<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


                                       4                   


<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            


<PAGE>  7


                                  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#:    
                                             ----------------------

                                    ADDRESS:
                                             ----------------------
                         
                                             ----------------------


    
<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: mc@memery-crystal.co.uk
                                             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
[{"type": "S-8", "sequence": "1", "description": "FORM S-8", "secsgml_size_bytes": 186848}]
{"company-data": {"conformed-name": "MICRO FOCUS GROUP PUBLIC LIMITED COMPANY", "cik": "0000881581", "assigned-sic": "3577", "irs-number": "000000000", "state-of-incorporation": "X0", "fiscal-year-end": "0131"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-45701", "film-number": "98522822"}, "business-address": {"street1": "THE LAWN OLD BATH ROAD", "city": "NEWBURY ENGLAND", "state": "X0"}, "mail-address": {"street2": "701 EAST MIDDLEFIELD ROAD", "city": "MOUNTAIN", "state": "CA", "zip": "94303"}}
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

                                          CALCULATION OF REGISTRATION FEE

-------------------------------------- ---------------- ----------------------- -------------------------- ---------------
Amount          Proposed Maximum         Proposed Maximum         Amount of
         Title of Securities                Being           Offering Price         Aggregate Offering       Registration
          Being Registered               Registered           Per Share                   Price                 Fee
-------------------------------------- ---------------- ----------------------- -------------------------- ---------------
Ordinary Shares,  GBP 0.10 par
value, or ADS's (1)                     38,571  (2)              $26.65 (3)               $1,027,917.15         $303.24
(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).
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
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
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

                                       4
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
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
7

                                  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
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.
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
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
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
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,
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.
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
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.
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.
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).
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
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
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.
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.
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
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
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
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.
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.
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)
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.
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:
                                           -----------------------------
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:
                                             ------------------------
                                             
                                             ------------------------
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
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
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
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
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);
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.
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
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.
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.
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).
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
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.
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
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
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.
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.
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.
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
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
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.
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
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#:    
                                             ----------------------

                                    ADDRESS:
                                             ----------------------
                         
                                             ----------------------
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: mc@memery-crystal.co.uk
                                             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.
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
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