<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...June 30, 1996
-------------
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 July 1, 1996, there were outstanding 43,680,413 shares of the Registrant's
Common Stock (par value $0.01 per share).
This report, including exhibits, consists of 120 pages. The exhibit index
begins on page twelve.
<PAGE>
FORM 10-Q
INDEX
PAGE
----
Cover Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and March 31, 1996 3
Condensed Consolidated Statements of Income - three months
ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
three months ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements -
June 30, 1996 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12 - 14
Signatures 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands, except share data) June 30, 1996 March 31, 1996
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $55,953 $34,180
Marketable securities 72,975 81,417
Accounts receivable, net 37,905 34,043
Inventories 5,146 4,863
Prepaid expenses and deferred tax assets 12,818 11,303
---------- ----------
Total current assets 184,797 165,806
Property and Equipment, at cost:
Demonstration and rental equipment 10,714 9,968
Office and development equipment 28,823 27,443
Leasehold improvements 2,902 2,771
---------- ----------
42,439 40,182
Less accumulated depreciation and amortization (25,336) (23,006)
---------- ----------
Net property and equipment 17,103 17,176
Long-term Investments 24,763 37,139
Other Assets 4,353 3,209
---------- ----------
$231,016 $223,330
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $4,854 $4,300
Accrued liabilities 17,998 14,749
Deferred revenue 22,338 20,916
---------- ----------
Total current liabilities 45,190 39,965
Long-term Deferred Revenue and Taxes 3,346 3,248
Stockholders' Equity:
Common stock - - $.01 par value
Authorized - - 50,000,000 shares
Issued - - 46,570,413 shares at June 30, 1996 and
46,068,302 shares at March 31, 1996 466 461
Additional paid-in-capital 131,285 127,482
Retained earnings 100,484 91,799
Less treasury stock, at cost - - 2,890,000 shares at
June 30, 1996
2,490,000 shares at March 31, 1996 (49,755) (39,625)
---------- ----------
Total stockholders' equity 182,480 180,117
---------- ----------
$231,016 $223,330
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Three Months Ended
June 30,
1996 1995
-------- --------
(Unaudited)
Revenues:
Products $40,639 $31,830
Services 11,041 7,910
-------- --------
Total Revenues 51,680 39,740
Cost of Revenues:
Products 9,661 6,904
Services 3,312 2,217
-------- --------
Total Cost of Revenues 12,973 9,121
-------- --------
Gross profit 38,707 30,619
Operating Expenses:
Sales and marketing 17,022 13,596
Research and development 7,176 5,791
General and administrative 3,704 2,631
-------- --------
Total Operating Expenses 27,902 22,018
Income from operations 10,805 8,601
Interest Income, net 1,691 1,746
-------- --------
Income before provision for income taxes 12,496 10,347
Provision for Income Taxes 3,811 3,156
-------- --------
Net income $8,685 $7,191
-------- --------
-------- --------
Earnings Per Share $.19 $.16
-------- --------
-------- --------
Weighted Average Common and Common
Equivalent Shares Outstanding 46,145 45,414
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands) For the Three Months Ended
June 30,
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $8,685 $7,191
Adjustments to reconcile net income to net cash provided by
operating activities :
Depreciation and amortization 2,219 1,754
Deferred taxes, net (692) 1,839
Net change in certain assets and liabilities (790) 1,813
---------- ----------
Net cash provided by operating activities 9,422 12,597
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held-to-maturity investments (33,816) (38,105)
Purchases of available-for-sale investments (8,900) -
Proceeds from maturities of held-to-maturity investments 50,046 26,058
Proceeds from sales/maturities of available-for-sale investments 13,600 -
Net additions to property and equipment (2,257) (3,463)
---------- ----------
Net cash provided by (used in) investing activities 18,673 (15,510)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of issuance costs 3,808 931
Repurchase of common stock (10,130) (6,122)
---------- ----------
Net cash used in financing activities (6,322) (5,191)
Net increase (decrease) in cash and cash equivalents 21,773 (8,104)
Cash and cash equivalents at beginning of period 34,180 18,950
---------- ----------
Cash and cash equivalents at end of period $55,953 $10,846
---------- ----------
---------- ----------
Supplemental Disclosures
Cash paid during the period for:
Income taxes $1,982 $148
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Network General Corporation (the "Company") have been prepared in accordance
with generally accepted accounting principles of interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented. These unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements, and notes thereto, for the year ended
March 31, 1996 included in the Company's 1996 Annual Report on Form 10-K. The
results of operations for the three months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ending March 31, 1997.
Certain prior year interim balances have been reclassified to conform to the
fiscal 1997 presentation.
B. CASH AND CASH EQUIVALENTS, MARKETABLE DEBT SECURITIES, AND LONG-TERM
INVESTMENTS
For purposes of the condensed consolidated statements of cash flows, the Company
considers certificates of deposits, commercial paper, money market funds, and
other similar financial instruments with an original maturity date of three
months or less to be cash equivalents.
SECURITIES HELD-TO-MATURITY AND AVAILABLE-FOR-SALE: Management determines the
appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. Debt securities
are classified as held-to-maturity when the company has the positive intent and
ability to hold the securities to maturity. Marketable debt securities not
classified as held-to-maturity are classified as available-for-sale. Held-to-
maturity investments are stated at cost, adjusted for amortization of premiums
and accretion of discounts to maturity. Available-for-sale securities are
carried at fair value, with unrealized gains and losses reported as a separate
component of stockholders' equity, if significant.
As of June 30, 1996, the following is a summary of held-to-maturity and
available-for-sale securities:
HELD-TO-MATURITY SECURITIES
<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. government agencies $30,347 $30,398 $51
Debt securities issued by states of the United States
and political subdivisions of the state 40,159 40,206 47
-------- -------- --------
$70,506 $70,604 $98
-------- -------- --------
-------- -------- --------
AVAILABLE-FOR-SALE SECURITIES
(In thousands) Amortized Aggregate Unrealized
Cost Fair Value Gains
--------- --------- ---------
Debt securities issued by the U.S. Treasury and
other U.S. government agencies $1,000 $1,003 $3
Debt securities issued by states of the United States
and political subdivisions of the state 26,232 26,524 292
-------- -------- --------
$27,232 $27,527 $295
-------- -------- --------
-------- -------- --------
</TABLE>
6
<PAGE>
C. 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:
(In thousands) June 30, 1996 March 31, 1996
------------- --------------
Purchased parts $3,627 $2,650
Finished goods 1,519 2,213
------ ------
$5,146 $4,863
------ ------
------ ------
D. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of fiscal year 1997 and there
was no impact on the Company's financial statements.
E. EARNINGS PER SHARE
Earnings per share are computed using the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. Fully
diluted earnings per share are the same as primary earnings per share.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations may contain forward-looking statements within the meaning
of section 27A of the Securities and Exchange Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, which
reflect the Company's current judgment on those issues. Because such statements
apply to future events, they are subject to risks and uncertainties that could
cause the actual results to differ materially. Important factors which could
cause actual results to differ materially are described in the following
paragraphs and are particularly noted under BUSINESS RISKS on pages 10 and 11
and the Company's reports on Forms 10-K and 10-Q on file with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
Revenues for the quarter ended June 30, 1996 were $51,680,000, an increase of
30% over revenues of $39,740,000 for the quarter ended June 30, 1995. Domestic
revenues increased 22% to $38,900,000 for the quarter ended June 30, 1996
compared to $31,769,000 for quarter ended June 30, 1995. International
revenues increased 60% for the first quarter of fiscal 1997 compared to the
first quarter of fiscal 1996, growing from $7,971,000 to $12,780,000. Pacific
Rim and Latin America revenues increased 65% quarter over quarter while European
revenues grew 53%. International revenues increased to 25% of total revenues
for the quarter ended June 30, 1996, compared to 20% for the quarter ended
June 30, 1995.
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:
Three Months Ended June 30,
---------------------------
(dollars in thousands)
SOURCES OF REVENUES 1996 1995
------- -------
Tool Products (1) $27,036 $20,424
System Products (2) 13,603 11,406
------- -------
Subtotal Products Revenues 40,639 31,830
Services (3) 11,041 7,910
------- -------
Total Revenues $51,680 $39,740
------- -------
------- -------
PERCENTAGES OF REVENUES 1996 1995
------- -------
Tool Products 52% 51%
System Products 27% 29%
------- -------
Subtotal Products Revenues 79% 80%
Services 21% 20%
------- -------
Total Revenues 100% 100%
------- -------
------- -------
(1) Tool products include revenues from the Sniffer-Registered Trademark-
Network Analyzer products, the Progressive Computing, Inc. ("PCI") line of
Wide Area Network (WAN) analysis products, product rentals and royalties
from license agreements.
(2) System products consist of revenues from the Distributed Sniffer System
analysis products, performance measurement analysis products, the
Distributed Sniffer System-Registered Trademark- monitoring products and
the Sharpshooter monitoring products.
(3) Services revenues include first-year warranty revenues 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 products revenues increased 32% to $27,036,000 for the
quarter ended June 30, 1996 compared to $20,424,000 for the quarter ended June
30, 1995. Sniffer Network Analyzer products accounted for substantially all of
the Company's tool products revenues in both periods. Tool products revenues
represented approximately 52% of Network General's revenues for the first
fiscal quarter ended June 30, 1996, compared to 51% for the same period in
fiscal 1995.
Revenues for the quarter ended June 30, 1996 included $13,603,000 in system
products revenues, a 19% increase compared to $11,406,000 of system products
revenues for the same period in fiscal 1996. The Distributed Sniffer System
(DSS) analysis products accounted for the majority of the Company's system
products revenues in both periods. System products revenues represented
approximately 27% of Network General's revenues for the quarter ended June
30, 1996, a slight decrease from 29% for the quarter ended June 30, 1995, due
to faster growth in tools and services revenues.
Services 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 have been deferred in
accordance with SOP 91-1, "Software Revenue Recognition". For the first fiscal
quarter ended June 30, 1996, services revenues increased 40% to $11,041,000,
from $7,910,000 for the same quarter in fiscal 1996. The increase in services
revenues resulted from increases in all categories of services revenues. As a
percentage of total revenues, services revenues represented approximately 21% of
Network General's revenues for the first fiscal quarter ended June 30, 1996, an
increase from 20% for the same period ended June 30, 1995.
Cost of revenues consists of manufacturing costs, cost of services, royalties,
and warranty expenses. Gross profit as a percentage of revenues decreased
to 75% for the quarter ended June 30, 1996 from 77% for the quarter ended
June 30, 1995, primarily resulting from the impact of promotional pricing
activities for an older product platform. Gross profit and gross profit
percent may vary as a result of a number of factors, including the mix
between tool products (which include sales of third party platforms which
have lower margins than the Company's own products), system products and
services, and the mix of international and domestic sales.
Sales and marketing expenses were $17,022,000 in the first quarter of fiscal
1997, an increase of 25% compared to $13,596,000 in the first quarter of fiscal
1996. The increase was primarily due to increased staffing, commission expense
and promotional activity required to support increased sales volumes. As a
percentage of revenues, sales and marketing expenses decreased to 33% from 34%
for the quarters ended June 30, 1996 and 1995, respectively, due to increased
productivity and increased use of alternative distribution channels to sell the
Company's products and services.
Research and development expenses were $7,176,000 in the first quarter of fiscal
1997, compared to $5,791,000 in the first quarter of fiscal 1996. As a
percentage of revenues, research and development expenses were 14% for the
quarter ended June 30, 1996 compared to 15% for the quarter ended June 30, 1995.
The increase in spending was a result of increased staffing and equipment
expense to support accelerated development efforts for high speed network
technology. The Company believes 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 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 were $3,704,000 for the quarter ended June
30, 1996 and $2,631,000 for the quarter ended June 30, 1995. Increased spending
for general and administrative expenses was primarily the result of increased
staffing to support operations. General and administrative expenses as a
percentage of revenues were 7% for both quarters ended June 30, 1996 and 1995.
Earnings per share for the quarter ended June 30, 1996 increased to $0.19
compared to $0.16 per share earned in the quarter ended June 30, 1995. The
increase was due to increased revenues and gross margin dollars, as well as
lower operating expenses as a percentage of revenues. The number of weighted
average common stock equivalents increased from 45,414,000 in the first
quarter of fiscal 1996 to 46,145,000 in the first quarter of fiscal 1997.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $9,422,000 for the three months
ended June 30, 1996 and $12,597,000 for the three months ended June 30, 1995.
The primary source of these funds was net income in fiscal 1997 and 1996, as
well as net changes in deferred taxes and certain assets and liabilities in
fiscal 1996.
Net cash provided by investing activities was $18,673,000 for the three months
ended June 30, 1996, compared to net cash used in investing activities of
$15,510,000 for the three months ended June 30, 1995. Net cash from
investing activities in the first three months of fiscal 1997 reflects proceeds
from sales/maturities of held-to-maturity and available-for-sale investments
reinvested in cash and cash equivalents, net of additions to property and
equipment and purchases of held-to-maturity and available-for-sale investments.
The Company used net cash of $6,322,000 in the three month period ended June 30,
1996 relating to financing activities. Repurchases of common stock totaling
$10,130,000 were offset by $3,808,000 from proceeds from the issuance of common
stock. Net cash used in financing activities for the quarter ended June 30,
1995 was comprised of stock repurchases totaling $6,122,000, offset by proceeds
from stock issuances totaling $931,000.
As of June 30, 1996, the Company's principal sources of liquidity included cash,
cash equivalents, marketable securities and long-term investments totaling
$153,691,000, including $24,763,000 of long-term investments. The Company
currently has no outstanding bank borrowings and has no established lines of
credit. The Company believes 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.
BUSINESS RISKS
The Company's future operating results may be adversely 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 technology changes is the
development of switching technologies for the transmission of data along local
area and wide area networks, such as asynchronous transfer mode ("ATM") and
switched-Ethernet. Network General believes its future success will depend, in
part, on its ability to continue to develop, introduce and sell new products.
The Company is committed to continuing investments in research and development;
however, there is no assurance these efforts will result in the development of
products for the appropriate platforms or operating systems, or the timely
release or market acceptance of new products.
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.
New and competitive entrants into the field of network fault and performance
management may come from such diverse entities as established network hardware
companies which have embedded systems in their network hardware and smaller
companies which market their software products as having "network management"
functionality. There can be no assurance Network General will be able to compete
successfully in the future with existing or future competitors. New entrants,
new technology and new marketing techniques may cause customer confusion,
thereby lengthening the sales cycle process for the Company. Increased
competition may also lead to downward pricing pressure on the Company's
products.
In addition, the Company's expansion of its indirect channels of distribution
may lead to channel conflict and downward pricing pressure.
The Company is in the final stages of a revised distribution strategy in Europe
which includes a combination of third party distributors and direct sales and,
as a result, there may be fluctuating results in European sales efforts until
the strategy is fully implemented.
10
<PAGE>
Network General does not carry a significant level of backlog. The majority of
the Company's revenues in each quarter are a result of shippable orders booked
in that quarter. Orders in the most recent quarter were received by the Company
later in the fiscal quarter than they have been in prior quarters. It is
anticipated this trend will continue into the near future. To the extent orders
are received late in the fiscal quarter, there is more risk the Company may not
attain quarterly revenue targets. Since the Company's expense levels are based
on expectations of future revenues, failure of the Company to achieve quarterly
revenue targets would, therefore, have an adverse effect 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 voting interest of
AIM. 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 Network General will be successful in developing products based on
AIM's engineering expertise and technology, that Network General will be
successful in integrating its own distribution channels with those of AIM, that
Network General will be successful in penetrating AIM's customer base, that
Network General will be successful in selling AIM's products to its own customer
base, 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 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 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 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.
11
<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 any such proceedings presently pending will have a
material adverse affect on the Company's financial position or its results
of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
1) Exhibits
Exhibit
Number Exhibit Title
- -------- -------------
3.1 Third 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 Company's Registration Statement
No. 33-26107 on Form S-1, which became effective February 2, 1989
("Form S-1").
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.
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 Company's Annual Report on Form 10-K for the year
ended March 31, 1991.
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 Description of Company's Cash Bonus Plan, which is incorporated
by reference to Exhibit 10.6 of the Form S-1.
10.7 Form of Director and Officer Indemnification Agreement, which is
incorporated by reference to Exhibit 10.7 of the Form S-1.
10.8 1989 Outside Directors Stock Option Plan and related
documentation, as amended August 9, 1996.
12
<PAGE>
10.9 OEM Agreement dated August 3, 1991 between the Company and NCR
Corporation which is incorporated by reference to Exhibit 10.18
of the Company's Registration Statement No. 33-45580 on Form S-3
which became effective on April 6, 1992.
10.10 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 1994 Form 10-K.
10.11 Employment agreement dated April 6, 1994 between the Company and
Leslie Denend, which is incorporated by reference to Exhibit
10.21 of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 ("June 1994 Form 10-Q").
10.12 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.
10.13 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.
10.14 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").
10.15 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.
10.16 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").
10.17 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.
10.18 Network General Corporation 1989 Employee Stock Option Plan and
related documentation, as amended August 9, 1996.
10.19 Network General Corporation 1989 Employee Stock Purchase Plan and
related documentation, as amended August 9, 1996.
10.20 Employment Agreement dated August 19, 1995 between the Company
and Michael Kremer which is incorporated by reference to Exhibit
10.22 to the Company's Annual Report on Form 10-K for the year
ended March 31, 1996.
10.21 Lease dated July 3, 1996, between the Company and Campbell Avenue
Associates.
13
<PAGE>
2) Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
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
(Registrant)
Date: August 12, 1996 by S/JAMES T. RICHARDSON
---------------- -----------------------------------
James T. Richardson
Senior Vice President, Corporate
Operations, Chief Financial Officer
and Assistant Secretary
(authorized officer)
Date: August 12, 1996 by S/BERNARD J. WHITNEY
--------------- -----------------------------------
Bernard J. Whitney
Vice President, Controller and
Chief Accounting Officer
(authorized officer)
14
<PAGE>
EXHIBIT 10.8
NETWORK GENERAL CORPORATION
1989 OUTSIDE DIRECTORS STOCK OPTION PLAN
(As Amended August 9, 1996)
1. PURPOSE. The Network General Corporation 1989 Outside Directors Stock
Option Plan (the "Plan") is established effective as of April 6, 1989 (the
"Effective Date") to create additional incentive for the outside directors of
Network General Corporation and any successor corporation thereto (collectively
referred to as the "Company"), to promote the financial success and progress of
the Company.
2. ADMINISTRATION. 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 to the Board shall also mean the committee if it 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.
The Board shall have no authority, discretion, or power to select the non-
employee directors of the Company who will receive options under the Plan, to
set the exercise price of the options granted under the Plan, to determine the
number of shares of common stock to be granted under option or the time at which
such options are to be granted, to establish the duration of option grants, or
alter any other terms or conditions specified in the Plan, except in the sense
of administering the Plan subject to the provisions of the Plan. 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. All Options shall be nonqualified stock options. Any officer of the
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.
3. ELIGIBILITY AND TYPE OF OPTION. The Options may be granted only to
directors of the Company who are not employees of the Company or any present or
future parent and/or subsidiary corporations of the Company. Options granted to
eligible directors of the Company ("Outside Directors") shall be nonqualified
stock options; that is, options which are not treated as having been granted
under section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"). 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 Code.
4. SHARES SUBJECT TO OPTION. Options shall be options for the purchase
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 8
below. The maximum number of shares of Stock which may be issued under the Plan
shall be 1,020,000 shares. In the event that any outstanding Option for any
reason expires or is terminated and/or shares of Stock subject to
1
<PAGE>
repurchase are repurchased by the Company, the shares allocable to the
unexercised portion of such Option, or such repurchased shares, may again be
subjected to an Option. 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 under the Securities
Exchange Act of 1934, as amended, and as amended from time to time or any
successor rule or regulation ("Rule 16b-3").
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within ten (10) years from the Effective Date.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Options granted pursuant to
the Plan shall be evidenced by written agreements specifying the number of
shares of Stock covered thereby, in the two forms attached hereto as EXHIBIT A
and EXHIBIT B, respectively, and incorporated herein by reference (the "Option
Agreements"), and shall comply with and be subject to the following terms and
conditions:
(a) AUTOMATIC GRANT OF OPTIONS. Subject to execution by each Outside
Director of the appropriate Option Agreement:
(i) On the Effective Date, each Outside Director shall be
granted an Option to purchase one hundred and twenty thousand (120,000) shares
of Stock. Each Outside Director who is first elected to serve on the Board
after the Effective Date shall be granted an Option to purchase one hundred and
twenty thousand (120,000) shares of Stock upon such election; provided, however,
that on and after November 1, 1993, such number shall be forty thousand
(40,000).
(ii) Each Outside Director shall be granted an Option to purchase
twenty thousand (20,000) shares of Stock upon each Anniversary Date of such
Outside Director; provided, however, that for Anniversary Dates occurring on and
after November 1, 1993, such number shall be ten thousand (10,000).
(iii) The Anniversary Date of an Outside Director who was
elected to the Board prior to the Effective Date shall be the date which is
twelve (12) months after the Effective Date and successive anniversaries
thereof. The Anniversary Date of an Outside Director who is elected to the
Board after the Effective Date shall be the date which is twelve (12) months
after such election and successive anniversaries thereof.
(iv) Notwithstanding the foregoing, any Outside Director may
elect not to receive an Option granted pursuant to this paragraph 6(a) by
delivering written notice of such election to the Board (1) in the case of an
initial Option grant, no later than the date upon which such Outside Director
commences service on the Board, or (2) in the case of an Option grant pursuant
to paragraph 6(a)(ii), no later than six (6) months prior to the date on which
such Option would otherwise be granted.
2
<PAGE>
(v) Notwithstanding any other provision of the Plan, no Option
shall be granted to an Outside Director on his Anniversary Date when he is no
longer serving as a director of the Company on such Anniversary Date.
(b) OPTION PRICE. The option price per share for an Option shall be
the fair market value, as determined by the average of the high and low prices
of a sale of a share of Stock on the National Association of Securities Dealer's
Automated Quotations System (the "NASDAQ System") or other national securities
exchange, on the date of the granting of the Option. If the date of the
granting of the Option does not fall on a day on which the Company's Stock is
trading on the NASDAQ System or other national securities exchange, the date on
which the option price per share shall be established shall be the last day on
which the Company's Stock was so traded prior to the date of the granting of the
Option. Notwithstanding the foregoing, an 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.
(c) EXERCISE PERIOD OF OPTIONS. Any Option granted hereunder shall
be exercisable for a term of ten (10) years.
(d) PAYMENT OF OPTION PRICE. Payment of the option price for the
number of shares of Stock being purchased pursuant to any Option shall be made
in cash, by check, or in cash equivalent.
(e) STOCKHOLDER APPROVAL. Any Option granted pursuant to the Plan
shall be subject to obtaining stockholder approval of the Plan at the first
annual meeting of stockholders after the Effective Date. Notwithstanding the
foregoing, stockholder approval shall not be necessary in order to grant any
Option granted on the Effective Date; provided, however, that the exercise of
any such Option shall be subject to obtaining stockholder approval of the Plan.
7. AUTHORITY TO VARY TERMS. The Board shall have the authority from time
to time to vary the terms of the Option Agreements set forth as EXHIBIT A and
EXHIBIT B, respectively, 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
stock option agreements 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 the Optionee on exercise of
an Option in the event such Optionee's service as a director of the Company is
terminated for any reason.
8. 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 and
to any outstanding Options and in the option price of any outstanding Options in
the event of a stock dividend, stock split, reverse stock split, combination,
reclassification or like change in the capital structure of the Company.
9. 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 Company.
3
<PAGE>
(a) the direct or indirect sale or exchange by the stockholders of
the Company of all or substantially all of the stock of the Company where the
stockholders of the 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 Company;
(b) a merger in which the stockholders of the Company before such
merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company;
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Company's assets (other than a sale, exchange, or transfer to one (1) or more
corporations where the stockholders of the 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, 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 9 shall be conditioned upon the consummation of the Transfer of
Control. Any Options which are not exercised as of the date of the Transfer of
Control shall terminate effective as of the date of the Transfer of Control.
10. 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.
11. TERMINATION OR AMENDMENT OF PLAN. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the stockholders of the Company,
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 8 above), and
(b) no expansion in the class of persons eligible to receive Options; and
provided, further, that the provisions of the Plan addressing eligibility to
participate in the Plan and the amount, price and timing of grants of Options
shall not be amended more than once every six (6) months, other than to comport
to changes in the Code, or the rules thereunder. In addition to the foregoing,
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. In any event, no amendment may adversely affect any
then outstanding Option or any unexercised portion thereof, without the consent
of the Optionee.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Network General Corporation 1989 Outside Directors Stock Option
Plan was duly amended by the Board of Directors of the Company on the 9th day of
August, 1996.
4
<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(INITIAL 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) 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
------------
On Date of Option Grant 0
On Initial Vesting Date provided the 1/4
Optionee has continuously served as
a director of the Company from the
Date of Option Grant until the
Initial Vesting Date
PLUS
For each full month of Optionee's 1/48
continuous service as a director of the
Company from the Initial Vesting Date
In no event shall the Vested Ratio exceed
1/1.
1
<PAGE>
(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) "Plan" shall mean the Network General Corporation 1989 Outside
Directors Stock Option Plan.
2. STATUS OF 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 reference 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 the 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. 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, 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.
(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
2
<PAGE>
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 Company, prior to the termination of the Option as set
forth in paragraph 6 below, accompanied by full payment of the exercise price
for the number of shares being purchased.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made in
cash, by check, or in cash equivalent.
(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, or (ii) the transfer, in whole or in part, of
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) RESTRICTION ON GRANT OF 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 or
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 the Optionee's
termination of service as a director of the Company as described in paragraph 7
below, or (c) upon a Transfer of Control as described in paragraph 8 below.
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<PAGE>
7. TERMINATION OF SERVICE AS A DIRECTOR.
(a) TERMINATION OF DIRECTOR STATUS. If the Optionee ceases to be a
director of the Company for any reason other than the Optionee's 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 a director, may be exercised by the Optionee at any time
prior to the expiration of three (3) months from the date the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Term Date. If the Optionee ceases to be a director of the Company
because of the death of the Optionee or disability of the Optionee within the
meaning of section 422(c) of the Code, the Option, to the extent unexercised and
exercisable by the Optionee on the date of such death or disability, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of six (6) months from the date the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Term Date. The Optionee's service as a director of the Company shall be
deemed to have terminated on account of death if the Optionee dies within
one (1) month after the Optionee's termination of service as a director of the
Company.
(b) EXERCISE PREVENTED BY LAW. Except as provided in this
paragraph 7, the Option shall terminate and may not be exercised after the
Optionee's service as a director of the Company 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.
(c) 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 service as a
director of the Company, or (iii) the Option Term Date.
8. TRANSFER OF CONTROL. An "Ownership Change" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company.
(a) the direct or indirect sale or exchange by the stockholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger in which the 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
Company's assets (other than a sale, exchange, or transfer to one (1) or more
corporations where the stockholders of the 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).
4
<PAGE>
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the 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 Company.
In the event of a Transfer of Control, any unexercisable portion of the
Option shall be immediately exercisable as of a date prior to the Transfer of
Control, as the Board determines. The Option shall terminate effective as of
the date of the Transfer of Control to the extent that the Option is not
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. 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.
11. LEGENDS. The Company may at any time place legends referencing any
applicable federal and/or state securities law restrictions on this Option
Agreement and/or 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 this Option Agreement and/or 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.
12. 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.
13. 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.
14. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company 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
5
<PAGE>
or provided for herein. To the extent contemplated herein, the provisions of
this Option Agreement shall survive any exercise of this Option and shall remain
in full force and effect.
15. 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:
---------------------------------- ---------------------------------
Optionee's Signature
---------------------------------
Printed Name of Optionee
6
<PAGE>
NETWORK GENERAL CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
(SUBSEQUENT 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 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
------------
On Date of Option Grant 0
On Initial Vesting Date provided the 1/12
Optionee has continuously served as
a director of the Company from the
Date of Option Grant until the
Initial Vesting Date
PLUS
For each full month of Optionee's 1/12
continuous service as a director of the
Company from the Initial Vesting Date.
In no event shall the Vested Ratio exceed
1/1.
1
<PAGE>
(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) "Plan" shall mean the Network General Corporation 1989 Outside
Directors Stock Option Plan.
2. STATUS OF 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 reference 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 the 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. 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, 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.
(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
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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 Company, prior to the termination of the Option as set
forth in paragraph 6 below, accompanied by full payment of the exercise price
for the number of shares being purchased.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made in
cash, by check, or in cash equivalent.
(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, or (ii) the transfer, in whole or in part, of
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) RESTRICTION ON GRANT OF 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 or
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 the Optionee's
termination of service as a director of the Company as described in paragraph 7
below, or (c) upon a Transfer of Control as described in paragraph 8 below.
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7. TERMINATION OF SERVICE AS A DIRECTOR.
(a) TERMINATION OF DIRECTOR STATUS. If the Optionee ceases to be a
director of the Company for any reason other than the Optionee's 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 a director, may be exercised by the Optionee at any time
prior to the expiration of three (3) months from the date the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Term Date. If the Optionee ceases to be a director of the Company
because of the death of the Optionee or disability of the Optionee within the
meaning of section 422(c) of the Code, the Option, to the extent unexercised and
exercisable by the Optionee on the date of such death or disability, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of six (6) months from the date the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Term Date. The Optionee's service as a director of the Company shall be
deemed to have terminated on account of death if the Optionee dies within
one (1) month after the Optionee's termination of service as a director of the
Company.
(b) EXERCISE PREVENTED BY LAW. Except as provided in this
paragraph 7, the Option shall terminate and may not be exercised after the
Optionee's service as a director of the Company 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.
(c) 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 service as a
director of the Company, or (iii) the Option Term Date.
8. TRANSFER OF CONTROL. An "Ownership Change" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company.
(a) the direct or indirect sale or exchange by the stockholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger in which the 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
Company's assets (other than a sale, exchange, or transfer to one (1) or more
corporations where the stockholders of the 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).
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A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the 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 Company.
In the event of a Transfer of Control, any unexercisable portion of the
Option shall be immediately exercisable as of a date prior to the Transfer of
Control, as the Board determines. The Option shall terminate effective as of
the date of the Transfer of Control to the extent that the Option is not
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. 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.
11. LEGENDS. The Company may at any time place legends referencing any
applicable federal and/or state securities law restrictions on this Option
Agreement and/or 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 this Option Agreement and/or 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.
12. 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.
13. 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.
14. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company 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
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or provided for herein. To the extent contemplated herein, the provisions of
this Option Agreement shall survive any exercise of this Option and shall remain
in full force and effect.
15. 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:
--------------------------------- ---------------------------------
Optionee's Signature
---------------------------------
Printed Name of Optionee
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EXHIBIT 10.18
NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK OPTION PLAN
(As Amended August 9, 1996)
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
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under the Exchange Act and amended from time to time or any successor rule or
regulation ("Rule 16b-3").
(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 Sixteen Million (16,000,000) 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 Six Hundred Thousand (600,000) shares; provided, however, that
the foregoing limit shall be One Miilion Two Hundred Thousand (1,200,000) 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
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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
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.
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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 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.
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(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:
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."
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(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.
(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
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(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 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;
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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.
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 9th day of August, 1996.
-------------------------------
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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
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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
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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 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
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<PAGE>
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 Act of 1933, as amended (the "Securities Act"), shall at the time
of exercise of the
4
<PAGE>
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 Participating Company Group terminates unless the exercise
of the Option in accordance with
5
<PAGE>
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 Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
6
<PAGE>
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 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
7
<PAGE>
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.
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.
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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 the terms and provisions tereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions this Option Agreement.
By: -------------------------
Title: -------------------------
Date: -------------------------
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<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.
Cumulative
Vesting Date Shares Vesting Vested Shares
------------ -------------- --------------
_______ , 199____ ______________ ______________
_______ , 199____ ______________ ______________
_______ , 199____ ______________ ______________
_______ , 199____ ______________ ______________
(g) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
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(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.
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<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.
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(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.
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(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.
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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
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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 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 neither assumed by the Acquiring Corporation nor exercised as of
the date of the Transfer of Control.
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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.
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
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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:________________________
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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
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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 herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
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<PAGE>
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.
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
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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 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
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<PAGE>
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 the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
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<PAGE>
(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.
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
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<PAGE>
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 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
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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: _______________________________
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:__________________________
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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
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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 herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
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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.
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
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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 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
4
<PAGE>
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 the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
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<PAGE>
(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.
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
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<PAGE>
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 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
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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.
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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: _______________________
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EXHIBIT 10.19
NETWORK GENERAL CORPORATION
1989 EMPLOYEE STOCK PURCHASE PLAN
(As Amended August 9, 1996)
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 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 1,500,000 shares of Network General's authorized but unissued
common stock or
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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 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
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<PAGE>
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 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 five thousand (5,000) 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
3
<PAGE>
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 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.
4
<PAGE>
(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
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
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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 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.
(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:
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<PAGE>
(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.
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.
7
<PAGE>
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
(b) 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 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.
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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
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
9
<PAGE>
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.
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 9th day of August, 1996.
10
<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:----------------------
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<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: ________________________
12
<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:_________________________
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<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 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
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<PAGE>
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
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EXHIBIT 10.21
Tenant: Network General
LEASE
TABLE OF CONTENTS
ARTICLE TITLE PAGE
1 - Premises and Term 1
2 - Rent 2
3 - Landlord's Work - Tenant's Work 4
4 - Streets 4
5 - Utility Services 4
6 - Assignment - Change of Ownership 4
7 - Tenant's Additional Agreements 7
8 - Use of Premises 9
9 - Indemnity and Public Liability Insurance 9
10 - Fire Insurance and Casualty 10
11 - Repair 13
12 - Fixtures & Alterations 15
13 - Remedies 16
14 - Bankruptcy 18
15 - Surrender of Premises 18
16 - Eminent Domain 19
17 - Real Property Taxes 20
18 - Parking and Accommodation Areas 21
19 - Miscellaneous 22
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BUSINESS PARK LEASE
THIS LEASE is made this 3rd day of July, 1996, between CAMPBELL AVENUE
ASSOCIATES, a California partnership, herein referred to as "Landlord," and
NETWORK GENERAL, a Delaware corporation, herein referred to as "Tenant".
WITNESSETH:
ARTICLE 1 - Premises and Term
SECTION 1.1. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the demised premises, including the building and other
improvements thereon consisting of approximately 65,839 square feet and
located at 4045-4055 Campbell Avenue, Menlo Park, California (as shown
cross-hatched on EXHIBIT "A"), upon and subject to the terms and provisions
of this Lease for a demised term of five (5) years (plus any partial period
prior to the commencement of the first full calendar month), commencing
ninety (90) days after Landlord delivers the demised premises to Tenant
(scheduled to be on or before October 1, 1996, and potentially as early as
July 1, 1996, subject to the vacation of the demised premises by the existing
tenant as described in SECTION 1.2 below) for the purposes of performing
construction of improvements pursuant to Article 3, and ending on the last
day of the fifth (5th) year (exclusive of such partial period, if any) after
such commencement.
Following commencement of the demised term, the parties agree to execute a
"Commencement Date Memorandum" or like document specifying the following with
respect to this Lease: (i) the commencement date, (ii) dates on which the
base rent shall increase pursuant to Section 2.1., and (iii) the expiration
date.
SECTION 1.2. The demised premises are currently occupied by an existing
tenant pursuant to a lease which is currently in full force and effect. This
Lease and the obligations of Tenant and Landlord hereunder are expressly
conditioned upon the vacation of the demised premises by the existing tenant.
The existing lease is scheduled to expire on September 30, 1996. Landlord
agrees to the following: (i) Landlord has not heretofore, and agrees that it
shall not, extend the existing lease or amend any term therein that will create
rights of the existing tenant to remain in the demised premises after the
expiration date thereof; (ii) Landlord shall use diligent efforts to cause the
existing tenant to vacate the demised premises on or before September 30, 1996,
and (iii) the demised premises shall not be deemed delivered to Tenant until the
existing tenant has completed site closure in accordance with a closure work
plan prepared for Tenant by a licensed environmental consultant and submitted
for approval to all applicable governmental agencies and the existing tenant's
concrete hazardous materials containment area and facilities have been removed.
Tenant acknowledges that the closure plan may not be reviewed by applicable
governmental authorities until after possession of the demised premises has been
delivered to Tenant and that such review shall not delay commencement of the
demised term unless such governmental authorities require additional closure
work which actually delays construction of the Tenant's improvements or
interferes with Tenant's occupancy of the demised premises in which case the
required commencement date shall be extended by the actual number of days of
such delay or interference. Tenant acknowledges that
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Landlord cannot require the existing tenant to vacate the demised premises prior
to the scheduled expiration date of the existing lease.
SECTION 1.3. Provided that an Event of Default (as defined in Section
13.1. below) does not exist either at the time of exercise of either of the
following options, or at the expiration of the initial five-year term or at the
expiration of the first one-year option term, Tenant is hereby given options to
extend the term of this Lease as follows: the first option period shall be for
one (1) year and the second option period shall be for three (3) years,
commencing respectively (i) at the expiration of the initial five year term as
to the first option period and (ii) at the expiration of the first one year
option period, if any, as to the second option period, upon the following terms
and conditions:
A. Tenant shall exercise each of the options by giving Landlord written
notice at least two hundred fifteen (215) days prior to (i) the expiration of
the initial five year term as to the first option period and (ii) the expiration
of the first one year option period, if any, as to the second option period.
The exercise of the first option is an express condition precedent to the
exercise of the second option.
B. Base rent during each of the extended terms, if any, shall be
established as set out in SECTION 2.2 below.
C. Landlord shall not be obligated to provide any improvements in the
demised premises.
D. There shall be no further option to extend than that as set forth
hereinabove.
E. All other terms and conditions shall be as set forth in the Lease.
ARTICLE 2 - Rent
SECTION 2.1. Tenant covenants and agrees to pay to Landlord without set-
off, recoupment, deduction or demand of any nature whatsoever (other than the
potential abatement of base rent contemplated by Sections 10.2. and 16.1.
hereof), base rent as follows: for the first (1st) and second (2nd) years
during the demised term (plus any partial period prior to the commencement of
the first full calendar month) the amount of Six Hundred Seventy One Thousand
Five Hundred Fifty Seven and 80/100 Dollars ($671,557.80) per annum, payable in
twelve (12) equal monthly installments of Fifty Five Thousand Nine Hundred Sixty
Three and 15/100 Dollars ($55,963.15); for the third (3rd) and fourth (4th)
years during the demised term the amount of Seven Hundred Eleven Thousand Sixty
One and 20/100 Dollars ($711,061.20) per annum, payable in twelve (12) equal
monthly installments of Fifty Nine Thousand Two Hundred Fifty Five and 10/100
Dollars ($59,255.10); and for the fifth (5th) year during the demised term the
amount of Seven Hundred Fifty Thousand Five Hundred Sixty Four and 60/100
Dollars ($750,564.60) per annum, payable in twelve (12) equal monthly
installments of Sixty Two Thousand Five Hundred Forty Seven and 05/100 Dollars
($62,547.05). Base rent shall be paid monthly in advance on the first (1st) day
of each calendar month.
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SECTION 2.2. Base rent during each of the extended terms, if any, will be
the fair market rental value of the demised premises (including any appropriate
interim adjustments) on the date of the commencement of the applicable extended
term based upon current rental rates for spaces of comparable size, age,
construction, location and condition as the building, taking into account the
age and condition of any improvements installed in the building and any lease
incentives such as improvement allowances and free rent then prevailing in the
market (the "fair market rental value") as determined by negotiation of Landlord
and Tenant. If Landlord and Tenant shall be unable to arrive at a mutualy
acceptable base rent for either of the extended terms at least five (5) months
prior to (i) the expiration of the initial five year term as to the first option
period and (ii) the expiration of the first one year option period, if any, as
to the second option period, then the matter shall be submitted to arbitration
in accordance with the provisions of SECTION 19.20. In no event shall the base
rent for the first extended term be reduced below the base rent in effect during
the fifth (5th) year of the demised term, and in no event shall the base rent
for the second extended term be reduced below the base rent in effect during the
last year of the first extended term.
SECTION 2.3. For the purpose of this Lease, a year shall be twelve (12)
calendar months, commencing with the first day of the first full calendar month
of the demised term and the succeeding anniversaries thereof. For any period
prior to the commencement of the first year or subsequent to the end of the last
year of the demised term, rent shall be prorated on the basis of the rental rate
then payable.
SECTION 2.4. All sums payable and all statements deliverable to Landlord
by Tenant under this Lease shall be paid and delivered at 60 Hillsdale Mall, San
Mateo, California 94403-3497, or at such other place as Landlord may from time
to time direct by notice to Tenant and all such sums shall be paid in lawful
money of the United States.
SECTION 2.5. Upon execution of this Lease, Tenant shall pay to the
Landlord the following:
Fifty Five Thousand Nine Hundred Sixty Three and 15/100 Dollars
($55,963.15) which shall be applied by Landlord to the first base rent to become
due and payable under this Lease.
SECTION 2.6. In addition to base rent under SECTION 2.1., all other
payments to be made under this Lease by Tenant to Landlord shall be deemed to be
and shall become additional rent hereunder, whether or not the same to be
designated as such, and shall be included in the term "rent" wherever used in
this Lease; and, unless another time shall be expressly provided for the payment
thereof, all rent and additional rent shall be due and payable together with the
next succeeding installment of base rent; and Landlord shall have the same
remedies for failure to pay the same as for a nonpayment of base rent.
SECTION 2.7. Any amount due from Tenant to Landlord that is not paid
within three (3) business days after receipt of written notice that payment is
due shall bear interest at the lesser of (i) ten percent (10%) per annum, or
(ii) the highest rate then permitted to be charged on late payments under leases
under California law; provided,
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however, the payment of any such interest shall not excuse or cure the default
upon which such interest accrued. Tenant acknowledges and agrees that payment
of such interest on late payments is reasonable compensation to Landlord for the
additional costs incurred by Landlord caused by such late payment, including,
but not limited to, collection and administration expenses and the loss of the
use of the money that was late in payment.
ARTICLE 3 - Landlord's Work - Tenant's Work
SECTION 3.1. Landlord shall not be required to perform any work in the
demised premises; and, subject to Section 11.6, Tenant accepts the demised
premises in an "as is" condition.
SECTION 3.2. Tenant shall provide certain interior improvements as
described in EXHIBIT "C" to be made a part hereof and upon terms and conditions
as set forth in Exhibit "D" attached hereto. Such improvements shall be made at
the sole cost of Tenant (subject to Landlord's contribution set forth in EXHIBIT
"D") in accordance with detailed plans and specifications therefor which must be
approved, in writing, by Landlord or Landlord's architect before work is
commenced. Tenant shall furnish Landlord with a set of "as built" plans on
diskettes that are compatible with Landlord's "AutoCAD" system after any such
work is completed.
ARTICLE 4 - Streets
SECTION 4.1. Tenant agrees to use diligent efforts to require employees,
and to direct customers and other persons visiting Tenant, to park in the
parking area provided in the Parking and Accommodation Areas.
ARTICLE 5 - Utility Services
SECTION 5.1. Landlord has at its own cost and expense secured the
installation of water, gas, sanitary sewers and electrical services to the
demised premises and made all necessary connections thereof to the building.
Tenant shall pay all meter or service charges made by public utilities companies
and shall pay for the water, gas and/or electricity used on the demised premises
and sewer use fees and charges whether ad valorum or not and any so called
"sewer connection charges" based on increased wastewater discharge from the
demised premises exclusively. Tenant shall maintain such connections of
utilities to the building.
SECTION 5.2. Landlord shall not be liable to Tenant for the failure of
any utility services.
ARTICLE 6 - Assignment - Change of Ownership
SECTION 6.1.
A. Except as otherwise provided herein, Tenant shall not, by operation of
law or otherwise, transfer, assign, sublet, enter into license or concession
agreements,
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change ownership, mortgage or hypothecate this Lease or the Tenant's interest in
and to the demised premises without first procuring the written consent of
Landlord which consent shall not be unreasonably withheld, conditioned or
delayed. Any attempted transfer, assignment, subletting, license or concession
agreement, change of ownership, mortgage or hypothecation without Landlord's
written consent shall be void and confer no rights upon any third person.
Landlord's consent to a proposed assignment or sublease shall not be
unreasonably withheld provided that the proposed assignee or sublessee shall
have: (i) a net worth, at the time of the assignment or sublease, determined in
accordance with good accounting principles, equal to or in excess of the net
worth of Tenant at the date of the Lease; (ii) been active in its current
business for a minimum of three (3) years immediately prior to the assignment or
sublease; and (iii) a good reputation in the business community; provided
further that Tenant shall give Landlord not less than fifteen (15) days' notice
prior to the effective date of any such assignment or sublease, and Landlord
shall have the option, in the case of an assignment or sublease (except as
provided below) for substantially all of the remaining demised term of the
Lease, to terminate this Lease with respect to the space to be assigned or
subleased by notice to Tenant given within seven (7) days of Landlord's receipt
of Tenant's notice. Notwithstanding the above, Landlord shall not have the
right to terminate the Lease in connection with any proposed assignment or
sublet to any entity which controls or is controlled by or is under common
control with Tenant or to any entity with or into with Tenant is merged, or any
entity that acquires all or substantially all of Tenant's stock or assets, or
any other entity with which Tenant is combined or consolidated (herein, an
"Affiliate"). Nothing herein contained shall relieve Tenant and any Guarantor
from its covenants and obligations for the demised term. Tenant agrees to
reimburse Landlord for Landlord's reasonable outside attorneys' fees (not to
exceed Five Hundred Dollars ($500.00) incurred in conjunction with the
processing and documentation of any such requested transfer, assignment,
subletting, licensing or concession agreement, change of ownership, mortgage or
hypothecation of this Lease or Tenant's interest in and to the demised premises.
If Landlord consents to any assignment or sublease pursuant to this Article,
Tenant shall pay Landlord, as additional rent:
(a) in the case of each and every assignment, except the assignment to an
Affiliate, an amount equal to ALL monies, property, and other consideration of
every kind whatsoever paid or payable to Tenant by the assignee for such
assignment and for all property of Tenant transferred to the assignee as part of
the transaction (including, but not limited to, fixtures, other leasehold
improvements, furniture, equipment, and furnishings); and
(b) in the case of each and every sublease, fifty percent (50%) of any
Sublease Premium (determined below), LESS all base rent and additional rent
under this Lease accruing during the term of the sublease in respect of the
subleased space (as reasonably determined by Landlord, taking into account the
useable area of the premises demised under the sublease). "Sublease Premium"
shall mean all rent, additional rent, and/or other monies, property, and other
consideration of every kind whatsoever received by Tenant from the subtenant for
or by reason of the sublease (including all amounts received by Tenant for, or
attributable to, any Included Property), LESS:
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(i) commissions actually paid by Tenant to procure the sublease to an
independent third party licensed real estate broker and outside attorneys' fees
actually paid by Tenant, amortized over the term of the sublease, commencing
with the date on which the sublease term commences:
(ii) the actual cost of leasehold improvements undertaken by Tenant
(subject to Landlord's prior written consent) solely to prepare the sublease
space for the subtenant amortized over the period of the term of the sublease
commencing with the date on which the sublease commences; and
(iii) the unamortized cost of Included Property, if any, determined on a
straight-line basis over the period of the term of the sublease as certified to
Landlord by Tenant's independent certified public accountant (at Tenant's
expense).
The term "Included Property" means all property of Tenant transferred to
the subtenant as part of the transaction (including, but not limited to,
fixtures, other leasehold improvements, furniture, equipment, and furnishings).
Tenant shall pay fifty percent (50%) of the Sublease Premium to Landlord as and
when Tenant receives payment from such subtenant.
B. Each transfer, assignment, subletting, license, concession agreement,
mortgage and hypothecation to which there has been consent shall be by an
instrument in writing in form satisfactory to Landlord, and shall be executed by
the transferor, assignor, sublessor, licensor, concessionaire, hypothecator or
mortgagor and the transferee, assignee, sublessee, licensee, concessionaire or
mortgagee in each instance, as the case may be; and each transferee, assignee,
sublessee, licensee, concessionaire or mortgagee shall agree in writing for the
benefit of Landlord herein to assume, to be bound by, and to perform the terms,
covenants and conditions of this Lease to be done, kept and performed by Tenant
(except such terms, covenants and conditions which by the express terms of the
sublease Tenant agrees to perform), including the payment of all amounts due or
to become due under this Lease directly to Landlord. One (1) executed copy of
such written instrument shall be delivered to Landlord. Failure to first obtain
in writing Landlord's consent or failure to comply with the provisions of this
Article shall operate to prevent any such transfer, assignment, subletting,
license, concession agreement, mortgage, or hypothecation from becoming
effective.
C. If Tenant hereunder is a corporation which, under the then current
laws of the State of California, is not deemed a public corporation, or is an
unincorporated association or partnership, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of twenty-five percent (25%) shall be
deemed an assignment within the meaning and provisions of this SECTION 6.1.
D. Landlord's rights to assign this Lease are and shall remain
unqualified. Upon any sale of the demised premises and provided the purchaser
assumes all obligations under this Lease, Landlord shall thereupon be entirely
released of all
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obligations of Landlord hereunder and shall not be subject to any liability
resulting from any act or omission or event occurring after such sale.
E. The consent of Landlord to any transfer, assignment, sublease, license
or concession agreement, change in ownership, mortgage or hypothecation of this
Lease is not and shall not operate as a consent to any future or further
transfer, assignment, sublease, license or concession agreement, change in
ownership, mortgage or hypothecation, and Landlord specifically reserves the
right to refuse to grant any such consents except as otherwise provided in
this SECTION 6.1.
ARTICLE 7 - Tenant's Additional Agreements
SECTION 7.1. Tenant agrees at all times during the demised term to: (A)
Keep the demised premises in a neat and clean condition. (B) Promptly remove
all waste, garbage or refuse from the demised premises. (C) Promptly comply
with all laws and ordinances and all rules and regulations of duly constituted
governmental authorities affecting the demised premises, and the cleanliness,
safety, use and occupation thereof, but this clause (C) shall not be construed
to require Tenant to comply with any such laws, ordinances, rules or regulations
which require structural changes in the demised premises unless the same are
made necessary by act or work performed by Tenant or the nature of the
particular activities being carried on by Tenant in the demised premises; and
this clause (C) does not apply to hazardous materials and other environmental
matters, which laws shall be complied with pursuant to Section 7.4; provided,
however, that Tenant has no obligation to remedy any instance of violation of
laws existing as of the date this Lease is executed. (D) Prevent the escape
from the demised premises of all fumes, odors and other substances which are
offensive or may constitute a nuisance or interfere with other tenants.
SECTION 7.2. Tenant agrees that it will not at any time during the
demised term without first obtaining the Landlord's written consent: (A) Conduct
or permit any fire, bankruptcy or auction sale in the demised premises. (B)
Place on the exterior walls (including both interior and exterior surfaces of
windows and doors), the roof of any buildings or any other part of the demised
premises, any sign, symbol, advertisement, neon light, other light or other
object or thing visible to public view outside of the demised premises. (C)
Change the exterior color of the building on the demised premises, or any part
thereof, or the color, size, location or composition of any sign, symbol or
advertisement that may have been approved by Landlord. (D) Park, operate, load
or unload, any truck or other delivery vehicle on any place other than the
loading area designated for Tenant's use. (E) Use the plumbing facilities for
any purpose other than that for which they were constructed or dispose of any
foreign substance therein. (F) Install any exterior lighting or plumbing
facilities, shades or awnings, amplifiers or similar devices, or use any
advertising medium which may be heard or experienced outside the demised
premises, such as loudspeakers, phonographs, or radio broadcasts. (G) Deface
any portion of the building or improvements on the demised premises, normal
usage excepted. In the event any portion of the building is defaced or damaged,
Tenant agrees to repair such damage. (H) Permit any rubbish or garbage to
accumulate on the demised premises, or any part thereof, unless confined in
metal containers so located as not to be visible to members of the public. (I)
Install, maintain or operate any sign except as approved in writing by Landlord.
(J) Store materials,
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supplies, equipment, finished products, raw materials or articles of any nature
outside of the demised premises. (K) Use the demised premises for retail, or
residential purposes.
SECTION 7.3. Tenant agrees that it will not at any time during the
demised term: (A) Perform any act or carry on any practice which may injure the
demised premises. (B) Burn anything in or about the demised premises. (C) Keep
or display any merchandise or other object on or otherwise obstruct any
sidewalks, walkways driveways. (D) Use or permit the use of any portion of the
demised premises as living quarters, sleeping apartments, lodging rooms, or for
any unlawful purpose. (E) Use or permit the demised premises to be used for any
purpose which is or shall not then be allowed under the Zoning Ordinance of the
City of Menlo Park, California, in that area.
SECTION 7.4. Tenant shall, at its expense, comply with all applicable
laws, regulations, rules and orders, regardless of when they become or became
effective, relating to health, safety, noise, environmental protection, waste
disposal, and water and air quality, and furnish copies of permits, manifests
and other applicable evidence of such compliance, if any, upon request of
Landlord.
Should any discharge, leakage, spillage, emission or pollution of any type
occur upon or from the demised premises due to Tenant's use and occupancy
thereof, Tenant, at its expense, shall be obligated to remedy the same to the
satisfaction of Landlord and any governmental body having jurisdiction
thereover; provided, however, that Tenant shall not be obligated to perform
remediation to a level in excess of that which is required by law so long as
such limitation of Tenant to perform remediation does not interfere with
Landlord's use and enjoyment, or the value, of the demised premises. Tenant
agrees to indemnify, hold harmless, and defend Landlord against all liability,
cost, and expense (including without limitation any fines, penalties, judgments,
litigation costs, and attorneys' fees) incurred by Landlord as a result of
Tenant's breach of this section, or as a result of any such discharge, leakage,
spillage, emission, or pollution, due to Tenant's use and occupancy of the
demised premises, regardless of whether such liability, cost, or expense arises
during or after the demised term.
Tenant shall pay all amounts due Landlord under this section, as additional
rent, within ten (10) days after any such amounts become due.
Tenant shall, prior to the expiration or earlier termination of the Lease,
submit such closure plan(s) regarding hazardous materials and/or hazardous
substances as are then required under applicable law (including any applicable
local ordinances), with a copy to Landlord; and Tenant shall, at Tenant's
expense, prior to the expiration or earlier termination of the demised term,
comply with such closure plan(s).
Landlord's and Tenant's obligations under this SECTION 7.4. shall survive
the expiration or earlier termination of this Lease, including without
limitation any termination resulting from any default by Tenant under the Lease.
Landlord has initiated and received a Phase I Environmental Study ("Study")
dated April 1996 prepared by Green Environmental, Inc. of the demised premises
and has shall provided Tenant with a copy thereof. Landlord shall reimburse
Tenant for the
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cost of removal of any asbestos containing materials associated with the floor
tile in the manufacturing area of the demised premises currently occupied by the
existing tenant. Subject to Section 1.2. herein, Tenant agrees to comply with
all applicable laws in the removal of any such asbestos or other hazardous
materials currently located in the demised premises which Tenant removes in the
course of its construction; and Tenant shall be liable for any failure to comply
with any such laws in the course of such removal.
Landlord agrees to indemnify and hold harmless Tenant against all
liability, cost and expense incurred by Tenant as a result of any pollution or
other environmental problem caused by Landlord or Landlord's employees, agents
or contractors.
With respect to any contamination of the demised premises caused by the existing
tenant, Landlord agrees to assign to Tenant, subject to reservation by Landlord
for Landlord's losses directly or indirectly caused by any such contamination by
the existing tenant, the benefit of any indemnity or contract rights against the
existing tenant for losses sustained by Tenant resulting from any such
contamination.
ARTICLE 8 - Use of Premises
SECTION 8.1. Tenant shall use the demised premises solely for general
office, research and development, light assembly, and storage of Tenant's
products and any related lawful purpose as approved by Landlord and in
conformity with municipal zoning requirements and any CC&Rs applicable to the
demised premises, and for no other purposes without Landlord's written consent.
ARTICLE 9 - Indemnity and Public Liability Insurance
SECTION 9.1. Tenant agrees to indemnify and save harmless Landlord from
and against all claims arising from any act, omission or negligence of Tenant,
or its contractors, licensees, agents, servants, invitees or employees, or
arising from any accident, injury or damage whatsoever caused to any person, or
to the property of any person occurring during the demised term in the demised
premises, from and against all costs, expenses and liabilities incurred in or in
connection with any such claim or proceeding brought thereon, including, but not
limited to, reasonable attorneys' fees and court costs; provided, however, that
in no event shall Tenant have any indemnification obligation or other
responsibility under this Section for any costs, expenses and liabilities
attributable to the negligence or willful misconduct of Landlord or its agents,
contractors or employees.
SECTION 9.2. Tenant agrees to maintain in full force during the demised
term a policy of public liability and property damage insurance under which
Landlord (and such other persons, firms or corporations as are designated by
Landlord and are properly includible as additional insureds under the terms of
any such policies of insurance) and Tenant are named as insureds, and the
insurer agrees to indemnify and hold Landlord and Landlord's said designees
harmless from and against all cost, expense and/or liability arising out of or
based upon any and all claims, accidents, injuries and damage mentioned in
SECTION 9.1. Each such policy shall be placed with an insurer having a Best
rating of at least A-X and shall be noncancelable with respect to the Landlord
and
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Landlord's said designees without twenty (20) days' written notice to the
Landlord and Landlord's said designees, shall be renewed at least thirty (30)
days before the expiration of each policy, and a duplicate original or
certificate thereof shall be delivered to Landlord prior to commencement of the
demised term and thereafter within thirty (30) days of the renewal of the term
of each policy. The limits of liability of such comprehensive general liability
insurance shall be Two Million Dollars ($2,000,000.00) for injury or death to
one or more persons and damage to property, combined single limit. All public
liability, property damage and other casualty policies shall be written as
primary policies, not contributing with and not in excess of coverage which
Landlord may carry.
If Tenant shall not comply with its covenants to maintain insurance made
above, or if Tenant fails to provide duplicate originals or certificates thereof
to Landlord as is provided above, Landlord may, but shall not be required to,
obtain any such insurance; and if Landlord does obtain any such insurance,
Tenant shall, on demand, reimburse Landlord for the premium for any such
insurance.
SECTION 9.3. Tenant agrees to use and occupy the demised premises, the
Parking and Accommodation Areas and to use all other portions of the Business
Park (which it is herein given the right to use) at its own risk and hereby
releases to the full extent permitted by law the Landlord, and its agents,
servants, contractors, and employees, from all claims and demands of every kind
resulting from any accident, damage or injury occurring therein unless caused by
the negligence or willful misconduct of Landlord, its employees, agents or
contractors. Landlord shall have no responsibility or liability for any loss of
or damage to fixtures or other personal property of Tenant. The provisions of
this Section shall apply during the whole of the demised term.
ARTICLE 10 - Fire Insurance and Casualty
SECTION 10.1. If the building on the demised premises should be damaged or
destroyed during the demised term by any casualty insurable under Landlord's
standard fire and extended coverage insurance policies, Landlord shall (except
as hereinafter provided) repair and/or rebuild the same to substantially the
condition in which the same existed immediately prior to such damage or
destruction. Landlord's obligation under this Section shall in no event exceed
either (A) the scope of the work done by Landlord in the original construction
of such building, or (B) the proceeds of any such insurance policy if Landlord
keeps the building and the demised premises insured against loss or damage by
such fire and extended coverage insurance to the extent of at least eighty
percent (80%) of the insurable value of the building with a replacement cost
endorsement (or otherwise for the full replacement value) to the extent
reasonably obtainable from responsible insurance companies licensed to do
business in California, unless Landlord nevertheless elects to repair and/or
rebuild the building and the demised premises. Landlord covenants and agrees to
carry the insurance described in the preceding sentence if available at
commercially reasonable prices. Tenant shall in the event of any such damage or
destruction, unless this Lease shall be terminated as hereinafter provided, be
responsible for replacing or repairing all exterior signs, trade fixtures,
equipment, display cases, and other installations originally installed by the
Tenant. Except for the immediately preceding sentence and the
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deductible under Landlord's casualty insurance, Tenant shall have no obligation
to pay for any costs of reconstruction. Tenant shall have no interest in the
proceeds of any insurance carried by Landlord. Subject to the provisions of
Article 12, Landlord shall have no interest in Tenant's personal property.
Tenant shall not have any further contractual obligation to Landlord to maintain
its personal property other than to perform all of the terms and provisions of
this Lease on Tenant's part to be performed with respect thereto, and the
parties agree that maintenance, repair and replacement of Tenant's personal
property shall be and remain Tenant's sole responsibility. Tenant shall
reimburse Landlord for the deductible amount under Landlord's casualty insurance
(if the Lease is not terminated); provided that, the amount of any deductible
exceeding $20,000.00 shall be amortized on a straight line basis and paid
monthly (together with interest at the rate of 10% per annum) over the remaining
portion of the demised term.
SECTION 10.2. Tenant's base rent shall be abated proportionately during
any period in which, by reason of any such damage or destruction, the building
is rendered partially or totally untenantable. Such abatement shall continue
for the period commencing with such destruction or damage and ending with the
substantial completion by the Landlord of such work or repair and/or
reconstruction as Landlord is obligated to do.
SECTION 10.3. If the building on the demised premises should be damaged or
destroyed to the extent of 33-1/3% or more of the then monetary value thereof by
an event described in SECTION 10.1., then Landlord may terminate this Lease by
written notice to Tenant.
Within forty-five (45) days of the date of casualty Landlord shall notify
Tenant, in writing, of Landlord's reasonable estimate of the time period
required for repair of the demised premises. If Landlord's estimate indicates
that the necessary time for repair will exceed two hundred seventy (270) days
from the date of casualty for the demised premises then, in that event, Tenant
may by written notice to Landlord given within ten (10) days of Landlord's
notice terminate this Lease. If Tenant does not terminate the Lease then
Landlord shall (subject to Landlord's termination rights) thereafter diligently
pursue such repairs and use its diligent efforts to complete the repairs within
the above-referenced time period. If Landlord fails to complete the repairs
within such time periods and is not diligently pursuing completion of the same
then Tenant may terminate the Lease. If such damage or destruciton occurs and
this Lease is not so terminated, this Lease shall remain in full force and
effect and the parties waive the provisons of any laws to the contrary.
If neither party elects to terminate this Lease then Landlord shall repair
and/or rebuild the same as provided in SECTION 10.1. If such damage or
destruction occurs and this Lease is not so terminated, this Lease shall remain
in full force and effect and the parties waive the provisions of any law to the
contrary. The Landlord's obligation under this Section shall in no event exceed
the scope of the work to be done by the Landlord in the original construction of
said building and the demised premises.
SECTION 10.4.
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SECTION 10.5. Tenant agrees, in addition to any rent provided for herein,
to pay to the Landlord the cost of the fire and extended coverage insurance
policy carried by Landlord on the demised premises during the entire demised
term or any renewal or extension thereof. This Section expressly permits the
Landlord to carry standard fire and extended coverage policies to the extent of
one hundred percent (100%) of the insurable value.
SECTION 10.6. During the demised term, Tenant shall carry, at its expense,
insurance, or shall self-insure, against loss and damage by fire with an "All
Risk" endorsement for the full insurable value of Tenant's merchandise, trade
fixtures, furnishings, operating equipment and personal property, including wall
coverings, carpeting and drapes, if installed by Tenant.. A certificate
evidencing such coverage shall be delivered to Landlord prior to commencement of
the demised term and thereafter thirty (30) days prior to the expiration of the
term of such policy. Such insurance shall be written as a primary policy, not
contributing with and not in excess of coverage Landlord may carry.
SECTION 10.7. In the event the building on the demised premises shall be
damaged as a result of any flood, earthquake, act of war, nuclear reaction,
nuclear radiation or radioactive contamination, or from any other casualty not
covered by Landlord's fire and extended coverage insurance, to any extent
whatsoever, Landlord may within ninety (90) days following the date of such
damage, commence repair, reconstruction or restoration of the building and
prosecute the same diligently to completion, in which event this Lease shall
continue in full force and effect, or within said ninety (90) day period elect
not to so repair, reconstruct or restore the building, in which event this Lease
shall cease and terminate. In either such event Landlord shall give Tenant
written notice of its intention within said ninety-day period. Tenant's base
rent shall be abated proportionately during any period in which, by reason of
any such damage or destruction, the building is rendered partially or totally
untenantable. Such abatement shall continue for the period commencing with such
destruction or damage and ending with the substantial completion by the Landlord
of such work or repair and/or reconstruction as Landlord is obligated to do.
SECTION 10.8. Upon any termination of this Lease under the provisions of
this ARTICLE 10, the rent shall be adjusted as of the date of such termination
and the parties shall be released without further obligation to the other party
upon the surrender of possession of the demised premises to Landlord, except for
items that have been theretofore accrued and are then unpaid, and except for
obligations that are designated as surviving such termination.
SECTION 10.9. Notwithstanding anything in this ARTICLE 10 or elsewhere in
this Lease to the contrary, Landlord may maintain any insurance on the demised
premises that Landlord deems necessary or advisable, including, but not limited
to, any rental insurance (not to exceed twelve (12) months), owner's protective
liability insurance or any insurance required by any mortgagee of Landlord; and
earthquake insurance provided that any such earthquake insurance is available at
commercially reasonable rates, and Landlord may include the amount of the
premiums for such insurance in the total of the insurance premiums which Tenant
is required to pay under the terms hereof.
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ARTICLE 11 - Repair
SECTION 11.1. Landlord agrees, at Landlord's sole expense, to repair and
maintain building foundations, exterior wall structure, roof structure and
structural support systems for the demised premises throughout the life of the
Lease. Structural defects and maintenance shall not be deemed to include non-
structural cracks or fissures in walls or floors, (i.e., cracks or fissures
which do not materially adversely affect the structural initegrity of the
building), so long as such cracks or fissures do not substantially interfere
with Tenant's use and occupancy of the demised premises, nor the requirement of
painting or caulking. Additionally, Landlord shall, at Landlord's sole expense,
restripe and reseal the parking lot as needed prior to the commencement of the
Lease. The foregoing sentence shall be a one time obligation of Landlord as of
the commencement of the Lease. Thereafter, additional changes shall be made and
paid for pursuant to Article 18 below.
SECTION 11.2. Subject to Section 11.1., Tenant agrees during the demised
term or any extension thereof to maintain the interior of the building on the
demised premises, and every part thereof, except as to work to be performed by
Landlord under SECTIONS 11.1. AND 11.3. Tenant further agrees to clean, inside
and out, all of the glass on the exterior of the building. If Tenant should
fail to faithfully perform its maintenance obligations hereunder then Landlord
shall, upon having given notice to Tenant of the need for said maintenance, have
the right to perform, or cause to be performed, said maintenance and Tenant
shall on demand reimburse Landlord for Landlord's costs of providing such
maintenance.
SECTION 11.3. Subject to Section 11.5., Landlord shall provide the
following services and Tenant shall, in addition to all other payments required
to be made under other provisions of this Lease, on demand reimburse Landlord
for Landlord's gross costs of: (i) maintaining, repairing and replacing the
roof; (ii) painting, maintaining and repairing the exterior of the building;
(iii) maintaining, repairing and replacing the elevator and elevator equipment
room (if any); (iv) maintenance and repair associated with the mechanical and
electrical rooms; (v) maintenance and repair of the trash enclosure utilized in
connection with the building; (vi) maintenance, repair and replacement of the
glass on the exterior of the building and (vii) any other maintenance and repair
other than that which Landlord is required to perform at Landlord's expense per
SECTION 11.1. Tenant shall also, on demand, reimburse Landlord for Landlord's
costs of maintaining, repairing and replacing the heating and air conditioning
equipment serving the demised premises, whether furnished by Landlord or Tenant.
Landlord's said costs as used in this SECTION 11.3. shall include all costs and
expenses of every kind or nature reasonably incurred by Landlord in the
performance of such maintenance, repair or replacements.
SECTION 11.4. If during the term of this Lease Landlord or Landlord's
insurance carrier requires the installation of an Ansul Fire Control System or
its equivalent, or any fire detection device, because of the nature of the
particular activities being carried on by Tenant in the demised premises, then
said system or device shall be installed by Landlord at its cost, within the
time specified, and Tenant shall be entitled to amortize the cost thereof,
determined by multiplying the cost by a fraction, the numerator of which is the
number of days in the demised term (both elapsed and not elapsed) and
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the denominator of which is the number of days in the estimated useful life of
the fire control system. Tenant shall pay any such cost, as additional rent,
monthly on a straight-line basis amortized over the remaining demised term of
the Lease using an interest rate equal to ten 10% per annum.
Section 11.5. Notwithstanding the provisions of Sections 11.3 and 18.3
hereof, Tenant's obligation to reimburse Landlord for the cost of any capital
improvement (as used in this Section 11.5., "capital improvement" shall be
repairs or replacements which cost in excess of Ten Thousand Dollars
($10,000.00) individually, or in excess of Thirty Thousand Dollars ($30,000.00)
in the aggregate in any one calendar year) required to be made by Landlord
pursuant to Article 11 and/or Article 18 of this Lease during the demised term
and required under good accounting practice to be amortized, shall be limited to
a proportionate share of such replacement or repair costs (the "Reimbursement
Amounts") calculated as follows:
(a) if such costs are incurred during the initial demised term of
this Lease but before Tenant has exercised its right to extend the term of this
Lease, by multiplying such replacement costs by a fraction, the numerator of
which is the number of days in the original demised term and the denominator of
which is the number of days in the estimated useful life of the replacement; and
(b) if such costs are incurred during (i) the initial demised term of
this Lease but after Tenant has exercised either of its rights to extend the
term of this Lease, or (ii) either of the extended terms of this Lease, by
multiplying such replacement costs by a fraction, the numerator of which is the
number of days in the demised term of this Lease (including the original demised
term and the extended term(s)) and the denominator of which is the number of
days in the estimated useful life of the replacement.
If a Reimbursement Amount has been determined under subsection (a) or (b)
above with respect to any replacement costs, and Tenant subsequently extends the
term of this Lease, Tenant shall also be responsible for an additional
Reimbursement Amount with respect to the remaining unamortized amount of such
replacement costs determined by multiplying the remaining unamortized amount of
such replacement costs by a fraction, the numerator of which is the number of
days in the extended term(s) of this Lease and the denominator of which is the
remaining number of days in the estimated useful life of the replacement. In no
event shall Tenant be obligated to pay Landlord more than 100% of such
replacement costs, together with interest as hereinbelow set forth.
The foregoing limitation shall not apply to equipment furnished by Tenant
and maintained by Landlord and shall in no event apply to any costs for repairs
or replacements occasioned by (x) Tenant's negligent acts or omissions or those
of its employees, contractors, agents, invitees or servants, or (y) the
particular nature of Tenant's business, all of which costs shall be borne soley
by Tenant. Tenant shall pay any Reimbursement Amounts, as additional rent,
monthly on a straight-line basis amortized over the remaining demised term of
the Lease using an interest rate equal to ten percent (10%) per annum.
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SECTION 11.6 Landlord agrees that it will deliver the demised
premises to Tenant with the existing sidewalks, driveways and parking areas, and
the truck doors, mechanical, electrical, plumbing, roof and roofing systems of
the building on the demised premises, in good operating condition and the
glazing watertight. If any of the items mentioned in this Section 11.6 fail to
perform within six (6) months following Tenant's occupancy of the demised
premises for any reason, other than (i) Tenant's failure to perform routine
maintenance, (ii) Tenant's particular use of any such system, or (iii) any
negligent act or omission of Tenant, its employees, agents, contractors,
invitees or servants, and provided an Event of Default (as defined in Section
13.1 below) does not exist, then, and in such event, Landlord shall, at its
cost, repair the deficiency; otherwise, and after the expiration of the above
six (6) month period, Tenant shall be responsible for the cost of the
maintenance, repair or replacement pursuant to the provisions of Sections 11.3,
11.5 and 18.3. hereof.
ARTICLE 12 - FIXTURES & ALTERATIONS
SECTION 12.1. All trade fixtures owned by Tenant and installed in the
demised premises shall remain the property of Tenant and may be removed from
time to time and shall be removed at the expiration of the demised term. Tenant
shall repair any damage to the demised premises caused by the removal of said
fixtures. If Tenant fails to remove such fixtures on or before the last day of
the demised term, all such fixtures shall become the property of Landlord,
unless Landlord elects to require their removal, in which case Tenant shall
promptly remove them and restore the demised premises to its condition prior to
such removal. Landlord may also, at Landlord's sole discretion, store such
fixtures at Tenant's expense.
SECTION 12.2. Except for non-structural interior alterations (with a
cost not exceeding Ten Thousand Dollars ($10,000.00) in any one calendar year)
which do not materially affect the sprinkler system and/or mechanical/electrical
systems or require removal or modification of improvements installed by
Landlord, and provided that Tenant shall notify Landlord of any such alterations
and provide Landlord with plans on diskettes that are compatible with Landlord's
"AutoCAD" system, Tenant shall not make any alterations, additions or
improvements in or to the demised premises or the building without submitting
plans and specifications therefor for the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed but, if granted, may
be subject to such reasonable conditions as Landlord may deem appropriate. Any
such alterations, additions or improvements consented to by Landlord shall be
made at Tenant's sole cost and expense in accordance with the plans and
specifications therefor and Tenant agrees to provide Landlord with an "as built"
set of plans and specifications after any such work is completed. Tenant shall
secure any and all governmental permits, approvals or authorizations required in
connection with any such work, and shall hold Landlord harmless from any and all
liability, costs, damages, expenses (including attorneys' fees) and any and all
liens resulting therefrom. All alterations, additions and improvements (and
expressly including the light fixtures and floor coverings installed by Tenant),
shall be deemed to belong to Tenant, but shall be deemed to have been attached
to the demised premises or the building and to have become the property of
Landlord upon the termination of the demised term except that
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the foregoing shall not apply to furniture, removable paneling, decorations,
wall fixtures, trade fixtures, appliances, equipment and other personal property
of Tenant which do not become a part of the demised premises. Upon the
expiration or sooner termination of the demised term hereof, Tenant shall, upon
written demand by Landlord, at Tenant's sole cost and expense, forthwith remove
any alterations, decorations, additions or improvements made by Tenant,
designated by Landlord to be removed, and Tenant shall forthwith at its sole
cost and expense repair any damage to the demised premises or the building
caused by such removal. Upon request, Landlord shall advise Tenant in writing
whether it reserves the right to require Tenant to remove any alterations from
the demised premises upon termination of the Lease. If Landlord elects not to
reserve such right, then Tenant shall not be required to remove the alterations
in question from the demised premises at such time.
ARTICLE 13 - Remedies
SECTION 13.1. An "Event of Default" by Tenant shall have occurred under
this Lease if (1) Tenant defaults in the payment of base rent or any item of
additional rent when due and such default continues for more than five (5) days
following Tenant's receipt of written notice of delinquency, or (2) Tenant
defaults in the performance of any other obligation under the Lease and Tenant
fails to remedy same within thirty (30) days following Tenant's receipt of
written notce of default, provided that if the nature of the default is such
that it can be cured, but cannot reasonably be remedied within thirty (30) days,
then no Event of Default shall be deemed to have occurred so long as Tenant
commences the cure of such default within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion.
Should an Event of Default occur, then, in addition to all other rights and
remedies Landlord may have under this Lease or under applicable law, Landlord
shall have the following rights and remedies:
(1) The Landlord has the remedy described in California Civil Code
Section 1951.4 (Landlord may continue the lease in effect after Tenant's breach
and abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations). If Tenant breaches
any covenants of this Lease or if an Event of Default occurs, whether or not
Tenant abandons the demised premises, this Lease shall continue in effect until
Landlord terminates Tenant's right to possession, and Tenant shall remain liable
to perform all of its obligations under this Lease and Landlord may enforce all
of Landlord's rights and remedies, including the right to recover rent as it
falls due. If Tenant abandons the demised premises or fails to maintain and
protect the same as herein provided, Landlord shall have the right to do all
things necessary or appropriate to maintain, preserve and protect the demised
premises, including the installation of guards, and may do all things
appropriate to a re-letting of the demised premises, and none of said acts shall
be deemed to terminate Tenant's right of possession, unless Landlord elects to
terminate the same by written notice to Tenant. Tenant agrees to reimburse
Landlord on demand for all amounts reasonably expended by Landlord in
maintaining, preserving and protecting the demised premises, together with
interest on the amounts expended from time to time at the lesser of (i) ten
percent (10%) per annum, or (ii) the maximum legal rate (as used in
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this Section 13.1, the "Maximum Legal Rate"). Landlord shall also have the
right to repair, remodel and renovate the demised premises at the expense of
Tenant and as deemed necessary by Landlord.
(2) Landlord shall have the right to terminate Tenant's possession of the
demised premises, and if Tenant's right to possession of the demised premises is
terminated by Landlord by reason of an Event of Default by Tenant, or by reason
of the happening of an Event of Default, or by reason of abandonment of the
demised premises by Tenant, Tenant agrees to pay to Landlord on demand (i) all
unpaid rent earned at the time of termination, together with interest on all
unpaid installments from the times they were due to the date of termination at
the Maximum Legal Rate; (ii) the amounts by which the unpaid rent which would
have been due and payable by Tenant since the date of termination exceeds the
amount of any rental loss that Tenant proves could have been avoided, together
with interest on said amounts from the dates they were due at the Maximum Legal
Rate; (iii) the worth at the time of demand of the amount by which the unpaid
rent for the balance of the term of this Lease exceeds the amount of rental loss
that Tenant proves may reasonably be avoided, together with interest on such
amount at the Maximum Legal Rate from the date of demand until paid; (iv) all
other amounts due Landlord from Tenant under the terms of this Lease, or
necessary to compensate Landlord for all detriment caused by Tenant's failure to
perform its obligations under this Lease. The right to possession of the
demised premises by Tenant should not be deemed terminated until Landlord gives
Tenant written notice of such termination or until Landlord re-lets all or a
portion of the demised premises. In the event that Landlord seeks to recover
the amount due, Landlord shall be entitled to recover the amounts specified in
paragraphs (a) (1), (a) (2) and (a) (4) of Section 1951.2 of the Civil Code of
California as such section reads at the date of this Lease, together with
interest on said amounts at the Maximum Legal Rate from the dates they were due,
computed as of the date of the award, together with the worth at the time of the
award of the amount by which the unpaid rent for the balance of the term exceeds
the amount of such rental loss that Tenant proves could reasonably have been
avoided. Landlord shall be required to mitigate damages by making a good faith
effort to re-let the demised premises.
(3) No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy herein or by law, provided
that each shall be cumulative and in addition to every other right or remedy
given herein or now hereafter existing at law or in equity or by statute.
SECTION 13.2. Landlord shall in no event be in default in the performance
of any of its obligations hereunder unless and until Landlord shall have failed
to perform such obligations within thirty (30) days or such additional times as
is reasonably required to correct any such default after notice by Tenant to the
Landlord properly specifying wherein the Landlord has failed to perform any such
obligation or after Landlord otherwise becomes aware of the default.
ARTICLE 14 - Bankruptcy
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SECTION 14.1. Tenant shall give written notice to Landlord of its
intention to commence proceedings under any state or federal insolvency or
bankruptcy law, or any comparable law that is now or hereafter may be in effect,
whereby Tenant seeks to be, or would be, discharged of its debts or the payment
of its debts is sought to be delayed, at least thirty (30) days prior to the
commencement of such proceedings.
SECTION 14.2. If any of the following events occur:
(1) The entry of an order for relief under Title 11 of the United States
Code as to Tenant or its executors, administrators or assigns, if any, or the
adjudication of Tenant or its executors, administrators or assigns, if any, as
insolvent or bankrupt pursuant to the provisions of any state insolvency or
bankruptcy act;
(2) The appointment of a receiver, trustee or other custodian of the
property of Tenant by reason of the insolvency or inability of Tenant to pay its
debts;
(3) The assignment of the property of Tenant for the benefit of creditors;
(4) The commencement of any proceedings under any state or federal
insolvency or bankruptcy law, or any comparable law that is now or hereafter may
be in effect, whereby Tenant seeks to be, or would be, discharged of its debts
or the payment of its debts is sought to be delayed (unless, in the case of an
involuntary proceeding, if any such proceeding has not been vacated within sixty
(60) days following the commencement of that action);
(5) The failure of Tenant to give written notice to Landlord provided for
in SECTION 14.1. above;
then Landlord may, at any time thereafter, in addition to any and all other
rights or remedies of Landlord under this Lease or under applicable law, upon
written notice to Tenant, terminate this Lease, and upon such notice this Lease
shall cease and terminate with the same force and effect as though the date set
forth in said notice were the date originally set forth herein and fixed for the
expiration of the demised term. Tenant shall thereupon vacate and surrender the
demised premises, but shall remain liable as herein provided.
ARTICLE 15 - Surrender of Premises
SECTION 15.1. Tenant shall, upon termination of the demised term, or any
earlier termination of this Lease, surrender to Landlord the demised premises,
including, without limitation, all building equipment and apparatus, and
fixtures (except as provided in SECTIONS 12.1. AND 12.2.) then upon the demised
premises without any damage, injury, or disturbance thereto, or payment
therefor, except damages due to ordinary wear and tear, acts of God, fire and
other perils to the extent the demised premises are not required to be repaired
or restored as hereinbefore provided, and Tenant shall dispose of any hazardous
materials stored, dispensed, handled or used by Tenant or Tenant's agents,
employees, contractors, invitees or servants in, at or upon the demised premises
in accordance with the provisions of SECTION 7.4. Tenant shall
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not be required to repair worn carpets, nail holes and other incidental damage
that results from Tenant's lawful use and occupancy of the demised premises.
ARTICLE 16 - Eminent Domain
SECTION 16.1. If (i) more than thirty-three percent (33%) of the floor
area of the building on the demised premises shall be taken under the power of
eminent domain and the portion not so taken will not be reasonably adequate for
the operation of Tenant's business after the Landlord completes such repairs or
alterations as the Landlord is obligated or elects to make, or (ii) if a portion
of the demised premises, including the parking areas, shall be taken under the
power of eminent domain and the portion not so taken will not be reasonably
adequate for Tenant to effectively and efficiently, in the use of good business
judgment, use Tenant's shipping and distribution facilities on the demised
premises after the Landlord completes such repairs or alterations as the
Landlord is obligated or elects to make, Tenant shall have the right to elect
either to terminate this Lease, or, subject to Landlord's right to terminate the
Lease pursuant to SECTION 16.4., to continue in possession of the remainder of
the demised premises and shall notify Landlord in writing within thirty (30)
days after such taking of Tenant's election. In the event less than thirty-
three percent (33%) of the floor area of the building on the demised premises
shall be taken or Tenant elects to remain in possession, as provided in the
first sentence hereof, all of the terms herein provided shall continue in
effect, except that the base rent shall be reduced in the same proportion that
the floor area of the building on the demised premises taken bears to the
original floor area of the building on the demised premises, and Landlord shall
at its own cost and expense make all necessary repairs or alterations to the
building so as to constitute the portion of the building not taken a complete
architectural unit and the demised premises a complete unit for the purposes
allowed by this Lease, but such work shall not exceed the scope of the work to
be done by Landlord in originally constructing said building.
SECTION 16.2. Each party waives the provisions of Code of Civil Procedure
Section 1265.130 allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial taking.
SECTION 16.3. All damages or awards for any taking under the power of
eminent domain whether for the whole or a part of the demised premises shall
belong to and be the property of Landlord whether such damages or awards shall
be awarded as compensation for diminution in value to the leasehold or to the
fee of the demised premises; provided however, that Landlord shall not be
entitled to the award made to Tenant or Landlord for loss of business,
depreciation to, and cost or removal of stock and fixtures and for leasehold
improvements which have been installed by Tenant at its sole cost and expense
less depreciation which is to be computed on the basis of completely
depreciating such leasehold improvements during the initial term of this Lease,
and any award made to Tenant in excess of the then depreciated value of
leasehold improvements shall be payable to the Landlord.
SECTION 16.4. If more than thirty-three percent (33%) of the floor areas
of the building on the demised premises shall be taken under power of eminent
domain, or if more than fifty percent (50%) of the Parking and Accommodation
Areas shall be so
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taken, Landlord may, by written notice to Tenant delivered on or before the date
of surrendering possession to the public authority pursuant to such taking,
terminate this Lease as of such date.
SECTION 16.5. If this Lease is terminated as provided in this Article, the
rent shall be paid up to the day that possession is so taken by public authority
and Landlord shall make a prorata refund of any rent and all deposits paid by
Tenant in advance and not yet earned.
ARTICLE 17 - Real Property Taxes
SECTION 17.1. Tenant shall reimburse Landlord for all real property taxes,
assessments and ongoing sewer fees applicable to the demised premises. Taxes
shall be prorated to lease years for purpose of making this computation. Such
payment shall be made by Tenant within thirty (30) days after receipt of
Landlord's written statement setting forth the amount of such computation
thereof. If the demised term of this Lease shall not expire concurrently with
the expiration date of the fiscal tax year, Tenant's liability for taxes for the
last partial lease year shall be prorated on an annual basis.
SECTION 17.2. If the demised premises are not separately assessed,
Tenant's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Landlord from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Landlord's reasonable determination thereof, in good
faith, shall be conclusive.
SECTION 17.3. Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the demised premises or elsewhere.
Tenant shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Landlord.
If any of Tenant's said personal property shall be assessed with Landlord's
real property, Tenant shall pay Landlord the taxes attributable to Tenant within
ten (10) days after receipt of a written statement setting forth the taxes
applicable to Tenant's property.
SECTION 17.4. In addition to all other payments provided for herein, the
Tenant shall on demand reimburse Landlord for any surcharges, fees, and any
similar charges required to be paid by any instrumentality of local, state or
federal government in connection with parking in the parking area, including
policing; supervising with attendants; other costs in connection with providing
charged parking; repairs, replacements and maintenance not properly chargeable
to capital account under good accounting principles; interest and depreciation
of the actual cost of modification or improvements to the areas, facilities and
improvements maintained in this Article either (i) required by any
instrumentality of local, state or federal government, or (ii) installed by
Landlord to facilitate payment of a parking charge by the general public for
parking in the parking area, or both, and other similar costs; and there shall
be excluded (a) cost of construction of such improvements which is properly
chargeable to capital
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account and (b) depreciation of the original cost of construction of all items
not previously mentioned in this sentence. If Landlord shall require the
payment of a parking charge by the general public for parking in the parking
area, then during any period in which such a charge is made the total revenue
(after deducting excise and similar taxes thereon and taxes, fees or surcharges
imposed by any agency or instrumentality of local, state or federal government)
actually received in cash or its equivalent by Landlord for such parking charge
shall be credited against said gross costs.
SECTION 17.5. Notwithstanding the provisions of ARTICLE 17 hereinabove,
Tenant shall pay any increase in "real property taxes" resulting from any and
all improvements of any kind whatsoever placed on or in the demised premises for
the benefit of or at the request of Tenant regardless of whether said
improvements were installed or constructed either by Landlord or Tenant.
SECTION 17.6. In addition to all other payments provided for herein, the
Tenant shall on demand reimburse Landlord for any tax (excluding income tax)
and/or business license fee or other levy that may be levied, assessed or
imposed upon the rent or other payments provided for herein or on the square
footage of the demised premises, on the act of entering into this Lease, or on
the occupancy of the Tenant however described, as a direct substitution in whole
or in part for, or in addition to, any real property taxes, whether pursuant to
laws presently existing or enacted in the future.
ARTICLE 18 - Parking and Accommodation Areas
SECTION 18.1. Landlord grants to Tenant during the demised term the non-
exclusive right to use the parking facilities and other areas provided and
designated as "Parking and Accommodation Areas" on EXHIBIT "B" hereto for the
accommodation and parking of such automobiles of the Tenant, its officers,
agents, employees and its customers while working or visiting Tenant; provided
that Landlord shall have no obligation to enforce such exclusive use of the
parking facilities on Tenant's behalf. Except as provided in SECTION 17.4.,
Landlord shall not charge parking fees for such right to use parking facilities.
SECTION 18.2. All parking areas and facilities furnished by Landlord
including, but not limited to, pedestrian sidewalks, landscaped areas and
parking areas shall at all times be subject to the control and management of
Landlord so that Landlord will be in a position to make available efficient and
convenient use thereof, and Landlord shall have the right from time to time to
establish, modify and enforce reasonable rules and regulations with respect to
all facilities and areas mentioned in this Article, and Tenant agrees to abide
by and conform therewith. Landlord shall have the right to construct, maintain
and operate lighting facilities on all of said areas and improvements, to police
the same, from time to time to change the area, location and arrangement of
parking areas and facilities, to restrict employee parking to employee parking
areas, to construct surface, subterranean and/or elevated parking areas and
facilities, to establish and from time to time change the level of parking
surfaces, to close (if necessary) all or any portion of said areas or facilities
to such extent as may in the opinion of Landlord's counsel be legally sufficient
to prevent a dedication thereof or the
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accrual of any rights of any person or of the public therein, and to do and
perform such other acts in and to said areas and improvements respectively as in
the use of good business judgment the Landlord shall determine to be advisable
with a view to the improvement of the convenience and use thereof by Tenant,
other lessees, and their respective employees and visitors. Landlord agrees
that in the exercise of its rights herein Landlord shall use its reasonable
efforts to minimize the disruption of Tenant's business in the demised premises.
In no event shall Landlord reduce the number of parking spaces in the parking
area, unless required to do so by law.
SECTION 18.3. Subject to Section 11.5,. Tenant agrees during the demised
term to pay to Landlord an annual charge which shall be Landlord's actual gross
costs of operating, maintaining and/or replacing all of the areas and facilities
mentioned in this Article. The annual charge shall be an estimate computed on
the basis of periods of twelve (12) consecutive calendar months, commencing and
ending on such dates as may be designated by Landlord, and shall be paid in
monthly installments on the first day of each calendar month in the amount
estimated by Landlord. Within ninety (90) days after the end of each such
annual period, Landlord will determine (and furnish to Tenant a statement
showing in reasonable detail) the actual annual charge for such period and the
amounts so estimated and paid during such period shall be adjusted within such
ninety (90) days (including adjustments on a prorata basis of any partial such
period at either end of the demised term) and one party shall pay to the other
on demand whatever amount is necessary to effectuate such adjustment.
Landlord's said gross costs shall consist of and include all costs and
expenses of every kind or nature incurred by Landlord in the operation,
maintenance and/or replacement of all of the areas, facilities and improvements
mentioned in this Article determined in accordance with good accounting practice
by an accountant employed by Landlord. The determination of such accountant
shall be conclusive. Without otherwise limiting the generality of the
foregoing, there shall be included in such gross costs public liability and
property damage insurance, landscape maintenance, maintenance of utilities,
water, cleaning of areas, facilities and improvements, operation of lighting,
common area taxes and assessments determined in the same manner as taxes and
assessments on the demised premises, policing and sweeping of parking areas,
supervising with attendants, repairs, replacements and maintenance, and an
amount equal to ten percent (10%) of the total of all of the above (excluding
real property taxes levied pursuant to Article 17 and property damage insurance)
for administration of the Parking and Accommodation Areas.
SECTION 18.4. The Parking and Accommodation Areas included for the purpose
of this Article are those shown cross-hatched on EXHIBIT "B" outside of the
building area.
ARTICLE 19 - Miscellaneous
SECTION 19.1. Landlord and its designee shall have the right, upon 24
hours' advance notice to Tenant (except in emergencies),during reasonable
business hours to enter the demised premises except restricted areas as
established by or on behalf of the Federal Government for security purposes (and
in emergencies at all times), subject to Tenant's reasonable security
precautions (i) to inspect the same, (ii) for any purpose connected with
Landlord's rights or obligations under this Lease and, (iii) for all
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other lawful purposes, and Landlord shall use its reasonable efforts to minimize
the disruption of Tenant's business in the demised premises.
SECTION 19.2. Tenant shall not be entitled to make repairs at Landlord's
expense, and Tenant waives the provisions of Civil Code Sections 1941 and 1942
with respect to Landlord's obligations for tenantability of the demised premises
and Tenant's right to make repairs and deduct the expenses of such repairs from
rent.
SECTION 19.3. This Lease shall be governed exclusively by the provisions
hereof and by the laws of the State of California as the same from time to time
exist. This Lease expresses the entire understanding and all agreements of the
parties hereto with each other and neither party hereto has made or shall be
bound by any agreement or any representation to the other party which is not
expressly set forth in this Lease.
SECTION 19.4. If Tenant should hold over after the demised term and any
extension thereof as herein provided for, then such holding over with Landlord's
consent shall be construed as a tenancy from month to month at a rent 110% of
that provided for under the monthly rental of the principal term of this Lease.
If Tenant should hold over after the demised term and any extension thereof as
herein provided for without Landlord's consent, rent shall be 150% of that
provided for under the monthly rental as of the last month of the original (or
extended) term of this Lease; provided said increased rent shall not prejudice
Landlord from pursuing any other remedies for such unlawful holdover to which
Landlord is legally entitled.
SECTION 19.5. Tenant agrees to maintain all toilet and washroom facilities
within the demised premises in a neat, clean and sanitary condition.
SECTION 19.6. Landlord covenants and agrees that Tenant, subject to the
terms and provisions of this Lease, on paying the rent and observing, keeping
and performing all of the terms and provisions of this Lease on its part to be
observed, kept and performed, shall lawfully, peaceably and quietly have, hold,
occupy and enjoy the demised premises during the demised term without hindrance
or ejection by any person lawfully claiming under or against the Landlord.
SECTION 19.7. Subject to ARTICLE 6, the terms and provisions hereof shall
be construed as running with the land and shall be binding upon and inure to the
benefit of heirs, executors, administrators, successors and assigns of Landlord
and Tenant.
SECTION 19.8.
A. Tenant shall promptly pay all sums of money with respect to any labor,
services, materials, supplies or equipment furnished or alleged to have been
furnished to Tenant in, at or about the demised premises, or furnished to
Tenant's agents, employees, contractors or subcontractors, that may be secured
by any mechanic's, materialmen's, supplier's or other liens against the demised
premises or Landlord's interest therein. In the event any such or similar liens
shall be filed, Tenant shall, within three (3) days of receipt thereof, give
notice to Landlord of such lien, and Tenant shall, within ten (10) days after
receiving notice of the filing of the lien, discharge such lien by payment of
the amount due to the lien claimant. However, Tenant may in good faith
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<PAGE>
contest such lien provided that within such ten (10) day period Tenant provides
Landlord with a surety bond from a company acceptable to Landlord, protecting
against said lien in an amount at least 110% of the amount claimed or secured as
a lien or such greater amount as may be required by applicable law; and provided
further that Tenant, if it should decide to contest such lien, shall agree to
indemnify, defend and save harmless Landlord from and against all costs arising
from or in connection with any proceeding with respect to such lien. Failure of
Tenant to discharge the lien, or, if contested, to provide such bond and
indemnification, shall constitute an Event of Default under this Lease and in,
addition to any other right or remedy of Landlord, Landlord may, but shall not
be obligated, to discharge or secure the release of any lien by paying the
amount claimed to be due, and the amount so paid by Landlord, and all costs and
expenses incurred by Landlord therewith, including, but not limited to, court
costs and reasonable attorneys' fees, shall be due and payable by Tenant to
Landlord forthwith on demand.
B. Except with respect to Tenant's improvements constructed at the
commencement of the demised term of this Lease, at least fifteen (15) days
before the commencement by Tenant of any material construction or remodeling
work on the demised premises, Tenant shall give written notice thereof to
Landlord. Landlord shall have the right to post and maintain on the demised
premises such Notices of Non-Responsibility, or similar notices, provided for
under applicable laws.
SECTION 19.9.
SECTION 19.10. All notices, statements, demands, requests, consents,
approvals, authorizations, offers, agreements, appointments or designations
hereunder by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party if sent by overnight carrier
or United States certified mail, return receipt requested, postage prepaid, and
addressed as follows:
If sent to Tenant, the same shall be addressed to the Tenant at 4045-4055
CAMPBELL AVENUE, MENLO PARK, CALIFORNIA 94025, or at such other place as Tenant
may from time to time designate by notice to Landlord.
If sent to Landlord, the same shall be addressed to Landlord at 60
HILLSDALE MALL, SAN MATEO, CALIFORNIA 94403-3497, or at such other place as
Landlord may from time to time designate by notice to Tenant.
Any such notice when sent by overnight carrier or certified mail as above
provided shall be deemed duly served as follows: (i) when sent by certified
mail, return receipt requested, on the date the U. S. Post Office certifies
delivery or refusal to accept delivery or returns the notice as undeliverable,
if addressed to the other party at the address for notices herein, or (ii) when
sent by overnight carrier, the first business day following the date of such
mailing.
SECTION 19.11. As used in this Lease and when required by the context,
each number (singular or plural) shall include all numbers, and each gender
shall include all genders; and unless the context otherwise requires, the word
"person" shall include corporation, firm or association.
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<PAGE>
SECTION 19.12. In case of litigation with respect to the mutual
rights, obligations, or duties of the parties hereunder, the prevailing party
shall be entitled to reimbursement from the other party of all costs and
reasonable attorneys' fees actually incurred.
SECTION 19.13. Each term and each provision of this instrument
performable by Tenant shall be construed to be both a covenant and a condition.
SECTION 19.14. Except as otherwise expressly stated, each payment
provided herein to be made by Tenant to Landlord shall be in addition to and not
in substitution for the other payments to be made by Tenant to Landlord.
SECTION 19.15. Time is and shall be of the essence of this Lease and
all of the terms, provisions, covenants and conditions hereof.
SECTION 19.16. The Tenant warrants that it has not had any dealings
with any realtor, broker, or agent in connection with the negotiation of this
Lease excepting only Cooper/Brady Corporate Real Estate Services, whom Landlord
agrees to pay whatever commission may be due. Except for Cooper/Brady Corporate
Real Estate Services, each party agrees to hold the other harmless from any
cost, expense or liability for any compensation, commissions or charges claimed
by any realtor, broker, or agent with respect to this Lease and/or the
negotiation thereof with whom the other party has or purportedly has dealt.
SECTION 19.17. Tenant agrees that its interest in this Lease shall be
subordinate to any mortgage, deed of trust and/or other security indenture
hereafter placed upon the demised premises and to any and all advances made or
to be made thereunder and to the interest thereon made and all renewals,
replacements, and extensions thereof, but nothing herein contained shall be
deemed to alter or limit Tenant's rights as set forth in SECTION 19.6. If any
mortgagee, trustee or holder of such security instrument elects to have the
Tenant's interest in this Lease superior to any such instrument by notice to
Tenant, then this Lease should be deemed superior to the lien of any such
mortgage, deed of trust or security indenture whether this Lease was executed
before or after said mortgage, deed of trust and/or security indenture.
Landlord shall use its reasonable efforts to obtain from the existing mortgagee
a Subordination, Non-Disturbance and Attornment Agreement wherein such mortgagee
recognizes in writing Tenant's interest in the demised premises and provides
that Tenant's interest hereunder shall not be disturbed so long as Tenant is not
in default under the terms of this Lease.
SECTION 19.18. Landlord reserves the right during the last seven
months of the demised term of this Lease or the last seven months of any
extension hereof to enter the property upon 24 hours' advance notice to Tenant,
during normal working hours for the purpose of showing the demised premises
(except restricted areas established by, or on behalf of, the Federal Government
for security purposes and subject to Tenant's reasonable security precautions)
to prospective tenants or purchasers and to place signs (for the last year) on
the demised premises advertising the property for lease or sale. Landlord shall
use its reasonable efforts to minimize the disruption of Tenant's business in
the demised premises.
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<PAGE>
SECTION 19.19. The following terms as used in this Lease shall have
the following meaning:
(a) "Unavoidable Delay" means any prevention, delay or stoppage due to
strike(s), lockout(s), labor dispute(s), act(s) of God, inability to obtain
labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, enemy or hostile
governmental action, civil commotion, fire or other casualty, and other
conditions or causes beyond the reasonable control of the party obligated to
perform.
SECTION 19.20. If Landlord and Tenant are unable, pursuant to SECTION
2.2., to agree upon a base rent for the option periods referenced in SECTION
1.3. at least one hundred fifty (150) days prior to (i) the expiration of the
initial five year term as to the first option period and (ii) the expiration of
the first one year option period, if any, as to the second option period, then
the amount by which base rent will be increased shall be determined by
arbitration. At least one hundred twenty (120) days prior to (i) the expiration
of the initial five year term as to the first option period and (ii) the
expiration of the first one year option period, if any, as to the second option
period, Landlord and Tenant shall each select a qualified, licensed MAI real
estate appraiser familiar with the value of office/industrial property in the
City of Menlo Park to act as an arbitrator. Within ten (10) days thereafter,
unless during such period the two appraisers shall have agreed upon the fair
market rental value (as defined in SECTION 2.2. hereof), including interim
adjustments, in which case their determination shall be final and binding, the
two arbitrators so appointed shall select a third appraiser similarly qualified
to act as the third arbitrator (the two arbitrators will use reasonable efforts
to select a third arbitrator who has had no prior dealings with Landlord or
Tenant). If the two arbitrators are unable to agree on a third arbitrator, the
third arbitrator shall be appointed by the Superior Court of San Mateo County
having jurisdiction over the property on application of either Landlord or
Tenant. Within forty five (45) days after the appointment of the third
arbitrator, the three arbitrators shall determine the fair market rental value
(as defined in SECTION 2.2. hereof), including interim adjustments, of the
demised premises as they then exist. If the three (3) arbitrators are unable to
agree, the base rent shall be the average of the base rent proposals made by the
two (2) arbitrators whose proposals are closest. Landlord and Tenant shall each
pay the fees of their own arbitrator and shall share equally the fee of the
third arbitrator (including all costs associated with an appointment by the
Superior Court of San Mateo, if applicable, regardless of which party filed the
application). Anything herein to the contrary notwithstanding, the fair market
rental value of the demised premises for each year of the option periods shall
not be determined to be less than the base rent for the preceding year and shall
in no event be less than the base rent in effect during the last year of the
initial term with respect to the first option period, or first extended term
with respect to the second option period, as the case may be. The rental so
established by this provision shall be the rental for each of the option
periods.
SECTION 19.21. So long as no Event of Default (as defined in Section
13.1 above) by Tenant then exists, Landlord shall, if and when such space
becomes available, and so long as such space is not otherwise already encumbered
by leases, rights or options of the existing tenant, offer to Tenant the option
to expand the demised premises by adding space thereto consisting of the entire
building located at 4065
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Campbell Avenue, Menlo Park, California (the "expansion space") under the
following terms and conditions.
If Landlord makes such an offer it shall do so by giving written notice to
Tenant not more than three (3) months after Landlord has knowledge that the
expansion space will become available for lease and otherwise before Landlord
markets the expansion space to third parties.
If Landlord offers the expansion space, Tenant shall, within ten (10)
business days of Landlord's notice to Tenant offering such space, either accept
or reject Landlord's offer. If Tenant accepts Landlord's offer, the parties
shall enter into a lease for such expansion space. The right of first offer
granted hereunder is only the right of the Tenant to accept or reject the total
proposal being offered by Landlord. Such proposal may include but not be
limited to, lease rate, lease term, tenant improvements, interim adjustments to
lease rate and expense payments and options to extend lease term. Nothing
herein shall be construed to prevent Landlord from offering the expansion space
to lease to third parties (including existing or future tenants of other
properties owned by Landlord) provided Landlord has first made an offer to
Tenant as provided herein and Tenant has refused to accept such offer. The right
granted Tenant in this SECTION 19.21 may only be exercised by Network General
for Network General's sole benefit and cannot be transferred nor can it be
exercised by Network General for any other party, except that the right granted
Tenant herein may be transferred to an Affiliate (as defined in Section 6.1)
provided that the Lease has been assigned to an Affiliate pursuant to the
provisions of Section 6.1. Neither Landlord or Tenant shall be bound to the
terms and conditions of the offer until the execution of a mutually acceptable
lease. If such a lease is not executed within thirty (30) days of Tenant's
acceptance of Landlord's offer, for any reason, then, in such event, the right
granted hereunder shall lapse and Landlord shall have no further obligation to
Tenant with respect to the expansion space. Landlord agrees that from the date
of execution and delivery of this Lease, with respect to the expansion space,
Landlord shall not extend any existing leases or amend any term of existing
leases that will create rights of any existing tenants to remain in the
expansion space beyond their original demised term or previously granted option
period(s); provided that nothing herein shall limit Landlord's ability to make
any other amendments to leases with exsiting tenant(s) in the expansion space
during the original demised term or previously granted option period(s).
Section 19.22. Landlord acknowledges that during the demised term
Tenant may wish to obtain a new street number for the demised premises. Tenant
shall have the right to change the street number provided that (i) Tenant
obtains all applicable governmental approvals to do so, and (ii) at the
expiration or earlier termination of this Lease Landlord may, at Landlord's
option, require Tenant (at Tenant's expense) to change the street number of the
demised premises back to 4045-4055 Campbell Avenue.
Section 19.23. Tenant shall have the right, at Tenant's expense, to
dig a trench running between the demised premises and Tenant's facilities in
the Menlo Oaks
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Business Park and install utilities and telecommunications conduits and other
related equipment therein provided that (i) Tenant shall secure any and all
governmental permits, approvals or authorizations required in connection with
any such work, with copies to Landlord for Landlord's prior approval, (ii)
Tenant agrees to indemnify, hold harmless, and defend Landlord against all
liability, cost, and expense (including without limitation any fines, penalties,
judgments, liens, litigation costs, and attorneys' fees) incurred by Landlord
resulting therefrom, regardless of whether such liability, cost, or expense
arises during or after the demised term, (iii) Tenant shall at its sole cost and
expense repair any damage to the demised premises or property owned by Landlord
or Landlord's subsidiary, affiliate or parent thereof caused by such work and
(iv) prior to the expiration or earlier termination of this Lease, Tenant shall,
at its sole cost and expense, remove from the building, disconnect and cap off
any such utilities, conduits and equipment installed by Tenant, designated by
Landlord to be removed, and repair any damage to the demised premises or the
property caused by such removal. The rights granted to Tenant by Landlord
herein extend only to the property owned by Landlord, or Landlord's subsidiary,
affiliate or parent thereof, and shall not be deemed to extend to property owned
by a third party.
IN WITNESS WHEREOF, the parties have executed this instrument.
TENANT: LANDLORD:
NETWORK GENERAL CAMPBELL AVENUE ASSOCIATES,
a Delaware corporation a California partnership
By: /s/LESLIE G. DENEND By: /s/ FRANCIS NELSON
--------------------- ----------------------
President Managing Partner
By: /s/ JAMES T. RICHARDSON By: _______________________
-----------------------
Assistant Secretary
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