chaplin and Ronald  William Green whereby Ronald William Green
         was appointed an Additional Trustee.

8.       Amendment No.1 to the Rules of the  Settlement  approved and adopted by
         resolution of the Trustees of the Settlement on the 24th October 1995.

9.       Amendment No.2 to the Rules of the  Settlement  approved and adopted by
         resolution of the Trustees of the Settlement on the 29th January 1996.

10.      A Deed dated 29th August 1998 made by and between the Trustees  whereby
         Victor   Aloysius  Hebert  was  appointed  as  a  new  Trustee  of  the
         Settlement.

11.      A Deed dated 20th  November 1998 between  London  Pacific Group Limited
         and the Trustees  amending the Rules of the Settlement with effect from
         30th November 1998.

12.      A Deed dated 31st May 2000 between the  Trustees  amending the Rules of
         the Settlement with effect from 2nd June 2000.

WHEREAS:-

A.       The  Retiring  Trustee  and the  Continuing  Trustees  are the  present
         trustees of the Settlement.
<PAGE>

B.       Pursuant to Clause 6 of the Settlement  the Retiring  Trustee wishes to
         resign as a trustee of the settlement with effect from 1st June 2000.

C.       The Retiring  Trustee  wishes to be  discharged  from the trusts of the
         Settlement upon being indemnified as follows.

D.       By clause 6 of the Settlement the Trustees have power to appoint one or
         more other persons to be additional trustees thereof.

E.       The Trustees are desirous of appointing  an Additional  Trustee to be a
         trustee of the Settlement  and the Additional  Trustee has consented to
         such appointment.

F.       The property,  at present subject to the trusts of the  Settlement,  is
         specified in the schedule hereto and it is intended that as soon as may
         be  after  the  execution  of this  Deed  the  said  property  shall be
         transferred  into the names of or under the  control of the  Continuing
         Trustees and the Additional Trustee.

NOW THIS DEED WITNESSETH as follows:-

1.       Unless the context otherwise required words and expressions used herein
         and defined in the  Settlement  shall have the same meanings  herein as
         are ascribed to them in the Settlement.

2.       The Retiring  Trustee hereby resigns the  Trusteeship of the Settlement
         with effect from 1st June 2000.

3.       The Retiring  Trustee  hereby retires from the trusts of the Settlement
         with effect from 1st June 2000 and is hereby discharged from the same.

4.       In  exercise  of the  power  conferred  upon  them by  clause  6 of the
         Settlement the Trustees  hereby appoint the Additional  Trustee to be a
         new Trustee of the Settlement with effect from 1st June 2000.

5.       The new Trustee hereby accepts such appointment.
<PAGE>

6.       It is hereby agreed and declared that such  appointment  and retirement
         shall take effect from 1 June 2000 and that the property now subject to
         the Settlement,  and all rights,  powers,  interest and entitlements of
         the Retiring  Trustee arising under the Settlement,  shall  immediately
         vest in the Continuing Trustees and the Additional Trustee.

7.       The Continuing  Trustees and the Additional Trustee hereby consent with
         the  Retiring  Trustee  at all  times  hereafter  to keep the  Retiring
         Trustee fully and effectually indemnified and held harmless against all
         actions,  proceedings,  accounts,  claims  and  demands  (and costs and
         expenses in connection  therewith) which may be brought or made against
         the Retiring Trustee whether by any Beneficiary of the Settlement,  any
         other party interested under the Settlement or any third party, arising
         out of any act or omission of the Retiring  Trustee in connection  with
         the  trusts  of the  Settlement  or in any other  way  relating  to the
         Settlement  or to the  assets  comprised  therein  from  time  to  time
         including any taxes,  duties or other fiscal liabilities payable in any
         part of the world on, or in, respect of the assets comprising the Trust
         Fund and  whether  in respect  of a period or event  falling  wholly or
         partly  prior  to the  date  hereof  and  whether  the  same  shall  be
         enforceable in law against the Retiring  Trustee or not PROVIDED ALWAYS
         THAT:-

         i.       the  indemnity  herein  contained  shall  not  extend  to  any
                  liabilities  of the Retiring  Trustee  arising from any fraud,
                  wilful neglect or default or gross  negligence on the party of
                  the Retiring Trustee;

         ii.      the  Retiring  Trustee  shall  only  be able  to  enforce  the
                  indemnity  herein  given  against  the  assets  (or the  value
                  produced by a subsequent disposition thereof) contained in the
                  Trust Fund at the time a claim is made hereunder.

8.       The  Retiring  Trustee  shall  notify the  Continuing  Trustees and the
         Additional  Trustee of any actions,  proceedings,  accounts,  claims or
         demands which may be brought, or made against,  the Retiring Trustee in
         respect of which the  Retiring  Trustee may be entitled to an indemnity
         hereunder as soon as possible  after becoming aware of any such actions
         as  aforesaid  and the  Retiring  Trustee  shall make no  admission  of
         liability  of any sort nor give any  undertaking,  offer or  promise in
         respect thereof,  nor make any payments in respect  thereof,  nor enter
         into any  correspondence or negotiations in respect thereof,  nor incur
         any legal  expenses in connection  therewith  without the prior
<PAGE>

         written consent of the Continuing  Trustees and the Additional  Trustee
         which shall be  entitled,  if they so desire,  to take over and conduct
         the defence of any such actions as aforesaid.

9.       This deed shall be governed by and  construed  in  accordance  with the
         laws of The Island of Jersey and the parties hereby  irrevocably submit
         to the  non-exclusive  jurisdiction of the courts of the said Island of
         Jersey.

IN WITNESS  whereof these  presents have been executed by the parties hereto the
day and year first above written.

                                  THE SCHEDULE

         12,078,381 Ordinary 5c Shares in London Pacific Group Limited.

SIGNED by the said
RICHARD JOHN PIROUET
in the presence of:-

SIGNED by the said
CLIVE AUBREY CHARLES CHAPLIN
in the presence of:-

SIGNED by the said
RONALD WILLIAM GREEN
in the presence of:-

SIGNED by the said
VICTOR ALOYSIUS HEBERT
in the presence of:-

SIGNED by the said
CHRISTOPHER BYRNE
in the presence of:-<PAGE>   1

                                                                    EXHIBIT 10.6

                      ALLIANCE FIBER OPTIC PRODUCTS, INC.

                        2000 EMPLOYEE STOCK PURCHASE PLAN

                   (Adopted by the Board on September 7, 2000)

<PAGE>   2
<TABLE>
<CAPTION>
                                Table of Contents

                                                                                          Page
                                                                                          ----
<S>        <C>                                                                           <C>
SECTION 1. PURPOSE OF THE PLAN...............................................................1

SECTION 2. DEFINITIONS.......................................................................1
   (A)  "ACCUMULATION PERIOD"................................................................1
   (B)  "BOARD"..............................................................................1
   (C)  "CODE"...............................................................................1
   (D)  "COMMITTEE"..........................................................................1
   (E)  "COMPANY"............................................................................1
   (F)  "COMPENSATION".......................................................................1
   (G)  "CORPORATE REORGANIZATION"...........................................................1
   (H)  "ELIGIBLE EMPLOYEE"..................................................................2
   (I)  "EXCHANGE ACT".......................................................................2
   (J)  "FAIR MARKET VALUE"..................................................................2
   (K)  "IPO"................................................................................2
   (L)  "OFFERING PERIOD"....................................................................2
   (M)  "PARTICIPANT"........................................................................2
   (N)  "PARTICIPATING COMPANY"..............................................................2
   (O)  "PLAN"...............................................................................2
   (P)  "PLAN ACCOUNT".......................................................................2
   (Q)  "PURCHASE PRICE".....................................................................2
   (R)  "STOCK"..............................................................................2
   (S)  "SUBSIDIARY".........................................................................3

SECTION 3. ADMINISTRATION OF THE PLAN........................................................3
   (A)  COMMITTEE COMPOSITION................................................................3
   (B)  COMMITTEE RESPONSIBILITIES...........................................................3

SECTION 4. ENROLLMENT AND PARTICIPATION......................................................3
   (A)  OFFERING PERIODS.....................................................................3
   (B)  ACCUMULATION PERIODS.................................................................3
   (C)  ENROLLMENT...........................................................................3
   (D)  DURATION OF PARTICIPATION............................................................3
   (E)  APPLICABLE OFFERING PERIOD...........................................................4

SECTION 5. EMPLOYEE CONTRIBUTIONS............................................................4
   (A)  FREQUENCY OF PAYROLL DEDUCTIONS......................................................4
   (B)  AMOUNT OF PAYROLL DEDUCTIONS.........................................................4
   (C)  CHANGING WITHHOLDING RATE............................................................4
   (D)  DISCONTINUING PAYROLL DEDUCTIONS.....................................................4
   (E)  LIMIT ON NUMBER OF ELECTIONS.........................................................4

SECTION 6. WITHDRAWAL FROM THE PLAN..........................................................5
   (A)  WITHDRAWAL...........................................................................5
   (B)  RE-ENROLLMENT AFTER WITHDRAWAL.......................................................5

SECTION 7. CHANGE IN EMPLOYMENT STATUS.......................................................5
   (A)  TERMINATION OF EMPLOYMENT............................................................5
   (B)  LEAVE OF ABSENCE.....................................................................5
   (C)  DEATH................................................................................5
</TABLE>

                                       i
<PAGE>   3

<TABLE>

<S>        <C>                                                                           <C>
SECTION 8. PLAN ACCOUNTS AND PURCHASE OF SHARES..............................................5
   (A)  PLAN ACCOUNTS........................................................................5
   (B)  PURCHASE PRICE.......................................................................5
   (C)  NUMBER OF SHARES PURCHASED...........................................................6
   (D)  AVAILABLE SHARES INSUFFICIENT........................................................6
   (E)  ISSUANCE OF STOCK....................................................................6
   (F)  UNUSED CASH BALANCES.................................................................6
   (G)  STOCKHOLDER APPROVAL.................................................................6

SECTION 9. LIMITATIONS ON STOCK OWNERSHIP....................................................7
   (A)  FIVE PERCENT LIMIT...................................................................7
   (B)  DOLLAR LIMIT.........................................................................7

SECTION 10. RIGHTS NOT TRANSFERABLE..........................................................7

SECTION 11. NO RIGHTS AS AN EMPLOYEE.........................................................7

SECTION 12. NO RIGHTS AS A STOCKHOLDER.......................................................8

SECTION 13. SECURITIES LAW REQUIREMENTS......................................................8

SECTION 14. STOCK OFFERED UNDER THE PLAN.....................................................8
   (A)  AUTHORIZED SHARES....................................................................8
   (B)  ANTIDILUTION ADJUSTMENTS.............................................................8
   (C)  REORGANIZATIONS......................................................................8

SECTION 15. AMENDMENT OR DISCONTINUANCE......................................................8

SECTION 16. EXECUTION........................................................................9
</TABLE>

                                       ii
<PAGE>   4

                       ALLIANCE FIBER OPTIC PRODUCTS, INC.

                        2000 EMPLOYEE STOCK PURCHASE PLAN

SECTION 1.     Purpose Of The Plan.

        The Plan was adopted by the Board on September 7, 2000, effective as of
the date of the IPO. The purpose of the Plan is to provide Eligible Employees
with an opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify under
section 423 of the Code.

SECTION 2.     Definitions.

        (a) "Accumulation Period" means a six-month period during which
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).

        (b)    "Board" means the Board of Directors of the Company, as
constituted from time to time.

        (c)    "Code" means the Internal Revenue Code of 1986, as amended.

        (d)    "Committee" means a committee of the Board, as described in
Section 3.

        (e)    "Company" means Alliance Fiber Optic Products, Inc., a
California corporation.

        (f) "Compensation" means (i) the total compensation paid in cash to a
Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or
section 125 of the Code. "Compensation" shall exclude all non-cash items, moving
or relocation allowances, cost-of-living equalization payments, car allowances,
tuition reimbursements, imputed income attributable to cars or life insurance,
severance pay, fringe benefits, contributions or benefits received under
employee benefit plans, income attributable to the exercise of stock options,
and similar items. The Committee shall determine whether a particular item is
included in Compensation.

        (g)  "Corporate Reorganization" means:

            (i) The consummation of a merger or consolidation of the Company
with or into another entity, or any other corporate reorganization; or

            (ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets or the complete liquidation or
dissolution of the Company.

        (h) "Eligible Employee" means any employee of a Participating Company
whose customary employment is for more than five months per calendar year and
for more than 20 hours per week.

<PAGE>   5

        The foregoing notwithstanding, an individual shall not be considered an
Eligible Employee if his or her participation in the Plan is prohibited by the
law of any country which has jurisdiction over him or her or if he or she is
subject to a collective bargaining agreement that does not provide for
participation in the Plan.

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

        (j) "Fair Market Value" means the market price of Stock, determined by
the Committee as follows:

               (i) If Stock was traded on The Nasdaq National Market on the date
in question, then the Fair Market Value shall be equal to the last-transaction
price quoted for such date by The Nasdaq National Market; or

               (ii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; or

               (iii) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.

        Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Wall Street Journal or as
reported directly to the Company by Nasdaq or a stock exchange. Such
determination shall be conclusive and binding on all persons.

        (k) "IPO" means the initial offering of Stock to the public pursuant to
a registration statement filed by the Company with the Securities and Exchange
Commission.

        (l) "Offering Period" means a 24-month period with respect to which the
right to purchase Stock may be granted under the Plan, as determined pursuant to
Section 4(a).

        (m) "Participant" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 4(c).

        (n) "Participating Company" means (i) the Company and (ii) each present
or future Subsidiary designated by the Committee as a Participating Company.

        (o) "Plan" means this Alliance Fiber Optic Products, Inc. 2000 Employee
Stock Purchase Plan, as it may be amended from time to time.

        (p) "Plan Account" means the account established for each Participant
pursuant to Section 8(a).

        (q) "Purchase Price" means the price at which Participants may purchase
Stock under the Plan, as determined pursuant to Section 8(b).

        (r) "Stock" means the Common Stock of the Company.

                                       2
<PAGE>   6

        (s) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

SECTION 3.   Administration of the Plan.

      (a) Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.

      (b) Committee Responsibilities. The Committee shall interpret the Plan and
make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.

SECTION 4.   Enrollment and Participation.

        (a) Offering Periods. While the Plan is in effect, two Offering Periods
shall commence in each calendar year. The Offering Periods shall consist of the
24-month periods commencing on each May 1 and November 1, except that the first
Offering Period shall commence on the date of the IPO and end on October 31,
2002.

        (b) Accumulation Periods. While the Plan is in effect, two Accumulation
Periods shall commence in each calendar year. The Accumulation Periods shall
consist of the six-month periods commencing on May 1 and November 1, except that
the first Accumulation Period shall commence on the date of the IPO and end on
April 30, 2001.

        (c) Enrollment. Any individual who, on the day preceding the first day
of an Offering Period (other than the initial Offering Period), qualifies as an
Eligible Employee may elect to become a Participant in the Plan for such
Offering Period by executing the enrollment form prescribed for this purpose by
the Committee. The enrollment form shall be filed with the Company at the
prescribed location not later than 15 days prior to the commencement of such
Offering Period. All Eligible Employees shall be automatically enrolled in the
initial Offering Period under the Plan.

        (d) Duration of Participation. Once enrolled in the Plan, a Participant
shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end
of the Offering Period in which his or her employee contributions were
discontinued under Section 5(d) or 9(b). A Participant who discontinued employee
contributions under Section 5(d) or 9(b) or withdrew from the Plan under Section
6(a) may again become a Participant, if he or she then is an Eligible Employee,
by following the procedure described in Subsection (c) above. A Participant
whose employee contributions were discontinued automatically under Section 9(b)
shall automatically resume participation at the beginning of the earliest
Offering Period ending in the next calendar year, if he or she then is an
Eligible Employee.

                                       3
<PAGE>   7

      (e) Applicable Offering Period. For purposes of calculating the purchase
price under Section 8(b), the applicable Offering Period shall be determined as
follows:

               (i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until the
earliest of: (A) the end of such Offering Period; (B) the end of his or her
participation under Subsection (d) above; or (C) re-enrollment in a subsequent
Offering Period under Paragraph (ii) below.

               (ii) In the event that the Fair Market Value of Stock on the last
trading day before the commencement of the Offering Period in which the
Participant is enrolled is higher than on the last trading day before the
commencement of any subsequent Offering Period, the Participant shall
automatically be re-enrolled for such subsequent Offering Period.

               (iii) When a Participant reaches the end of an Offering Period
but his or her participation is to continue, then such Participant shall
automatically be re-enrolled for the Offering Period that commences immediately
after the end of the prior Offering Period.

SECTION 5.   Employee Contributions.

        (a) Frequency of Payroll Deductions. A Participant may purchase shares
of Stock under the Plan solely by means of payroll deductions; provided,
however, that in the initial Accumulation Period, Participants may also purchase
shares of Stock by making a lump sum cash payment at the end of the Accumulation
Period. Payroll deductions, as designated by the Participant pursuant to
Subsection (b) below, shall occur on each payday during participation in the
Plan.

        (b) Amount of Payroll Deductions. An Eligible Employee shall designate
on the enrollment form the portion of his or her Compensation that he or she
elects to have withheld for the purchase of Stock. Such portion shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 20%. During the initial Accumulation Period, no payroll deduction
will be made unless a Participant timely files the proper form with the Company
after a registration statement covering the Stock is filed and effective under
the Securities Act of 1933, as amended.

        (c) Changing Withholding Rate. If a Participant wishes to change the
rate of payroll withholding, he or she may do so by filing a new enrollment form
with the Company at the prescribed location at any time. The new withholding
rate shall be effective as soon as reasonably practicable after such form has
been received by the Company. The new withholding rate shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 20%.

       (d) Discontinuing Payroll Deductions. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time. Payroll
withholding shall cease as soon as reasonably practicable after such form has
been received by the Company. (In addition, employee contributions may be
discontinued automatically pursuant to Section 9(b)). A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding shall resume as soon as reasonably practicable after such form has
been received by the Company.

        (e) Limit on Number of Elections. No Participant shall make more than
two elections under Subsection (c) or (d) above during any Offering Period.

                                       4
<PAGE>   8

SECTION 6.   Withdrawal From The Plan.

        (a) Withdrawal. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Accumulation Period; provided, however, that in
the initial Accumulation Period, Participants may be deemed to withdraw from the
Plan by declining or failing to remit timely payment to the Company for the
shares of Stock. As soon as reasonably practicable thereafter, payroll
deductions shall cease and the entire amount credited to the Participant's Plan
Account shall be refunded to him or her in cash, without interest. No partial
withdrawals shall be permitted.

      (b) Re-enrollment After Withdrawal. A former Participant who has withdrawn
from the Plan shall not be a Participant until he or she re-enrolls in the Plan
under Section 4(c). Re-enrollment may be effective only at the commencement of
an Offering Period.

SECTION 7.  Change in Employment Status.

        (a) Termination of Employment. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 6(a). (A transfer from one Participating
Company to another shall not be treated as a termination of employment.)

        (b) Leave of Absence. For purposes of the Plan, employment shall not be
deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company
in writing. Employment, however, shall be deemed to terminate ninety (90) days
after the Participant goes on a leave, unless a contract or statute guarantees
his or her right to return to work. Employment shall be deemed to terminate in
any event when the approved leave ends, unless the Participant immediately
returns to work.

      (c) Death. In the event of the Participant's death, the amount credited to
his or her Plan Account shall be paid to a beneficiary designated by him or her
for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company at the
prescribed location before the Participant's death.

SECTION 8.   Plan Accounts and Purchase of Shares.

        (a) Plan Accounts. The Company shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust
funds and may be commingled with the Company's general assets and applied to
general corporate purposes. No interest shall be credited to Plan Accounts.

      (b) Purchase Price. The Purchase Price for each share of Stock purchased
on the last trading day of the month in which the Accumulation Period expired
shall be the lower of:

               (i)    85% of the Fair Market Value of such share on the last
trading day of the month in which the Accumulation Period expired; or

               (ii) 85% of the Fair Market Value of such share on the last
trading day before the commencement of the applicable Offering Period (as
determined under Section 4(e)) or, in

                                       5
<PAGE>   9

the case of the first Offering Period under the Plan, 85% of the price at which
one share of Stock is offered to the public in the IPO.

        (c) Number of Shares Purchased. As of the last trading day of each month
in which the Accumulation Period expired, each Participant shall be deemed to
have elected to purchase the number of shares of Stock calculated in accordance
with this Subsection (c), unless the Participant has previously elected to
withdraw from the Plan in accordance with Section 6(a). The amount then in the
Participant's Plan Account shall be divided by the Purchase Price, and the
number of shares that results shall be purchased from the Company with the funds
in the Participant's Plan Account. The foregoing notwithstanding, no Participant
shall purchase more than 1,333 shares of Stock with respect to any Accumulation
Period nor more than the amounts of Stock set forth in Sections 9(b) and 14(a).
The Committee may determine with respect to all Participants that any fractional
share, as calculated under this Subsection (c), shall be (i) rounded down to the
next lower whole share or (ii) credited as a fractional share.

      (d) Available Shares Insufficient. In the event that the aggregate number
of shares that all Participants elect to purchase during an Accumulation Period
exceeds the maximum number of shares remaining available for issuance under
Section 14(a), then the number of shares to which each Participant is entitled
shall be determined by multiplying the number of shares available for issuance
by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.

        (e) Issuance of Stock. Certificates representing the shares of Stock
purchased by a Participant under the Plan shall be issued to him or her as soon
as reasonably practicable after the close of the applicable Accumulation Period,
except that the Committee may determine that such shares shall be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.

        (f) Unused Cash Balances. An amount remaining in the Participant's Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 9(b) or Section 14(a) shall be refunded to the
Participant in cash, without interest.

        (g) Stockholder Approval. Any other provision of the Plan
notwithstanding, no shares of Stock shall be purchased under the Plan unless and
until the Company's stockholders have approved the adoption of the Plan.

                                       6
<PAGE>   10

SECTION 9. Limitations on Stock Ownership.

        (a) Five Percent Limit. Any other provision of the Plan notwithstanding,
no Participant shall be granted a right to purchase Stock under the Plan if such
Participant, immediately after his or her election to purchase such Stock, would
own stock possessing more than 5% of the total combined voting power or value of
all classes of stock of the Company or any parent or Subsidiary of the Company.
For purposes of this Subsection (a), the following rules shall apply:

               (i)    Ownership of stock shall be determined after applying the
attribution rules of section 424(d) of the Code;

               (ii) Each Participant shall be deemed to own any stock that he or
she has a right or option to purchase under this Plan or any other; and

               (iii) Each Participant shall be deemed to have the right to
purchase 1,333 shares of Stock under this Plan with respect to each Accumulation
Period.

        (b) Dollar Limit. Any other provision of the Plan notwithstanding, no
Participant shall purchase Stock with a Fair Market Value in excess of $25,000
per calendar year (under this Plan and all other employee stock purchase plans
of the Company or any parent or Subsidiary of the Company).

        For purposes of this Subsection (b), the Fair Market Value of Stock
shall be determined in each case as of the beginning of the Offering Period in
which such Stock is purchased. Employee stock purchase plans not described in
section 423 of the Code shall be disregarded. If a Participant is precluded by
this Subsection (b) from purchasing additional Stock under the Plan, then his or
her employee contributions shall automatically be discontinued and shall resume
at the beginning of the earliest Accumulation Period ending in the next calendar
year (if he or she then is an Eligible Employee).

        SECTION 10.   Rights Not Transferable.

        The rights of any Participant under the Plan, or any Participant's
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any manner other than by beneficiary designation or the
laws of descent and distribution. If a Participant in any manner attempts to
transfer, assign or otherwise encumber his or her rights or interest under the
Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 6(a).

        SECTION 11.   No Rights as an Employee.

        Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.

                                       7
<PAGE>   11

SECTION 12.  No Rights as a Stockholder.

        A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.

SECTION 13.  Securities Law Requirements.

        Shares of Stock shall not be issued under the Plan unless the issuance
and delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.

SECTION 14.  Stock Offered Under The Plan.

        (a) Authorized Shares. The maximum aggregate number of shares of Stock
available for purchase under the Plan is one million five hundred thousand
(1,500,000), plus an annual increase to be added on the first day of the
Company's fiscal year beginning in 2001 equal to such amount as may be
determined by the Board or, if less, the lesser of (i) one million  (1,000,000)
shares or (ii) one percent (1%) of the outstanding shares on such date. The
aggregate number of Shares available for purchase under the Plan shall at all
times be subject to adjustment pursuant to Section 14.

        (b) Antidilution Adjustments. The aggregate number of shares of Stock
offered under the Plan, the 1,333 share limitation described in Section 8(c)
and the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.

        (c) Reorganizations. Any other provision of the Plan notwithstanding,
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period then in progress shall terminate and shares shall be purchased
pursuant to Section 8, unless the Plan is assumed by the surviving corporation
or its parent corporation pursuant to the plan of merger or consolidation. The
Plan shall in no event be construed to restrict in any way the Company's right
to undertake a dissolution, liquidation, merger, consolidation or other
reorganization.

SECTION 15.  Amendment or Discontinuance.

        The Board shall have the right to amend, suspend or terminate the Plan
at any time and without notice. Except as provided in Section 14, any increase
in the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a vote of the
stockholders of the Company to the extent required by an applicable law or
regulation.

                                       8
<PAGE>   12

SECTION 16. Execution.

        To record the adoption of the Plan by the Board on September 7, 2000,
the Company has caused its authorized officer to execute the same.

                   Alliance Fiber Optic Products, Inc.

                   By:  ___________________________

                   Title: __________________________

                   Title: __________________________

                                       9

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