<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
__
|X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
|__| OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended...September 30, 1995
------------------
OR
__
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
|__| OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 0-17431
NETWORK GENERAL CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0115204
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4200 Bohannon Drive, Menlo Park, California 94025
- --------------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (415) 473-2000
--------------
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of October 1, 1995, there were outstanding 21,837,895 shares of the
Registrant's Common Stock (par value $0.01 per share).
This report, including exhibits, consists of 104 pages. The exhibit index
begins on page thirteen.
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NETWORK GENERAL CORPORATION
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Interim Financial Statements of Network General
Corporation (the "Company") have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
Company believes the disclosures included in the Condensed Consolidated Interim
Financial Statements, when read in conjunction with the Company's consolidated
financial statements as of March 31, 1995 and the notes thereto included in the
Company's 1995 Annual Report, are adequate to make the information presented not
misleading.
The Condensed Consolidated Interim Financial Statements reflect, in the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to summarize fairly the financial position, results of
operations and cash flows for such periods.
The results of operations for the six month period ended September 30, 1995
are not necessarily indicative of the results that may be expected for the
entire fiscal year ending March 31, 1996.
2
<PAGE>
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
<TABLE>
<CAPTION>
(dollars in thousands) September 30, 1995 March 31, 1995
------------------ --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $21,039 $18,950
Marketable securities 78,390 73,964
Accounts receivable, net 25,066 18,800
Inventories 2,557 4,226
Prepaid expenses and deferred tax assets 13,235 13,974
------------------ --------------
Total current assets 140,287 129,914
------------------ --------------
Property and Equipment at cost:
Demonstration and rental equipment 7,841 6,147
Office and development equipment 27,084 20,486
Leasehold improvements 2,159 1,816
------------------ --------------
37,084 28,449
Less - accumulated depreciation and amortization (19,041) (15,425)
------------------ --------------
Net property and equipment 18,043 13,024
------------------ --------------
Long-Term Investments 43,027 52,410
------------------ --------------
Other Assets 2,303 842
------------------ --------------
$203,660 $196,190
------------------ --------------
------------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $5,985 $4,186
Accrued liabilities 11,204 9,817
Deferred revenue 16,461 14,375
------------------ --------------
Total current liabilities 33,650 28,378
------------------ --------------
Long-Term Deferred Revenue and Taxes 2,258 2,225
Stockholders' Equity:
Common stock - - $.01 par value
Authorized - - 50,000,000 shares
Issued - - 22,682,895 shares at September 30, 1995 and
22,225,207 shares at March 31995 227 222
Additional paid-in-capital 118,829 109,746
Retained earnings 71,875 64,374
Less Treasury Stock, at cost - - 845,000 shares at
September 30, 1995
395,000 shares at March 31, 1995 (23,179) (8,755)
------------------ --------------
Total stockholders' equity 167,752 165,587
------------------ --------------
$203,660 $196,190
------------------ --------------
------------------ --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(in thousands, except per Three Months Ended Six Months Ended
share amounts) September 30, September 30,
1995 1994 1995 1994
-------- -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Product $35,436 $26,165 $67,266 $50,008
Service 8,293 6,210 16,203 12,417
-------- -------- -------- --------
Total Revenues 43,729 32,375 83,469 62,425
-------- -------- -------- --------
Cost of Revenues:
Product 7,744 5,492 14,648 10,299
Service 2,330 1,956 4,547 3,904
-------- -------- -------- --------
Total Cost of Revenues 10,074 7,448 19,195 14,203
-------- -------- -------- --------
Gross profit 33,655 24,927 64,274 48,222
-------- -------- -------- --------
Operating Expenses:
Sales and marketing 15,082 11,339 28,678 22,379
Research and development 6,824 4,843 12,615 9,366
General and administrative 2,946 2,256 5,577 4,416
Acquired in-process research
and development 7,153 - 7,153 -
-------- -------- -------- --------
Total Operating Expenses 32,005 18,438 54,023 36,161
-------- -------- -------- --------
Income from operations 1,650 6,489 10,251 12,061
Interest Income, net 1,860 1,152 3,606 2,245
-------- -------- -------- --------
Income before provision for
income taxes 3,510 7,641 13,857 14,306
Provision for Income Taxes 3,200 2,410 6,356 4,509
-------- -------- -------- --------
Net income $310 $5,231 $7,501 $9,797
-------- -------- -------- --------
-------- -------- -------- --------
Earnings Per Share $.01 $.24 $.33 $.45
-------- -------- -------- --------
Weighted Average Common and Common
Equivalent Shares Outstanding 22,989 22,038 22,900 21,991
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(dollars in thousands) For the six months end
September 30,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $7,501 $9,797
Adjustments to reconcile net income to net cash provided by
operating activities :
Depreciation and amortization 3,668 3,304
Acquired in-process research & development 7,153 -
Deferred taxes, net 567 3,147
(Increase) decrease in assets:
Accounts receivable (6,266) (1,675)
Inventories 1,669 (1,331)
Prepaid expenses (1,858) (4,414)
Other assets (56) (77)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 4,195 1,774
Income taxes payable (1,009) 1,997
Deferred revenue 2,144 257
----------- -----------
Net cash provided by operating activities 17,708 12,779
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held-to maturity investments (76,658) (56,674)
Proceeds from maturities of held-to-maturity investments 81,615 47,657
Cash expenditures for acquisition (6,501) -
Purchase of property and equipment (8,739) (3,540)
----------- -----------
Net cash used in investing activities (10,283) (12,557)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of issuance costs 9,088 3,979
Repurchase of common stock (14,424) (2,984)
----------- -----------
Net cash (used in) provided by financing (5,336) 995
activities ----------- -----------
Net increase in cash and cash equivalents 2,089 1,217
Cash and cash equivalents at beginning of period 18,950 4,286
----------- -----------
Cash and cash equivalents at end of period $21,039 $5,503
----------- -----------
----------- -----------
Supplemental Disclosures
Cash paid during the period for:
Interest $--- $---
Income taxes $5,060 $3,121
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
September 30, 1995
A. FINANCIAL STATEMENT PRESENTATION
Certain amounts included in the condensed consolidated interim statements of
income and the condensed consolidated interim balance sheets have been
reclassified from amounts previously reported. Such reclassifications are not
considered to be significant.
B. ACQUISITION
In September 1995 the Company acquired all of the remaining 90% of voting
interest of AIM Technology, (AIM), which it did not own for approximately
$6,501,000. The acquisition was accounted for as a purchase. Accordingly, the
result of operations of AIM have been included in the results of the Company
from the date of acquisition. The purchase price, including $600,000 invested
by the Company for 10% of the voting interest of AIM Technology prior to the
acquisition, was allocated to acquired assets and liabilities assumed based on
their estimated fair values at the acquisition date as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Cash and cash equivalents $ 309
Accounts receivable, net 347
In-process research and development 7,153
Property and equipment, net 288
Deposits & other assets 441
Accounts payable & accrued liabilities (1,437)
------
$7,101
------
------
</TABLE>
In September 1995, amounts allocated to in-process research and development
were charged to operations.
C. CASH AND CASH EQUIVALENTS, MARKETABLE DEBT SECURITIES, AND LONG-TERM
INVESTMENTS
For purposes of the consolidated statements of cash flows, the Company
considers certificates of deposits, commercial paper and money market funds with
an original maturity date of three months or less to be cash equivalents.
Marketable securities consist of municipal notes and U.S. Treasury notes with
average maturities of less than one year. Long-term investments are held to
maturity and are carried at amortized cost.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115. The Company adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" in the first
quarter of fiscal year 1995, and the affect on its financial statements was not
significant. In accordance with SFAS No. 115, the Company has classified all
marketable debt securities and long-term debt investments as Held-to-Maturity,
and has accounted for these investments at amortized cost. Accordingly, no
adjustment for unrealized holding gains or losses have been reflected in the
Company's financial statements.
6
<PAGE>
At September 30, 1995 the amortized cost basis, aggregate fair value and gross
unrealized holding gains by major security type were as follows:
<TABLE>
<CAPTION>
(In thousands) Amortized Aggregate Unrealized
Cost Fair Value Gains
--------- ---------- ----------
<S> <C> <C> <C>
Debt securities issued by the U.S. Treasury and other
U.S. govenment agencies $ 33,601 $ 33,602 1
Debt securities issued by states of the United States
and political subdivisions of the state 87,816 87,840 24
--------- ---------- ----------
$121,417 $121,442 $ 25
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
D. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and related manufacturing overhead. Inventories
consist of:
<TABLE>
<CAPTION>
(In thousands)
September 30, 1995 March 31, 1995
------------------ --------------
<S> <C> <C>
Purchased parts $1,566 $1,496
Finished goods 991 2,730
------ ------
$2,557 $4,226
------ ------
------ ------
</TABLE>
E. EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares of
common and common equivalent shares resulting from outstanding options. Fully
diluted earnings per share is the same as primary earnings per share.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
REVENUES
Revenues for the quarter ended September 30, 1995 were $43,729,000 an increase
of 35% over the $32,375,000 in revenues for the quarter ended September 30,
1994. Both domestic and international revenues increased in the second quarter
of fiscal 1996 when compared to the second quarter of fiscal 1995. Domestic
revenues increased by 43% for the quarter ended September 30, 1995 compared to
the quarter ended September 30, 1994, growing from $24,762,000 to $35,332,000.
Higher non-European international revenues offset a decrease in European
revenues causing overall international revenues to increase by 10% for the
second quarter of fiscal 1996 compared to the second quarter of fiscal 1995,
growing from $7,613,000 to $8,397,000. Although the Company is in the process of
revisiting its distribution strategy for Europe to include a combination of
third party distributors and direct sales, continued weakness in European sales
is expected to persist until such new strategy is fully implemented.
International revenues represented 19% of total revenues for quarter ended
September 30, 1995 as compared to 24% for the quarter ended September 30, 1994.
Revenues for the six month period ended September 30, 1995 were $83,469,000, an
increase of 34% over the $62,425,000 in revenues for the six month period ended
September 30, 1994. Both domestic and international revenues increased in the
first six months of fiscal 1996 when compared to the first six months of fiscal
1995. Domestic revenues increased by 37% for the six month period ended
September 30, 1995 compared to the six month period ended September 30, 1994,
growing from $48,833,000 to $67,101,000. International revenues increased by
20% for the six month period ended September 30, 1995 compared to the six month
period ended September 30, 1994, growing from $13,592,000 to $16,368,000.
International revenues represented 20% of the revenues for the six month period
ended September 30, 1995, compared to 22% for the six month period ended
September 30, 1994.
The following table presents the Company's revenues for each of its product
lines in absolute dollars and as a percentage of revenues for each of the
periods shown below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
(Dollars in Thousands) (Dollars in Thousands)
SOURCES OF REVENUE 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Tool Products(1) $21,291 $17,453 $41,715 $33,318
System Products(2) 14,145 8,712 25,551 16,690
------- ------- ------- -------
Subtotal Product Revenue 35,436 26,165 67,266 50,008
Services(3) 8,293 6,210 16,203 12,417
------- ------- ------- -------
Total Revenues $43,729 $32,375 $83,469 $62,425
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF REVENUE 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Tool Products 49% 54% 50% 53%
System Products 32% 27% 31% 27%
--- --- --- ---
Subtotal Product Revenue 81% 81% 81% 80%
Services 19% 19% 19% 20%
--- --- --- ---
Total Revenues 100% 100% 100% 100%
---- ---- ---- ----
---- ---- ---- ----
</TABLE>
- ------------------------------------
(1) Tool Products include revenues from the Sniffer-Registered Trademark-
Network Analyzer products, the PCI line of Wide Area Network (WAN) Analysis
products, the Watchdog-Trademark- Network Monitor products, product rentals, and
royalties from license agreements.
(2) System Products consist of revenues from the Distributed Sniffer System-
Registered Trademark- analysis products and from the Distributed Snifffer System
Monitoring products (formerly ProTools Network Control Series).
(3) Service revenues include first-year warranty revenue as defined by
Statement of Position ("SOP") 91-1 and revenues from software support and
maintenance contracts, training, and consulting services.
8
<PAGE>
The Company's tool product revenues increased 22% to $21,291,000 in the quarter
ended September 30, 1995, as compared to $17,453,000 for the quarter ended
September 30, 1994. Sniffer Network Analyzer products accounted for
substantially all of the Company's tool product revenues in each of the periods
shown above and are responsible for almost all of the increase in tool product
revenues from the second quarter of fiscal 1995 to the second quarter of fiscal
1996. Tool product revenues represented approximately 49% of Network General's
revenues for the second fiscal quarter ended September 30, 1995, as compared to
54% for the same period in fiscal 1995. Tool product revenues declined as a
percentage of total revenues due to faster growth in system products revenues
during this period.
Revenues from the Company's tool products were $41,715,000 in the six month
period ended September 30, 1995, a 25% increase from the $33,318,000 in tool
product revenues for the six month period ended September 30, 1994. Increased
sales of the Company's Sniffer Network Analyzer products were responsible for
almost all of the increase in tool product revenues from the first six months of
fiscal 1995 to the first six months of fiscal 1996.
Revenues for the quarter ended September 30, 1995 included $14,145,000 in system
product revenues, a 62% increase as compared to the $8,712,000 in system product
revenues for the same period in fiscal 1995. The Distributed Sniffer System
(DSS) analysis products accounted for a majority of the Company's system product
revenues in each of the periods shown above. System product revenues
represented approximately 32% of Network General's revenues for the quarter
ended September 30, 1995, as compared to 27% for the quarter ended September 30,
1994.
Revenues for the six months ended September 30, 1995 included $25,551,000 in
system product revenues, a 53% increase as compared to the $16,690,000 in system
product revenues for the six month period ended September 30, 1994. System
product revenues represented approximately 31% of Network General's revenues for
the six months ended September 30, 1995, as compared to 27% for the six months
ended September 30, 1994.
Service revenues include revenues from software support and maintenance
contracts, training, and consulting services, as well as those revenues from the
first year warranty period of customer support which had been deferred in
accordance with SOP 91-1, "Software Revenue Recognition". For the second
fiscal quarter ended September 30, 1995, service revenues increased 34% to
$8,293,000, from $6,210,000 for the same quarter in fiscal 1995. The increase
in service revenues was due to increases in all categories of service revenues.
As a percentage of total revenues, service revenues remain flat at 19% of total
revenues.
Service revenues for the six month period ended September 30, 1995 totaled
$16,203,000, an increase of 30% from the $12,417,000 in service revenues for the
six month period ended September 30, 1994. The increase in service revenues was
due to increases in all categories of service revenues. As a percentage of total
revenues, service revenues decreased slightly from 20% of total revenues in the
first six months of fiscal 1995 to 19% of total revenues in the first six months
of fiscal 1996.
GROSS PROFIT
Cost of revenues consists of manufacturing costs, cost of services and warranty
expenses. Gross profit as a percentage of revenues was 77% for all periods
shown. Gross profit and gross profit percent may vary as a result of a number
of factors, including the mix between tool products, system products and
services, third party computer platforms, which have lower margins than the
Company's own products, and the mix of international and domestic sales.
9
<PAGE>
SALES AND MARKETING EXPENSES
Sales and marketing expenses were $15,082,000 in the second quarter of fiscal
1996, an increase of 33% compared to $11,339,000 of sales and marketing
expenses in the second quarter of fiscal 1995. The increase was primarily due
to increased domestic sales expense for increased staffing, commission expense
and promotional activity needed to support increased sales. As a percent of
revenues, sales and marketing expenses were 34% and 35% for the quarters ended
September 30, 1995 and 1994, respectively. Sales and marketing expenses were
$28,678,000 in the six month period ended September 30, 1995, an increase of
28% compared to $22,379,000 of sales and marketing expenses in the same period
of fiscal 1995. As a percent of revenues, sales and marketing expenses were 34%
and 36% for the six month periods ended September 30, 1995 and 1994,
respectively.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were $6,824,000 in the second quarter of
fiscal 1996, as compared to $4,843,000 in the second quarter of fiscal 1995. As
a percent of revenues, research and development expenses were 16% for the
quarter ended September 30, 1995, and 15% for the quarter ended September 30,
1994. Research and development expenses were $12,615,000 in the first six
months of fiscal 1996, as compared to $9,366,000 in the first six months of
fiscal 1995. Research and development expenses as a percent of revenues were
15% for both six month periods ended September 30, 1995 and 1994. The increases
for the three and six month periods ended September 30, 1995 as compared to the
same periods in fiscal 1995 were due to increased staffing to support
accelerated development efforts for high speed network technology. The Company
believes that continued commitment to research and development is required to
remain competitive.
Research and development expenses are accounted for in accordance with Statement
of Financial Accounting Standards (SFAS) No. 86, under which the Company is
required to capitalize software development costs after technological
feasibility is established. Capitalizable software development costs incurred to
date have not been significant and, thus, the Company has charged all software
development costs to research and development expenses in the consolidated
statements of income.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $2,946,000 for the quarter ended
September 30, 1995 and were $2,256,000 for the quarter ended September 30, 1994.
For the six months ended September 30, 1995, general and administrative expenses
were $5,577,000, as compared to $4,416,000 for the six months ended September
30, 1994. General and administrative expenses as a percent of revenues were 7%
for all periods shown. Increases to general and administrative expenses were
primarily due to increases in staffing to support operations.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
Acquired in-process research and development of $7,153,000 for the quarter ended
September 30, 1995 reflects the value of development projects in process at the
time of the acquisition of AIM Technology in September 1995.
INTEREST INCOME, NET
Interest income, net increased 61% to $1,860,000 in the second quarter of
fiscal year 1996 as compared to $1,152,000 in the second quarter of fiscal year
1995. For the six months ended September 30, 1995, interest income, net was
$3,606,000, as compared to $2,245,000 for the six months ended September 30,
1994. The increase in interest income earned in both the three and six month
periods ended September 30, 1995, as compared to the same periods in fiscal
1995, reflect a combination of higher balances of cash, cash equivalents and
marketable securities available for investment, as well as higher returns on
investments during the first half of fiscal year 1996.
10
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes for the three and six month periods ended
September 30, 1995 was 91.2 % and 45.9% of pretax income, respectively, as
compared to 31.5% for the same periods in fiscal 1995. Excluding the impact of
the AIM Technology acquisition, the provision for income taxes would have been
30.5% of pretax income for both the three and six month periods ended September
30, 1995. The decrease in the provision rate, exclusive of the AIM Technology
acquisition, from fiscal 1995 to fiscal 1996 was primarily due to increased
utilization of ProTools' operating losses, and to a lesser extent, a lower
effective state tax rate between years.
EARNINGS PER SHARE
Earnings per share for the quarter ended September 30, 1995, were $0.01, as
compared to $0.24 per share earned in the quarter ended September 30, 1994.
Earnings per share for the six months ended September 30, 1995, were $0.33, as
compared to $0.45 per share earned in the same period in fiscal 1995. Earnings
per share were reduced by approximately $0.33 in the second quarter of fiscal
year 1996 as a result of the acquisition of AIM Technology. Excluding the
impact of the AIM Technology acquisition, the primary cause of the increase in
earnings per share was the increase in revenues. The number of common share
equivalents increased 4% from 22,038,000 in the second quarter of fiscal 1995
to 22,989,000 in the second quarter of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $17,708,000 for the six months
ended September 30, 1995, and $12,779,000 for the six months ended September 30,
1994. The primary source of these funds was net income, as well as increases
to accounts payable and accrued liabilities for both periods shown. The net
increase for the first six months of fiscal 1996 also reflects increases to
deferred revenue, partially offset by increases to accounts receivable. Cash
provided by operating activities in the first six months of fiscal 1995 reflects
increases to income taxes payable, partially offset by increases in prepaid
expenses.
Net cash used in investing activities was $10,283,000 for the six months ended
September 30, 1995, as compared to cash used in investing activities of
$12,557,000 for the six months ended September 30, 1994. Net cash used in
investing activities in the first half of fiscal 1996 reflects increased
balances in marketable securities, cash used to acquire AIM Technology and
purchases of property and equipment, partially offset by decreased balances in
long-term investments. Cash used in investing activities in the first six
months of fiscal 1995 consists principally of increased balances in marketable
securities and purchases of property and equipment.
The Company used $5,336,000 in the six month period ended September 30, 1995
relating to financing activities. Repurchase of common stock totaling
approximately $14,424,000 was partially offset by proceeds from the issuance of
common stock. Net cash provided by financing activities was $995,000 in the six
months ended September 30, 1994, resulting from proceeds from the issuance of
common stock net of repurchase activity.
As of September 30, 1995, the Company's principal sources of liquidity included
cash, cash investments, marketable securities and long-term investments totaling
$142,456,000, including $43,027,000 of long-term investments. The Company
currently has no outstanding bank borrowings and has no established lines of
credit. The Company believes that cash generated from operations, together with
existing cash and investment balances will be sufficient to satisfy operating
cash and capital expenditure requirements through at least the next twelve
months.
11
<PAGE>
BUSINESS RISKS
The Company's future operating results may be affected by certain factors and
trends of its market which are beyond its control. The market for Network
General's products is characterized by rapidly changing technology and evolving
industry standards. Included in such changes is the development of asynchronous
transfer mode ("ATM") for the transmission of data along local area and wide
area networks, as well as other switching technologies. Network General
believes that its future success will depend, in part, on its ability to
continue to develop, introduce and sell new products. The Company is committed
to continued investments in research and development; however, there is no
assurance that these efforts will result in the development, timely release or
market acceptance of new products.
In addition, the Company's results may be adversely affected by the actions of
existing or future competitors including established and emerging computer,
communications, intelligent network wiring, network management and test
instrument companies. There can be no assurance that Network General will be
able to compete successfully in the future with existing or future competitors.
Network General does not carry a significant level of backlog. The majority of
the Company's revenues in each quarter are a result of orders booked in that
quarter. Expense levels are based on expectations of future revenues. Expense
levels would be disproportionately high in the event of a decrease in near-term
demand for the Company's products and would therefore have an adverse affect on
the Company's operating results.
Network General products may be considered by certain customers to be capital
purchases. An adverse change in general economic conditions could cause certain
of the Company's customers to reduce their capital spending, which may adversely
affect the Company's operating results.
In September 1995, the company acquired the remaining 90% of outstanding common
stock of AIM Technology. The successful combination of companies in the high
technology industry may be more difficult to accomplish than in other
industries. There can be no assurance that Network General will be successful
in developing products based on AIM Technology engineering expertise or
technology, that Network General will be successful in integrating its own
distribution channels with those of AIM Technology, that Network General will be
successful in penetrating AIM Technology's customer lease, that Network General
will be successful in selling AIM Technology's products to its own customer
base, or that the combined companies will retain their key personnel or that
Network General will realize any of the benefits anticipated at the time of the
merger.
There has been substantial litigation regarding patent and other intellectual
property rights in the software industry. As is typical in the software
industry, the Company has received from time to time notices from third
parties alleging infringement claims. Although there are currently no pending
lawsuits against Network General regarding any possible infringement claims,
there can be no assurance that infringement claims will not be asserted in
the future or that such assertions will not materially adversely affect the
Company's business, financial condition and results of operations. If any
such claims are asserted against Network General, the Company may need to
seek to obtain a license under the third party's intellectual property
rights. There can be no assurance that a license will be available on
reasonable terms or at all. Failure to obtain a necessary license on
commercially reasonable terms would materially adversely affect the Company's
business, financial condition and results of operations. Network General
could decide, in the alternative, to resort to litigation to challenge such
claims. Such litigation could be expensive and time consuming and could
materially adversely affect the Company's business, financial condition and
results of operations.
For certain critical components of its products, Network General relies on a
limited number of suppliers. In addition, some of the Company's products are
designed around specific computer platforms which are only available from
certain manufacturers. As a result of product transitions by these computer
platform manufacturers, the Company has found it increasingly necessary to
purchase and inventory computer platforms for resale to its customers. Any
significant shortage of computer platforms or other critical components for the
Company's products could lead to cancellations or delays of purchases of the
Company's products which would materially and adversely affect the Company's
operating results. If purchases of computer platforms or other components
exceed demand, the Company would incur expenses for disposing of the excess
inventory, which would also adversely affect the Company's operating results.
TRADEMARKS
Sniffer and Distributed Sniffer Systems are registered trademarks of Network
General and/or its wholly owned subsidiaries.
12
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
From time to time the Company has been, or may become, involved in
litigation proceedings incidental to the conduct of its business. The
Company does not believe that any such proceedings presently pending
will have a material adverse affect on the Company's financial
position or its results of operations.
Item 2. Changes in Securities:
Not Applicable.
Item 3. Defaults upon Senior Securities:
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
The Company's annual meeting of stockholders was held on August 18,
1995. At the meeting, Janet L. Hyland and Gregory M. Gallo were
reelected as members of Class II of the Company's Board of Directors,
with terms expiring at the Company's annual meeting of stockholders in
1998 or until the election of their successors. Mr. Gallo was
reelected with 19,561,617 votes FOR and 57,148 votes ABSTAINING. Ms.
Hyland was reelected with 19,561,617 votes FOR and 57,148 votes
ABSTAINING.
At the same meeting, the stockholders also approved two other
proposals. The first proposal was to amend article VI and article IX
of the Network General Corporation Certificate of Incorporation to
reduce the affirmative vote of stockholders required (i) to amend or
repeal articles V, VI, VIII and IX of the certificate and (ii) to
adopt, amend or repeal any provision of the bylaws from 80% to 66 2/3%.
Approval was obtained with 17,773,379 votes FOR, 106,235 votes AGAINST,
88,389 votes ABSTAINING and 1,650,762 Broker Non-Votes on this
proposal. The second proposal was to elect Arthur Andersen LLP as the
independent public accountants for the Company for fiscal 1996.
Approval was obtained with 19,542,284 votes FOR, 23,417 votes AGAINST
and 53,064 votes ABSTAINING on this proposal.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
1) Exhibits
Exhibit
Number Exhibit Title
- ------ -------------
3.1 Second restated certificate of Incorporation of Network
General Corporation, a Delaware corporation.
3.2 Amended and Restated Bylaws of Network General Corporation.
4.1 Registration Rights Agreement between the Company and
certain investors dated December 31, 1987, which is
incorporated by reference to Exhibit 4.2 of the Form S-1.
13
<PAGE>
4.2 Rights Agreement between the Company and Chemical Trust Company of
California dated June 26, 1992, as amended, which is incorporated by
reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K
for the year ended March 31, 1993. ("1993 Form 10-K").
10.1 Standard Business Lease (Net) for the Company's principal facility
dated June 18, 1991, between the Company and Menlo Oaks Partners,
L.P., which is incorporated by reference to Exhibit 10.3 of the 1991
Form 10-K.
10.2 First Amendment to Lease dated June 10, 1992, between the Company and
Menlo Oaks Partners, L.P., which is incorporated by reference to
Exhibit 10.3 of the Company's Annual Report on Form 10-K for the year
ended March 31, 1992 ("1992 Form 10-K").
10.3 Standard Business Lease (Net) for the Company's principal facility
dated March 11, 1992, between the Company and Menlo Oaks Partners,
L.P., which is incorporated by reference to Exhibit 10.4 of the
1992 Form 10-K.
10.4 First Amendment to Lease dated June 18, 1992, between the Company and
Menlo Oaks Partners, L.P., which is incorporated by reference to
Exhibit 10.5 of the 1992 Form 10-K.
10.5 Lease dated March 31, 1992, between the Company and Equitable Life
Assurance Society of the United States, which is incorporated by
reference to Exhibit 10.4 of the 1992 Form 10-K.
10.6 Lease dated March 31, 1992, between the Company and Equitable Life
Assurance Society of the United States, which is incorporated by
reference to Exhibit 10.4 of the 1992 Form 10-K.
10.7 Description of Company's Cash Bonus Plan, which is incorporated by
reference to Exhibit 10.6 of the Form S-1.
10.8 Form of Director and Officer Indemnification Agreement, which is
incorporated by reference to Exhibit 10.7 of the Form S-1.
10.9 Amended and Restated 1989 Outside Directors Stock Option Plan, which is
incorporated by reference to Exhibit 10.12 of the 1992 Form 10-K.
10.10 Forms of Stock Option Agreement used in conjunction with the 1989
Outside Directors Stock Option Plan, which are incorporated by
reference to Exhibit 10.15 of the Company's 1989 Form 10-K.
10.11 OEM Agreement dated August 3, 1990 between the Company and NCR
Corporation which is incorporated by reference to Exhibit 10.18 of the
ompany's Registration statement No. 33-45580 on Form S-3 which became
effective on April 6, 1992.
14
<PAGE>
10.12 Standard Business lease (Net) for the Company's Beaverton, Oregon
facility dated February 4, 1994 between the Company and Hartford
Underwriters Insurance Company which is incorporated by reference to
Exhibit 10.18 of the March 1994 10-K.
10.13 Agreement dated April 8, 1994 between the Company and PNJ Engineering
providing for a lump sum settlement of a royalty obligation between
the Company and PNJ engineering which is incorporated by reference to
Exhibit 10.19 of the March 1994 10-K.
10.14 Employment agreement dated April 6, 1994 between the Company and
Leslie Denend, which is incorporated by reference to Exhibit 10.21 of
the June 1994 Form 10-Q.
10.15 Employment agreement dated April 6, 1994 between the Company and James
T. Richardson, which is incorporated by reference to Exhibit 10.22 of
the June 1994 Form 10-Q.
10.16 Employment agreement dated April 6, 1994 between the Company and
Richard Lewis, which is incorporated by reference to Exhibit 10.23 of
the June 1994 Form 10-Q.
10.17 Second Amendment to Lease dated February 1, 1995 between the Company
and Menlo Oaks Partners, L.P., which is incorporated by reference to
Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994 ("December 1994 Form 10-Q").
10.18 Third Amendment to Lease dated February 1, 1995 between the Company
and Menlo Oaks Partners, L.P., which is incorporated by reference to
Exhibit 10.23 of the December 1994 Form 10-Q.
10.19 Fourth Amendment to Lease dated May 31, 1995 between the Company and
Menlo Oaks Partners, L.P which is incorporated by reference to Exhibit
10.27 of the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 10-Q ("June 1995 form 10-Q").
10.20 Fifth Amendment to Lease dated June 13, 1995 between the Company and
Menlo Oaks Partners, L.P which is incorporated by reference to Exhibit
10.28 of the June 1995 Form 10-Q.
10.21 Network General Corporation 1989 Stock Option Plan, as amended June
20, 1994 and related documentation.
10.22 Network General Corporation 1989 Employee Stock Purchase Plan, as
amended June 20, 1994 and related documentation.
2) Form 8-K
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Network General Corporation
DATE November 13, 1995 by S/JAMES T. RICHARDSON
----------------- -------------------------
James T. Richardson
Senior Vice President, Corporate
Operations and Chief Financial Officer
(authorized officer)
DATE November 13, 1995 by S/BERNARD J. WHITNEY
----------------- ------------------------
Bernard J. Whitney
Controller and Chief Accounting Officer
(authorized officer)
16
<PAGE>
EXHIBIT 3.1
SECOND
RESTATED CERTIFICATE OF INCORPORATION
OF
NETWORK GENERAL CORPORATION
A Delaware corporation
Network General Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware, certifies that:
1. The name of the corporation is Network General Corporation (the
"Corporation"). The Corporation was originally incorporated under the same
name, and the Corporation's original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on
July 31, 1987.
2. At a meeting of the Board of Directors of the Corporation, resolutions
were duly adopted setting forth the proposed amendment and restatement of the
Corporation's Certificate of Incorporation, declaring such amendment and
restatement to be advisable, and calling for a vote of the Corporation's
stockholders to approve such amendment and restatement. The resolution setting
forth the proposed amendment and restatement was as follows:
RESOLVED, that the Corporation's Certificate of Incorporation be amended
and restated so that, as amended and restated, the Certificate shall read
in its entirety as follows:
FIRST: The name of the Corporation is Network General Corporation.
SECOND: The name and address in the State of Delaware of the
Corporation's registered office in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, in the City of Wilmington, County of New
Castle and The Corporation Trust Company is the Corporation's registered
agent at the address of its registered office.
1
<PAGE>
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a Corporation may be organized under the General
Corporation Law of Delaware.
FOURTH: This Corporation is authorized to issue two classes of stock
to be designated, respectively, Preferred Stock and Common Stock. The
total number of shares of Preferred Stock this Corporation shall have
authority to issue is two million (2,000,000), par value one cent ($.01)
per share, and the total number of shares of Common Stock this Corporation
shall have authority to issue is fifty million (50,000,000), par value one
cent ($.01) per share.
The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article FOURTH, to provide for
the issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereon.
Pursuant to the foregoing provision, the Board of Directors has
created one series of Preferred Stock with the following rights, powers,
preferences, qualifications, limitations and restrictions:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series A Preferred Stock" (the "Series A Preferred
Stock"), $0.01 par value per share, and the number of shares constituting
such series shall be 1,000,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) The dividend rate on the shares of Series A Preferred Stock shall
be for each quarterly dividend (hereinafter referred to as a "quarterly
dividend period"), which quarterly dividend periods shall commence on April
1, July 1, October 1 and January 1, in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date") (or in the case
of original issuance, from the date of original issuance) and shall end on
and include the day next preceding the first date of the next quarterly
dividend period, at a rate per quarterly dividend period (rounded to the
nearest cent) equal to the greater of (a) $225.00 or (b) subject to the
provisions for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per
share amount (payable in cash, based upon the fair market value at the time
the non-cash dividend or other distribution is declared as determined in
good faith by the Board of Directors) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared (but not withdrawn) on the Common Stock, par value
$.01 per share, of the Corporation (the "Common Stock") during the
immediately preceding quarterly dividend period, or, with respect to the
first quarterly dividend period, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event this
Corporation shall at any time after July 14, 1992 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable
2
<PAGE>
in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Preferred
Stock, unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 45 days prior to
the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided in this Certificate of Incorporation
or by law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
3
<PAGE>
(C) Except as set forth in this Certificate of Incorporation and in
the Bylaws, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.
Section 4. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 5. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Series A
Preferred Stock shall be entitled to receive the greater of (a) $9,000 per
share, plus accrued dividends to the date of distribution, whether or not
earned or declared, or (b) an amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of Common Stock. In the
event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event pursuant to clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 6. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
the shares of Series A Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the
4
<PAGE>
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section 8. FRACTIONAL SHARES. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and have the benefit of all other
rights of holders of Series A Preferred Stock. All payments made with
respect to fractional shares hereunder shall be rounded to the nearest
whole cent.
Section 9. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.
5
<PAGE>
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 9, purchase or otherwise acquire such shares at such
time and in such manner.
Section 10. RANKING. The Series A Preferred Stock shall be junior to
all other Series of the Corporation's preferred stock as to the payment of
dividends and the distribution of assets, unless the terms of any series
shall provide otherwise.
Section 11. AMENDMENT. This Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of two-thirds or more of the outstanding shares of Series A
Preferred Stock voting together as a single class.
FIFTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability of a
director, then the liability of a director of the Corporation will be
eliminated to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this Article
FIFTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time
of such repeal or modification.
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders.
1. The number of directors shall initially be five and,
thereafter, shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is
presented to the Board for adoption). The directors shall be divided into
three classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the annual meeting of
stockholders held in 1991, the term of office of the second class to expire
at the annual meeting of stockholders held in 1992 and the term of office
of the third class to expire at the annual meeting of stockholders held in
1993. At each annual meeting of stockholders following such initial
classification and election,
6
<PAGE>
directors shall be elected to succeed those directors whose terms expire
for a term of office to expire at the third succeeding annual meeting of
stockholders after their election. All directors shall hold office until
the expiration of the term for which elected, and until their respective
successors are elected, except in the case of the death, resignation, or
removal of any director. The directors of the Corporation need not be
elected by written ballot unless the Bylaws so provide.
2. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any vacancies in
the Board of Directors resulting from death, resignation, retirement,
removal from office, disqualification or other cause may be filled only by
a majority vote of the directors then in office, through less than a
quorum, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class
to which they have been elected expires. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
3. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least a majority of the
voting power of all of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
("Voting Stock") voting together as a single class.
4. The Board of Directors is expressly empowered to adopt,
amend, or repeal the Bylaws of the Corporation. Any adoption, amendment,
or repeal of the Bylaws of the Corporation by the Board of Directors will
require the approval of a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously
authorized directorships at the time any resolution providing for adoption,
amendment or repeal is presented to the Board). The stockholders will also
have power to adopt, amend, or repeal the Bylaws of the Corporation. Any
adoption, amendment or repeal of Bylaws of the Corporation by the
Stockholders shall require, in addition to any vote of the holders of any
class or series of stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of at least sixty-six
and two-thirds percent (66 2/3%) of the Voting Stock, voting together as a
single class.
5. Special meetings of stockholders of the Corporation may be
called only (a) by the Board of Directors or (b) by the President of the
Corporation.
6. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected
by any consent in writing by such stockholders.
7. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. In addition to the
powers and authorities
7
<PAGE>
expressly conferred upon them by statute or by this Certificate of
Incorporation or by the Bylaws of the Corporation, the directors are hereby
empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation; subject, nevertheless, to the
provisions of the statutes of the State of Delaware, to the provisions of
this Certificate of Incorporation, and to any Bylaws from time to time made
by the stockholders or the directors; provided, however, that no Bylaws so
made shall invalidate any prior act of the directors which would have been
valid if such Bylaw had not been made.
SEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware, may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of Title
8 of the Delaware Code, or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under the
provisions of Section 279 of Title 8 of the Delaware Code, order a meeting
of the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this Corporation, as the case may be, to be summoned in
such manner as such court shall direct. If a majority in number of
representing three-fourths (3/4) in value of the creditors or class of
creditors, and three-fourths (3/4) of the outstanding shares of each class
and series of the Corporation's capital stock, voting separately as a
class, agree to any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.
EIGHTH: The Board of Directors of the Corporation (the "Board"), when
evaluating any offer of another party (a) to make a tender or exchange
offer for any Voting Stock of the Corporation (as defined in Article SIXTH)
or (b) to effect any merger, consolidation, or sale of all or substantially
all of the assets of the Corporation, shall, in connection with the
exercise of its judgment in determining what is in the best interests of
the Corporation as a whole, be authorized to give due consideration to such
factors as the Board determines to be relevant, including, without
limitation:
(i) The interests of the Corporation's stockholders;
(ii) whether the proposed transaction might violate
federal or state laws;
(iii) not only the consideration being offered in the
proposed transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price
for the capital stock of the Corporation over a period of years, the
estimated price that might be achieved in a negotiated sale of the
Corporation as a whole or in part or through orderly liquidation, the
premiums over
8
<PAGE>
market price for the securities of other corporations in similar
transactions, current political, economic and other factors bearing on
securities prices and the Corporation's financial condition and future
prospects; and
(iv) the social, legal and economic effects upon
employees, suppliers, customers and others having similar relationships
with the Corporation, and the communities in which the Corporation conducts
its business.
In connection with any such evaluation, the Board is authorized to conduct
such investigations and to engage in such legal proceedings as the Board
may determine.
NINTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred
upon stockholders are granted subject to this reservation; PROVIDED,
HOWEVER, that, notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any vote of the holders of any class or
series of the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the then-outstanding
shares of the Voting Stock, voting together as a single class, shall be
required to amend this Article NINTH, Article FIFTH, Article SIXTH or
Article EIGHTH.
1. Thereafter, at the Corporation's 1995 Annual Meeting of the
Stockholders duly called and held August 18, 1995, amendments included in the
above restatement were approved by the holders of outstanding stock having not
less than eighty percent (80%) of the then-outstanding shares of the
Corporation's capital stock, voting together as a single class.
2. The amendment and restatement of the Certificate of Incorporation was
duly adopted and approved in accordance with the provisions of Sections 242 and
245 of the General Corporation Law of the State of Delaware.
3. The Corporation's capital will not be reduced as a result of the
amendment and restatement of the Certificate of Incorporation.
9
<PAGE>
IN WITNESS WHEREOF, the corporation has caused this certificate to be
signed by Leslie G. Denend, its President, and James T. Richardson, its
Secretary, effective this day of September 12, 1995.
By: /s/ LESLIE G. DENEND
--------------------
Leslie G. Denend
Attest: /s/ JAMES T. RICHARDSON
-----------------------
James T. Richardson
Secretary
10
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS OF
NETWORK GENERAL CORPORATION
ARTICLE I
OFFICES
The principal office of the corporation shall be located in the State of
California or at such other place or places within or without the United States
as the Board of Directors may, from time to time, determine. The Corporation
may establish such branch or subsidiary offices in such locations as it shall
deem advisable.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the stockholders of the
corporation shall be held within five months after the close of the fiscal year
of the corporation, or at such other time as may be established by the
directors, for the purpose of electing directors and transacting such other
business as may properly come before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may be
called at any time only by the Board of Directors or by the President, or as
otherwise required under the provisions of the General Corporation Law of the
State of Delaware.
SECTION 3. PLACE OF MEETINGS. All meetings of stockholders shall be held
at the principal office of the corporation, or at such other places as shall be
designated in the notices or waivers of notice of such meetings.
SECTION 4. NOTICE OF MEETINGS.
(a) Except as otherwise provided by statute, written notice of each
meeting of stockholders, whether annual or special, stating the time when and
place where it is to be held, shall be served either personally or by mail, not
less than ten or more than sixty days before the meeting, upon each stockholder
of record entitled to vote at such meeting, and to any other stockholder to whom
the giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle stockholders to receive payment for their shares
pursuant to statute, the notice of such meeting shall include a statement
1
<PAGE>
to that effect. If mailed, such notice shall be directed to each such
stockholder at his address, as it appears on the records of the stockholders of
the corporation, unless he shall have previously filed with the Secretary of the
corporation a written request that notices intended for him be mailed to some
other address, in which case, it shall be mailed to the address designated in
such request.
(b) Notice of any meeting need not be given to any person who may
become a stockholder of record after the mailing of such notice and prior to the
meeting, or to any stockholder who attends such meeting, in person or by proxy,
or to any stockholder who, in person or by proxy, submits a signed waiver of
notice either before or after such meeting. Notice of any adjourned meeting of
stockholders need not be given, unless otherwise required by statute.
SECTION 5. QUORUM.
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such Certificate and any amendment thereof being
hereinafter collectively referred to as the "Certificate of Incorporation"), at
all meetings of stockholders of the corporation, the presence at the
commencement of such meetings in person or by proxy of stockholders holding of
record a majority of the total number of shares of the corporation then issued
and outstanding and entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The withdrawal of any
stockholder after the commencement of a meeting shall have no effect on the
existence of a quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting
of stockholders, the chairman of the meeting or the stockholders, by a majority
of the votes cast by the holders of shares entitled to vote thereon, may adjourn
the meeting to another date, place or time. At any such adjourned meeting at
which a quorum is present, any business may be transacted at the meeting as
originally called as if a quorum had been present.
SECTION 6. VOTING.
(a) Except as otherwise provided by statute, by these Bylaws or by
the Certificate of Incorporation, any corporate action, other than the election
of directors, to be taken by vote of the stockholders, shall be determined by a
majority of votes cast affirmatively or negatively at a meeting of stockholders
by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute, or these Bylaws or by
the Certificate of Incorporation, at each meeting of stockholders, each holder
of record of stock of the corporation entitled to vote thereat shall be entitled
to one vote for each share of stock registered in his name on the books of the
corporation.
(c) At any meeting of the stockholders, every stockholder entitled to
vote may vote in person or by proxy authorized by an instrument in writing or by
a transmission permitted by law filed in accordance with the procedure
established for the meeting. No stockholder may
2
<PAGE>
authorize more than one proxy for his shares and no proxy shall be valid after
the expiration of eleven months from the date of its execution, unless the
person executing it shall have specified therein the length of time it is to
continue in force. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be submitted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile transmission or other reproduction shall be a
complete reproduction of the entire original writing or transmission. Such
instrument shall be exhibited to the Secretary at the meeting and shall be filed
with the records of the corporation.
(d) All voting, including on the election of directors but excepting
where otherwise required by law, may be by a voice vote; provided, however, that
upon demand therefor by a stockholder entitled to vote or his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting. The Corporation may, and to the
extent required by law, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting may, and to the extent required by law, shall, appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
SECTION 7. CONDUCT OF THE STOCKHOLDERS' MEETING. At every meeting of the
stockholders, the Chairman of the Board, if there is such an officer, or if not,
the President of the corporation, or in his absence the Vice President
designated by the President, or in the absence of such designation any Vice
President, or in the absence of the President or any Vice President a chairman
chosen by the majority of the voting shares represented in person or by proxy,
shall act as Chairman. The Secretary of the corporation or a person designated
by the Chairman shall act as Secretary of the meeting. Unless otherwise
approved by the Chairman, attendance at any stockholders' meeting is restricted
to stockholders of record, persons authorized in accordance with Section 6 of
Article II of these Bylaws to act by proxy, and officers of the corporation.
SECTION 8. CONDUCT OF BUSINESS. The Chairman shall call the meeting to
order, establish the agenda, and conduct the business of the meeting in
accordance therewith or, at the Chairman's discretion, it may be conducted
otherwise in accordance with the wishes of the stockholders in attendance. The
date and time of the opening and closing of the polls for each matter upon which
the stockholders will vote at the meeting shall be announced at the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule on
the precedence of, and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to
3
<PAGE>
take part. The Chairman may impose reasonable limits on the amount of time
taken up at the meeting on discussion in general or on remarks by any one
stockholder. Should any person in attendance become unruly or obstruct the
meeting proceedings, the Chairman shall have the power to have such person
removed from participation. Notwithstanding anything in the Bylaws to the
contrary, no business shall be conducted at a meeting except in accordance with
the procedures set forth in this Section 8 and Section 9, below. The Chairman
of a meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and, in accordance
with the provisions of this Section 8 and Section 9, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
SECTION 9. NOTICE OF STOCKHOLDER BUSINESS. At an annual or special
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors or
the President, (b) properly brought before the meeting by or at the direction of
the Board of Directors, (c) properly brought before an annual meeting by a
stockholder, or (d) properly brought before a special meeting by a stockholder,
but if, and only if, the notice of a special meeting provides for business to be
brought before the meeting by stockholders. For business to be properly brought
before a meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder proposal to be presented at an annual meeting shall be received at
the corporation's principal executive offices not less than 120 calendar days in
advance of the date that the corporation's (or the corporation's predecessor's)
proxy statement was released to stockholders in connection with the previous
year's annual meeting of stockholders, except that if no annual meeting was held
in the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy statement, or in the event of a special meeting, notice by the
stockholder to be timely must be received not later than the close of business
on the tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual or special meeting (a) a brief description of the
business desired to be brought before the annual or special meeting and the
reasons for conducting such business at the annual or special meeting, (b) the
name and address, as they appear on the corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the corporation
which are beneficially owned by the stockholder, and (d) any material interest
of the stockholder in such business.
4
<PAGE>
SECTION 10. STOCK LIST. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERM OF OFFICE.
(a) The number of directors shall initially be five (5) and,
thereafter, shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption). The directors shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the annual meeting of stockholders held in 1991, the
term of office of the second class to expire at the annual meeting of
stockholders held in 1992 and the term of office of the third class to expire at
the annual meeting of stockholders held in 1993. At each annual meeting of
stockholders following such initial classification and election, directors shall
be elected to succeed those directors whose terms expire for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. All directors shall hold office until the expiration of the term for
which elected and until their respective successors are elected, except in the
case of the death, resignation or removal of any director.
(b) Except as may otherwise be provided herein, in the Certificate of
Incorporation or as otherwise provided by law, the members of the Board of
Directors of the corporation, who need not be stockholders, shall be elected by
a plurality of the votes cast at a meeting of stockholders, by the holders of
shares, present in person or by proxy, entitled to vote in the election.
SECTION 2. DUTIES AND POWERS. The Board of Directors shall be responsible
for the control and management of the affairs, property and interests of the
corporation, and may exercise all powers of the corporation, except as are in
the Certificate of Incorporation or these Bylaws or by statute expressly
conferred upon or reserved to the stockholders.
5
<PAGE>
SECTION 3. ANNUAL AND REGULAR MEETINGS; NOTICE.
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the stockholders, at the place of
such annual meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by
resolution for the holding of other regular meetings of the Board of Directors,
and may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not
be required to be given and, if given, need not specify the purpose of the
meeting; provided, however, that in case the Board of Directors shall fix or
change the time or place of any regular meeting, notice of such action shall be
given to each director who shall not have been present at the meeting at which
such action was taken within the time limits, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph (c) of such Section 4.
SECTION 4. SPECIAL MEETINGS; NOTICE.
(a) Special meetings of the Board of Directors shall be held whenever
called by the Chairman or the President or by any two or more directors, at such
time and place as may be specified in the respective notices or waivers of
notice thereof.
(b) Except as otherwise required by statute, notice of special
meetings shall be mailed directly to each director, addressed to him at his
residence or usual place of business, at least two (2) days before the day on
which the meeting is to be held, or shall be sent to him at such place by telex
or telecopy, or shall be delivered to him personally or given to him orally, not
later than the day before the day on which the meeting is to be held. A notice,
or waiver of notice, except as required by Section 8 of this Article III, need
not specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given
to any director who shall attend such meeting without protesting prior thereto
or at its commencement, the lack of notice to him, or who submits a signed
waiver of notice, whether before or after the meeting. Notice of any adjourned
meeting shall not be required to be given.
SECTION 5. CHAIRMAN OF MEETINGS. At all meetings of the Board of
Directors, the Chairman of the Board, if any and if present, shall preside as
Chairman. If there shall be no Chairman of the Board, or he shall be absent,
then the President of the corporation, if any and if present, shall preside. If
there shall be no President, or he shall be absent, then a Chairman chosen by
the directors shall preside.
SECTION 6. QUORUM AND ADJOURNMENTS.
6
<PAGE>
(a) At all meetings of the Board of Directors, the presence of a
majority of the entire Board shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise provided by law, by
the Certificate of Incorporation, or by these Bylaws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without notice, until a quorum shall be present.
SECTION 7. MANNER OF ACTING.
(a) At all meetings of the Board of Directors, each director present
shall have one vote, irrespective of the number of shares of stock, if any,
which he may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
SECTION 8. VACANCIES. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any vacancy in the Board of Directors
occurring by reason of any increase in the number of directors, or by reason of
the death, resignation, disqualification, removal or inability to act of any
director, or otherwise, may be filled for the unexpired portion of the term only
by a majority vote of the remaining directors, although less than a quorum, at
any regular meeting or special meeting of the Board of Directors called for that
purpose, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 9. RESIGNATION. Any director may resign at any time by giving
written notice to the Board of Directors, the Chairman, the President or the
Secretary of the corporation. Unless otherwise specified in such written
notice, such resignation shall take effect upon receipt thereof by the Board of
Directors or such officer, and the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 10. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of all of the then-outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class.
7
<PAGE>
SECTION 11. SALARY. No stated salary shall be paid to directors, as such,
for their services, but by resolution of the Board of Directors a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board; provided, however, that nothing herein contained
shall be construed to preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
SECTION 12. CONTRACTS.
(a) No contract or other transaction between this corporation and any
other corporation shall be impaired, affected or invalidated, nor shall any
director be liable in any way by reason of the fact that any one or more of the
directors of this corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporation, provided that
such facts are disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or
may be interested in any contract or transaction of this corporation, and no
director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of Directors,
and provided that the Board of Directors shall authorize, approve or ratify such
contract or transaction by the vote (not counting the vote of any such director)
of a majority of a quorum, notwithstanding the presence of any such director at
the meeting at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting. This Section
shall not be construed to impair or invalidate or in any way affect any contract
or other transaction which would otherwise be valid under the law (common,
statutory or otherwise) applicable thereto.
SECTION 13. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the entire Board, may from time to time designate from among its
members an executive committee and such other committees, and alternate members
thereof, as they may deem desirable, each consisting of three or more members,
with such powers and authority (to the extent permitted by law) as may be
provided in such resolution. Each such committee shall serve at the pleasure of
the Board.
SECTION 14. NOMINATION OF DIRECTOR CANDIDATES. Subject to the rights of
holders of any class or series of Preferred Stock then outstanding, nominations
for the election of directors may be made by the Board of Directors or a proxy
committee appointed by the Board of Directors or by any stockholder entitled to
vote in the election of directors generally. However, any stockholder entitled
to vote in the election of directors generally may nominate one or more persons
for election as directors at a meeting only if timely notice of such
stockholder's intent to make such nomination or nominations has been given in
writing to the Secretary of the corporation. To be timely, a stockholder
nomination for a director to be elected at an annual meeting shall be received
at the corporation's principal executive offices not less than 120 calendar days
in advance of the date that the corporation's (or the corporation's
predecessor's) proxy statement was released to stockholders in connection with
the previous year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the
8
<PAGE>
date of the annual meeting has been changed by more than 30 calendar days from
the date contemplated at the time of the previous year's proxy statement, or in
the event of a nomination for director to be elected at a special meeting,
notice by the stockholders to be timely must be received not later than the
close of business on the tenth day following the day on which such notice of the
date of the special meeting was mailed or such public disclosure was made. Each
such notice shall set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated; (b)
a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote for the election of directors on the date of such
notice and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of each
nominee to serve as a director of the Corporation if so elected.
In the event that a person is validly designated as a nominee in accordance
with this Section 14 and shall thereafter become unable or unwilling to stand
for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than five days prior to the date of
the meeting for the election of such nominee, of a written notice to the
Secretary setting forth such information regarding such substitute nominee as
would have been required to be delivered to the Secretary pursuant to this
Section 14 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
corporation, if elected, of each such substitute nominee.
If the chairman of the meeting for the election of directors determines
that a nomination of any candidate for election as a director at such meeting
was not made in accordance with the applicable provisions of this Section 14,
such nomination shall be void; provided, however, that nothing in this Section
14 shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock designation for any series of Preferred Stock.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE.
(a) The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and one or more Vice Presidents. The corporation may
also have, at the discretion of the Board of Directors, a Chairman of the Board
and such other officers, as the Board of
9
<PAGE>
Directors may from time to time deem advisable. Any officer may be, but is not
required to be, a director of the corporation. Any two or more offices may be
held by the same person.
(b) The officers of the corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of stockholders.
(c) Each officer shall hold office until the annual meeting of the
Board of Directors next succeeding his election, and until his successor shall
have been elected and qualified, or until his death, resignation or removal.
SECTION 2. RESIGNATION. Any officer may resign at any time by giving
written notice of such resignation to the Board of Directors, or to the
Chairman, President or the Secretary of the corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or by such officer, and the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, and a successor elected by a majority vote of the Board of Directors at
any time.
SECTION 4. VACANCIES. A vacancy in any office by reason of death,
resignation, inability to act, disqualification, or any other cause, may at any
time be filled for the unexpired portion of the term by a majority vote of the
Board of Directors.
SECTION 5. DUTIES OF OFFICERS. Officers of the corporation shall, unless
otherwise provided by the Board of Directors, each have such powers and duties
as generally pertain to their respective offices as well as such powers and
duties as may be set forth in these Bylaws, or may from time to time be
specifically conferred or imposed by the Board of Directors. Unless otherwise
determined by a resolution of the Board of Directors, the President shall be the
chief executive officer of the corporation.
SECTION 6. SURETIES AND BONDS. In case the Board of Directors so shall
require, any officer, employee or agent of the corporation shall execute a bond
in such sum, and with such surety or sureties as the Board of Directors may
direct, conditioned upon the faithful performance of his duties to the
corporation, including responsibility for negligence and for the accounting for
all property, funds or securities of the corporation which may come into his
hands.
SECTION 7. SHARES OF OTHER CORPORATIONS. Whenever the corporation is the
holder of shares of any other corporation, any right or power of the corporation
as such stockholder (including the attendance, acting and voting at stockholders
meetings and execution of waivers, consents, proxies or other instruments) may
be exercised on behalf of the corporation by the Chairman of the Board,
President, any Vice President, or such other person as the Board of Directors
may authorize.
10
<PAGE>
ARTICLE V
SHARES OF STOCK
SECTION 1. CERTIFICATE OF STOCK.
(a) The certificates representing shares of the corporation shall be
in such form as shall be adopted by the Board of Directors, and shall be
numbered and registered in the order issued. They shall bear the holder's name
and the number of shares, and shall be signed by (i) the President or a Vice
President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or
Assistant Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
(c) To the extent permitted by law, the Board of Directors may
authorize the issuance of certificates for fractions of a share which shall
entitle the holder to exercise voting rights, receive dividends and participate
in liquidating distributions in proportion to the fractional holdings; or it may
authorize the payment in cash of the fair value of fractions of a share as of
the time when those entitled to receive such fractions are determined; or it may
authorize the issuance, subject to such conditions as may be permitted by law,
of scrip in registered or bearer form over the signature of an officer or agent
of the corporation, exchangeable as therein provided for full shares, but such
scrip shall not entitle the holder to any rights of a stockholder, except as
therein provided.
SECTION 2. LOST OR DESTROYED CERTIFICATES. The holder of any certificate
representing shares of the corporation shall immediately notify the corporation
of any loss or destruction of the certificate representing the same. The
corporation may issue a new certificate in the place of any certificate
theretofore issued by it, alleged to have been lost or destroyed. On production
of such evidence of loss or destruction as the Board of Directors in its
discretion may require, the Board of Directors may, in its discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond in such sum as the Board may direct, and with such
surety or sureties as may be satisfactory to the Board, to indemnify the
corporation against any claims, loss, liability or damage it may suffer on
account of the issuance of the new certificate. A new certificate may be issued
without requiring any such evidence or bond when, in the judgment of the Board
of Directors, it is proper to do so.
SECTION 3. TRANSFERS OF SHARES.
(a) Transfers of shares of the corporation shall be made in the share
records of the corporation only by the holder of record thereof, in person or by
his duly authorized attorney, upon surrender for cancellation of the certificate
or certificates representing such shares, with an assignment or power of
transfer endorsed thereon or delivered therewith, duly executed, with such proof
of the authenticity of the signature and of authority to transfer and of payment
of transfer taxes as the corporation or its agents may require.
11
<PAGE>
(b) The corporation shall be entitled to treat the holder of record
of any share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
SECTION 4. RECORD DATE. In lieu of closing the share records of the
corporation, the Board of Directors may fix, in advance, a date not exceeding
sixty days, nor less than ten days, as the record date for the determination of
stockholders entitled to receive notice of, or to vote at, any meeting of
stockholders, or to consent to any proposal without a meeting, or for the
purpose of determining stockholders entitled to receive payment of any
dividends, or allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the next day preceding the day on which the
notice is given, or, if no notice is given, the day on which the meeting is
held; the record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the resolution of the directors
relating thereto is adopted. When a determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders has been made as
provided for herein, such determination shall apply to any adjournment thereof,
unless the directors fix a new record date for the adjourned meeting.
ARTICLE VI
DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amounts and at such time or times as
the Board Directors may determine.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall end on March 31, unless otherwise
fixed by the Board of Directors from time to time, subject to applicable law.
ARTICLE VIII
CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from
time to time by the Board of Directors.
12
<PAGE>
ARTICLE IX
AMENDMENTS
The Board of Directors is expressly empowered to adopt, amend or repeal
Bylaws of the corporation. Any adoption, amendment or repeal of Bylaws of the
corporation by the Board of Directors shall require the approval of a majority
of the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the Board). The
stockholders shall also have power to adopt, amend or repeal the Bylaws of the
corporation. In addition to any vote of the holders of any class or series of
stock of this corporation required by law or by these Bylaws, the affirmative
vote of the holders of at least sixty-six and two-thirds percent (662/3%) of the
voting power of all of then outstanding shares of the capital stock of the
corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to adopt, amend or repeal any
provisions of the Bylaws of the corporation.
ARTICLE X
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director or officer, employee or
agent of the Corporation or is or was serving at the request of the corporation
as a director or officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
any hereafter be amended, (but in the case of any such amendment, only to the
extent that such amendment permits the corporation to provide broader
indemnification rights than said Law permitted the corporation to provide prior
to such amendment) against all expenses, liability and loss (including
attorney's fees, judgment, fines, ERISA excise taxes or penalties, amounts paid
or to be paid in settlement and amounts expended in seeking indemnification
granted to such person under applicable law, this bylaw or any agreement with
the corporation) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
this or her heirs, executors and administrators; provided, however, that, except
as provided in Section 2 of this Article X, the corporation shall indemnify any
such person seeking indemnity in connection with such an action, suit or
proceeding (or part thereof) initiated by such person only if such action, suit
or proceeding (or part thereof) was authorized by the Board of Directors of the
corporation. Such right shall be a contract right and shall include the right
to be paid by the corporation expenses incurred in defending any such proceeding
in advance of its final disposition including expenses
13
<PAGE>
relating to obtaining a determination that such officers and directors are
entitled to indemnification; provided, however, that, if the Delaware General
Corporation Law then so requires, the payment of such expenses incurred by a
director or officer of the corporation in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it should be determined ultimately that such director or officer
is not entitled to be indemnified under this Section or otherwise.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 1 is
not paid in full by the corporation within ninety (90) days after a written
claim has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to this Corporation) that
the claimant has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed, but the burden of providing such defense shall
be on the corporation. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not met the applicable standard of
conduct.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by Sections 1 and 2 shall not be exclusive of any other right which such persons
may have or hereafter acquired under any statute, provisions of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 4. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the corporation, or any person serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
board of directors so determines, greater than, those provided for in this
Article X.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss,
14
<PAGE>
whether or not the corporation would have the power to indemnify such person
against such expenses, liability or loss under Delaware General Corporation Law.
SECTION 6. EFFECT OF AMENDMENT. Any amendment, repeal or modification of
any provisions of this Article X by the stockholders or the directors of the
corporation shall not adversely affect any right or protection of a director or
officer or former director or former officer of the corporation existing at the
time of such amendment, repeal or modification.
SECTION 7. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director, officer, employee and
agent of the corporation as to costs, charges and expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the corporation, to the
full extent permitted by any applicable portion of this Article that shall not
have been invalidated and to the full extend permitted by applicable law.
15
<PAGE>
CERTIFICATE OF SECRETARY
I, hereby certify:
That I am the duly elected and acting Secretary of Network General
Corporation, a Delaware corporation; and
That the foregoing Bylaws comprising fifteen (15) pages, constitute the
Bylaws of said corporation as duly amended by the Board of Directors on April
28, 1995 and effective August 18, 1995.
IN WITNESS WHERE, I have hereunder subscribed my name and affixed the seal
of said cooperation this 19th day of August, 1995.
/s/ JAMES T. RICHARDSON
------------------------
James T. Richardson
16
<PAGE>
EXHIBIT 10.21
NETWORK GENERAL CORPORATION
1989 STOCK OPTION PLAN
(As Amended June 20, 1994)
1. PURPOSE. The Network General Corporation 1989 Stock Option Plan (the
"Plan") is established to create additional incentive for key employees,
directors and consultants of Network General Corporation and any successor
corporation thereto (collectively referred to as the "Company"), and any present
or future parent and/or subsidiary corporations of such corporation (all of whom
along with the Company being individually referred to as a "Participating
Company" and collectively referred to as the "Participating Company Group"), to
promote the financial success and progress of the Participating Company Group.
For purposes of the Plan, a parent corporation and a subsidiary corporation
shall be as defined in sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD AND/OR COMMITTEE. The Plan shall be
administered by the Board of Directors of the Company (the "Board") and/or by a
duly appointed committee of the Board having such powers as shall be specified
by the Board. Any subsequent references herein to the Board shall also mean the
committee if such committee has been appointed and, unless the powers of the
committee have been specifically limited, the committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law. All questions of interpretation of
the Plan or of any options granted under the Plan (an "Option") shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan and/or any Option.
(b) OPTIONS AUTHORIZED. Options may be either incentive stock
options as defined in section 422 of the Code ("Incentive Stock Options") or
nonqualified stock options.
(c) AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
(d) DISINTERESTED ADMINISTRATION. With respect to the participation
in the Plan of officers or directors of the Company subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan shall
be administered by the Board in compliance with the "disinterested
administration" requirement of Rule 16b-3, as promulgated under the Exchange Act
and amended from time to time or any successor rule or regulation
("Rule 16b-3").
1
<PAGE>
(e) COMPLIANCE WITH SECTION 162(M) OF THE CODE. In the event a
Participating Company is a "publicly held corporation" as defined in paragraph
(2) of section 162(m) of the Code, as amended by the Revenue Reconciliation Act
of 1993 (P.L. 103-66), and the regulations promulgated thereunder ("Section
162(m)"), the Company may establish a committee of outside directors meeting the
requirements of paragraph 4(C)(i) of Section 162(m) to approve the grant of
Options which might reasonably be anticipated to result in the payment of
employee remuneration that would otherwise exceed the limit on employee
remuneration deductible for income tax purposes pursuant to Section 162(m).
3. ELIGIBILITY. The Options may be granted only to employees (including
officers and directors who are also employees) of the Participating Company
Group or to individuals who are rendering services as consultants or other
independent contractors to the Participating Company Group. The Board shall, in
the Board's sole discretion, determine which persons shall be granted Options
(an "Optionee"). An individual who is rendering services as a consultant or
other independent contractor shall be eligible to be granted only a nonqualified
stock option. An Optionee may, if otherwise eligible, be granted additional
Options.
4. SHARES SUBJECT TO OPTION. Options shall be for the purchase of shares
of the authorized but unissued common stock or treasury shares of common stock
of the Company (the "Stock"), subject to adjustment as provided in paragraph 9
below. The maximum number of shares of Stock which may be issued under the Plan
shall be Seven Million (7,000,000) shares. Subject to adjustment as provided in
paragraph 9 below, at any such time as a Participating Company is a "publicly
held corporation" as defined in paragraph 2 of Section 162(m), no person shall
be granted within any fiscal year of the Company Options which in the aggregate
cover more than Three Hundred Thousand (300,000) shares; provided, however, that
the foregoing limit shall be Six Hundred Thousand (600,000) shares with respect
to Options granted to any person during the first fiscal year of such person's
employment with the Company (the "Per Optionee Limit"). In the event that any
outstanding Option for any reason expires or is terminated or canceled and/or
shares of Stock subject to repurchase are repurchased by the Company, the shares
allocable to the unexercised portion of such Option, or such repurchased shares,
may again be subject to an Option grant. Notwithstanding the foregoing, any
such shares shall be made subject to a new Option only if the grant of such new
Option and the issuance of such shares pursuant to such new Option would not
cause the Plan or any Option granted under the Plan to contravene Rule 16b-3.
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the shareholders of the Company.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Subject to the provisions of
the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the option price of the Option, the exercisability of the Option, whether the
Option is to be treated as an Incentive Stock Option or as a nonqualified stock
option and all other terms and conditions of the Option not inconsistent with
the Plan. Options granted pursuant to the Plan shall be evidenced by written
agreements specifying the
2
<PAGE>
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish, and shall comply with and be subject to the following
terms and conditions:
(a) EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (i) the
exercise price per share for an Option shall be not less than the fair market
value, as determined by the Board, of a share of Stock on the date of the
granting of the Option, and (ii) no Option granted to an Optionee who at the
time the Option is granted owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of a Participating
Company within the meaning of section 422(b)(6) of the Code and/or ten percent
(10%) of the total combined value of all classes of stock of a Participating
Company (a "Ten Percent Owner Optionee") shall have an exercise price per share
less than one hundred ten percent (110%) of the fair market value of a share of
Stock on the date the Option is granted. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a nonqualified stock option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying with the provisions of section 424(a) of
the Code.
(b) EXERCISE PERIOD OF OPTIONS. The Board shall have the power to
set the time or times within which each Option shall be exercisable or the event
or events upon the occurrence of which all or a portion of each Option shall be
exercisable and the term of each Option; provided, however, that (I) no Option
shall be exercisable after the expiration of ten (10) years after the date such
Option is granted and (ii) no Option granted to a Ten Percent Owner Optionee
shall be exercisable after the expiration of five (5) years after the date such
Option is granted.
(c) PAYMENT OF EXERCISE PRICE. Payment of the exercise price for the
number of shares of Stock being purchased pursuant to any Option shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's stock owned by the Optionee having a value, as
determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the exercise price, (iii) by the Optionee's recourse promissory note, (iv)
by the assignment of the proceeds of a sale of some or all of the shares being
acquired upon the exercise of an Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System), or (v) by
any combination thereof. The Board may at any time or from time to time, by
adoption of or by amendment to the form of Standard Option Agreement described
in paragraph 7 below, or by other means, grant Options which do not permit all
of the foregoing forms of consideration to be used in payment of the exercise
price and/or which otherwise restrict one (1) or more forms of consideration.
Notwithstanding the foregoing, an Option may not be exercised by tender to the
Company of shares of the Company's stock to the extent such tender of stock
would constitute a violation of the provisions of any law, regulation and/or
agreement restricting the redemption of the Company's stock. Furthermore, no
promissory note shall be permitted if an exercise using a promissory note would
be a violation of any law. Any permitted promissory note shall be due and
payable not more than five (5) years after the Option is exercised and interest
shall be
3
<PAGE>
payable at least annually and be at least equal to the minimum interest rate
necessary to avoid imputed interest pursuant to all applicable sections of the
Code. The Board shall have the authority to permit or require the Optionee to
secure any promissory note used to exercise an Option with the shares of Stock
acquired on exercise of the Option and/or with other collateral acceptable to
the Company.
(x) Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's stock unless such
shares of the Company's stock either have been owned by the Optionee for more
than six (6) months or were not acquired, directly or indirectly, from the
Company.
(y) Unless otherwise provided by the Board, in the event the
Company at any time is subject to the regulations promulgated by the Board of
Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(z) The Company reserves, at any and all times, the right, in
the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedures for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
7. STANDARD FORM OF STOCK OPTION AGREEMENT. Unless otherwise provided
for by the Board at the time an Option is granted or as otherwise provided for
by this paragraph 7, all Options shall comply with and be subject to the terms
and conditions set forth in the stock option agreement attached hereto as
Exhibit A and incorporated herein by reference (the "Standard Option
Agreement").
(a) MODIFICATIONS FOR INCENTIVE STOCK OPTIONS. In the event the
Option is designated as an Incentive Stock Option, the Standard Option Agreement
for such Option shall be the Standard Option Agreement attached hereto as
Exhibit A as modified as set forth below unless otherwise specified by the
Board:
(i) The title and paragraph 2 of the Standard Option Agreement
shall reflect the Option's status as an Incentive Stock Option.
(ii) Paragraph 7(f) of the Standard Option Agreement, regarding
an Optionee who is a director or consultant but not an employee of the Company,
shall be deleted and shall not apply to the Option.
(iii) A new paragraph 13 shall be added to the Standard
Option Agreement providing, among other things, that the Optionee give the
Company notice of sales upon disqualifying dispositions of shares of Stock
acquired pursuant to the exercise of Incentive Stock Options as follows:
4
<PAGE>
13. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The
Optionee shall dispose of the shares acquired pursuant to the Option
only in accordance with the provisions of this Option Agreement. In
addition, the Optionee shall promptly notify the Chief Financial
Officer of the Company if the Optionee disposes of any of the shares
acquired pursuant to the Option within one (1) year from the date the
Optionee exercises all or part of the Option or within two (2) years
of the date of grant of the Option. Until such time as the Optionee
disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired
pursuant to the Option in the Optionee's name (and not in the name of
any nominee) for the one-year period immediately after exercise of the
Option and the two-year period immediately after grant of the Option.
At any time during the one-year or two-year periods set forth above,
the Company may place a legend or legends on any certificate or
certificates representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the
Company of any such transfers. The obligation of the Optionee to
notify the Company of any such transfer shall continue notwithstanding
that a legend has been placed on the certificate or certificates
pursuant to the preceding sentence.
(iv) Paragraph 13 of the Standard Option Agreement shall be
renumbered as paragraph 14 and a new paragraph 14(a) shall be added to the
Standard Option Agreement providing for a legend regarding Incentive Stock
Options to be placed on each certificate representing shares of Stock acquired
pursuant to the Option as follows:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE
STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES
BY THE REGISTERED HOLDER HEREOF MADE ON OR BEFORE_____________________.
THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE OPTION
IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)
PRIOR TO THIS DATE."
(v) Paragraph 15 of the Standard Option Agreement shall be
renumbered as paragraph 16 and shall be modified to provide that amendments to
the Standard Option Agreement may be made without the Optionee's consent if such
amendments are required to enable an Option designated as an Incentive Stock
Option to qualify as an Incentive Stock Option.
(vi) The remaining paragraphs of such modified Standard Option
Agreement for Incentive Stock Options shall be renumbered accordingly.
5
<PAGE>
(b) STANDARD TERM FOR OPTIONS. Unless otherwise provided for by the
Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. AUTHORITY TO VARY TERMS. The Board shall have the authority from time
to time to vary the terms of the Standard Option Agreement either in connection
with the grant of an individual Option or in connection with the authorization
of a new standard form or forms; provided, however, that the terms and
conditions of such revised or amended standard form or forms of stock option
agreement shall be in accordance with the terms of the Plan. Such authority
shall include, but not by way of limitation, the authority to grant Options
which are immediately exercisable subject to the Company's right to repurchase
any unvested shares of Stock acquired by an Optionee on exercise of an Option in
the event such Optionee's employment with the Participating Company Group is
terminated for any reason, with or without cause.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan, to
the Per Optionee Limit set forth in paragraph 4 above, and to any outstanding
Options and in the exercise price of any outstanding Options in the event of a
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or like change in the capital structure of the Company.
10. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Control
Company. For purposes of applying this paragraph 10, the "Control Company"
shall mean the Participating Company whose stock is subject to the Option.
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company where the stockholders of the Control Company before such sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Control Company;
(b) a merger in which the stockholders of the Control Company before
such merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Control Company; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the stockholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall either assume the Company's rights and obligations under
outstanding stock option agreements or substitute
6
<PAGE>
options for the Acquiring Corporation's stock for such outstanding Options. In
the event the Acquiring Corporation elects not to assume or substitute for such
outstanding Options in connection with a merger described in (B) above or a sale
of assets described in (C) above, the Board shall provide that any unexercisable
and/or unvested portion of the outstanding Options shall be immediately
exercisable and vested as of a date prior to the Transfer of Control, as the
Board so determines. The exercise and/or vesting of any Option that was
permissible solely by reason of this paragraph 10 shall be conditioned upon the
consummation of the Transfer of Control. Any Options which are neither assumed
by the Acquiring Corporation nor exercised as of the date of the Transfer of
Control shall terminate effective as of the date of the Transfer of Control.
11. PROVISION OF INFORMATION. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
12. OPTIONS NON-TRANSFERABLE. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
13. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating Company
assigns, other than by operation of law, to a third person, other than another
Participating Company, any of the Participating Company's rights to repurchase
any shares of Stock acquired on the exercise of an Option, the assignee shall
pay to the assigning Participating Company the value of such right as determined
by the Company in the Company's sole discretion. Such consideration shall be
paid in cash. In the event such repurchase right is exercisable at the time of
such assignment, the value of such right shall be not less than the fair market
value of the shares of Stock which may be repurchased under such right (as
determined by the Company) minus the repurchase price of such shares. The
requirements of this paragraph 13 regarding the minimum consideration to be
received by the assigning Participating Company shall not inure to the benefit
of the Optionee whose shares of Stock are being repurchased. Failure of a
Participating Company to comply with the provisions of this paragraph 13 shall
not constitute a defense or otherwise prevent the exercise of the repurchase
right by the assignee of such right.
14. TERMINATION OR AMENDMENT OF PLAN OR OPTIONS. The Board, including any
duly appointed committee of the Board, may terminate or amend the Plan or any
Option at any time; provided, however, that without the approval of the
Company's stockholders, there shall be (a) no increase in the total number of
shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 9 above), (b) no change in the class of persons eligible to receive
Incentive Stock Options and (c) no expansion in the class of persons eligible to
receive nonqualified stock options. In addition to the foregoing, the approval
of the Company's stockholders shall be sought for any amendment to the Plan or
an Option for which the Board deems stockholder approval necessary in order to
comply with Rule 16b-3. In any event, no amendment may adversely affect any
then outstanding Option or any unexercised portion thereof, without the consent
of the Optionee, unless such amendment is required to enable an Option
designated as an Incentive Stock Option to qualify as an Incentive Stock Option.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Network General Corporation 1989 Stock Option Plan was duly
amended by the Board of Directors of the Company on the 20th day of June, 1994.
________________________________________
8
<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(INITIAL OPTION)
Network General Corporation (the "Company") granted to the individual named
below an option to purchase certain shares of common stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean ____________________________________.
(b) "Date of Option Grant" shall mean ________________________.
(c) "Number of Option Shares" shall mean _____________________
shares of common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $___________ per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date occurring one (1) year
after the Date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one (1) year
after the Date of Option Grant.
(g) Determination of "Vested Ratio":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/4
provided the Optionee is
continuously employed by
a Participating Company from
the Date of Option Grant until
the Initial Vesting Date
1
<PAGE>
Plus
----
For each full month 1/48
of the Optionee's
continuous employment by a
Participating Company from the
Initial Vesting Date
In no event shall the Vested
Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Network General Corporation, a Delaware
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Network General Corporation 1989 Stock
Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company
2
<PAGE>
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall first become exercisable on the Initial Exercise Date. The
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option in the amount equal to the Number of Option Shares
multiplied by the Vested Ratio as set forth in paragraph 1 above less the number
of shares previously acquired upon exercise of the Option. In no event shall
the Option be exercisable for more shares than the Number of Option Shares.
Notwithstanding the foregoing, the Option may not be exercised more frequently
than twice in any continuous twelve (12) month period; provided, however, that
the foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in paragraph 7
below or (ii) during the thirty (30) day periods immediately preceding and
following an Ownership Change as defined in paragraph 8 below. In addition to
the foregoing, in the event that the adoption of the Plan or any amendment of
the Plan is subject to the approval of the Company's stockholders in order for
the Option to comply with the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall not be exercisable prior to such stockholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such stockholder
approval.
(b) METHOD OF EXERCISE. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment
of the exercise price for the number of shares being purchased and (ii) an
executed copy, if required herein, of the then current form of joint escrow
instructions referenced below.
(c) FORM OF PAYMENT OF EXERCISE PRICE. Such payment shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the exercise price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by cash for a portion of the exercise price and the Optionee's
promissory note for the balance of the exercise price, (iv) by Immediate Sales
Proceeds, as defined below, or (v) by any combination of the foregoing.
Notwithstanding the foregoing, the Option may not be exercised by tender to the
Company of shares of the Company's common stock to the extent such tender of
stock would constitute a violation of the provisions of
3
<PAGE>
any law, regulation and/or agreement restricting the redemption of the Company's
common stock. Unless otherwise specified by the Board at the time the Option is
granted, the promissory note permitted in clause (iii) above shall not exceed
the amount permitted by law to be paid by a promissory note and shall be a full
recourse note in a form satisfactory to the Company, with principal payable in
equal annual installments with the last installment due four (4) years from the
date the Option is exercised. Interest on the principal balance of the
promissory note shall be payable in annual installments at the minimum interest
rate necessary to avoid imputed interest pursuant to all applicable sections of
the Code. Such recourse promissory note shall be secured by the shares of stock
acquired pursuant to the then current form of security agreement as approved by
the Company. In the event the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine, the
Optionee shall pay the unpaid principal balance of the promissory note and any
accrued interest thereon upon termination of the Optionee's employment with the
Participating Company Group for any reason, with or without cause. "Immediate
Sales Proceeds" shall mean the assignment in form acceptable to the Company of
the proceeds of a sale of some or all of the shares acquired upon the exercise
of the Option pursuant to a program and/or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. In
addition, no Option may be exercised unless (i) a registration statement under
the Securities
4
<PAGE>
Act of 1933, as amended (the "Securities Act"), shall at the time of exercise of
the Option be in effect with respect to the shares issuable upon exercise of the
Option or (ii) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Option may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee within the meaning of section 422(c) of the Code, the Option may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within one (1) month after the Optionee's termination of
employment. Except as the Company and the Optionee otherwise agree, exercise of
the Option pursuant to this paragraph 7(a) may not be made by delivery of a
promissory note as provided in paragraph 4(c)(iii) above.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXERCISE PREVENTED BY LAW. Except as provided in this paragraph
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the
5
<PAGE>
Participating Company Group terminates unless the exercise of the Option in
accordance with this paragraph 7 is prevented by the provisions of paragraph
4(f) above. If the exercise of the Option is so prevented, the Option shall
remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(d) OPTIONEE SUBJECT TO SECTION 16(B). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day following the date on
which the Optionee would no longer be subject to such suit, (ii) the one hundred
and ninetieth (190th) day after the Optionee's termination of employment, or
(iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
(f) APPLICATION TO CONSULTANTS. For purposes of this Option
Agreement, in the event the Optionee is a consultant or other independent
contractor but not an employee of a Participating Company at the time the Option
is granted, termination of the Optionee's status as a consultant or other
independent contractor of the Participating Company shall be deemed to be
termination of the Optionee's employment.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. For purposes hereof, the
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the stockholders of the Control
6
<PAGE>
Company before such sale, exchange, or transfer retain, directly or indirectly,
at least a majority of the beneficial interest in the voting stock of the
corporation(s) to which the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that any
unexercised portion of the Option shall be fully exercisable as of a date prior
to the Transfer of Control, as the Board so determines. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A STOCKHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares which are security for
any promissory note will be available for repurchase, the Company may require
the Optionee to deposit the certificate or certificates evidencing the shares
which the Optionee purchases upon
7
<PAGE>
exercise of the Option with an agent designated by the Company under the terms
and conditions of a security agreement approved by the Company. If the Company
does not require such deposit as a condition of exercise of the Option, the
Company reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
full repayment on any promissory note secured by the shares in escrow, but not
more frequently than twice each year, the agent shall deliver to the Optionee
the shares no longer security for any promissory note.
12. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to any security interest held by the
Company with the same force and effect as the shares subject to such security
interest immediately before such event.
13. LEGENDS. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph.
14. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
15. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
16. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
8
<PAGE>
17. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
NETWORK GENERAL CORP.
By:_________________________________________
Title:______________________________________
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Date:______________________________ _______________________________________
9
<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(SPECIAL VESTING)
Network General Corporation (the "Company") granted to the individual named
below an option to purchase certain shares of common stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean ____________________________________.
(b) "Date of Option Grant" shall mean ________________________.
(c) "Number of Option Shares" shall mean _____________________
shares of common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $__________ per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall mean __________________________.
(f) Determination of "Cumulative Vested Shares":
On each Vesting Date set forth in the table below, provided that
the Optionee is continuously employed by a Participating Company from the Date
of Option Grant until the respective Vesting Date, the Optionee shall become
vested in the number of Cumulative Vested Shares set forth opposite such Vesting
Date.
<TABLE>
<CAPTION>
Cumulative
Vesting Date Shares Vesting Vested Shares
------------ -------------- -------------
<S> <C> <C>
_____, 199__ _____ _____
_____, 199__ _____ _____
_____, 199__ _____ _____
_____, 199__ _____ _____
</TABLE>
1
<PAGE>
(g) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(i) "Company" shall mean Network General Corporation, a Delaware
corporation, and any successor corporation thereto.
(j) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(k) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(l) "Plan" shall mean the Network General Corporation 1989 Stock
Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
2
<PAGE>
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall first become exercisable on the Initial Exercise Date. The
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option in the amount equal to the number of Cumulative
Vested Shares set forth in paragraph 1 above less the number of shares
previously acquired upon exercise of the Option. In no event shall the Option
be exercisable for more shares than the Number of Option Shares.
Notwithstanding the foregoing, the Option may not be exercised more frequently
than twice in any continuous twelve (12) month period; provided, however, that
the foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in paragraph 7
below or (ii) during the thirty (30) day periods immediately preceding and
following an Ownership Change as defined in paragraph 8 below. In addition to
the foregoing, in the event that the adoption of the Plan or any amendment of
the Plan is subject to the approval of the Company's stockholders in order for
the Option to comply with the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall not be exercisable prior to such stockholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such stockholder
approval.
(b) METHOD OF EXERCISE. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
3
<PAGE>
(c) FORM OF PAYMENT OF EXERCISE PRICE. Such payment shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the exercise price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by cash for a portion of the exercise price and the Optionee's
promissory note for the balance of the exercise price, (iv) by Immediate Sales
Proceeds, as defined below, or (v) by any combination of the foregoing.
Notwithstanding the foregoing, the Option may not be exercised by tender to the
Company of shares of the Company's common stock to the extent such tender of
stock would constitute a violation of the provisions of any law, regulation
and/or agreement restricting the redemption of the Company's common stock.
Unless otherwise specified by the Board at the time the Option is granted, the
promissory note permitted in clause (iii) above shall not exceed the amount
permitted by law to be paid by a promissory note and shall be a full recourse
note in a form satisfactory to the Company, with principal payable in equal
annual installments with the last installment due four (4) years from the date
the Option is exercised. Interest on the principal balance of the promissory
note shall be payable in annual installments at the minimum interest rate
necessary to avoid imputed interest pursuant to all applicable sections of the
Code. Such recourse promissory note shall be secured by the shares of stock
acquired pursuant to the then current form of security agreement as approved by
the Company. In the event the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine, the
Optionee shall pay the unpaid principal balance of the promissory note and any
accrued interest thereon upon termination of the Optionee's employment with the
Participating Company Group for any reason, with or without cause. "Immediate
Sales Proceeds" shall mean the assignment in form acceptable to the Company of
the proceeds of a sale of some or all of the shares acquired upon the exercise
of the Option pursuant to a program and/or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
4
<PAGE>
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. In
addition, no Option may be exercised unless (i) a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
5
<PAGE>
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee within the meaning of section 422(c) of the Code, the Option may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within one (1) month after the Optionee's termination of
employment. Except as the Company and the Optionee otherwise agree, exercise of
the Option pursuant to this paragraph 7(a) may not be made by delivery of a
promissory note as provided in paragraph 4(c)(iii) above.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXERCISE PREVENTED BY LAW. Except as provided in this paragraph
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
(d) OPTIONEE SUBJECT TO SECTION 16(B). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Option shall remain exercisable
until the earliest to occur of (I) the tenth (10th) day following the date on
which the Optionee would no longer be subject to such suit, (ii) the one hundred
and ninetieth (190th) day after the Optionee's termination of employment, or
(iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety
6
<PAGE>
(90) days or less. In the event of a leave in excess of ninety (90) days, the
Optionee's employment shall be deemed to terminate on the ninety-first (91st)
day of the leave unless the Optionee's right to reemployment with the
Participating Company Group remains guaranteed by statute or contract.
Notwithstanding the foregoing, however, a leave of absence shall be treated as
employment for purposes of determining the Optionee's Cumulative Vested Shares
if and only if the leave of absence is designated by the Company as (or required
by law to be) a leave for which vesting credit is given.
(f) APPLICATION TO CONSULTANTS. For purposes of this Option
Agreement, in the event the Optionee is a consultant or other independent
contractor but not an employee of a Participating Company at the time the Option
is granted, termination of the Optionee's status as a consultant or other
independent contractor of the Participating Company shall be deemed to be
termination of the Optionee's employment.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. For purposes hereof, the
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the stockholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that any
unexercised portion of the Option shall be fully exercisable as of a date prior
to the Transfer of Control, as the Board so determines. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is
7
<PAGE>
neither assumed by the Acquiring Corporation nor exercised as of the date of the
Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A STOCKHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares which are security for
any promissory note will be available for repurchase, the Company may require
the Optionee to deposit the certificate or certificates evidencing the shares
which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of a security agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in escrow.
The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
full repayment on any promissory note secured by the shares in escrow, but not
more frequently than twice each year, the agent shall deliver to the Optionee
the shares no longer security for any promissory note.
12. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to any security interest held by the
Company with the same force and effect as the shares subject to such security
interest immediately before such event.
8
<PAGE>
13. LEGENDS. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph.
14. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
15. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
16. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
17. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
NETWORK GENERAL CORPORATION
By:________________________________
Title:_____________________________
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Date:________________________
9
<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(FOCAL GRANT)
Network General Corporation (the "Company") granted to the individual named
below an option to purchase certain shares of common stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean __________________________________.
(b) "Date of Option Grant" shall mean _______________________.
(c) "Number of Option Shares" shall mean ____________________ shares
of common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $___________ per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date occurring one (1) month
after the Date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring one (1) month
after the Date of Option Grant.
(g) Determination of "Vested Ratio":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/12
provided the Optionee is
continuously employed by
a Participating Company from
the Date of Option Grant until
the Initial Vesting Date
1
<PAGE>
Plus
----
For each full month 1/12
of the Optionee's
continuous employment by a
Participating Company from the
Initial Vesting Date
In no event shall the Vested
Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Network General Corporation, a Delaware
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Network General Corporation 1989 Stock
Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company
2
<PAGE>
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall first become exercisable on the Initial Exercise Date. The
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option in the amount equal to the Number of Option Shares
multiplied by the Vested Ratio as set forth in paragraph 1 above less the number
of shares previously acquired upon exercise of the Option. In no event shall
the Option be exercisable for more shares than the Number of Option Shares.
Notwithstanding the foregoing, the Option may not be exercised more frequently
than twice in any continuous twelve (12) month period; provided, however, that
the foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in paragraph 7
below or (ii) during the thirty (30) day periods immediately preceding and
following an Ownership Change as defined in paragraph 8 below. In addition to
the foregoing, in the event that the adoption of the Plan or any amendment of
the Plan is subject to the approval of the Company's stockholders in order for
the Option to comply with the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall not be exercisable prior to such stockholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such stockholder
approval.
(b) METHOD OF EXERCISE. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
(c) FORM OF PAYMENT OF EXERCISE PRICE. Such payment shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the exercise price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by cash for a portion of the exercise price and the Optionee's
promissory note for the balance of the exercise price, (iv) by Immediate Sales
Proceeds, as defined below, or (v) by any combination of the foregoing.
Notwithstanding the foregoing, the Option may not be exercised by tender to the
Company of shares of the Company's common stock to the extent such tender of
stock would constitute a violation of the provisions of any law, regulation
and/or agreement restricting the redemption of the Company's common stock.
3
<PAGE>
Unless otherwise specified by the Board at the time the Option is granted, the
promissory note permitted in clause (iii) above shall not exceed the amount
permitted by law to be paid by a promissory note and shall be a full recourse
note in a form satisfactory to the Company, with principal payable in equal
annual installments with the last installment due four (4) years from the date
the Option is exercised. Interest on the principal balance of the promissory
note shall be payable in annual installments at the minimum interest rate
necessary to avoid imputed interest pursuant to all applicable sections of the
Code. Such recourse promissory note shall be secured by the shares of stock
acquired pursuant to the then current form of security agreement as approved by
the Company. In the event the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine, the
Optionee shall pay the unpaid principal balance of the promissory note and any
accrued interest thereon upon termination of the Optionee's employment with the
Participating Company Group for any reason, with or without cause. "Immediate
Sales Proceeds" shall mean the assignment in form acceptable to the Company of
the proceeds of a sale of some or all of the shares acquired upon the exercise
of the Option pursuant to a program and/or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. In
addition, no Option may be exercised unless (i) a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of
4
<PAGE>
legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee within the meaning of section 422(c) of the Code, the Option may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within one (1) month after the Optionee's termination of
employment. Except as the Company and the Optionee otherwise agree, exercise of
the Option pursuant to this paragraph 7(a) may not be made by delivery of a
promissory note as provided in paragraph 4(c)(iii) above.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXERCISE PREVENTED BY LAW. Except as provided in this paragraph
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date
5
<PAGE>
the Optionee is notified by the Company that the Option is exercisable, but in
any event no later than the Option Term Date.
(d) OPTIONEE SUBJECT TO SECTION 16(B). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day following the date on
which the Optionee would no longer be subject to such suit, (ii) the one hundred
and ninetieth (190th) day after the Optionee's termination of employment, or
(iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract.
(f) APPLICATION TO CONSULTANTS. For purposes of this Option
Agreement, in the event the Optionee is a consultant or other independent
contractor but not an employee of a Participating Company at the time the Option
is granted, termination of the Optionee's status as a consultant or other
independent contractor of the Participating Company shall be deemed to be
termination of the Optionee's employment.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. For purposes hereof, the
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the stockholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
6
<PAGE>
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that any
unexercised portion of the Option shall be fully exercisable as of a date prior
to the Transfer of Control, as the Board so determines. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A STOCKHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares which are security for
any promissory note will be available for repurchase, the Company may require
the Optionee to deposit the certificate or certificates evidencing the shares
which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of a security agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in escrow.
The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
full repayment on any promissory note secured by the shares in escrow, but not
more frequently than
7
<PAGE>
twice each year, the agent shall deliver to the Optionee the shares no longer
security for any promissory note.
12. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to any security interest held by the
Company with the same force and effect as the shares subject to such security
interest immediately before such event.
13. LEGENDS. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph.
14. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
15. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
16. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
17. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
NETWORK GENERAL CORPORATION
By: __________________________________
Title: _______________________________
8
<PAGE>
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Date:__________________________
9
<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
(EVERGREEN OPTION)
Network General Corporation (the "Company") granted to the individual named
below an option to purchase certain shares of common stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean __________________________________.
(b) "Date of Option Grant" shall mean _______________________.
(c) "Number of Option Shares" shall mean ____________________ shares
of common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $___________ per share as adjusted
from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date occurring thirty-seven
(37) months after the Date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring thirty-seven
(37) months after the Date of Option Grant.
(g) Determination of "Vested Ratio":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/12
provided the Optionee is
continuously employed by
a Participating Company from
the Date of Option Grant until
the Initial Vesting Date
1
<PAGE>
Plus
----
For each full month 1/12
of the Optionee's
continuous employment by a
Participating Company from the
Initial Vesting Date
In no event shall the Vested
Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Network General Corporation, a Delaware
corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Network General Corporation 1989 Stock
Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company
2
<PAGE>
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall first become exercisable on the Initial Exercise Date. The
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option in the amount equal to the Number of Option Shares
multiplied by the Vested Ratio as set forth in paragraph 1 above less the number
of shares previously acquired upon exercise of the Option. In no event shall
the Option be exercisable for more shares than the Number of Option Shares.
Notwithstanding the foregoing, the Option may not be exercised more frequently
than twice in any continuous twelve (12) month period; provided, however, that
the foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in paragraph 7
below or (ii) during the thirty (30) day periods immediately preceding and
following an Ownership Change as defined in paragraph 8 below. In addition to
the foregoing, in the event that the adoption of the Plan or any amendment of
the Plan is subject to the approval of the Company's stockholders in order for
the Option to comply with the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall not be exercisable prior to such stockholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such stockholder
approval.
(b) METHOD OF EXERCISE. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of joint escrow instructions
referenced below.
(c) FORM OF PAYMENT OF EXERCISE PRICE. Such payment shall be made
(I) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the exercise price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by cash for a portion of the exercise price and the Optionee's
promissory note for the balance of the exercise price, (iv) by Immediate Sales
Proceeds, as defined below, or (v) by any combination of the foregoing.
Notwithstanding the foregoing, the Option may not be exercised by tender to the
Company of shares of the Company's common stock to the extent such tender of
stock would constitute a violation of the provisions of any law, regulation
and/or agreement restricting the redemption of the Company's common stock.
3
<PAGE>
Unless otherwise specified by the Board at the time the Option is granted, the
promissory note permitted in clause (iii) above shall not exceed the amount
permitted by law to be paid by a promissory note and shall be a full recourse
note in a form satisfactory to the Company, with principal payable in equal
annual installments with the last installment due four (4) years from the date
the Option is exercised. Interest on the principal balance of the promissory
note shall be payable in annual installments at the minimum interest rate
necessary to avoid imputed interest pursuant to all applicable sections of the
Code. Such recourse promissory note shall be secured by the shares of stock
acquired pursuant to the then current form of security agreement as approved by
the Company. In the event the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Optionee shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations. Except as the Company in its sole discretion shall determine, the
Optionee shall pay the unpaid principal balance of the promissory note and any
accrued interest thereon upon termination of the Optionee's employment with the
Participating Company Group for any reason, with or without cause. "Immediate
Sales Proceeds" shall mean the assignment in form acceptable to the Company of
the proceeds of a sale of some or all of the shares acquired upon the exercise
of the Option pursuant to a program and/or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired on exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. In
addition, no Option may be exercised unless (i) a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of
4
<PAGE>
legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminates, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death of the Optionee or disability of
the Optionee within the meaning of section 422(c) of the Code, the Option may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within one (1) month after the Optionee's termination of
employment. Except as the Company and the Optionee otherwise agree, exercise of
the Option pursuant to this paragraph 7(a) may not be made by delivery of a
promissory note as provided in paragraph 4(c)(iii) above.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXERCISE PREVENTED BY LAW. Except as provided in this paragraph
7, the Option shall terminate and may not be exercised after the Optionee's
employment with the Participating Company Group terminates unless the exercise
of the Option in accordance with this paragraph 7 is prevented by the provisions
of paragraph 4(f) above. If the exercise of the Option is so prevented, the
Option shall remain exercisable until three (3) months after the date
5
<PAGE>
the Optionee is notified by the Company that the Option is exercisable, but in
any event no later than the Option Term Date.
(d) OPTIONEE SUBJECT TO SECTION 16(B). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended, the Option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day following the date on
which the Optionee would no longer be subject to such suit, (ii) the one hundred
and ninetieth (190th) day after the Optionee's termination of employment, or
(iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract.
(f) APPLICATION TO CONSULTANTS. For purposes of this Option
Agreement, in the event the Optionee is a consultant or other independent
contractor but not an employee of a Participating Company at the time the Option
is granted, termination of the Optionee's status as a consultant or other
independent contractor of the Participating Company shall be deemed to be
termination of the Optionee's employment.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. For purposes hereof, the
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the stockholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
6
<PAGE>
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall assume the Company's rights and obligations under this
Option Agreement or substitute an option for the Acquiring Corporation's stock
for the Option. In the event the Acquiring Corporation elects not to assume the
Company's rights and obligations under this Option Agreement or substitute for
the Option in connection with a Transfer of Control involving an Ownership
Change described in (b) or (c) above, the Board shall provide that any
unexercised portion of the Option shall be fully exercisable as of a date prior
to the Transfer of Control, as the Board so determines. The Option shall
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A STOCKHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares which are security for
any promissory note will be available for repurchase, the Company may require
the Optionee to deposit the certificate or certificates evidencing the shares
which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of a security agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in escrow.
The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
full repayment on any promissory note secured by the shares in escrow, but not
more frequently than
7
<PAGE>
twice each year, the agent shall deliver to the Optionee the shares no longer
security for any promissory note.
12. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to any security interest held by the
Company with the same force and effect as the shares subject to such security
interest immediately before such event.
13. LEGENDS. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph.
14. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
15. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
16. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
17. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
8
<PAGE>
NETWORK GENERAL CORPORATION
By: _________________________________
Title: ______________________________
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Date: _______________________
9
<PAGE>
EXHIBIT 10.22
NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
(As Amended June 20, 1994)
1. PURPOSE. The Network General Corporation 1989 Employee Stock Purchase
Plan (the "Plan") is established to provide eligible employees of Network
General Corporation, a Delaware corporation ("Network General"), and any current
or future parent or subsidiary corporations of Network General which the Board
of Directors of Network General (the "Board") determines should be included in
the Plan (collectively referred to as the "Company"), with an opportunity to
acquire a proprietary interest in the Company by the purchase of the common
stock of Network General. (Network General and any parent or subsidiary
corporation designated by the Board as a participating corporation shall be
individually referred to herein as a "Participating Company." For purposes of
the Plan, a parent corporation and a subsidiary corporation shall be as defined
in sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended.
(the "Code").)
It is intended that the Plan shall qualify as an "employee stock purchase
plan" under section 423 of the Code (including any future amendments or
replacements of such section), and the Plan shall be so construed. Any term not
expressly defined in the Plan but defined for purposes of section 423 of the
Code shall have the same definition herein.
An employee participating in the Plan (a "Participant") may withdraw such
Participant's accumulated payroll deductions (if any) therein at any time during
an Offering Period (as defined below). Accordingly, each Participant is, in
effect, granted an option pursuant to the Plan (a "Purchase Right") which may or
may not be exercised at the end of an Offering Period and which is intended to
qualify as an option described in section 423 of the Code.
2. ADMINISTRATION. The Plan shall be administered by the Board and/or by
a duly appointed committee of the Board having such powers as shall be specified
by the Board. Any subsequent references to the Board shall also mean the
committee if a committee has been appointed. The Board shall have the sole and
absolute discretion to determine from time to time what parent corporations
and/or subsidiary corporations shall be Participating Companies. All questions
of interpretation of the Plan or of any Purchase Right shall be determined by
the Board and shall be final and binding upon all persons having an interest in
the Plan and/or any Purchase Right. Subject to the
1
<PAGE>
provisions of the Plan, the Board shall determine all of the relevant terms and
conditions of Purchase Rights granted pursuant to the Plan; provided, however,
that all Participants granted Purchase Rights pursuant to the Plan shall have
the same rights and privileges within the meaning of section 423(b)(5) of the
Code. All expenses incurred in connection with the administration of the Plan
shall be paid by the Company.
3. SHARE RESERVE. The maximum number of shares which may be issued under
the Plan shall be 700,000 shares of Network General's authorized but unissued
common stock or treasury shares of common stock (the "Shares"). In the event
that any Purchase Right for any reason expires or is cancelled or terminated,
the Shares allocable to the unexercised portion of such Purchase Right may again
be subjected to a Purchase Right.
4. ELIGIBILITY. Any employee of a Participating Company is eligible to
participate in the Plan except the following:
(a) employees who have not completed one (1) month of continuous
employment with the Company as of the commencement of an Offering Period;
(b) employees who are customarily employed by the Company for less
than twenty (20) hours a week;
(c) employees whose customary employment is for not more than five
(5) months in any calendar year; and
(d) employees who own or hold options to purchase or who, as a result
of participation in this Plan, would own or hold options to purchase, stock of
the Company possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company within the meaning of
section 423(b)(3) of the Code.
5. OFFERING DATES.
(a) OFFERING PERIODS. Except as otherwise set forth below, the Plan
shall be implemented by sequential offerings (individually an "Offering") of six
(6) months duration (an "Offering Period"). Prior to August 1, 1992, an
Offering Period shall commence on the first day of January and end on the last
day of June of the same year. An Offering Period shall also commence on the
first day of July of each year and end on the last day of December of the same
year. The first Offering Period shall commence on the effective date of a
registration statement on Form S-1 under the Securities Act of 1933, as amended,
which covers the common stock of Network General, whether or not such
registration statement covers some or all of the Shares
2
<PAGE>
issuable under the Plan. Effective as of August 1, 1992 and in lieu of the
foregoing, an Offering Period shall commence on the first day of February of
each year and end on the last day of July of the same year. An Offering Period
shall also commence on the first day of August of each year and end on the last
day of January of the succeeding year. Notwithstanding the foregoing, the Board
may establish a different term for one or more Offerings and/or different
commencing and/or ending dates for such Offerings. An employee who becomes
eligible to participate in the Plan after an Offering Period has commenced shall
not be eligible to participate in such Offering but may participate in any
subsequent Offering provided such employee is still eligible to participate in
the Plan as of the commencement of any such subsequent Offering. The first day
of an Offering Period shall be the "Offering Date" for such Offering Period. In
the event the first and/or last day of an Offering Period is not a business day,
the Company shall specify the business day that will be deemed the first or last
day, as the case may be, of the Offering Period.
(b) GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL. Notwithstanding any
other provision of the Plan to the contrary, any Purchase Right granted pursuant
to the Plan shall be subject to (i) obtaining all necessary governmental
approvals and/or qualifications of the sale and/or issuance of the Purchase
Rights and/or the Shares, and (ii) obtaining stockholder approval of the Plan.
Notwithstanding the foregoing, stockholder approval shall not be necessary in
order to grant any Purchase Right granted on the Offering Date of either of the
Plan's first Offering Period; provided, however, that the exercise of any such
Purchase Right shall be subject to obtaining stockholder approval of the Plan.
6. PARTICIPATION IN THE PLAN.
(a) INITIAL PARTICIPATION. An eligible employee shall become a
participant in the Plan (a "Participant") on the first Offering Date after
satisfying the eligibility requirements and delivering to the Company not later
than the close of business on the last business day before such Offering Date
(the "Subscription Date") a subscription agreement indicating the employee's
election to participate in the Plan and authorizing payroll deductions. An
eligible employee who does not deliver a subscription agreement to the Company
on or before the Subscription Date shall not participate in the Plan for that
Offering Period or for any subsequent Offering Period unless such eligible
employee subsequently enrolls in the Plan by complying with the provisions of
paragraph 4 and by filing a subscription agreement with the Company on or before
the Subscription Date for such subsequent Offering Period. The Company may,
from time to time, change the Subscription Date as deemed advisable by the
Company in its sole discretion for proper administration of the Plan.
(b) CONTINUED PARTICIPATION. Participation in the Plan shall
continue until (i) the Participant ceases to be eligible as provided in
paragraph 4, (ii) the
3
<PAGE>
Participant withdraws from the Plan pursuant to paragraph 11, or (iii) the
Participant terminates employment as provided in paragraph 12. At the end of an
Offering Period, each Participant in such terminating Offering Period shall
automatically participate in the first subsequent Offering Period according to
the same elections contained in the Participant's subscription agreement
effective for the Offering Period which has just ended, provided such
Participant is still eligible to participate in the Plan as provided in
paragraph 4. However, a Participant may file a subscription agreement with
respect to such subsequent Offering Period if the Participant desires to change
any of the Participant's elections contained in the Participant's then effective
subscription agreement.
7. RIGHT TO PURCHASE SHARES. During an Offering Period each Participant
in such Offering Period shall have a Purchase Right consisting of the right to
purchase two thousand five hundred (2,500) Shares.
8. PURCHASE PRICE. The purchase price at which Shares may be acquired at
the end of an Offering pursuant to the exercise of all or any portion of a
Purchase Right granted under the Plan (the "Offering Exercise Price") shall be
set by the Board; provided, however, that the purchase price shall not be less
than eighty-five percent (85%) of the lesser of (a) the fair market value of the
Shares on the Offering Date of such Offering Period, or (b) the fair market
value of the Shares at the time of exercise of all or any portion of the
Purchase Right. Unless otherwise provided by the Board prior to the
commencement of an Offering Period, the Offering Exercise Price shall be
eighty-five percent (85%) of the lesser of (a) the fair market value of the
Shares on the Offering Date of such Offering Period or (b) the fair market value
of the Shares at the time of exercise of all or any portion of the Purchase
Right. The fair market value of the Shares on the Offering Date or on the date
of exercise will be the closing price quoted on the National Association of
Securities Dealers Automated Quotation System on such date; however the fair
market value of the Shares on the first Offering Date will be the offering price
for the common stock of Network General as registered on the Form S-1 filed with
the Securities and Exchange Commission.
9. PAYMENT OF PURCHASE PRICE. Shares which are acquired pursuant to the
exercise of all or any portion of a Purchase Right for a given Offering Period
may be paid for only by means of payroll deductions from the Participant's
Compensation accumulated during the Offering Period. For purposes of the Plan,
a Participant's "Compensation" with respect to an Offering shall include all
amounts paid in cash and includable as "wages" subject to tax under section
3101(a) of the Code without applying the dollar limitation of section 3121(a) of
the Code. Accordingly, Compensation shall include, without limitation,
salaries, commissions, bonuses, overtime, and salary deferrals under section
401(k) of the Code. Notwithstanding the foregoing, Compensation shall not
include reimbursements of expenses, allowances, or any amount deemed received
without the actual transfer of cash or any amounts directly or
4
<PAGE>
indirectly paid pursuant to the Plan or any other stock purchase or stock option
plan. Except as set forth below. the amount of Compensation to be withheld from
a Participant's Compensation during each pay period shall be determined by the
Participant's subscription agreement.
(a) ELECTION TO DECREASE WITHHOLDING. During an Offering Period, a
Participant may elect to decrease the amount withheld from his or her
Compensation by filing an amended subscription agreement with the Company on or
before the Change Notice Date. The "Change Notice Date" shall initially be the
seventh (7th) day prior to the end of the first pay period for which such
election is to be effective; however, the Company may change such Change Notice
Date from time to time. A Participant may not elect to increase the amount
withheld from the Participant's Compensation during an Offering Period.
(b) LIMITATIONS ON PAYROLL WITHHOLDING. The amount of payroll
withholding with respect to the Plan for any Participant during any pay period
shall not exceed ten percent (10%) of the Participant's Compensation for such
pay period. Amounts shall be withheld in whole percentages only and shall be
reduced by any amounts contributed by the Participant and applied to the
purchase of Company stock pursuant to any other employee stock purchase plan
qualifying under section 423 of the Code.
(c) PAYROLL WITHHOLDING. Payroll deductions shall commence on the
first payday following the Offering Date and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in the Plan.
(d) PARTICIPANT ACCOUNTS. Individual accounts shall be maintained
for each Participant. All payroll deductions from a Participant's Compensation
shall be credited to such account and shall be deposited with the general funds
of the Company. All payroll deductions received or held by the Company may be
used by the Company for any corporate purpose.
(e) NO INTEREST PAID. Interest shall not be paid on sums withheld
from a Participant's Compensation.
(f) EXERCISE OF PURCHASE RIGHT. On the last day of an Offering
Period, each Participant who has not withdrawn from the Offering or whose
participation in the Offering has not terminated on or before such last day
shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole Shares arrived at by dividing the total
amount of the Participant's accumulated payroll deductions for the Offering
Period by the Offering Exercise Price; provided, however, in no event shall the
number of Shares purchased by the Participant exceed the number of Shares
subject to the Participant's Purchase Right. No Shares shall be purchased on
5
<PAGE>
behalf of a Participant whose participation in the Offering or the Plan has
terminated on or before the date of such exercise.
(g) RETURN OF CASH BALANCE. Any cash balance remaining in the
Participant's account shall be refunded to the Participant as soon as practical
after the last day of the Offering Period. In the event the cash to be returned
to a Participant pursuant to the preceding sentence is an amount less than the
amount necessary to purchase a whole Share, the Company may establish procedures
whereby such cash is maintained in the Participant's account and applied toward
the purchase of Shares in the subsequent Offering Period.
(h) WITHHOLDING. At the time the Purchase Right is exercised, in
whole or in part, or at the time some or all of the Shares are disposed of, the
Participant shall make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, which arise upon exercise of the
Purchase Right and/or upon disposition of Shares. The Company may, but shall
not be obligated to, withhold from the Participant's Compensation the amount
necessary to meet such withholding obligations.
(i) COMPANY ESTABLISHED PROCEDURES. The Company may, from time to
time, establish (i) a minimum required withholding amount for participation in
any Offering, (ii) limitations on the frequency and/or number of changes in the
amount withheld during an Offering, (iii) an exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, (iv) payroll withholding
in excess of or less than the amount designated by a Participant in order to
adjust for delays or mistakes in the Company's processing of subscription
agreements, and/or (v) such other limitations or procedures as deemed advisable
by the Company in the Company's sole discretion which are consistent with the
Plan and section 423 of the Code.
(j) EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which such Purchase Right relates shall expire immediately upon the end of such
Offering Period.
10. LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
(a) FAIR MARKET VALUE LIMITATION. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase Shares under
the Plan (and any other employee stock purchase plan sponsored by Network
General or a parent or subsidiary corporation of Network General) at a rate
which exceeds $25,000 in fair market value, determined as of the Offering Date
for each Offering Period (or such other limit as may be imposed by the Code),
for each calendar year in which the Participant participates in the Plan (and
any other employee stock purchase plan
6
<PAGE>
sponsored by Network General or a parent or subsidiary corporation of Network
General).
(b) ALLOCATION OF SHARES. In the event the number of Shares which
might be purchased by all Participants in the Plan exceeds the number of Shares
available in the Plan, the Company shall make a pro rata allocation of the
remaining Shares in as uniform a manner as shall be practicable and as the
Company shall determine to be equitable.
(c) RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall have
no rights as a stockholder by virtue of the Participant's participation in the
Plan until the date of the issuance of a stock certificate(s) for the Shares
being purchased pursuant to the exercise of the Participant's Purchase Right.
No adjustment shall be made for cash dividends or distributions or other rights
for which the record date is prior to the date such stock certificate(s) are
issued. Nothing herein shall confer upon a Participant any right to continue in
the employ of the Company or interfere in any way with any right of the Company
to terminate the Participant's employment at any time.
11. WITHDRAWAL.
(a) WITHDRAWAL FROM AN OFFERING. A Participant may withdraw from an
Offering by signing a written notice of withdrawal on a form provided by the
Company for such purpose and delivering such notice to the Company at any time
prior to the end of an Offering Period. Unless otherwise indicated by the
Participant, withdrawal from an Offering shall not result in a withdrawal from
the Plan or any succeeding Offering therein. A Participant is prohibited from
again participating in an Offering upon withdrawal from such Offering. The
Company may, from time to time, impose a requirement that the notice of
withdrawal be on file with the Company for a reasonable period prior to the
effectiveness of the Participant's withdrawal from an Offering.
(b) WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the
Plan by signing a written notice of withdrawal on a form provided by the Company
for such purpose and delivering such notice to the Company. In the event a
Participant voluntarily elects to withdraw from the Plan, the Participant may
not resume participation in the Plan during the same Offering Period, but may
participate in any subsequent Offering under the Plan by again satisfying the
requirements of paragraph 6. The Company may impose, from time to time, a
requirement that the notice of withdrawal be on file with the Company for a
reasonable period prior to the effectiveness of the Participant's withdrawal
from the Plan.
7
<PAGE>
(c) LIMITATION FOLLOWING CESSATION OF PARTICIPATION BY CERTAIN
EMPLOYEES. Notwithstanding any provision herein to the contrary, an employee
shall be prohibited from again participating in the Plan for at least six months
after the date on which such employee is deemed to "cease participation" in the
Plan (as defined below) if such employee is:
(1) an officer or director of Network General subject to Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and
(2) deemed to have "ceased participation" in the Plan within the
meaning of Rule 16b-3, promulgated under the Exchange Act, as amended from time
to time or any successor rule or regulation ("Rule 16b-3") as a consequence of
such employee's election to (i) withdraw from an Offering pursuant to paragraph
11(a) above, (ii) withdraw from the Plan pursuant to paragraph 11(b) above, or
(iii) stop or decrease to a nominal level the amount withheld from such
employee's Compensation pursuant to paragraph 9(a) above.
(d) WAIVER OF WITHDRAWAL RIGHT. The Company may, from time to time,
establish a procedure pursuant to which a Participant may elect (an "Irrevocable
Election"), at least six (6) months prior to the last day of an Offering Period,
to have all payroll deductions accumulated in such Participant's Plan account as
of such date applied to purchase shares under the Plan, and (1) to waive such
Participant's right to withdraw from the Offering or the Plan and (2) to waive
such Participant's right to increase, decrease, or cease payroll deductions
under the Plan from such Participant's Compensation during the Offering Period
ending on such date. An Irrevocable Election shall be made in writing on a form
provided by the Company for such purpose and must be delivered to the Company
not later than the close of business on the day preceding the date which is six
(6) months before the last day of the Offering Period for which such election is
to be first effective.
12. TERMINATION OF EMPLOYMENT. Termination of a Participant's employment
with the Company on account of either death or disability shall terminate the
Participant's participation in the Plan at the end of the Offering Period in
which the Participant's death or disability occurs.
Termination of a Participant's employment with the Company for any reason
other than death or disability, including the failure of a Participant to remain
an employee eligible to participate in the Plan, shall terminate the
Participant's participation in the Plan at the end of thirty (30) days after
such termination of employment. A Participant whose participation has been so
terminated may again become eligible to participate in the Plan by again
satisfying the requirements of paragraphs 4 and 6.
8
<PAGE>
In the event of termination of a Participant's employment on account of the
Participant's death, the Participant's legal representative shall have the right
to withdraw from the Plan according to the terms of paragraph 11 prior to the
time the deceased Participant's participation in the Plan terminates.
13. REPAYMENT OF PAYROLL DEDUCTIONS. In the event a Participant's
interest in the Plan or any Offering therein is terminated for any reason, the
balance held in the Participant's account shall be returned as soon as
practicable after such termination to the Participant (or, in the case of the
Participant's death, to the Participant's legal representative) and all of the
Participant's rights under the Plan shall terminate. Such account balance may
not be applied to any other Offering under the Plan. No interest shall be paid
on sums returned to a Participant pursuant to this paragraph 13.
14. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Control
Company. For purposes of applying this paragraph 14, the "Control Company"
shall mean Network General.
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company where the stockholders of the Control Company before such sale or
exchange do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Control Company;
(b) a merger in which the stockholders of the Control Company before
such merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Control Company; or
(c) the sale, exchange, or transfer of all or substantially all of
the Control Company's assets (other than a sale, exchange, or transfer to one
(1) or more corporations where the stockholders of the Control Company before
such sale, exchange, or transfer retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the corporation(s) to
which the assets were transferred).
In the event of a Transfer of Control, the Board, in its sole discretion,
shall either (i) provide that Purchase Rights granted under the Plan shall be
fully exercisable to the extent of each Participant's account balance for the
Offering Period as of a date prior to the Transfer of Control, as the Board so
determines, or (ii) arrange with the surviving, continuing, successor, or
purchasing corporation, as the case may be, that such corporation assume the
Company's rights and obligations under the Plan. All Purchase Rights shall
terminate effective as of the date of the Transfer of Control to the extent that
the Purchase Right is neither exercised as of the date of the Transfer of
Control nor
9
<PAGE>
assumed by the surviving, continuing, successor, or purchasing corporation, as
the case may be.
15. CAPITAL CHANGES. In the event of changes in the common stock of the
Company due to a stock split, reverse stock split, stock dividend, combination,
reclassification, or like change in the Company's capitalization, or in the
event of any merger, sale or other reorganization, appropriate adjustments shall
be made by the Company in the Plan's share reserve, the number of Shares subject
to a Purchase Right and in the purchase price per share.
16. NON-TRANSFERABILITY. A Purchase Right may not be transferred in any
manner otherwise than by will or the laws of descent and distribution and shall
be exercisable during the lifetime of the Participant only by the Participant.
17. REPORTS. Each Participant who exercised all or part of the
Participant's Purchase Right for an Offering Period shall receive as soon as
practicable after the last day of such Offering Period a report of such
Participant's account setting forth the total payroll deductions accumulated,
the number of Shares purchased and the remaining cash balance to be refunded or
retained in the Participant's account pursuant to paragraph 9(g), if any.
18. PLAN TERM. This Plan shall continue until terminated by the Board or
until all of the Shares reserved for issuance under the Plan have been issued,
whichever shall first occur.
19. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares pursuant to
the Purchase Right shall be subject to compliance with all applicable
requirements of federal or state law with respect to such securities. The
Purchase Right may not be exercised if the issuance of shares upon such exercise
would constitute a violation of any applicable federal or state securities laws
or other law or regulations. In addition, no Purchase Right may be exercised
unless (i) a registration statement under the Securities Act of 1933, as
amended, shall at the time of exercise of the Purchase Right be in effect with
respect to the shares issuable upon exercise of the Purchase Right, or (ii) in
the opinion of legal counsel to the Company, the shares issuable upon exercise
of the Purchase Right may be issued in accordance with the terms of an
applicable exemption from the registration requirements of said Act. As a
condition to the exercise of the Purchase Right, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation, and to make any
representation or warranty with respect thereto as may be requested by the
Company.
20. LEGENDS. The Company may at any time place legends or other
identifying symbols referencing any applicable federal and/or state securities
10
<PAGE>
restrictions and any provision convenient in the administration of the Plan on
some or all of the certificates representing shares of stock issued under the
Plan. The Participant shall, at the request of the Company, promptly present to
the Company any and all certificates representing shares acquired pursuant to a
Purchase Right in the possession of the Participant in order to carry out the
provisions of this paragraph. Unless otherwise specified by the Company,
legends placed on such certificates may include but shall not be limited to the
following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the California
Commissioner of Corporations.
21. NOTIFICATION OF SALE OF SHARES. The Company may require the
participant to give the Company prompt notice of any disposition of Shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may direct that the certificates evidencing shares
acquired by exercise of a Purchase Right refer to such requirement to give
prompt notice of disposition.
22. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend
or terminate the Plan, except that such termination shall not affect Purchase
Rights previously granted under the Plan, nor may any amendment make any change
in a Purchase Right previously granted under the Plan which would adversely
affect the right of any Participant (except as may be necessary to qualify the
Plan as an employee stock purchase plan pursuant to section 423 of the Code).
In addition, an amendment to the Plan must be approved by the stockholders of
the Company, within the meaning of section 423 of the Code, within twelve (12)
months of the adoption of such amendment if such amendment would authorize the
sale of more shares than are authorized for issuance under the Plan or would
change the definition of the corporations that may be designated by the Board as
a corporation the employees of which are eligible to participate in the Plan.
Furthermore, the approval of the Company's stockholders shall be sought for any
amendment to the Plan for which the Board deems stockholder approval necessary
in order to comply with Rule 16b-3.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Network General Corporation 1989 Employee Stock Purchase Plan was
duly amended by the Board of Directors on the 20th day of June, 1994.
_____________________
12
<PAGE>
NETWORK GENERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
____ Original Application
____ Change in Percentage of Payroll Deductions
I hereby elect to participate in the 1989 Employee Stock Purchase Plan (the
"Stock Purchase Plan") of Network General Corporation (the "Company") and
subscribe to purchase shares of the Company's common stock as determined in
accordance with the terms of the Stock Purchase Plan.
I hereby authorize payroll deductions in the amount of $____________ or
_________ percent of my compensation (fill in one only) from each paycheck
throughout the "Offering Period" (as defined in the Stock Purchase Plan) in
accordance with the terms of the Stock Purchase Plan. (I understand that the
amount deducted each pay period cannot be more than 10% of my compensation.) I
understand that these payroll deductions will be accumulated for the purchase of
shares of common stock of the Company at the applicable purchase price
determined in accordance with the Stock Purchase Plan. I further understand
that, except as otherwise set forth in the Stock Purchase Plan, shares will be
purchased for me automatically on the last day of the Offering Period unless I
withdraw from the Stock Purchase Plan or from the Offering by giving written
notice to the Company or unless I terminate employment.
I further understand that I will automatically participate in each
subsequent Offering under the Plan and have the same percentage of my
compensation withheld as I have designated in this agreement until such time as
I file with the Company a notice of withdrawal from the Stock Purchase Plan on
such form as may be established from time to time by the Company or I terminate
employment.
Shares purchased for me under the Stock Purchase Plan should be issued in
the name set forth below. I understand that Shares may be issued either in my
name alone or together with my spouse as community property or in joint
tenancy.)
NAME: _______________________________
ADDRESS: _______________________________
_______________________________
_______________________________
MY SOCIAL SECURITY NUMBER:________________________________
13
<PAGE>
I am familiar with the terms and provisions of the Stock Purchase Plan and
hereby agree to participate in the Stock Purchase Plan subject to all of the
terms and provisions thereof. I understand that the Board reserves the right to
amend the Stock Purchase Plan and my right to purchase stock under the Stock
Purchase Plan as may be necessary to qualify the Plan as an employee stock
purchase plan as defined in section 423 of the Internal Revenue Code of 1986, as
amended. I understand that the effectiveness of this subscription agreement is
dependent upon my eligibility to participate in the Stock Purchase Plan.
Date: ______________________________ Signature: _____________________________
14
<PAGE>
NETWORK GENERAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the current offering (the "Offering") of
the common stock of Network General Corporation (the "Company") under the
Network General Corporation 1989 Employee Stock Purchase Plan (the "Stock
Purchase Plan"), and hereby request that all payroll deductions credited to my
account under the Stock Purchase Plan with respect to the Offering (if any), and
not previously used to purchase shares of common stock of the Company under the
Stock Purchase Plan, be paid to me as soon as is practical. I understand that
this Notice of Withdrawal automatically terminates my interest in the Offering.
As to participation in future offerings of stock under the Stock Purchase
Plan, I elect as follows:
___ I elect to participate in future offerings under the Stock
Purchase Plan.
I understand that by making the election set forth above I shall
participate in all sequential offerings under the Stock Purchase Plan commencing
subsequent to the Offering until such time as I elect to withdraw from the Stock
Purchase Plan or any such subsequent offering. (However, if I am subject to
Section 16 of the Securities Exchange Act of 1934, I understand that I may be
prohibited from again participating in future Offerings for at least six months
from the date of my withdrawal. See applicable provisions of the Plan.)
___ I elect NOT to participate in future offerings under the Stock
Purchase Plan.
I understand that by making the election set forth above I terminate my
interest in the Stock Purchase Plan and that no further payroll deductions will
be made unless I elect in accordance with the Stock Purchase Plan to become a
participant in another offering under the Stock Purchase Plan.
I understand that if no election is made as to participation in future
offerings under the Stock Purchase Plan, I will be deemed to have elected to
participate in such future offerings.
Date:__________________________ Signature:____________________________
1
<PAGE>
NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
IRREVOCABLE ELECTION BY OFFICER
I, _______________________________, am a participant in the Network General
Corporation 1989 Employee Stock Purchase Plan (the "Plan"). In order to exempt
my future purchase(s) of common stock under the Plan from the "short-swing"
profit recovery provisions of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), I declare as follows:
1. TERM.
(a) The Term of this Election (the "Term") will commence either
immediately or on the first day of the offering period under the Plan beginning
on or after the date of this Election and ending at least six (6) months after
the date of this Election, as indicated below. The Term will end six (6) months
after the date on which I deliver to the Company a written revocation of this
Election on a form approved by the Company.
Check one:
_____The Term will commence on the first day of the offering period
beginning:
__________________________
(Enter Date)
_____The Term will commence immediately.
(b) I understand that any purchase I make under the Plan less than
six (6) months after the date of this Election or at any other time that this
Election is not in force may not be exempt from Section 16(b) of the Exchange
Act. I understand that any such purchase will be exempt from Section 16(b) only
if I hold the shares I acquire in such purchase for at least six months after
the date of purchase.
2. ELECTION. I IRREVOCABLY ELECT, for the duration of the Term, to have
all payroll deductions accumulated in my account under the Plan as of each
purchase date applied to purchase whole shares of common stock in accordance
with the terms of the Plan and my current subscription agreement. Furthermore,
I waive any and all rights I may have under the Plan or my subscription
agreement to increase or decrease the rate of payroll deductions set forth in my
current subscription agreement, to
1
<PAGE>
voluntarily cease such payroll deductions, or to withdraw from the Plan or any
offering period under the Plan.
3. INDEMNIFICATION. The Company will not be required to carry out any
instruction I may give to the Company, purporting to be effective at any time
during the Term, which is contrary to this Election. Notwithstanding the
foregoing, the Company shall have no liability to me, and I hereby agree to
indemnify and hold the Company harmless with respect to, any consequence arising
from the Company's compliance with any instruction that I may give, including,
without limitation, any cost, liability or penalty I may incur pursuant to any
federal or state income tax or securities law or regulation.
Date:______________________________
___________________________________
(Signature)
2
<PAGE>
NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
REVOCATION OF
ELECTION BY OFFICER
I,____________________________________________ hereby revoke my Election,
dated ________________________ 199 __ , with respect to my participation in the
Network General Corporation 1989 Employee Stock Purchase Plan. I understand
that this Revocation will become effective six (6) months after the date on
which this Revocation is delivered to the authorized representative of the
Company.
Date:______________________________
___________________________________
(Signature)
RECEIVED BY:
NETWORK GENERAL CORPORATION
AUTHORIZED REPRESENTATIVE
___________________________________ _______________________________________
Date: ________________________________________
(Signature)
(Name Printed)
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 21,039
<SECURITIES> 78,390
<RECEIVABLES> 26,769
<ALLOWANCES> (1,703)
<INVENTORY> 2,557
<CURRENT-ASSETS> 140,287
<PP&E> 37,084
<DEPRECIATION> (19,041)
<TOTAL-ASSETS> 203,660
<CURRENT-LIABILITIES> 33,650
<BONDS> 0
<COMMON> 227
0
0
<OTHER-SE> 167,525
<TOTAL-LIABILITY-AND-EQUITY> 203,660
<SALES> 67,266
<TOTAL-REVENUES> 83,469
<CGS> 14,648
<TOTAL-COSTS> 19,195
<OTHER-EXPENSES> 53,773
<LOSS-PROVISION> 250
<INTEREST-EXPENSE> (3,606)
<INCOME-PRETAX> 13,857
<INCOME-TAX> 6,356
<INCOME-CONTINUING> 7,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,501
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
