EXHIBIT
10.61


 


 


SIGMA SYSTEMS GROUP (CANADA) INC.


 


Nonstatutory Stock Option
Agreement


 


1.             Grant of Option.


On October 6, 2001 (the
“Grant Date”),  Sigma Systems Group
(Canada) Inc. (“Sigma Canada”) granted to Stephen Nicolle (the “Participant”) an
option (“Base Option”) to purchase 4,500,000 shares of Sigma Canada Class B
Preferred Shares (each, a “Class B Preferred Share”) pursuant to the
Nonstatutory Stock Option Agreement (Base) dated October 6, 2001, and in
October, 2001, the Participant purchased from Sigma Canada a total of 4,500,000
shares of Sigma Canada Non-Voting Common Shares (each, a “Common Share”; with
such Class B Preferred Shares and Common Shares being referred to herein,
collectively, as the “Sigma Canada Shares”) pursuant to the Restricted Stock
Agreement (Base) dated October 6, 2001 (“RSA”). As of August 7, 2002, the
Participant was vested in 1,218,750  of the Common Shares and 1,218,750  of
the Class B Preferred Shares subject to the Base Option (“Vested Sigma Canada
Shares”) and unvested in 3,281,250 of the Common Shares and 3,281,250 of the
Class B Preferred Shares subject to the Base Option (the “Unvested Sigma Canada
Shares”).


Sigma Canada and 1430416
Ontario Inc. (“Holdco”) amalgamated (the “Amalgamation”) to form the
amalgamated company, Sigma Systems Group (Canada) Inc. (the “Company”),
effective as of August 9, 2002.  In
connection with the Amalgamation, Holdco and the Participant executed an
agreement regarding the “Offer and Agreement to Purchase Non-Voting Common
Shares granted under the Restricted Stock Agreement (Base) among Stephen
Nicolle and Sigma Systems Group (Canada) Inc.” (“Holdco Offer”) pursuant to
which Holdco purchased all of the 4,500,000 Common Shares and paid for such
shares, in part, with the granting of an option (“Holdco Option”) to purchase
the 3,281,250 unvested Common Shares. 
The Holdco Offer also stated that (a) the Holdco Option would be subject
to the same terms as applied to the Common Shares issued under the RSA mutatis
mutandis; (b) the Holdco Option and the Base Option to purchase
3,281,250 of the unvested Class B Preferred Shares (“Unvested Base Option”)
would be assumed by the Company in connection with the Amalgamation; (c) the
Holdco Option and the Unvested Base Option would be terminated and exchanged
for an option (the “Unit Option”) to purchase 3,281,250 units (each, a “Unit”),
with each Unit consisting of one Company Class B Share and one Company Class C
Share, and the agreements evidencing the Unvested Base Option shall govern the
Unit Option mutatis
mutandis except that (i) the exercise price per Unit will be U.S.
$0.30; (ii) the Participant will not receive any vesting acceleration with
respect to the Unit Option for any reason or as a result of any event,
including but not limited to the Amalgamation and the Share Purchase (as
defined below) or the Participant’s termination of employment from Sigma
Canada, the Company or Liberate Technologies at any time for any reason and
(iii) the Participant cannot use a promissory note to pay the exercise price of
the Unit Option.


Pursuant to the Share
Purchase Agreement dated July 24, 2002, among Liberate Technologies, 2014120
Ontario Inc., a wholly-owned subsidiary of Liberate (“Purchase Sub”), 

















 


the Company, certain
holders of the Company’s capital stock (the “Holders”) and Arjun Jasuja, as the
representative of the Holders (the “Share Purchase Agreement”), Purchase Sub
acquired all of the outstanding shares of capital stock of the Company (the
“Share Purchase”).


This agreement (the
“Agreement”) evidences the Unit Option (hereinafter, the “option”) granted by
the Company on August 9, 2002 at an exercise price per Unit of U.S. $0.30 in
exchange for the Holdco Option and Unvested Base Option.


Unless earlier terminated, the option granted
hereunder shall expire at 11:59 p.m. (Toronto time) on October 6, 2011  (the
“Final Exercise Date”).


It is intended that the option evidenced by this
Agreement shall not be an incentive stock option as defined in Section 422 of
the U.S. Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the “Code”). 
Except as otherwise indicated by the context, (i) the term
“Participant”, as used in this Agreement, shall be deemed to include any person
who acquires the right to exercise the option granted hereby validly under its
terms and (ii) the term “Company” shall include any of the Company’s present or
future parent or subsidiary corporations as defined in Sections 424(e) or (f)
of the Code.


2.             Vesting Schedule.


The option granted hereunder will become vested as to
93,750 of the 3,281,250 Units upon the completion of each successive,
continuousone-month  period of service with the Company, with
the first of such 93,750 Units becoming vested on August 11, 2002, so that all
of the unvested Units shall be vested by June 11, 2005.  In computing the number of months during
which Participant shall have been employed with the Company, (i) each month of
employment shall be deemed to commence on the 11th day of such month
and (ii) a full month of employment shall be counted if employment continued
for a period of more than fourteen (14) days in such month.


The right of exercise shall be cumulative so that to
the extent the option is not exercised in any period to the maximum extent
permissible it shall continue to be exercisable, in whole or in part, with
respect to all Units for which it is vested until the earlier of the Final
Exercise Date or the termination of the option granted hereunder pursuant to
Section 3 hereof.


Notwithstanding the vesting schedule set forth in this
Agreement, the Participant may elect to exercise any or all of the unvested
portion of the option granted hereunder; provided, however, that
(i) the Units received upon the exercise of such unvested portion shall be
subject to a right of repurchase by the Company at the option exercise price
and (ii) such repurchase right shall lapse at the same rate as the portion of
the option so exercised would have become vested under the terms hereof.  If requested to do so by the Company, as a
condition to the exercise by the Participant of an unvested portion of the
option granted hereunder, the Participant shall enter into a Restricted Stock
Agreement with respect to the Units to be received upon such exercise.  Such Restricted Stock Agreement shall be on
terms substantially similar to the RSA. 
WITHOUT LIMITING THE GENERALITY OF SECTION 7 HEREOF, THE PARTICIPANT
ASSUMES ALL RESPONSIBILITY FOR HIS TAX LIABILITY THAT MAY ARISE AS A RESULT OF
ANY EXERCISE OF AN UNVESTED PORTION OF THE OPTION GRANTED 


 


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HEREUNDER, AND THE PARTICIPANT ACKNOWLEDGES THAT IT IS
HIS SOLE RESPONSIBILITY TO TIMELY MAKE ANY DESIRED FILINGS WITH THE INTERNAL
REVENUE SERVICE, INCLUDING, WITHOUT LIMITATION, A FILING UNDER SECTION 83(B) OF
THE INTERNAL REVENUE CODE.


3.             Exercise of Option.


(a)           Form
of Exercise.  Each election to
exercise the option granted hereunder shall be in writing in the form attached
hereto as Exhibit A, signed by the Participant, and received by the Company at
its principal office, accompanied by this Agreement, and payment in full in the
manner set forth in paragraph (b) below. 
The Participant may purchase less than the number of Units covered
hereby, provided that no partial exercise of the option granted hereunder may
be for any fractional Units or for fewer than ten whole Units.


(b)           Payment
Upon Exercise.  Units purchased upon
the exercise of the option granted hereunder shall be paid for as follows:


(1)           in
cash or by check, payable to the order of the Company;


(2)           if
and when the Units are registered under the Securities Exchange Act of 1934
(the “Exchange Act”), by delivery of Units owned by the Participant valued at
their fair market value as determined by (or in a manner approved by) the
Company in good faith (“Fair Market Value”), provided (i) such method of
payment is then permitted under applicable law and (ii) such securities, if
acquired directly from the Company, were owned by the Participant at least six
months prior to such delivery; or


(3)           by
any combination of the above permitted forms of payment.


(c)           Continuous
Relationship with the Company Required. 
Except as otherwise provided in this Section 3, the option granted
hereunder may not be exercised unless the Participant, at the time he exercises
the option, is, and has been at all times since the Grant Date, an employee,
officer or director of, or consultant or advisor to, the Company or any parent
or subsidiary of the Company as defined in Section 424(e) or (f) of the Code
(an “Eligible Participant”).


(d)           Termination
of Relationship with the Company. 
If the Participant ceases to be an Eligible Participant for any reason,
then the right to exercise the option granted hereunder shall terminate  one
year after such cessation (but in no event after the Final Exercise Date); provided,
however, that the option shall be exercisable only for that portion of
the option that had become vested on the date of such cessation.


4.             Adjustments for Changes in Capitalization and Certain Other Events.


(a)           Changes
in Capitalization.  In the event of
any stock split, reverse stock split, stock dividend, recapitalization,
combination of shares, reclassification of shares, spin-off or other similar
change in capitalization or event, or any distribution to holders of Units, as
the case may be, other than a normal cash dividend, the number and class of
securities and exercise price of the option granted hereunder shall be
appropriately adjusted by the Company to the extent the 


 


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Company shall determine, in good faith, that such an
adjustment is necessary and appropriate. 
If this Section 4(a) applies and Section 4(c) also applies to any event,
Section 4(c) shall be applicable to such event, and this Section 4(a) shall not
be applicable.


(b)           Liquidation
or Dissolution.  In the event of a
proposed liquidation or dissolution of the Company, the Company shall upon
written notice to the Participant provide that the option granted hereunder, to
the extent not then exercised, will terminate effective upon such liquidation
or dissolution, except to the extent exercised before such effective date.


(c)           Reorganization
and Change in Control Events.  Upon
the occurrence of a Reorganization Event (regardless of whether such event also
constitutes a Change in Control Event), or the execution by the Company of any
agreement with respect to a Reorganization Event (regardless of whether such
event will result in a Change in Control Event), the Company shall provide that
the option granted hereunder shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof) and shall continue to become vested in accordance with the original
vesting schedule set forth herein.  For
purposes hereof, the option granted hereunder shall be considered to be assumed
if, following consummation of the Reorganization Event, the option confers the
right to purchase, for each Unit subject to the option immediately prior to the
consummation of the Reorganization Event, the consideration (whether cash,
securities or other property) received as a result of the Reorganization Event
by holders of Units, as the case may be, for each Unit held immediately prior
to the consummation of the Reorganization Event (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of such outstanding securities).


Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does not agree to assume, or
substitute for, the option granted hereunder, then the Company shall, upon
written notice to the Participant, provide that the option granted hereunder
will terminate immediately prior to the consummation of such Reorganization
Event, except to the extent exercised by the Participant to purchase vested
Units before the consummation of such Reorganization Event; provided, however,
that in the event of a Reorganization Event under the terms of which holders of
Units will receive upon consummation thereof a cash payment for each Unit
surrendered pursuant to such Reorganization Event (the “Acquisition Price”),
then the Company may instead provide that the then unexercised portion of the
option granted hereunder shall terminate upon consummation of such
Reorganization Event and that Participant shall receive, in exchange therefor,
a cash payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of vested Units subject to such unexercised portion of
the option, exceeds (B) the aggregate exercise price of such vested Units.


For purposes of this Agreement “Reorganization Event”
shall mean:


(i)            any amalgamation, arrangement,
merger, consolidation or similar transaction of the Company with or into
another entity as a result of which all of the Units of the Company are
converted into or exchanged for the right to receive cash, securities or other
property; or


 


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(ii)           any exchange of all of the Units for
cash, securities or other property pursuant to a share exchange transaction.


For purposes of this
Agreement “Change in Control Event” shall mean: (i) a merger,
reorganization, or sale of all or substantially all of the assets of the
Company in which the shareholders of the Company immediately prior to such
transaction do not possess more than 50% of the voting power of the surviving
entity (or its parent) immediately after such 
transaction in the same proportion to one another after the transaction
as before it; or (ii) any transaction or series of related transactions by
which voting securities representing the right to elect a majority of the
members of the Company’s Board of Directors are transferred to a single person
or to a group of persons acting in concert with respect to electing directors
of the Company.


5.             Right of First Refusal.


(a)           If
the Participant proposes to sell, assign, transfer, pledge, hypothecate or
otherwise dispose of, by operation of law or otherwise (collectively,
“transfer”) any securities acquired upon exercise of this option, then the
Participant shall first give written notice of the proposed transfer (the
“Transfer Notice”) to the Company.  The
Transfer Notice shall name the proposed transferee and state the number of such
securities that the Participant proposes to transfer (the “Offered Shares”),
the price per Unit and all other material terms and conditions of the transfer.


(b)           For
30 days following its receipt of such Transfer Notice, the Company shall have
the option to purchase all (but not less than all) of the Offered Shares at the
price and upon the terms set forth in the Transfer Notice.  In the event the Company elects to purchase
all of the Offered Shares, it shall give written notice of such election to the
Participant within such 30-day period. 
Within 10 days after his receipt of such notice, the Participant shall
tender to the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. 
Promptly following receipt of such certificate or certificates, the
Company shall deliver or mail to the Participant a check in payment of the purchase
price for the Offered Shares; provided, however, that if the
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company may pay for the Offered Shares on the same terms and
conditions as were set forth in the Transfer Notice; and provided, further,
however, that any reasonable delay in making such payment shall not
invalidate the Company’s exercise of its option to purchase the Offered Shares.


(c)           If
the Company does not elect to acquire all of the Offered Shares, the
Participant may, within the 30-day period following the expiration of the
option granted to the Company under subsection (b) above, transfer the Offered
Shares to the proposed transferee, provided, however, that such
transfer shall not be on terms and conditions more favorable to the transferee
than those contained in the Transfer Notice. 
Notwithstanding any of the above, all Offered Shares transferred
pursuant to this Section 5 shall remain subject to the right of first refusal
set forth in this Section 5 and such transferee shall, as a condition to such
transfer, deliver to the 


 


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Company
a written instrument confirming that such transferee shall be bound by all of
the terms and conditions of this Section 5.


(d)           After
the time at which the Offered Shares are required to be delivered to the
Company for transfer to the Company pursuant to subsection (b) above, the
Company shall not pay any dividend to the Participant on account of such
Offered Shares or permit the Participant to exercise any of the privileges or
rights of a shareholder with respect to such Offered Shares, but shall, in so
far as permitted by law, treat the Company as the owner of such Offered Shares.


(e)           The
following transactions shall be exempt from the provisions of this Section 5:


(1)           any
transfer of securities to or for the benefit of any parent, spouse, child or
grandchild of the Participant, or to a trust for their benefit;


(2)           any
transfer pursuant to an effective registration statement filed by the Company
under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant
to a prospectus filed in accordance with the securities laws of any Province of
Canada; and


(3)           the
sale of all or substantially all of the shares of capital stock of the Company
(including pursuant to an amalgamation, arrangement, merger, consolidation or
similar transaction);


provided, however, that in the case of a
transfer pursuant to clause (1) above, such securities shall remain subject to the
right of first refusal set forth in this Section 5 and such transferee shall,
as a condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 5.


(f)            The
Company may assign its rights to purchase Offered Shares in any particular
transaction under this Section 5 to one or more persons or entities.


(g)           The
provisions of this Section 5 shall terminate upon the earlier of the following
events:


(1)           the
closing of the sale of Units in an underwritten public offering pursuant to an
effective registration statement filed by the Company under the Securities Act
or pursuant to a prospectus filed in accordance with the securities laws of any
Province of Canada; and


(2)           the
sale of all or substantially all of the capital stock, assets or business of
the Company, by merger, consolidation, sale of assets or otherwise (other than
an amalgamation, arrangement, merger, consolidation or similar transaction in
which all or substantially all of the individuals and entities who were
beneficial owners of the Company’s common shares immediately prior to such
transaction beneficially own, directly or indirectly, more than 75% of the
outstanding securities entitled to vote generally in the election of directors
of the resulting, surviving or acquiring corporation in such transaction).


(h)           The
Company shall not be required (a) to transfer on its books any of the
securities which shall have been sold or transferred in violation of any of the
provisions set forth 


 


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in this
Section 5, or (b) to treat as owner of such securities or to pay dividends to
any transferee to whom any such securities shall have been so sold or transferred.


6.             Agreement in Connection with Public
Offering.


The Participant agrees, in connection with the initial
underwritten public offering of the Company’s securities pursuant to a
registration statement under the Securities Act or pursuant to a prospectus filed
in accordance with the securities laws of any Province of Canada, (i) not to
sell, make short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any Units held by the Participant (other than those
securities included in such offering) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company’s securities for a period of 180 days from the effective date of
such offering, and (ii) to execute any agreement reflecting clause (i) above as
may be requested by the Company or the managing underwriters at the time of
such offering.  Subject to the
foregoing, if such initial public offering is conducted in accordance with the
Securities Act, then promptly upon completion of such offering, the Company
agrees to file in accordance with the Securities Act a Registration Statement
on Form S-8 (or any applicable successor form or form for a foreign issuer)
registering the equity securities then issuable upon any unexercised portion of
the option granted hereunder.  If such
initial public offering is conducted in Canada, the Company agrees to take such
reasonable action under applicable Canadian securities laws to provide comparable
liquidity to the Participant of the equity securities issuable upon any then
unexercised portion of the option granted hereunder.


7.             Withholding.


(a)           No
Units will be issued pursuant to the exercise of this option unless and until
the Participant pays to the Company, or makes provision satisfactory to the
Company for payment of, any federal, state, local or foreign withholding taxes
required by law to be withheld in respect of this option.


(b)           The
Participant has reviewed with the Participant’s own tax advisors the federal,
state, local and foreign tax consequences arising from this option grant and
the transactions contemplated hereby (including the consequences of the
exercise of any unvested portion of this option).  The Participant is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents.  The Participant understands that the
Participant (and not the Company) shall be responsible for the Participant’s
own tax liability that may arise as a result of this option grant or the
transactions contemplated by this Agreement.


(c)           Notwithstanding
any provision of this or any other agreement between the Company and the
Participant, the Company shall have the right to withhold any federal, state,
local or foreign taxes required by law to be withheld with respect to this
option or with respect to the Units acquired upon exercise of this option.  In the event that, for any reason, the
Company does not withhold, or the Participant does not pay, such taxes, then
the Participant shall be obligated to pay such taxes to the Company on demand
by the Company.


8.             Nontransferability of Option.


 


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This option may not be sold, assigned, transferred,
pledged or otherwise encumbered by the Participant, either voluntarily or by
operation of law, except by will or the laws of descent and distribution, and,
during the lifetime of the Participant, this option shall be exercisable only
by the Participant.


9.             No Right to Employment or Other Status.


The grant of this option shall not be construed as
giving the Participant the right to continued employment or any other
relationship with the Company.


10.           No Rights as Shareholder.


The Participant shall have no rights as a shareholder
with respect to any Units to be distributed under this Agreement until becoming
the record holder of such Units.


11.           Governing Law.


The provisions of this Agreement shall be governed by
and interpreted in accordance with the laws of the Commonwealth of
Massachusetts, without regard to any applicable conflicts of law.


[THE REMAINDER OF THIS
PAGE IS INTENTIONALLY LEFT BLANK]


 


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IN WITNESS
WHEREOF, the Company has caused this option to be executed under its corporate
seal by its duly authorized officer. 
This option shall take effect as a sealed instrument.


 


	
  Dated: 
  August 9, 2002

  	
  SIGMA SYSTEMS GROUP (CANADA) INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


 


 


 


PARTICIPANT’S ACCEPTANCE


The undersigned hereby accepts the foregoing option
and agrees to the terms and conditions thereof.


 


 


	
   

  	
   

  
	
   

  	
  STEPHEN NICOLLE

  



 


 


 


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EXHIBIT A


 


NOTICE OF STOCK
OPTION EXERCISE


	
  Date:

  	
   

  	
   

  	
   

  



 


Sigma Systems Group
(Canada) Inc.


55 York Street, Suite
1100


Toronto, Ontario M5J 1R7


 


Attention:  Treasurer


 


Dear Sir or Madam:


 


I am the holder of a Stock Option Agreement (the
“Agreement”) granted to me by Sigma Systems Group (Canada) Inc. (the “Company”)
for the purchase of 3,281,250 Units at a purchase price of US$0.30 per Unit.


I hereby exercise my option to purchase _________
Units for which I have enclosed [DESCRIBE PAYMENT METHOD] in the amount of
$___.  Please register my certificates
for the Units as follows:


	
   

  	
  Name(s):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Tax I.D. #:

  	
   

  	
   

  



 


I represent, warrant and covenant as follows:


1.             I
am purchasing the Units for my own account for investment only, and not with a
view to, or for sale in connection with, any distribution of the Units or the
securities into which the Units are convertible in violation of the Securities
Act of 1933 (the “Securities Act”), or any rule or regulation under the
Securities Act.


2.             I
have had such opportunity as I have deemed adequate to obtain from
representatives of the Company such information as is necessary to permit me to
evaluate the merits and risks of my investment in the Company.


3.             I
have sufficient experience in business, financial and investment matters to be
able to evaluate the risks involved in the purchase of the Units and to make an
informed investment decision with respect to such purchase.


 


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4.             I
can afford a complete loss of the value of the Units and am able to bear the
economic risk of holding the Units and the securities into which the Units are
convertible for an indefinite period.


5.             I
understand that (i) the Units and the securities into which the Units are
convertible have not been registered under the Securities Act and are
“restricted securities” within the meaning of Rule 144 under the Securities
Act, (ii) the Units and the securities into which the Units are convertible
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; (iii) in any event, the exemption from
registration under Rule 144 will not be available for at least one year and
even then will not be available unless a public market then exists for the
Units or the securities into which the securities are convertible, adequate
information concerning the Company is then available to the public, and other
terms and conditions of Rule 144 are complied with; and (iv) there is now no
registration statement on file with the Securities and Exchange Commission with
respect to any securities of the Company and the Company has no obligation or
current intention to register the Units or the securities into which the Units
are convertible under the Securities Act.


	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Signature)

  	
   

  



 


 


 


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