<PAGE> 1
As filed with the Securities and Exchange Commission on February 5, 1998
Registration No. 33-___________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MICRO FOCUS GROUP PLC
(Exact name of registrant as specified in its charter)
England and Wales Not Applicable
(State or other jurisdiction (I.R.S. employer identification no.)
of organization)
The Lawn, Old Bath Road
Newbury, England RG14 1QN
(Address of principal executive offices)
XDB Systems, Inc. 1992 Stock Option Plan
XDB Systems, Inc. 1996 Stock Option Plan
Assumed by the Registrant
(Full title of the plans)
Loren Hillberg
Vice President, General Counsel,
Acting Chief Financial Officer
and Secretary
Micro Focus Group plc
c/o Micro Focus Incorporated
701 East Middlefield Road
Mountain View, California 94043
(650) 938-3700
(Name, address and telephone number of agent for service)
Copies of Communications to:
Fritz K. Koehler
Senior Counsel
Micro Focus Group plc
c/o Micro Focus Incorporated
701 East Middlefield Road
Mountain View, California 94043
<TABLE>
CALCULATION OF REGISTRATION FEE
- -------------------------------------- ---------------- ----------------------- -------------------------- ---------------
<CAPTION>
Amount Proposed Maximum Proposed Maximum Amount of
Title of Securities Being Offering Price Aggregate Offering Registration
Being Registered Registered Per Share Price Fee
- -------------------------------------- ---------------- ----------------------- -------------------------- ---------------
<S> <C> <C> <C> <C>
Ordinary Shares, GBP 0.10 par
value, or ADS's (1) 38,571 (2) $26.65 (3) $1,027,917.15 $303.24
</TABLE>
(1) "ADS's" are American Depositary Shares which represent Ordinary Shares of
the Registrant, GBP 0.10 par value. A separate registration statement on
Form F-6 (File No. 33-34422) filed with the Securities and Exchange
Commission on April 18, 1990 has been declared effective with respect to
the American Depositary Shares represented by American Depositary Receipts
issuable on a one-for-one basis with the Ordinary Shares registered hereby
upon deposit of such Ordinary Shares.
(2) Shares subject to outstanding options as of February 1, 1998 under the 1992
and 1996 Stock Option Plans.
(3) Weighted average per share exercise price for such outstanding options
pursuant to Rule 457(h)(1).
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
- ------- ----------------------------------------
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference:
(a) The Registrant's Form 20-F filed on May 2, 1997 with the
Commission (the "1997 Form 20-F") pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), that contains audited financial statements for the
fiscal year ended January 31, 1997.
(b) The financial statements for the Registrant's latest fiscal
year ended January 31, 1997 contained in Registrant's Form 6-K
furnished on March 28, 1997 to the Commission pursuant to Rule
13a-16 of the Exchange Act. The financial statements for the
Registrant's fiscal quarters ended April 30, 1997, July 31,
1997 and October 31, 1997 contained in Registrant's Forms 6-K
filed with the Commission on June 16, 1997, Spetember 12, 1997
and December 12, 1997, respectively, pursuant to Section 13(a)
or 15(d) of the Exchange Act since the end of the fiscal year
covered by the annual report or the prospectus referred to in
(a) above.
(c) The description of the Registrant's Ordinary Shares contained
in the 1997 Form 20-F, including any amendment or report filed
for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities registered hereby
have been sold or which deregisters all securities then remaining unsold, shall
be deemed incorporated by reference herein and to be a part hereof from the date
of the filing of such documents.
Item 4. Description of Securities.
- ------- --------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
- ------- ---------------------------------------
None.
Item 6. Indemnification of Directors and Officers.
- ------- ------------------------------------------
The Registrant's Articles of Association contain a provision to the
effect that, so far as permitted by the statutory provisions of English law
concerning companies, the directors, other officers and auditor of Registrant
shall be indemnified by the Registrant against liabilities incurred by them in
relation to the exercise of their duties as directors, officers or the auditor
of Registrant, respectively. However, Section 310 of the Companies Act 1985
renders any such indemnity ineffective to the extent it covers any negligence,
default, breach of duty or breach of trust of which the director, other director
or auditor may be guilty in relation to the Registrant, except to the extent
that it covers liabilities incurred by the director, other officer or auditor,
respectively, in respect of court proceedings in which judgment or relief is
given in his favor.
The Registrant's policy is to enter into indemnity agreements with each
of its directors and executive officers. In addition, Micro Focus Incorporated,
a subsidiary of Registrant incorporated under the laws of the State of
California, has also entered into indemnity agreements with certain of the
2
<PAGE> 3
Registrant's directors and executive officers. The indemnity agreements provide
that directors and executive officers will be indemnified and held harmless to
the fullest possible extent permitted by law including against all expenses
(including attorneys' fee), judgments, fines and settlement amounts paid or
reasonably incurred by them in any action, suit or proceeding, including any
derivative action by or in the right of the Registrant, on account of their
services as directors, officers, employees or agents of the Registrant or as
directors, officers, employees or agents of any other company or enterprise when
they are serving in such capacities at the request of the Registrant. Neither
the Registrant nor Micro Focus Incorporated will be obligated pursuant to the
agreements to indemnify or advance expenses to an indemnified party with respect
to proceedings or claims: (i) initiated by the indemnified party and not by way
of defense, except with respect to a proceeding authorized by the Board of
Directors and successful proceedings brought to enforce a right to
indemnification under the indemnification agreements; (ii) for any amounts paid
in settlement of a proceeding unless the Registrant consents to such settlement;
(iii) on account of any suit in which judgment is rendered against the
indemnified party for an accounting of profits made from the purchase or sale by
the indemnified party of securities of the Registrant pursuant to the provisions
of Section 16(b) of the Exchange Act and related laws; (iv) on account of
conduct by an indemnified party that is finally adjudged to have not been honest
and reasonable under the circumstances; (v) on account of any criminal action or
proceeding arising out of conduct that the indemnified party had reasonable
cause to believe was unlawful; (vi) if the liabilities relating thereto are paid
to the indemnified party by an insurance carrier under a directors' and
officers' liability insurance policy maintained by the Registrant or Micro Focus
Incorporated; or (vii) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
The indemnity agreements are not exclusive of any rights a director,
other officer or auditor may have under the Articles of Association, other
agreements, any majority-in-interest vote of the shareholders or vote of
disinterested directors, applicable law or otherwise.
The indemnification provision in the Articles of Association, and the
indemnity agreements, may be sufficiently broad to permit indemnification of the
Registrant's directors and executive officers for liabilities arising under the
Securities Act. In addition, the Registrant has directors' and officers'
liability insurance.
Item 7. Exemption from Registration Claimed.
- ------- ------------------------------------
Not applicable.
Item 8. Exhibits.
- ------- ---------
4.01 XDB Systems, Inc. 1992 Stock Option Plan, as amended, and
related documents.
4.02 XDB Systems, Inc. 1996 Stock Option Plan, as amended, and
related documents.
5.01 Opinion of Memery Crystal.
23.01 Consent of Memery Crystal (included in Exhibit 5.01).
23.02 Consent of Ernst & Young.
24.01 Power of Attorney (see the section in this Registration
Statement entitled "Power of Attorney").
3
<PAGE> 4
Item 9. Undertakings.
- ------- -------------
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the Registration Statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
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<PAGE> 5
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mountain View, State of California, on the 5th day of
February, 1998.
MICRO FOCUS GROUP PLC
By: /s/ Loren Hillberg
-------------------------------
Loren Hillberg
Acting Chief Financial Officer
5
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Martin Waters and Loren Hillberg, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-8, and to file the same with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
Principal Executive Officer:
/s/ Martin E. Waters Chief Executive Officer, February 4, 1998
- ---------------------------- President and a Director
Martin E. Waters
Principal Financial and
Accounting Officer:
/s/ Loren E. Hillberg Acting Chief Financial February 5, 1998
- ----------------------------- Officer
Loren E. Hillberg
Additional Directors:
Director February _, 1998
- ----------------------------
Harold Hughes
/s/ J. Michael Gullard Director February 4, 1998
- ----------------------------
J. Michael Gullard
/s/ Ron H. Forbes Director February 5, 1998
- ----------------------------
Ron H. Forbes
/s/ Paul Adams Director February 4, 1998
- ----------------------------
Paul Adams
Director February _, 1998
- ----------------------------
J. Sidney Webb
6
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.01 XDB Systems, Inc. 1992 Stock Option Plan, as amended, and
related documents.
4.02 XDB Systems, Inc. 1996 Stock Option Plan, as amended, and
related documents.
5.01 Opinion of Memery Crystal.
23.01 Consent of Memery Crystal (included in Exhibit 5.01).
23.02 Consent of Ernst & Young.
24.01 Power of Attorney (see the section in this Registration
Statement entitled "Power of Attorney").
7
<PAGE> 8
EXHIBIT 4.01
XDB SYSTEMS, INC.
1992 STOCK OPTION PLAN
1. PURPOSE.
The purpose of this plan (the "Plan") is to secure for XDB Systems,
Inc. (the "Company") and its shareholders the benefits arising from
capital stock ownership by key employees, consultants, officers and
members of the Board of Directors of the Company who are expected to
contribute to the Company's future growth and success. Except where the
context otherwise requires, the term "Company" shall include the parent
and all present and future subsidiaries of the Company as defined in
Section 424(e) and 424(f) of the Internal Revenue Code of 1986, as
amended or replaced from time to time (the "Code").
2. TYPE OF OPTIONS AND ADMINISTRATION.
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan shall
be authorized by action of the Board of Directors of the
Company (or a Committee designated by the Board of Directors)
and may be either incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and
interpretation of the terms and provisions of the Plan shall
be final and conclusive. Except as set forth below, the Board
of Directors may in its sole discretion grant options to
purchase shares of the Company's Common Stock, $0.01 par value
("Common Stock"), and issue shares upon exercise of such
options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to
construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the terms and provisions of the
respective option agreements, which need not be identical, and
to make any other determination in the judgment of the Board
of Directors necessary or desirable for the administration of
the Plan. The Board of Directors may correct any defect or
supply any omission or reconcile any inconsistency in the Plan
or in any option agreement in the manner and to the extent it
shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. No
director shall be liable for any action or determination made
in good faith. The Board of Directors may, to the full extent
permitted by or consistent with applicable laws or regulations
(including, without limitation, applicable state law and Rule
16b-3 promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), or any successor rule ("Rule 16b-3")),
delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board of
Directors, and if the Committee is so appointed all references
to the Board of Directors in the Plan shall mean and relate to
such Committee.
<PAGE> 9
(c) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan
which make express reference to Rule 16b-3 shall apply only to
such persons as are required to file reports under Section
16(a) of the Exchange Act (a "Reporting Person").
3. ELIGIBILITY.
(a) GENERAL. Options shall be granted only to persons who are, at
the time of grant, employees (including officers who are
employees), consultants or advisors to, officers or directors
of the Company; PROVIDED, that the class of persons to whom
Incentive Stock Options may be granted shall be limited to all
employees of the Company. No person shall be granted any
Incentive Stock Option under the Plan who, at the time such
option is granted, owns, directly or indirectly, stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company, unless the requirements
of paragraph (b) of Section 11 are satisfied. The attribution
of stock ownership provisions of Section 424(d) of the Code,
and any successor provisions thereto, shall be applied in
determining the shares of stock owned by a person for purposes
of applying the foregoing percentage limitation. A person who
has been granted an option may, if he or she is otherwise
eligible, be granted an additional option or options if the
Board of Directors shall so determine.
(b) GRANT OF OPTIONS TO OFFICERS AND DIRECTORS. From and after the
registration of the Common Stock of the Company under the
Exchange Act, the selection of an officer or a director (as
the terms "officer" and "director" are defined for purposes of
Rule 16b-3) as a participant, the timing of the option grant,
the exercise price of the option and the number of shares for
which an option or options may be granted to such officer or
director shall be determined either (i) by the Board of
Directors, of which all members shall be "disinterested
persons" (as hereinafter defined), or (ii) by a committee of
two or more directors having full authority to act in the
matter, of which all directors shall be "disinterested
persons". For the purposes of the Plan, a director shall be
deemed to be "disinterested" only if such person qualifies as
a "disinterested person". For the purposes of the Plan, a
director shall be deemed to be "disinterested" only if such
person qualifies as a "disinterested person" within the
meaning of Rule 16b-3, as such term is interpreted from time
to time.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 17 below, the maximum
number of shares of Common Stock of the Company which may be issued and
sold under the Plan is 10,000,000 shares. Such shares may be authorized
and unissued shares or may be shares issued and thereafter acquired by
the Company. The Board of Directors will take steps to assure that
sales of securities to optionees under the Plan qualify under Rule 701
under the Securities Act of 1933, including the limit imposed by Rule
701 on the amount of securities that can be offered and sold. If an
option granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject
<PAGE> 10
to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the
Plan are tendered to the Company in payment of the exercise price of an
option granted under the Plan, such tendered shares shall again be
available for subsequent option grants under the Plan; provided that in
no event shall (i) the total number of shares issued pursuant to the
exercise of Incentive Stock Options under the Plan, on a cumulative
basis, exceed the maximum number of shares authorized for issuance
under the Plan exclusive of shares made available for issuance pursuant
to this sentence, or (ii) the total number of shares issued pursuant to
the exercise of options by Reporting Persons, on a cumulative basis,
exceed the maximum number of shares authorized for issuance under the
Plan exclusive of shares made available for issuance pursuant to this
sentence.
5. FORMS OF OPTION AGREEMENTS.
As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Board of
Directors. Such option agreements may differ among recipients. Each
option agreement shall state whether the options granted thereby are
Incentive Stock Options or non-statutory options.
6. PURCHASE PRICE.
(a) GENERAL. The purchase price per share of stock deliverable
upon the exercise of an option shall be determined by the
Board of Directors, PROVIDED, HOWEVER, that (i) in the case of
an Incentive Stock Option, the exercise price shall not be
less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of
such option, or less than 110% of such fair market value in
the case of options described in paragraph (b) of Section 11,
and (ii) in the case of a non-statutory stock option, the
exercise price shall not be less than the fair market value of
such stock, as determined by the Board of Directors, at the
time of grant of such option.
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the exercise price by delivery of
cash or a check to the order of the Company in an amount equal
to the exercise price of such options, or, to the extent
provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company
already owned by the optionee having a fair market value equal
in amount to the exercise price of the options being
exercised, or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee
payable on such terms as are specified by the Board of
Directors) which the Board of Directors determines are
consistent with the purpose of the Plan and with applicable
laws and regulations (including, without limitation, the
provisions of Rule 16b-3 and Regulation T promulgated by the
Federal Reserve Board) or (iii) by any combination of such
methods of payment. The fair market value of any shares of the
Company's Common Stock or other non-stock consideration which
may be delivered upon exercise of an option shall be
<PAGE> 11
determined in such manner as may be prescribed by the Board of
Directors.
7. OPTION PERIOD.
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, but, in the case of Incentive Stock
Options, in no event after the expiration of ten years from the day on
which the option is granted (or five years in the case of options
described in paragraph (b) of Section 11) and, in the case of
non-statutory options, in no event after the expiration of ten years
plus 30 days from the day on which the option is granted, and in either
case, shall be subject to earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as
shall be set forth in the agreement evidencing such option, subject to
the provisions of the Plan.
9. NONTRANSFERABILITY OF OPTIONS.
Except as set forth herein, no option granted under the Plan shall be
assignable or transferable by the person to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of
descent and distribution, and during the life of the optionee, shall be
exercisable only by the optionee.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
The Board of Directors shall determine the period of time during which
an optionee may exercise an option following (i) the termination of the
optionee's employment or other relationship with the Company or (ii)
the death or disability of the optionee. Such periods shall be set
forth in the agreement evidencing such option.
11. INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and
conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under
the Plan shall, at the time of the grant, be specifically
designated as such in the option agreement covering such
Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the
grant of such option, the owner of stock possessing more than
10% of the total combined voting power of all classes of stock
of the Company (after taking into account the attribution of
stock ownership rules of Section 424(d) of the Code), then the
<PAGE> 12
following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be
less than 110% of the fair market value of one share
of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five
years from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other
incentive stock option plans of the Company) which are
intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first
time in any one calendar year for shares of Common Stock with
an aggregate fair market value (determined as of the
respective date or dates of grant) of more than $100,000.
(d) No Incentive Stock Option may be exercised unless, at the time
of such exercise, the optionee is, and has been continuously
since the date of grant of his or her option, employed by the
Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee
ceases to be an employee of the Company (or within
such lesser period as may be specified in the
applicable option agreement), provided, that the
agreement with respect to such option may designate a
longer exercise period and that the exercise after
such three-month period shall be treated as the
exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee
ceases to be such an employee, the Incentive Stock
Option may be exercised by the person to whom it is
transferred by will or the laws of descent and
distribution within the period of one year after the
date of death (or within such lesser period as may be
specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning
of Section 22(e)(3) of the Code or any successor
provision thereto) while in the employ of the
Company, the Incentive Stock Option may be exercised
within the period of one year after the date the
optionee ceases to be such an employee because of
such disability (or within such lesser period as may
be specified in the applicable option agreement);
PROVIDED, HOWEVER, that in no event may any option be
exercised after the expiration date of the option. For all
purposes of the Plan and any option granted hereunder,
<PAGE> 13
"employment" shall be defined in accordance with the
provisions of Section 1.421-7(h) of the Income Tax Regulations
(or any successor regulations).
12. THE COMPANY'S RIGHT TO REPURCHASE SHARES ACQUIRED BY EXERCISE OF OPTION.
(a) VOLUNTARY SALE OF STOCK BY THE OPTIONEE. In the event an
optionee, who has exercised his option and has become a
shareholder in the Company, wishes to sell his stock in the
Company (or in the event of his death or disability his
personal representative, guardian, or heirs wish to sell the
stock) and has received a written bona fide binding offer, he
shall give written notice to the Company of his wish to sell
his stock, and such notice shall set forth the per share sales
price for such stock which has been offered by a third party
and shall include a copy of the written bona fide binding
offer. Such notice shall be sent by certified mail, return
receipt requested, to the President of the Company. The
Company shall have the right of first refusal to purchase such
shares at the price set forth in the notice.
(b) COMPANY'S RIGHT TO INITIATE REPURCHASE OF OPTIONEE'S STOCK.
The Company may, on its own initiative, repurchase such
optionee's stock under any of the following circumstances: (1)
such optionee resigns, is fired, or otherwise has employment
with the Company terminated, including events of death and
disability; (2) such optionee's insolvency, bankruptcy, or
other making of an assignment for the benefit of creditors;
(3) any purported or attempted sale or other assignment, gift,
or other transfer of stock to a third party in violation of
the terms of the Plan.
In any such event, the Company shall have the absolute right
to repurchase the shares of stock owned by such optionee for a
period of six (6) months immediately following the termination
of the employment (or other triggering event) of the optionee.
In the event the Company fails to purchase the optionee's
stock within said six-month (6) period, it may make an offer
to purchase said stock at any subsequent time, but the
optionee may elect to reject any such subsequent offer.
(c) MANNER OF EXERCISE. Within six (6) months following the date
that the Company receives written notice of an optionee's
desire to sell his stock in the Company, or following the date
of the triggering repurchase event, the Company shall notify
such optionee in writing of the number of shares, if any, that
the Company intends to repurchase and of the date, within the
six-month (6) period, upon which the Company shall purchase
the shares. Unless otherwise agreed by the parties, the
aggregate repurchase price shall be paid in cash to the
optionee or his representative.
(d) PRICE AT WHICH THE COMPANY MAY REPURCHASE SHARES. If the
Company elects to exercise its option pursuant to Section
12(b) hereof and purchase the shares of stock available from
the optionee, the Company shall pay such optionee the fair
market value of the stock being sold as determined by the
Board of Directors.
<PAGE> 14
If the Company elects to exercise its option pursuant to
Section 12(a) hereof and purchase the shares of stock that
such optionee seeks to sell to a third party, the Company
shall pay the optionee the price per share being offered by
such third party, as set forth in the notice delivered to the
Company pursuant to Section 12(a).
(e) If the Company does not elect to acquire such optionee's stock
pursuant to Section 12(a), the optionee may, within the
120-day period following the expiration of the right granted
to the Company set forth in Section 12(c), sell his or her
stock specified in the notice to the Company to the third
party, provided that the sale shall not be on terms and
conditions less favorable to the optionee than those contained
in the notice to the Company. If the optionee does not sell
his or her stock in such fashion, such stock shall remain
subject to the options set forth in this Section 12.
(f) Lapse of Repurchase Rights. Shares acquired pursuant to the
exercise of any option granted hereunder shall remain subject
to the Company's right to repurchase until the earliest to
occur of the following:
i. The effective date of a Registration Statement filed
with the Securities and Exchange Commission under the
1933 Act covering securities of the Company whether
or not such shares are covered;
ii. The date of which a class of securities of the
Company is registered under Section 12 of the
Securities Exchange Act of 1934; or
iii. The date on which the Company's right to repurchase
pursuant to a triggering event expires with respect
to such shares, in accordance with Section 12(c)
hereof.
(g) This Section 12 shall apply to all options granted pursuant to
the Plan unless otherwise waived or amended pursuant to an
optionee's option agreement.
13. SALE OR OTHER DISPOSITION BY MAJORITY INTEREST.
An optionee shall irrevocably appoint the Company and its Chief
Executive Officer, or either of them, as such optionee's agents and
attorneys-in-fact, with full power of substitution in the optionee's
name, to sell, exchange, transfer or otherwise dispose of all or a
portion of such optionee's shares of Common Stock and to do any and all
things and to execute any and all documents and instruments (including,
without limitation, any stock transfer powers) in connection therewith,
such power of attorney not to become operable until such time as the
holder or holders of a majority of the issued and outstanding shares of
Common Stock of the Company sell, exchange, transfer or otherwise
dispose of, or contract to sell, exchange, transfer or otherwise
dispose of, all or a portion of their shares of Common Stock of the
Company. Any sale, exchange, transfer or other disposition of all or a
portion of an optionee's shares of Common Stock pursuant to the
<PAGE> 15
foregoing powers of attorney shall be made upon substantially the same
terms and conditions (including sale price per share) applicable to a
sale, exchange, transfer or other dispositions of all or a portion of
shares of Common Stock of the Company owned by the holder or holders of
a majority of the issued and outstanding shares of Common Stock of the
Company. For purposes of determining the sale price per share of Common
Stock under this Section 13, there shall be excluded the consideration
(if any) paid or payable to the holder or holders of a majority of the
issued and outstanding shares of Common Stock of the Company in
connection with any employment consulting, noncompetition or similar
agreements which such holder or holders may enter into in connection
with or subsequent to such sale, transfer, exchange or other
disposition. The foregoing powers of attorney shall be irrevocable and
coupled with an interest and shall not terminate by operation of law,
whether by the death, bankruptcy or adjudication of incompetency or
insanity of the optionee or the occurrence of any other event.
14. ADDITIONAL PROVISIONS.
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in
its sole discretion, include additional provisions in any
option granted under the Plan, including without limitation
restrictions on transfer, repurchase rights, commitments to
pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options,
or such other provisions as shall be determined by the Board
of Directors; PROVIDED THAT such additional provisions shall
not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any
Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code or Rule 16b-3.
(b) ACCELERATION. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or
any particular option or options granted under the Plan may be
exercised or (ii) extend the dates during which all or any
particular option or options granted under the Plan may be
exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with
Section 422 of the Code or Rule 16b-3.
15. GENERAL RESTRICTIONS.
(a) Investment Representations. The Company may require any person
to whom an option is granted, as a condition of exercising
such option, to give written assurances in substance and form
satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option for his or
her own account for investment and not with any present
intention of selling or otherwise distributing the same, and
to such other effects as the Company deems necessary or
appropriate in order to comply with federal and applicable
state securities laws.
<PAGE> 16
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject
to the requirement that if, at any time, counsel to the
Company shall determine that the listing, registration or
qualification of the shares subject to such option upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, or
that the disclosure of non-public information or the
satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase
of shares thereunder, such option may not be exercised, in
whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such
condition shall have been effected or obtained on conditions
acceptable to the Board of Directors. Nothing herein shall be
deemed to require the Company to apply for or to obtain such
listing, registration or qualification, or to satisfy such
condition.
16. RIGHTS AS A SHAREHOLDER.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option (including, without
limitation, any rights to receive dividends or non-cash distributions
with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made
for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
17. ADJUSTMENT PROVISIONS FOR RECAPITALIZATION AND RELATED TRANSACTIONS.
(a) GENERAL. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets
of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock
split or other similar distribution with respect to the
outstanding shares of Common Stock or other securities, (i)
the outstanding shares of Common Stock are increased or
decreased, or are exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional
shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect
to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x)
the maximum number and kind of shares reserved for issuance
under the Plan, (y) the number and kind of shares or other
securities subject to then outstanding options under the Plan,
and (z) the price for each share subject to any then
outstanding options under the Plan, without changing the
aggregate purchase price as to which such options remain
exercisable, provided that no adjustment shall be made
pursuant to this Section 17 if such adjustment would cause the
Plan to fail to comply with Section 422 of the Code or with
Rule 16b-3.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Adjustments under this
Section 17 will be made by the Board of Directors, whose
determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No
fractional shares will be issued under the Plan on account of
any such adjustments.
<PAGE> 17
18. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of
all or substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for
securities, cash or other property of any other corporation or
business entity, or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board
of directors of any corporation assuming the obligations of
the Company, may, in its discretion, take any one or more of
the following actions as to outstanding options: (i) provide
that such options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), PROVIDED THAT any such
options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options
will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a
specified number of days following the date of such notice,
(iii) in the event of a merger under the terms of which
holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered
in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A)
the Merger Price times the number of shares of Common Stock
subject to such outstanding options (to the extent exercisable
at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding options in
exchange for the termination of such options, and (iv) provide
that all or any outstanding options shall become exercisable
in full immediately prior to such event. In any such case, the
Board of Directors may, in its discretion, advance the lapse
of any waiting or installment periods and exercise dates.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the
Plan in substitution for options held by employees of another
corporation who become employees of the Company, or a
subsidiary of the Company, as the result of a merger or
consolidation of the employing corporation with the Company or
a subsidiary of the Company, or as a result of the acquisition
by the Company, or one of its subsidiaries, of property or
stock of the employing corporation. The Company may direct
that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in
the circumstances,
19. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her
employment by the Company or interfere in any way with the right of the
Company at any time to terminate such employment or to increase or
decrease the compensation of the optionee. Whether an authorized leave
of absence, or absence in military or government service, shall
constitute termination of employment shall be determined at the time of
such absence in accordance with the provisions of Section 1.421-7(h) of
the Income Tax Regulations (or any successor regulations).
<PAGE> 18
20. OTHER EMPLOYEE BENEFITS.
Except as to plans which by their terms include such amounts as
compensation, neither the amount of any compensation deemed to be
received by an employee as a result of the exercise of an option nor
the sale of shares received upon such exercise will not constitute
compensation with respect to which any other employee benefits of such
employee are determined, including, without limitation, benefits under
any bonus, pension, profit-sharing, life insurance or salary
continuation plan, except as otherwise specifically determined by the
Board of Directors.
21. AMENDMENT OF THE PLAN.
(a) Except as set forth herein, the Board of Directors may at any
time, and from time to time, modify or amend the Plan in any
respect, except that if at any time the approval of the
shareholders of the Company is required as to such
modification or amendment under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options or
under Rule 16b-3 with respect to options held by Reporting
Persons, the Board of Directors may not effect such
modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his or
her rights under an option previously granted to him or her.
With the consent of the optionee affected, the Board of
Directors may amend outstanding option agreements in a manner
not inconsistent with the Plan. The Board of Directors shall
have the right to amend or modify (i) the terms and provisions
of the Plan and of any outstanding Incentive Stock Options
granted under the Plan to the extent necessary to qualify any
or all such options for such favorable federal income tax
treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of
the Code and (ii) the terms and provisions of the Plan and of
any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3 or any successor
rule.
22. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of
any kind otherwise due to the optionee any federal, state or
local taxes of any kind required by law to be withheld with
respect to any shares issued upon exercise of Options under
the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company to withhold shares of Common
Stock otherwise issuable pursuant to the exercise of an Option
or (ii) by delivering to the Company shares of Common Stock
already owned by the optionee. The shares so delivered or
withheld shall have a fair market value equal to such
withholding obligation. The fair market value of the shares
used to satisfy such withholding obligation shall be
determined by the Company as of the date that the amount of
<PAGE> 19
tax to be withheld is to be determined. In the event that
shares of Common Stock are being delivered to the Company
pursuant to this Section 23, an optionee may only satisfy his
or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting
Person, no election to use shares for the payment of
withholding taxes shall be effective unless made in compliance
with any applicable requirements of Rule 16b-3.
23. CANCELLATION AND NEW GRANT OF OPTIONS.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, (i)
the cancellation of any or all outstanding options under the Plan and
the grant in substitution therefor of new options under the Plan
covering the same or different numbers of shares of Common Stock having
an option exercise price per share which may be lower or higher than
the exercise price per share of the canceled options or (ii) the
amendment of the terms of any and all outstanding options under the
Plan to provide an option exercise price per share which is higher or
lower than the then-current exercise price per share of such
outstanding options.
24. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted
by the Board of Directors, but no Incentive Stock Option
granted under the Plan shall become exercisable unless and
until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained
within twelve months after the date of the Board's adoption of
the Plan, any Incentive Stock Options previously granted under
the Plan shall terminate and no further Incentive Stock
Options shall be granted. Amendments to the Plan not requiring
shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder
approval (as provided in Section 21) shall become effective
when adopted by the Board of Directors, but no Incentive Stock
Option issued after the date of such amendment shall become
exercisable (to the extent that such amendment to the Plan was
required to enable the Company to grant such Incentive Stock
Option to a particular optionee) unless and until such
amendment shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained
within twelve months of the Board's adoption of such
amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such
amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this
limitation, options may be granted under the Plan at any time
after the effective date and before the date fixed for
termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with
Section 18, the Plan shall terminate with respect to Incentive
Stock Options, upon the earlier of (i) the close of business
<PAGE> 20
on the day next preceding the tenth anniversary of the date of
its adoption by the Board of Directors, or (ii) the date on
which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise or cancellation of
options granted under the Plan. Unless sooner terminated in
accordance with Section 18, the Plan shall terminate with
respect to options which are not Incentive Stock Options on
the date specified in (ii) above. If the date of termination
is determined under (i) above, then options outstanding on
such date shall continue to have force and effect in
accordance with the provisions of the instruments evidencing
such options.
<PAGE> 21
NON-STATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. XDB Systems, Inc., a Maryland corporation (the
"Company"), hereby grants to _______________________ (the "Optionee")
an option, pursuant to the Company's 1992 Stock Option Plan (the
"Plan"), to purchase an aggregate of ______ shares of Common Stock,
$0.01 par value ("Common Stock"), of the Company at a price of $____
per share, purchasable as set forth in, and subject to the terms and
conditions of, this option and the Plan. This option is not intended to
qualify as an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). Except
where the context otherwise requires, the term "Company" shall include
the parent and all subsidiaries of the Company as defined in Sections
424(e) and 424(f) of the Code.
2. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) VESTING SCHEDULE. Except as otherwise provided in this
Agreement, this option may be exercised prior to the date 30
days after the 10th anniversary of the date of grant
(hereinafter the "Expiration Date") in annual installments as
to not more than the number of shares and during the
respective installment periods set forth in the table below.
The right of exercise shall be cumulative so that if the
option is not exercised to the maximum extent permissible
during any exercise period it shall be exercisable, in whole
or in part, with respect to all shares not so purchased at any
time prior to the Expiration Date or the earlier termination
of this option.
Total No. of
Exercise Period Shares Exercisable
--------------- ------------------
Prior to
On or after
but prior to
On or after
but prior to
On or after
but prior to
On or after
but prior to
On or after
This option may not be exercised at any time on or after the
Expiration Date.
<PAGE> 22
(b) EXERCISE PROCEDURE. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the
Optionee's delivery of written notice of exercise to the
Treasurer of the Company specifying the number of shares to be
purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 3.
Such exercise shall be effective upon receipt by the Treasurer
of the Company of such written notice together with the
required payment. The Optionee may purchase fewer than the
total number of shares covered hereby, provided that no
partial exercise of this option may be for any fractional
share or for fewer than ten whole shares.
(c) CONTINUOUS RELATIONSHIP REQUIRED. Except as otherwise provided
in this Section 3, this option may not be exercised unless the
Optionee, at the time he or she exercises this option, is, and
has been at all times since the date of grant of this option,
an employee, consultant, officer or director of the Company.
(d) TERMINATION OF RELATIONSHIP. If the Optionee ceases to be
employed by the Company for any reason other than death or
disability, as provided below, the right to exercise this
option shall terminate immediately upon such cessation of
employment.
(e) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Optionee dies
or becomes disabled (within the meaning of Section 22(e)(3) of
the Code or any successor provision thereto) prior to the
Expiration Date while he or she is an employee, consultant,
officer or director of the Company, this option shall be
exercisable, within the period of ninety days following the
date of death or disability of the Optionee (but in no event
after the Expiration Date), by the Optionee or by the person
to whom this option is transferred by will or the laws of
descent and distribution, PROVIDED THAT this option shall be
exercisable only to the extent that this option was
exercisable by the Optionee on the date of his or her death or
disability. Except as otherwise indicated by the context, the
term "Optionee," as used in this option, shall be deemed to
include the estate of the Optionee or any person who acquires
the right to exercise this option by bequest or inheritance or
otherwise by reason of the death of the Optionee.
3. PAYMENT OF PURCHASE PRICE
(a) METHOD OF PAYMENT. Payment of the purchase price for shares
purchased upon exercise of this option shall be made by
delivery to the Company of cash or a check to the order of the
Company in an amount equal to the purchase price of such
shares, or by delivery to the Company of shares of Common
Stock of the Company then owned by the Optionee having a fair
market value equal in amount to the purchase price of such
shares, or by any combination of such methods of payment.
(b) VALUATION OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. For
the purposes hereof, the fair market value of any share of the
Company's Common Stock which may be delivered to the Company
<PAGE> 23
in exercise of this option shall be determined in good faith
by the Board of Directors of the Company.
(c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. If
the Company permits the Optionee to exercise options by
delivery of shares of Common Stock of the Company, the
certificate or certificates representing the shares of Common
Stock of the Company to be delivered shall be duly executed in
blank by the Optionee or shall be accompanied by a stock power
duly executed in blank suitable for purposes of transferring
such shares to the Company. Fractional shares of Common Stock
of the Company will not be accepted in payment of the purchase
price of shares acquired upon exercise of this option.
(d) RESTRICTIONS UPON USE OF OPTION STOCK. Notwithstanding the
foregoing, no shares of Common Stock of the Company may be
tendered in payment of the purchase price of shares purchased
upon exercise of this option if the shares to be so tendered
were acquired within twelve (12) months before the date of
such tender, through the exercise of an option granted under
the Plan or any other stock option or restricted stock plan of
the Company.
4. DELIVERY OF SHARES; COMPLIANCE WITH SECURITIES LAW, ETC.
(a) GENERAL. The Company shall, upon payment of the option price
for the number of shares purchased and paid for, make prompt
delivery of such shares to the Optionee, provided that if any
law or regulation requires the Company to take any action with
respect to such shares before the issuance thereof, then the
date of delivery of such shares shall be extended for the
period necessary to complete such action.
(b) LISTING, QUALIFICATION, ETC. This option shall be subject to
the requirement that if, at any time, counsel to the Company
shall determine that the listing, registration or
qualification of the shares subject hereto upon any securities
exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary
as a condition of, or in connection with, the issuance or
purchase of shares hereunder, this option may not be
exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the
Board of Directors. Nothing herein shall be deemed to require
the Company to apply for or to obtain such listing,
registration or qualification.
5. NONTRANSFERABILITY OF OPTION. Except as provided in paragraph (e) of
Section 2, this option is personal and no rights granted hereunder may
be transferred, assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise) nor shall any such rights be subject
to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this
option or of such rights contrary to the provisions hereof, or upon the
levy of any attachment or similar process upon this option or such
<PAGE> 24
rights, this option and such rights shall, at the election of the
Company, become null and void.
6. RIGHTS TO WORK PRODUCT AND NON-COMPETE AGREEMENT. In consideration for
the granting of options pursuant to this Plan, the Optionee hereby
grants to the Company the entire and exclusive right, title, and
interest in and to his work product, including the following:
i. all original technical data or written material originated and
prepared for the Company;
ii. all ideas, concepts, know-how, or techniques relating to such
technical data or written material;
iii. all inventions, discoveries, or improvements, including ideas,
concepts know-how, or techniques relating to the software
industry that were (a) developed during the Optionee's
employment by the Company or (b) conceived or originated by
the Optionee solely or jointly with others (i) at the
Company's request or expense, at its facility, (ii) in the
course of the Optionee's employment, or (iii) based on
knowledge or information obtained from the Company during the
course of such employment.
The Optionee will promptly communicate and disclose to the Company all
such information, inventions, discoveries, and improvements. If
requested by the Company, the Optionee shall also execute all papers
necessary to assign them to the Company free of encumbrances and
restrictions. All such assignments shall include the patent rights, if
any, in this and all foreign countries.
In addition, for a period of one (1) year from the time the Optionee's
employment with the Company terminates, the Optionee shall not work for
any business, corporation, joint venture, partnership, or other entity
(as an owner, employee, consultant, independent contractor, or
investor) engaged in providing the same or similar services as the
Company to the same or similar customers as the Company. In no event
during said one-year (1) term shall the Optionee solicit customers of
the Company, inform customers of the Company of the name and location
of his new place of employment, and/or do any work, in any capacity
whatsoever, for any customers of the Company.
If the Optionee violates this Section 6, the Company shall be entitled
to obtain an injunctions enforcing this provision, to money damages and
to such other remedies as may be available.
The parties agree that they have attempted to limit the Optionee's
right to compete only to the extent necessary to protect the Company
from unfair competition. The parties recognize, however, that
reasonable people may differ in making such a determination.
Consequently, the parties hereby agree that, if the scope or
enforceability of the restrictive covenant is in any way disputed at
any time, a court or other trier of fact may modify and enforce the
<PAGE> 25
covenant to the extent that it believes to be reasonable under the
circumstances existing at that time.
The Optionee recognizes that the covenant not to compete and the
granting to the Company of the Optionee's work product as defined above
are an integral part of this Agreement without which the Company could
not afford to grant the Optionee the stock options granted herein.
7. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by
exercise of this option unless and until a certificate representing
such shares is duly issued and delivered to the Optionee. No adjustment
shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
8. RECAPITALIZATION.
(a) GENERAL. If, as a result of a merger, consolidation, sale of
all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other
distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common
Stock are increased or decreased, or are exchanged for a
different number or kind of shares or other securities, or if
additional shares or new or different shares or other
securities are distributed with respect to such shares of
Common Stock or other securities, an appropriate and
proportionate adjustment may be made in (i) the number and
kind of shares or other securities subject to this option and
(ii) the price for each share subject to this option, without
changing the aggregate purchase price as to which this option
remains exercisable.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Adjustments under this
Section 8 will be made by the Board of Directors, whose
determination as to what adjustments will be made and the
extent thereof will be final, binding and conclusive. No
fractional shares will be issued under this option on account
of any such adjustments.
9. MERGERS, ETC. In the event of a merger or consolidation in which the
Company is not the surviving corporation, or which results in the
acquisition of substantially all of the Company's outstanding Common
Stock by a single person, entity or group of persons or entities acting
in concert, or in the event of the sale or transfer of all or
substantially all of the assets of the Company, or in the event of a
reorganization or liquidation of the Company, prior to the Expiration
Date or termination of this option, the Optionee shall, with respect to
this option or any unexercised portion hereof, be entitled to the
rights and benefits, and be subject to the limitations, set forth in
Section 18 of the Plan.
10. WITHHOLDING TAXES. The Company's obligation to deliver shares upon the
exercise of this option shall be subject to the Optionee's satisfaction
of all applicable federal, state and local income and employment tax
withholding requirements.
<PAGE> 26
11. THE COMPANY'S RIGHT TO REPURCHASE SHARES ACQUIRED BY EXERCISE OF OPTION.
a. VOLUNTARY SALE OF STOCK BY THE OPTIONEE. In the event the
Optionee, who has exercised his option and has become a
shareholder in the Company, wishes to sell his stock in the
Company (or in the event of his death or disability his
personal representative, guardian, or heirs wish to sell the
stock), he shall give written notice to the Company of his
wish to sell his stock, and such notice shall set forth the
per share sales price for such stock which has been offered by
a third party. Such notice shall be sent by certified mail,
return receipt requested, to the President of the Company. The
Company shall have the right of first refusal to purchase such
shares at the price set forth in the notice.
b. COMPANY'S RIGHT TO INITIATE REPURCHASE OF OPTIONEE'S STOCK.
The Company may, on its own initiative, repurchase the
Optionee's stock under any of the following circumstances: (1)
The Optionee resigns, is fired, or otherwise has employment
with the Company terminated, including events of death and
disability; (2) the Optionee's insolvency, bankruptcy, or
other making of an assignment for the benefit of creditors;
(3) any purported or attempted sale or other assignment, gift,
or other transfer of stock to a third party in violation of
the terms of the Plan.
In any such event, the Company shall have the absolute right
to repurchase the shares of stock owned by the Optionee for a
period of six (6) months immediately following the termination
of the employment (or other triggering event) of the Optionee.
In the event the Company fails to purchase the Optionee's
stock within said six-month (6) period, it may make an offer
to purchase said stock at any subsequent time, but the
Optionee may elect to reject any such subsequent offer.
c. MANNER OF EXERCISE. Within six (6) months following the date
that the Company receives written notice of an Optionee's
desire to sell his stock in the Company, or following the date
of the triggering repurchase event, the Company shall notify
the Optionee in writing of the number of shares, if any, that
the Company intends to repurchase and of the date, within the
six-month (6) period, upon which the Company shall purchase
the shares. Unless otherwise agreed by the parties, the
aggregate repurchase price shall be paid in cash to the
Optionee or his representative.
d. PRICE AT WHICH THE COMPANY MAY REPURCHASE SHARES. If the
Company elects to exercise its option pursuant to Section 11.b
hereof and purchase the shares of stock available from the
Optionee, the Company shall pay the Optionee the book value of
the stock being sold as of the most recent fiscal quarter's
end prior to the date of the event triggering the Company's
right to repurchase. The book value of a share of stock shall
be the value, computed in accordance with generally accepted
accounting principles, of the common stockholders' equity of
the Company divided by the total number of shares of common
stock of the Company outstanding of the date on which the book
value is computed.
<PAGE> 27
If the Company elects to exercise its option pursuant to
Section 11.a. hereof and purchase the shares of stock that the
Optionee seeks to sell to a third party, the Company shall pay
the Optionee the price per share being offered by such third
party, as set forth in the notice delivered to the Company
pursuant to Section 11.a.
e. If the Company does not elect to acquire such Optionee's stock
pursuant to Section 11.a., the Optionee may, within the
120-day period following the expiration of the right granted
to the Company set forth in Section 11.c., sell his or her
stock specified in the notice to the Company to the third
party, provided that the sale shall not be on terms and
conditions less favorable to the Optionee than those contained
in the notice to the Company. If the Optionee does not sell
his or her stock in such fashion, such stock shall remain
subject to the options set forth in this Section 11.
f. LAPSE OF REPURCHASE RIGHTS. Shares acquired pursuant to the
exercise of any option granted hereunder shall remain subject
to the Company's right to repurchase until the earliest to
occur of the following:
i. The effective date of a Registration Statement filed
with the Securities and Exchange Commission under the
1933 Act covering securities of the Company whether
or not such shares are covered;
ii. The date of which a class of securities of the
Company is registered under Section 12 of the
Securities Exchange Act of 1934; or
iii. The date on which the Company's right to repurchase
pursuant to a triggering event expires with respect
to such shares, in accordance with Section 11.c.
hereof.
12. SALE OR OTHER DISPOSITION BY MAJORITY INTEREST. The Optionee shall
irrevocably appoint the Company and its Chief Executive Officer, or
either of them, as the Optionee's agents and attorneys-in-fact, with
full power of substitution in the Optionee's name, to sell, exchange,
transfer or otherwise dispose of all or a portion of the Optionee's
shares of Common Stock and to do any and all things and to execute any
and all documents and instruments (including, without limitation, any
stock transfer powers) in connection therewith, such power of attorney
not to become operable until such time as the holder or holders of a
majority of the issued and outstanding shares of Common Stock of the
Company sell, exchange, transfer or otherwise dispose of, or contract
to sell, exchange, transfer or otherwise dispose of, all or a portion
of their shares of Common Stock of the Company. Any sale, exchange,
transfer or other disposition of all or a portion of the Optionee's
shares of Common Stock pursuant to the foregoing powers of attorney
shall be made upon substantially the same terms and conditions
(including sale price per share) applicable to a sale, exchange,
transfer or other dispositions of all or a portion of shares of Common
Stock of the Company owned by the holder or holders of a majority of
the issued and outstanding shares of Common Stock of the Company. For
purposes of determining the sale price per share of Common Stock under
this Section 12, there shall be excluded the consideration (if any)
<PAGE> 28
paid or payable to the holder or holders of a majority of the issued
and outstanding shares of Common Stock of the Company in connection
with any employment consulting, noncompetition or similar agreements
which such holder or holders may enter into in connection with or
subsequent to such sale, transfer, exchange or other disposition. The
foregoing powers of attorney shall be irrevocable and coupled with an
interest and shall not terminate by operation of law, whether by the
death, bankruptcy or adjudication of incompetency or insanity of the
Optionee or the occurrence of any other event.
13. INVESTMENT REPRESENTATIONS; LEGEND.
(a) REPRESENTATIONS. The Optionee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this option
shall be acquired for the Optionee's account for
investment only, and not with a view to, or for sale
in connection with, any distribution of the shares in
violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under
the Securities Act.
(ii) The Optionee has had such opportunity as he or she
has deemed adequate to obtain from representatives of
the Company such information as is necessary to
permit the Optionee to evaluate the merits and risks
of his or her investment in the Company.
(iii) The Optionee is able to bear the economic risk of
holding such shares acquired pursuant to the exercise
of this option for an indefinite period.
(iv) The Optionee understands that (A) the shares acquired
pursuant to the exercise of this option will not be
registered under the Securities Act and are
"restricted securities" within the meaning of Rule
144 under the Securities Act; (B) such shares cannot
be sold, transferred or otherwise disposed of unless
they are subsequently registered under the Securities
Act or an exemption from registration is then
available; (C) in any event, the exemption from
registration under Rule 144 will not be available for
at least two years and even then will not be
available unless a public market then exists for the
Common Stock, adequate information concerning the
Company is then available to the public, and other
terms and conditions of Rule 144 are complied with;
and (D) there is now no registration statement on
file with the Securities and Exchange Commission with
respect to any stock of the Company and the Company
has no obligation or current intention to register
any shares acquired pursuant to the exercise of this
option under the Securities Act.
By making payment upon exercise of this option, the Optionee
shall be deemed to have reaffirmed, as of the date of such
payment, the representations made in this Section 10.
<PAGE> 29
(b) LEGEND ON STOCK CERTIFICATE. All stock certificates
representing shares of Common Stock issued to the Optionee
upon exercise of this option shall have affixed thereto a
legend substantially in the following form, in addition to any
other legends required by applicable state law:
"The shares of stock represented by this certificate
have not been registered under the Securities Act of
1933 and may not be transferred, sold or otherwise
disposed of in the absence of an effective
registration statement with respect to the shares
evidenced by this certificate, filed and made
effective under the Securities Act of 1933, or an
opinion of counsel satisfactory to the Company to the
effect that registration under such Act is not
required."
14. MISCELLANEOUS.
(a) Except as provided herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by
the Company and the Optionee.
(b) All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth
beneath their names below or at such other address as may be
designated in writing by either of the parties to one another.
(c) This option shall be governed by and construed in accordance
with the laws of the State of Maryland.
Date of Grant:
------------------------------------
By:
--------------------------------
Title:
-----------------------------
<PAGE> 30
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges
receipt of a copy of the Company's 1992 Stock Option Plan.
OPTIONEE
---------------------------------
SS#:
------------------------
ADDRESS:
------------------------
------------------------
<PAGE> 31
EXHIBIT 4.02
XDB SYSTEMS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE.
XDB SYSTEMS, INC. hereby establishes the XDB SYSTEMS, INC. 1996 STOCK
PLAN (the "Plan"). The purpose of this plan (the "Plan") is to secure
for XDB Systems, Inc. (the "Company") and its shareholders the benefits
arising from capital stock ownership by key employees, consultants,
officers and members of the Board of Directors of the Company who are
expected to contribute to the Company's future growth and success.
Except where the context otherwise requires, the term "Company" shall
include the parent and all present and future subsidiaries of the
Company as defined in Section 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended or replaced from time to time (the "Code").
2. TYPE OF OPTIONS AND ADMINISTRATION.
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan shall
be authorized by action of the Board of Directors of the
Company (or a Committee designated by the Board of Directors)
and may be either incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code.
(b) ADMINISTRATION. The Plan will be administered by the Board of
Directors of the Company, whose construction and
interpretation of the terms and provisions of the Plan shall
be final and conclusive. Except as set forth below, the Board
of Directors may in its sole discretion grant options to
purchase shares of the Company's Common Stock, $0.01 par value
("Common Stock"), and issue shares upon exercise of such
options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to
construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the terms and provisions of the
respective option agreements, which need not be identical, and
to make any other determination in the judgment of the Board
of Directors necessary or desirable for the administration of
the Plan. The Board of Directors may correct any defect or
supply any omission or reconcile any inconsistency in the Plan
or in any option agreement in the manner and to the extent it
shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. No
director shall be liable for any action or determination made
in good faith. The Board of Directors may, to the full extent
permitted by or consistent with applicable laws or regulations
(including, without limitation, applicable state law and Rule
16b-3 promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), or any successor rule ("Rule 16b-3")),
delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board of
<PAGE> 32
Directors, and if the Committee is so appointed all references
to the Board of Directors in the Plan shall mean and relate to
such Committee.
(c) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan
which make express reference to Rule 16b-3 shall apply only to
such persons as are required to file reports under Section
16(a) of the Exchange Act (a "Reporting Person").
3. ELIGIBILITY.
(a) GENERAL. Options shall be granted only to persons who are, at
the time of grant, employees (including officers who are
employees), consultants or advisors to, officers or directors
of the Company; PROVIDED, that the class of persons to whom
Incentive Stock Options may be granted shall be limited to all
employees of the Company. No person shall be granted any
Incentive Stock Option under the Plan who, at the time such
option is granted, owns, directly or indirectly, stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company, unless the requirements
of paragraph (b) of Section 11 are satisfied. The attribution
of stock ownership provisions of Section 424(d) of the Code,
and any successor provisions thereto, shall be applied in
determining the shares of stock owned by a person for purposes
of applying the foregoing percentage limitation. A person who
has been granted an option may, if he or she is otherwise
eligible, be granted an additional option or options if the
Board of Directors shall so determine.
(b) GRANT OF OPTIONS TO OFFICERS AND DIRECTORS. From and after the
registration of the Common Stock of the Company under the
Exchange Act, the selection of an officer or a director (as
the terms "officer" and "director" are defined for purposes of
Rule 16b-3) as a participant, the timing of the option grant,
the exercise price of the option and the number of shares for
which an option or options may be granted to such officer or
director shall be determined either (i) by the Board of
Directors, of which all members shall be "disinterested
persons" (as hereinafter defined), or (ii) by a committee of
two or more directors having full authority to act in the
matter, of which all directors shall be "disinterested
persons". For the purposes of the Plan, a director shall be
deemed to be "disinterested" only if such person qualifies as
a "disinterested person". For the purposes of the Plan, a
director shall be deemed to be ""disinterested" only if such
person qualifies as a "disinterested person" within the
meaning of Rule 16b-3, as such term is interpreted from time
to time.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 17 below, the maximum
number of shares of Common Stock of the Company which may be issued and
sold under the Plan is 10,000,000 shares. Such shares may be authorized
and unissued shares or may be shares issued and thereafter acquired by
the Company. The Board of Directors will take steps to assure that
sales of securities to optionees under the Plan qualify under Rule 701
<PAGE> 33
under the Securities Act of 1933, including the limit imposed by Rule
701 on the amount of securities that can be offered and sold. If an
option granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject
to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the
Plan are tendered to the Company in payment of the exercise price of an
option granted under the Plan, such tendered shares shall again be
available for subsequent option grants under the Plan; provided that in
no event shall (i) the total number of shares issued pursuant to the
exercise of Incentive Stock Options under the Plan, on a cumulative
basis, exceed the maximum number of shares authorized for issuance
under the Plan exclusive of shares made available for issuance pursuant
to this sentence, or (ii) the total number of shares issued pursuant to
the exercise of options by Reporting Persons, on a cumulative basis,
exceed the maximum number of shares authorized for issuance under the
Plan exclusive of shares made available for issuance pursuant to this
sentence.
5. FORMS OF OPTION AGREEMENTS.
As a condition to the grant of an option under the Plan, each recipient
of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Board of
Directors. Such option agreements may differ among recipients. Each
option agreement shall state whether the options granted thereby are
Incentive Stock Options or non-statutory options.
6. Purchase Price.
(a) GENERAL. The purchase price per share of stock deliverable
upon the exercise of an option shall be determined by the
Board of Directors, PROVIDED, HOWEVER, that (i) in the case of
an Incentive Stock Option, the exercise price shall not be
less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of
such option, or less than 110% of such fair market value in
the case of options described in paragraph (b) of Section 11,
and (ii) in the case of a non-statutory stock option, the
exercise price shall not be less than the fair market value of
such stock, as determined by the Board of Directors, at the
time of grant of such option.
(b) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the exercise price by delivery of
cash or a check to the order of the Company in an amount equal
to the exercise price of such options, or, to the extent
provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company
already owned by the optionee having a fair market value equal
in amount to the exercise price of the options being
exercised, or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee
payable on such terms as are specified by the Board of
Directors) which the Board of Directors determines are
consistent with the purpose of the Plan and with applicable
laws and regulations (including, without limitation, the
provisions of Rule 16b-3 and Regulation T promulgated by the
<PAGE> 34
Federal Reserve Board) or (iii) by any combination of such
methods of payment. The fair market value of any shares of the
Company's Common Stock or other non-stock consideration which
may be delivered upon exercise of an option shall be
determined in such manner as may be prescribed by the Board of
Directors.
7. OPTION PERIOD.
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, but, in the case of Incentive Stock
Options, in no event after the expiration of ten years from the day on
which the option is granted (or five years in the case of options
described in paragraph (b) of Section 11) and, in the case of
non-statutory options, in no event after the expiration of ten years
plus 30 days from the day on which the option is granted, and in either
case, shall be subject to earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as
shall be set forth in the agreement evidencing such option, subject to
the provisions of the Plan.
9. NONTRANSFERABILITY OF OPTIONS.
Except as set forth herein, no option granted under the Plan shall be
assignable or transferable by the person to whom it is granted, either
voluntarily or by operation of law, except by will or the laws of
descent and distribution, and during the life of the optionee, shall be
exercisable only by the optionee.
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
The Board of Directors shall determine the period of time during which
an optionee may exercise an option following (i) the termination of the
optionee's employment or other relationship with the Company or (ii)
the death or disability of the optionee. Such periods shall be set
forth in the agreement evidencing such option.
11. INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and
conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options granted under
the Plan shall, at the time of the grant, be specifically
designated as such in the option agreement covering such
Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the
grant of such option, the owner of stock possessing more than
<PAGE> 35
10% of the total combined voting power of all classes of stock
of the Company (after taking into account the attribution of
stock ownership rules of Section 424(d) of the Code), then the
following special provisions shall be applicable to the
Incentive Stock Option granted to such individual:
(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be
less than 110% of the fair market value of one share
of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five
years from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other
incentive stock option plans of the Company) which are
intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first
time in any one calendar year for shares of Common Stock with
an aggregate fair market value (determined as of the
respective date or dates of grant) of more than $100,000.
(d) No Incentive Stock Option may be exercised unless, at the time
of such exercise, the optionee is, and has been continuously
since the date of grant of his or her option, employed by the
Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee
ceases to be an employee of the Company (or within
such lesser period as may be specified in the
applicable option agreement), provided, that the
agreement with respect to such option may designate a
longer exercise period and that the exercise after
such three-month period shall be treated as the
exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee
ceases to be such an employee, the Incentive Stock
Option may be exercised by the person to whom it is
transferred by will or the laws of descent and
distribution within the period of one year after the
date of death (or within such lesser period as may be
specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning
of Section 22(e)(3) of the Code or any successor
provision thereto) while in the employ of the
Company, the Incentive Stock Option may be exercised
within the period of one year after the date the
optionee ceases to be such an employee because of
such disability (or within such lesser period as may
be specified in the applicable option agreement);
<PAGE> 36
PROVIDED, HOWEVER, that in no event may any option be
exercised after the expiration date of the option.
For all purposes of the Plan and any option granted
hereunder, "employment" shall be defined in
accordance with the provisions of Section 1.421-7(h)
of the Income Tax Regulations (or any successor
regulations).
12. THE COMPANY'S RIGHT TO REPURCHASE SHARES ACQUIRED BY EXERCISE OF
OPTION.
(a) VOLUNTARY SALE OF STOCK BY THE OPTIONEE. In the event an
optionee, who has exercised his option and has become a
shareholder in the Company, wishes to sell his stock in the
Company (or in the event of his death or disability his
personal representative, guardian, or heirs wish to sell the
stock) and has received a written bona fide binding offer, he
shall give written notice to the Company of his wish to sell
his stock, and such notice shall set forth the per share sales
price for such stock which has been offered by a third party
and shall include a copy of the written bona fide binding
offer. Such notice shall be sent by certified mail, return
receipt requested, to the President of the Company. The
Company shall have the right of first refusal to purchase such
shares at the price set forth in the notice.
(b) COMPANY'S RIGHT TO INITIATE REPURCHASE OF OPTIONEE'S STOCK.
The Company may, on its own initiative, repurchase such
optionee's stock under any of the following circumstances: (1)
such optionee resigns, is fired, or otherwise has employment
with the Company terminated, including events of death and
disability; (2) such optionee's insolvency, bankruptcy, or
other making of an assignment for the benefit of creditors;
(3) any purported or attempted sale or other assignment, gift,
or other transfer of stock to a third party in violation of
the terms of the Plan.
In any such event, the Company shall have the absolute right
to repurchase the shares of stock owned by such optionee for a
period of six (6) months immediately following the termination
of the employment (or other triggering event) of the optionee.
In the event the Company fails to purchase the optionee's
stock within said six-month (6) period, it may make an offer
to purchase said stock at any subsequent time, but the
optionee may elect to reject any such subsequent offer.
(c) MANNER OF EXERCISE. Within six (6) months following the date
that the Company receives written notice of an optionee's
desire to sell his stock in the Company, or following the date
of the triggering repurchase event, the Company shall notify
such optionee in writing of the number of shares, if any, that
the Company intends to repurchase and of the date, within the
six-month (6) period, upon which the Company shall purchase
the shares. Unless otherwise agreed by the parties, the
aggregate repurchase price shall be paid in cash to the
optionee or his representative.
(d) PRICE AT WHICH THE COMPANY MAY REPURCHASE SHARES. If the
Company elects to exercise its option pursuant to Section
12(b) hereof and purchase the shares of stock available from
the optionee, the Company shall pay such optionee the fair
market value of the stock being sold as determined by the
Board of Directors.
<PAGE> 37
If the Company elects to exercise its option pursuant to
Section 12(a) hereof and purchase the shares of stock that
such optionee seeks to sell to a third party, the Company
shall pay the optionee the price per share being offered by
such third party, as set forth in the notice delivered to the
Company pursuant to Section 12(a).
(e) If the Company does not elect to acquire such optionee's stock
pursuant to Section 12(a), the optionee may, within the
120-day period following the expiration of the right granted
to the Company set forth in Section 12(c), sell his or her
stock specified in the notice to the Company to the third
party, provided that the sale shall not be on terms and
conditions less favorable to the optionee than those contained
in the notice to the Company. If the optionee does not sell
his or her stock in such fashion, such stock shall remain
subject to the options set forth in this Section 12.
(f) LAPSE OF REPURCHASE RIGHTS. Shares acquired pursuant to the
exercise of any option granted hereunder shall remain subject
to the Company's right to repurchase until the earliest to
occur of the following:
i. The effective date of a Registration Statement filed
with the Securities and Exchange Commission under the
1933 Act covering securities of the Company whether
or not such shares are covered;
ii. The date of which a class of securities of the
Company is registered under Section 12 of the
Securities Exchange Act of 1934; or
iii. The date on which the Company's right to repurchase
pursuant to a triggering event expires with respect
to such shares, in accordance with Section 12(c)
hereof.
(g) This Section 12 shall apply to all options granted pursuant to
the Plan unless otherwise waived or amended pursuant to an
optionee's option agreement.
13. SALE OR OTHER DISPOSITION BY MAJORITY INTEREST.
An optionee shall irrevocably appoint the Company and its Chief
Executive Officer, or either of them, as such optionee's agents and
attorneys-in-fact, with full power of substitution in the optionee's
name, to sell, exchange, transfer or otherwise dispose of all or a
portion of such optionee's shares of Common Stock and to do any and all
things and to execute any and all documents and instruments (including,
without limitation, any stock transfer powers) in connection therewith,
such power of attorney not to become operable until such time as the
holder or holders of a majority of the issued and outstanding shares of
Common Stock of the Company sell, exchange, transfer or otherwise
dispose of, or contract to sell, exchange, transfer or otherwise
dispose of, all or a portion of their shares of Common Stock of the
Company. Any sale, exchange, transfer or other disposition of all or a
portion of an optionee's shares of Common Stock pursuant to the
<PAGE> 38
foregoing powers of attorney shall be made upon substantially the same
terms and conditions (including sale price per share) applicable to a
sale, exchange, transfer or other dispositions of all or a portion of
shares of Common Stock of the Company owned by the holder or holders of
a majority of the issued and outstanding shares of Common Stock of the
Company. For purposes of determining the sale price per share of Common
Stock under this Section 13, there shall be excluded the consideration
(if any) paid or payable to the holder or holders of a majority of the
issued and outstanding shares of Common Stock of the Company in
connection with any employment consulting, noncompetition or similar
agreements which such holder or holders may enter into in connection
with or subsequent to such sale, transfer, exchange or other
disposition. The foregoing powers of attorney shall be irrevocable and
coupled with an interest and shall not terminate by operation of law,
whether by the death, bankruptcy or adjudication of incompetency or
insanity of the optionee or the occurrence of any other event.
14. Additional Provisions.
(a) ADDITIONAL OPTION PROVISIONS. The Board of Directors may, in
its sole discretion, include additional provisions in any
option granted under the Plan, including without limitation
restrictions on transfer, repurchase rights, commitments to
pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options,
or such other provisions as shall be determined by the Board
of Directors; PROVIDED THAT such additional provisions shall
not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any
Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code or Rule 16b-3.
(b) ACCELERATION. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or
any particular option or options granted under the Plan may be
exercised or (ii) extend the dates during which all or any
particular option or options granted under the Plan may be
exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with
Section 422 of the Code or Rule 16b-3.
15. GENERAL RESTRICTIONS.
(a) INVESTMENT REPRESENTATIONS. The Company may require any person
to whom an option is granted, as a condition of exercising
such option, to give written assurances in substance and form
satisfactory to the Company to the effect that such person is
acquiring the Common Stock subject to the option for his or
her own account for investment and not with any present
intention of selling or otherwise distributing the same, and
to such other effects as the Company deems necessary or
appropriate in order to comply with federal and applicable
state securities laws.
<PAGE> 39
(b) COMPLIANCE WITH SECURITIES LAWS. Each option shall be subject
to the requirement that if, at any time, counsel to the
Company shall determine that the listing, registration or
qualification of the shares subject to such option upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, or
that the disclosure of non-public information or the
satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase
of shares thereunder, such option may not be exercised, in
whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such
condition shall have been effected or obtained on conditions
acceptable to the Board of Directors. Nothing herein shall be
deemed to require the Company to apply for or to obtain such
listing, registration or qualification, or to satisfy such
condition.
16. RIGHTS AS A SHAREHOLDER.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option (including, without
limitation, any rights to receive dividends or non-cash distributions
with respect to such shares) until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made
for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
17. ADJUSTMENT PROVISIONS FOR RECAPITALIZATION AND RELATED TRANSACTIONS.
(a) GENERAL. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets
of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock
split or other similar distribution with respect to the
outstanding shares of Common Stock or other securities, (i)
the outstanding shares of Common Stock are increased or
decreased, or are exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional
shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect
to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x)
the maximum number and kind of shares reserved for issuance
under the Plan, (y) the number and kind of shares or other
securities subject to then outstanding options under the Plan,
and (z) the price for each share subject to any then
outstanding options under the Plan, without changing the
aggregate purchase price as to which such options remain
exercisable, provided that no adjustment shall be made
pursuant to this Section 17 if such adjustment would cause the
Plan to fail to comply with Section 422 of the Code or with
Rule 16b-3.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Adjustments under this
Section 17 will be made by the Board of Directors, whose
determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No
fractional shares will be issued under the Plan on account of
any such adjustments.
<PAGE> 40
18. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of
all or substantially all of the assets of the Company in which
outstanding shares of Common Stock are exchanged for
securities, cash or other property of any other corporation or
business entity, or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board
of directors of any corporation assuming the obligations of
the Company, may, in its discretion, take any one or more of
the following actions as to outstanding options: (i) provide
that such options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), PROVIDED that any such
options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options
will terminate immediately prior to the consummation of such
transaction unless exercised by the optionee within a
specified number of days following the date of such notice,
(iii) in the event of a merger under the terms of which
holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered
in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A)
the Merger Price times the number of shares of Common Stock
subject to such outstanding options (to the extent exercisable
at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding options in
exchange for the termination of such options, and (iv) provide
that all or any outstanding options shall become exercisable
in full immediately prior to such event. In any such case, the
Board of Directors may, in its discretion, advance the lapse
of any waiting or installment periods and exercise dates.
(b) SUBSTITUTE OPTIONS. The Company may grant options under the
Plan in substitution for options held by employees of another
corporation who become employees of the Company, or a
subsidiary of the Company, as the result of a merger or
consolidation of the employing corporation with the Company or
a subsidiary of the Company, or as a result of the acquisition
by the Company, or one of its subsidiaries, of property or
stock of the employing corporation. The Company may direct
that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in
the circumstances,
19. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her
employment by the Company or interfere in any way with the right of the
Company at any time to terminate such employment or to increase or
decrease the compensation of the optionee. Whether an authorized leave
of absence, or absence in military or government service, shall
constitute termination of employment shall be determined at the time of
such absence in accordance with the provisions of Section 1.421-7(h) of
the Income Tax Regulations (or any successor regulations).
<PAGE> 41
20. OTHER EMPLOYEE BENEFITS.
Except as to plans which by their terms include such amounts as
compensation, neither the amount of any compensation deemed to be
received by an employee as a result of the exercise of an option nor
the sale of shares received upon such exercise will constitute
compensation with respect to which any other employee benefits of such
employee are determined, including, without limitation, benefits under
any bonus, pension, profit-sharing, life insurance or salary
continuation plan, except as otherwise specifically determined by the
Board of Directors.
21. AMENDMENT OF THE PLAN.
(a) Except as set forth herein, the Board of Directors may at any
time, and from time to time, modify or amend the Plan in any
respect, except that if at any time the approval of the
shareholders of the Company is required as to such
modification or amendment under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options or
under Rule 16b-3 with respect to options held by Reporting
Persons, the Board of Directors may not effect such
modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his or
her rights under an option previously granted to him or her.
With the consent of the optionee affected, the Board of
Directors may amend outstanding option agreements in a manner
not inconsistent with the Plan. The Board of Directors shall
have the right to amend or modify (i) the terms and provisions
of the Plan and of any outstanding Incentive Stock Options
granted under the Plan to the extent necessary to qualify any
or all such options for such favorable federal income tax
treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of
the Code and (ii) the terms and provisions of the Plan and of
any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3 or any successor
rule.
22. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of
any kind otherwise due to the optionee any federal, state or
local taxes of any kind required by law to be withheld with
respect to any shares issued upon exercise of Options under
the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company to withhold shares of Common
Stock otherwise issuable pursuant to the exercise of an Option
or (ii) by delivering to the Company shares of Common Stock
already owned by the optionee. The shares so delivered or
withheld shall have a fair market value equal to such
withholding obligation. The fair market value of the shares
used to satisfy such withholding obligation shall be
determined by the Company as of the date that the amount of
<PAGE> 42
tax to be withheld is to be determined. In the event that
shares of Common Stock are being delivered to the Company
pursuant to this Section 23, an optionee may only satisfy his
or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting
Person, no election to use shares for the payment of
withholding taxes shall be effective unless made in compliance
with any applicable requirements of Rule 16b-3.
23. CANCELLATION AND NEW GRANT OF OPTIONS.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, (i)
the cancellation of any or all outstanding options under the Plan and
the grant in substitution therefor of new options under the Plan
covering the same or different numbers of shares of Common Stock having
an option exercise price per share which may be lower or higher than
the exercise price per share of the canceled options or (ii) the
amendment of the terms of any and all outstanding options under the
Plan to provide an option exercise price per share which is higher or
lower than the then-current exercise price per share of such
outstanding options.
<PAGE> 43
NON-STATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. XDB Systems, Inc., a Maryland corporation (the
"Company"), hereby grants to_______________________ (the "Optionee") an
option, pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
to purchase an aggregate of __________ shares of Common Stock, $0.01
par value ("Common Stock"), of the Company at a price of $____ per
share, purchasable as set forth in, and subject to the terms and
conditions of, this option and the Plan. This option is not intended to
qualify as an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). Except
where the context otherwise requires, the term "Company" shall include
the parent and all subsidiaries of the Company as defined in Sections
424(e) and 424(f) of the Code.
2. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) VESTING SCHEDULE. Except as otherwise provided in this
Agreement, option(s) granted herein will become vested on each
succeeding first day of each month after the grant date on a
monthly prorated basis over a period of five (5) years.
However, this option may only be exercised prior to the date
30 days after the 10th anniversary of the date of grant
(hereinafter the "Expiration Date") in annual installments as
to not more than the number of shares and during the
respective installment periods set forth in the table below.
The right of exercise shall be cumulative so that if the
option is not exercised to the maximum extent permissible
during any exercise period it shall be exercisable, in whole
or in part, with respect to all shares not so purchased at any
time prior to the Expiration Date or the earlier termination
of this option.
Shares Become Cumulative Total
Vesting Period Exercisable Vested Shares
-------------- ------------- ----------------
Prior to
On or after
but prior to
On or after
but prior to
On or after
but prior to
On or after
but prior to
On or after
<PAGE> 44
This option may not be exercised at any time on or after the
Expiration Date. If employment with XDB is terminated prior to
the exercise date outlined above, then the options that have
become vested as of the effective termination date shall
become immediately exercisable pursuant to this plan.
(b) EXERCISE PROCEDURE. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the
Optionee's delivery of written notice of exercise to the
Treasurer of the Company specifying the number of shares to be
purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 3.
Such exercise shall be effective upon receipt by the Treasurer
of the Company of such written notice together with the
required payment. An example of such notice is attached for
your convenience. The Optionee may purchase fewer than the
total number of shares covered hereby, provided that no
partial exercise of this option may be for any fractional
share or for fewer than ten whole shares.
(c) CONTINUOUS RELATIONSHIP REQUIRED. Except as otherwise provided
in this Section 3, this option may not be exercised unless the
Optionee, at the time he or she exercises this option, is, and
has been at all times since the date of grant of this option,
an employee, consultant, officer or director of the Company.
(d) TERMINATION OF RELATIONSHIP. If the Optionee ceases to be
employed by the Company for any reason other than death or
disability, as provided below, the right to exercise this
option shall terminate immediately upon such cessation of
employment.
(e) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Optionee dies
or becomes disabled (within the meaning of Section 22(e)(3) of
the Code or any successor provision thereto) prior to the
Expiration Date while he or she is an employee, consultant,
officer or director of the Company, this option shall be
exercisable, within the period of ninety days following the
date of death or disability of the Optionee (but in no event
after the Expiration Date), by the Optionee or by the person
to whom this option is transferred by will or the laws of
descent and distribution, PROVIDED THAT this option shall be
exercisable only to the extent that this option was
exercisable by the Optionee on the date of his or her death or
disability. Except as otherwise indicated by the context, the
term "Optionee," as used in this option, shall be deemed to
include the estate of the Optionee or any person who acquires
the right to exercise this option by bequest or inheritance or
otherwise by reason of the death of the Optionee.
3. PAYMENT OF PURCHASE PRICE
(a) METHOD OF PAYMENT. Payment of the purchase price for shares
purchased upon exercise of this option shall be made by
delivery to the Company of cash or a check to the order of the
Company in an amount equal to the purchase price of such
shares, or by delivery to the Company of shares of Common
<PAGE> 45
Stock of the Company then owned by the Optionee having a fair
market value equal in amount to the purchase price of such
shares, or by any combination of such methods of payment.
(b) VALUATION OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. For
the purposes hereof, the fair market value of any share of the
Company's Common Stock which may be delivered to the Company
in exercise of this option shall be determined in good faith
by the Board of Directors of the Company.
(c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE. If
the Company permits the Optionee to exercise options by
delivery of shares of Common Stock of the Company, the
certificate or certificates representing the shares of Common
Stock of the Company to be delivered shall be duly executed in
blank by the Optionee or shall be accompanied by a stock power
duly executed in blank suitable for purposes of transferring
such shares to the Company. Fractional shares of Common Stock
of the Company will not be accepted in payment of the purchase
price of shares acquired upon exercise of this option.
(d) RESTRICTIONS UPON USE OF OPTION STOCK. Notwithstanding the
foregoing, no shares of Common Stock of the Company may be
tendered in payment of the purchase price of shares purchased
upon exercise of this option if the shares to be so tendered
were acquired within twelve (12) months before the date of
such tender, through the exercise of an option granted under
the Plan or any other stock option or restricted stock plan of
the Company.
4. DELIVERY OF SHARES; COMPLIANCE WITH SECURITIES LAW, ETC.
(a) GENERAL. The Company shall, upon payment of the option price
for the number of shares purchased and paid for, make prompt
delivery of such shares to the Optionee, provided that if any
law or regulation requires the Company to take any action with
respect to such shares before the issuance thereof, then the
date of delivery of such shares shall be extended for the
period necessary to complete such action.
(b) LISTING, QUALIFICATION, ETC. This option shall be subject to
the requirement that if, at any time, counsel to the Company
shall determine that the listing, registration or
qualification of the shares subject hereto upon any securities
exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary
as a condition of, or in connection with, the issuance or
purchase of shares hereunder, this option may not be
exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the
Board of Directors. Nothing herein shall be deemed to require
the Company to apply for or to obtain such listing,
registration or qualification.
<PAGE> 46
5. NONTRANSFERABILITY OF OPTION. Except as provided in paragraph (e) of
Section 2, this option is personal and no rights granted hereunder may
be transferred, assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise) nor shall any such rights be subject
to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this
option or of such rights contrary to the provisions hereof, or upon the
levy of any attachment or similar process upon this option or such
rights, this option and such rights shall, at the election of the
Company, become null and void.
6. RIGHTS TO WORK PRODUCT AND NON-COMPETE AGREEMENT. In consideration for
the granting of options pursuant to this Plan, the Optionee hereby
grants to the Company the entire and exclusive right, title, and
interest in and to his work product, including the following:
i. all original technical data or written material originated and
prepared for the Company;
ii. all ideas, concepts, know-how, or techniques relating to such
technical data or written material;
iii. all inventions, discoveries, or improvements, including ideas,
concepts know-how, or techniques relating to the software
industry that were (a) developed during the Optionee's
employment by the Company or (b) conceived or originated by
the Optionee solely or jointly with others (i) at the
Company's request or expense, at its facility, (ii) in the
course of the Optionee's employment, or (iii) based on
knowledge or information obtained from the Company during the
course of such employment.
The Optionee will promptly communicate and disclose to the Company all
such information, inventions, discoveries, and improvements. If
requested by the Company, the Optionee shall also execute all papers
necessary to assign them to the Company free of encumbrances and
restrictions. All such assignments shall include the patent rights, if
any, in this and all foreign countries.
In addition, for a period of one (1) year from the time the Optionee's
employment with the Company terminates, the Optionee shall not work for
any business, corporation, joint venture, partnership, or other entity
(as an owner, employee, consultant, independent contractor, or
investor) engaged in providing the same or similar services as the
Company to the same or similar customers as the Company. In no event
during said one-year (1) term shall the Optionee solicit customers of
the Company, inform customers of the Company of the name and location
of his new place of employment, and/or do any work, in any capacity
whatsoever, for any customers of the Company.
If the Optionee violates this Section 6, the Company shall be entitled
to obtain an injunctions enforcing this provision, to money damages and
to such other remedies as may be available.
<PAGE> 47
The parties agree that they have attempted to limit the Optionee's
right to compete only to the extent necessary to protect the Company
from unfair competition. The parties recognize, however, that
reasonable people may differ in making such a determination.
Consequently, the parties hereby agree that, if the scope or
enforceability of the restrictive covenant is in any way disputed at
any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the
circumstances existing at that time.
The Optionee recognizes that the covenant not to compete and the
granting to the Company of the Optionee's work product as defined above
are an integral part of this Agreement without which the Company could
not afford to grant the Optionee the stock options granted herein.
7. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by
exercise of this option unless and until a certificate representing
such shares is duly issued and delivered to the Optionee. No adjustment
shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
8. RECAPITALIZATION.
(a) GENERAL. If, as a result of a merger, consolidation, sale of
all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other
distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common
Stock are increased or decreased, or are exchanged for a
different number or kind of shares or other securities, or if
additional shares or new or different shares or other
securities are distributed with respect to such shares of
Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (i) the number and
kind of shares or other securities subject to this option and
(ii) the price for each share subject to this option, without
changing the aggregate purchase price as to which this option
remains exercisable.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Adjustments under this
Section 8 will be made by the Board of Directors, whose
determination as to what adjustments will be made and the
extent thereof will be final, binding and conclusive. No
fractional shares will be issued under this option on account
of any such adjustments.
9. MERGERS, ETC. In the event of a merger or consolidation in which the
Company is not the surviving corporation, or which results in the
acquisition of substantially all of the Company's outstanding Common
Stock by a single person, entity or group of persons or entities acting
in concert, or in the event of the sale or transfer of all or
substantially all of the assets of the Company, or in the event of a
reorganization or liquidation of the Company, prior to the Expiration
Date or termination of this option, the Optionee shall, with respect to
this option or any unexercised portion hereof, be entitled to the
rights and benefits, and be subject to the limitations, set forth in
Section 18 of the Plan.
<PAGE> 48
10. WITHHOLDING TAXES. The Company's obligation to deliver shares upon the
exercise of this option shall be subject to the Optionee's satisfaction
of all applicable federal, state and local income and employment tax
withholding requirements.
11. THE COMPANY'S RIGHT TO REPURCHASE SHARES ACQUIRED BY EXERCISE OF
OPTION.
a. VOLUNTARY SALE OF STOCK BY THE OPTIONEE. In the event the
Optionee, who has exercised his option and has become a
shareholder in the Company, wishes to sell his stock in the
Company (or in the event of his death or disability his
personal representative, guardian, or heirs wish to sell the
stock), he shall give written notice to the Company of his
wish to sell his stock, and such notice shall set forth the
per share sales price for such stock which has been offered by
a third party. Such notice shall be sent by certified mail,
return receipt requested, to the President of the Company. The
Company shall have the right of first refusal to purchase such
shares at the price set forth in the notice.
b. COMPANY'S RIGHT TO INITIATE REPURCHASE OF OPTIONEE'S STOCK.
The Company may, on its own initiative, repurchase the
Optionee's stock under any of the following circumstances: (1)
The Optionee resigns, is fired, or otherwise has employment
with the Company terminated, including events of death and
disability; (2) the Optionee's insolvency, bankruptcy, or
other making of an assignment for the benefit of creditors;
(3) any purported or attempted sale or other assignment, gift,
or other transfer of stock to a third party in violation of
the terms of the Plan.
In any such event, the Company shall have the absolute right
to repurchase the shares of stock owned by the Optionee for a
period of two (2) weeks immediately following the termination
of the employment (or other triggering event) of the Optionee.
In the event the Company fails to purchase the Optionee's
stock within said two (2) weeks period, it may make an offer
to purchase said stock at any subsequent time, but the
Optionee may elect to reject any such subsequent offer.
c. MANNER OF EXERCISE. Within two (2) weeks following the date
that the Company receives written notice of an Optionee's
desire to sell his stock in the Company, or following the date
of the triggering repurchase event, the Company shall notify
the Optionee in writing of the number of shares, if any, that
the Company intends to repurchase and of the date, within the
two (2) week period, upon which the Company shall purchase the
shares. Unless otherwise agreed by the parties, the aggregate
repurchase price shall be paid in cash to the Optionee or his
representative.
d. PRICE AT WHICH THE COMPANY MAY REPURCHASE SHARES. If the
Company elects to exercise its option pursuant to Section 11.b
hereof and purchase the shares of stock available from the
Optionee, the Company shall pay the Optionee the book value of
the stock being sold as of the most recent fiscal quarter's
end prior to the date of the event triggering the Company's
right to repurchase. The book value of a share of stock shall
be the value, computed in accordance with generally accepted
<PAGE> 49
accounting principles, of the common stockholders' equity of
the Company divided by the total number of shares of common
stock of the Company outstanding of the date on which the book
value is computed.
If the Company elects to exercise its option pursuant to
Section 11.a. hereof and purchase the shares of stock that the
Optionee seeks to sell to a third party, the Company shall pay
the Optionee the price per share being offered by such third
party, as set forth in the notice delivered to the Company
pursuant to Section 11.a.
e. If the Company does not elect to acquire such Optionee's stock
pursuant to Section 11.a., the Optionee may, within the
120-day period following the expiration of the right granted
to the Company set forth in Section 11.c., sell his or her
stock specified in the notice to the Company to the third
party, provided that the sale shall not be on terms and
conditions less favorable to the Optionee than those contained
in the notice to the Company. If the Optionee does not sell
his or her stock in such fashion, such stock shall remain
subject to the options set forth in this Section 11.
f. LAPSE OF REPURCHASE RIGHTS. Shares acquired pursuant to the
exercise of any option granted hereunder shall remain subject
to the Company's right to repurchase until the earliest to
occur of the following:
i. The effective date of a Registration Statement filed
with the Securities and Exchange Commission under the
1933 Act covering securities of the Company whether
or not such shares are covered;
ii. The date of which a class of securities of the
Company is registered under Section 12 of the
Securities Exchange Act of 1934; or
iii. The date on which the Company's right to repurchase
pursuant to a triggering event expires with respect
to such shares, in accordance with Section 11.c.
hereof.
12. SALE OR OTHER DISPOSITION BY MAJORITY INTEREST. The Optionee shall
irrevocably appoint the Company and its Chief Executive Officer, or
either of them, as the Optionee's agents and attorneys-in-fact, with
full power of substitution in the Optionee's name, to sell, exchange,
transfer or otherwise dispose of all or a portion of the Optionee's
shares of Common Stock and to do any and all things and to execute any
and all documents and instruments (including, without limitation, any
stock transfer powers) in connection therewith, such power of attorney
not to become operable until such time as the holder or holders of a
majority of the issued and outstanding shares of Common Stock of the
Company sell, exchange, transfer or otherwise dispose of, or contract
to sell, exchange, transfer or otherwise dispose of, all or a portion
of their shares of Common Stock of the Company. Any sale, exchange,
transfer or other disposition of all or a portion of the Optionee's
shares of Common Stock pursuant to the foregoing powers of attorney
shall be made upon substantially the same terms and conditions
<PAGE> 50
(including sale price per share) applicable to a sale, exchange,
transfer or other dispositions of a majority of shares of Common Stock
of the Company owned by the holder or holders of a majority of the
issued and outstanding shares of Common Stock of the Company. For
purposes of determining the sale price per share of Common Stock under
this Section 12, there shall be excluded the consideration (if any)
paid or payable to the holder or holders of a majority of the issued
and outstanding shares of Common Stock of the Company in connection
with any employment consulting, noncompetition or similar agreements
which such holder or holders may enter into in connection with or
subsequent to such sale, transfer, exchange or other disposition. The
foregoing powers of attorney shall be irrevocable and coupled with an
interest and shall not terminate by operation of law, whether by the
death, bankruptcy or adjudication of incompetency or insanity of the
Optionee or the occurrence of any other event.
13. INVESTMENT REPRESENTATIONS; LEGEND.
(a) REPRESENTATIONS. The Optionee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this option
shall be acquired for the Optionee's account for
investment only, and not with a view to, or for sale
in connection with, any distribution of the shares in
violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under
the Securities Act.
(ii) The Optionee has had such opportunity as he or she
has deemed adequate to obtain from representatives of
the Company such information as is necessary to
permit the Optionee to evaluate the merits and risks
of his or her investment in the Company.
(iii) The Optionee is able to bear the economic risk of
holding such shares acquired pursuant to the exercise
of this option for an indefinite period.
(iv) The Optionee understands that (A) the shares acquired
pursuant to the exercise of this option will not be
registered under the Securities Act and are
"restricted securities" within the meaning of Rule
144 under the Securities Act; (B) such shares cannot
be sold, transferred or otherwise disposed of unless
they are subsequently registered under the Securities
Act or an exemption from registration is then
available; (C) in any event, the exemption from
registration under Rule 144 will not be available for
at least two years and even then will not be
available unless a public market then exists for the
Common Stock, adequate information concerning the
Company is then available to the public, and other
terms and conditions of Rule 144 are complied with;
and (D) there is now no registration statement on
file with the Securities and Exchange Commission with
respect to any stock of the Company and the Company
has no obligation or current intention to register
any shares acquired pursuant to the exercise of this
option under the Securities Act.
<PAGE> 51
By making payment upon exercise of this option, the Optionee
shall be deemed to have reaffirmed, as of the date of such
payment, the representations made in this Section 10.
(b) LEGEND ON STOCK CERTIFICATE. All stock certificates
representing shares of Common Stock issued to the Optionee
upon exercise of this option shall have affixed thereto a
legend substantially in the following form, in addition to any
other legends required by applicable state law:
"The shares of stock represented by this certificate
have not been registered under the Securities Act of
1933 and may not be transferred, sold or otherwise
disposed of in the absence of an effective
registration statement with respect to the shares
evidenced by this certificate, filed and made
effective under the Securities Act of 1933, or an
opinion of counsel satisfactory to the Company to the
effect that registration under such Act is not
required."
14. MISCELLANEOUS.
(a) Except as provided herein, this option may not be amended or
otherwise modified unless evidenced in writing and signed by
the Company and the Optionee.
(b) All notices under this option shall be mailed or delivered by
hand to the parties at their respective addresses set forth
beneath their names below or at such other address as may be
designated in writing by either of the parties to one another.
(c) This option shall be governed by and construed in accordance
with the laws of the State of Maryland.
Date of Grant:
-----------------------------------
By: ___________________________
Title: ___________________________
XDB Systems, Inc.
9861 Broken Land Parkway
Columbia, MD 21046
<PAGE> 52
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges
receipt of a copy of the Company's 1996 Stock Option Plan.
OPTIONEE
-------------------------------
SS#:
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ADDRESS:
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<PAGE> 53
EXHIBIT 5.01
February 4, 1998
MICRO FOCUS GROUP plc MEMERY CRYSTAL
The Lawn Solicitors
Old Bath Road 31 Southampton Row
Newbury London WC1B 5HT
Berkshire RG14 1QN Telephone: +44(0) 171-242 5905
LDE No. 156 Chancery Lane
E-mail: [email protected]
Fax: +44(0) 171-242 5905
Group 4 Fax: +44(0) 171-242 5905
Dear Sirs,
Registration Statement on Form S-8
1. This opinion is given in connection with the registration under the
U.S. Securities Act of 1933, as amended ("the Securities Act"), of
ordinary shares of 10p nominal value each (each a "Share" and plurally
referred to as the "Shares") in Micro Focus Group plc ("the Company"),
which may be issued pursuant to the XDB Systems Inc. ("XDB") Stock
Option Plan 1992, as amended ("the 1992 Plan") and XDB Stock Option
Plan 1996, as amended ("the 1996 Plan"); the Company having assumed the
responsibilities of XDB under the 1992 Plan and the 1996 Plan on its
acquisition of stock of XDB in January 1998.
2. We have acted as English legal advisors to the Company in connection
with the foregoing. In so acting, we have examined such certificates of
the Company and directors and/or officers thereof and originals or
copies of all such corporate documents and records of the Company and
all such other documents as we deemed relevant and necessary as a basis
for our opinion hereinafter set forth. We have, with your consent,
relied upon such certificates of directors and/or officers of the
Company and upon statements and information furnished by directors
and/or officers of the Company with respect to their authority and the
accuracy of all factual matters contained therein which we have not
independently established. We have also assumed the genuineness of all
signatures thereon or on the originals of documents referred to
therein.
3. This opinion is limited to English law as at the date hereof applicable
and as currently applied by the English Courts and is given on the basis
that it will be governed by and be construed in accordance with current
English law. We have accordingly not made any investigations of the laws
of any jurisdictions other than England.
<PAGE> 54
4. You have confirmed to us that all necessary proceedings have been taken
by you in connection with the adoption by the Company of the 1992 Plan
and the 1996 Plan, and we have therefore assumed such in giving the
opinion contained herein.
5. It is our opinion that the Shares that may be issued upon the exercise
of options granted or to be granted under the 1992 Plan and the 1996
Plan when issued in accordance with the applicable plan or scheme and
options or purchase rights duly granted thereunder and the Company's
Memorandum and Articles of Association, and in the manner referred to
in the relevant prospectus associated with the Registration Statement
S-8 to be filed by the Company on or around 4 February 1998 ("the
Registration Statement") will be legally issued, fully paid and
non-assessable.
6. For the purpose of this opinion, we have assumed that the term
"non-assessable" in relation to the Shares means under English law that
holders of such Shares, having fully paid up all amounts due on such
Shares as to the nominal amount and any premium thereon, are under no
further personal liability to contribute to the assets or liabilities
of the Company in their capacities purely as holders of such Shares.
This opinion is strictly limited to the matters stated herein and is not to be
read as extending by implication to any other matter whatsoever.
This opinion is given to you solely for your benefit and for the purpose of the
Registration Statement. It is not to be transmitted to any other person nor is
it to be relied upon by any other person or for any purpose or quoted or
referred to in any public document without our prior written consent except that
we consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the references to us in the Registration
Statement. In giving the consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations thereunder.
Yours faithfully
/s/ Memery Crystal
MEMERY CRYSTAL
<PAGE> 55
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the employee share plans named on the facing
sheet thereof of our reports dated March 6, 1997 with respect to the
consolidated financial statements of Micro Focus Group Public Limited Company
for the year ended January 31, 1997 incorporated by reference in its Report of
Foreign Issuer (Form 6-K) filed with the Securities and Exchange Commission on
March 28, 1997 and in its 1996 Annual Report (Form 20-F).
/s/ Ernst & Young
ERNST & YOUNG
Chartered Accountants
Reading, England
5 February, 1998
