<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1999
REGISTRATION NO. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NETWORKS ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0316593
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER
3965 FREEDOM CIRCLE
SANTA CLARA, CALIFORNIA 95054
(408) 988-3832
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
1997 STOCK INCENTIVE PLAN
1994 EMPLOYEE STOCK PURCHASE PLAN
1993 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
(Full title of the plans)
William L. Larson
President and Chief Executive Officer
Network Associates, Inc.
3965 Freedom Circle, Santa Clara, California 95054
(409) 988-3832
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Jeffrey D. Saper, Esq. and Kurt J. Berney, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
Title of Securities to be Registered Amount to Proposed Maximum Proposed Maximum Amount of
be Registered Offering Price Aggregate Offering Registration
Per Share Price* Fee*
==============================================================================================================================
<S> <C> <C> <C> <C>
Common Stock to be issued under the
1997 Stock Inventive Plan 4,700,000 $19.31 $ 90,757,000 $25,230.45
Common Stock to be issued under the
1994 Employee Stock Purchase Plan 1,500,000 $19.31 $ 28,965,000 $ 8,052.27
Common Stock to be issued under the
1993 Stock Option Plan for Outside
Directors 500,000 $19.31 $ 9,655,000 $ 2,684.09
Total 6,700,000 $19.31 $129,378,000 $35,966.81
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for the purpose of calculating the registration fee on the
basis of $19.31 per share, the average of the high and low prices for the
Common Stock on September 29, 1999 as reported by NASDAQ.
2
<PAGE> 3
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The Security and Exchange Commission (the "Commission") allows us to
"incorporate by reference" the information we file with them, which means that
we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part
of this prospectus, and later information filed with the Commission will update
and supersede this information. We incorporate by reference the documents
listed below and any future filings made with the Commission under Section 13a,
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our offering is
completed.
(1) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 filed with the Commission on May 13, 1999;
(2) Our Annual Report on Form 10-K for the year ended December 31,
1998; as amended on Form 10-K/A, filed with the Commission on April
30, 1999;
(3) Our Quarterly Report on Form 10-Q for the quarter ended September
30, 1998; as amended on Form 10-Q/A, filed with the Commission on
April 15, 1999;
(4) Our Quarterly Report on Form 10-Q for the quarter ended June 30,
1998; as amended on Form 10-Q/A, filed with the Commission on April
15, 1999;
(5) Our Quarterly Report on Form 10-Q for the quarter ended March 31,
1998; as amended on Form 10-Q/A, filed with the Commission on April
15, 1999;
(6) Our Current Report on Form 8-K, filed with the Commission on
January 14, 1999;
(7) Our Current Report on Form 8-K, filed with the Commission on
November 24, 1998;
(8) Our Current Report on Form 8-K, filed with the Commission on
October 22, 1998;
(9) Our Current Report on Form 8-K, filed with the Commission on August
14, 1998;
(10) Our Current Report on Form 8-K, filed with the Commission on June
9, 1998; as amended on Form 8-K/A, filed with the Commission on
July 1, 1998;
(11) Our Current Report on Form 8-K, filed with the Commission on April
3, 1998;
(12) Our Current Report on Form 8-K, filed with the Commission on March
25, 1998; Our Current Report on Form 8-K, filed with the Commission
on February 10, 1998; as Amended on Form 8-K/A, filed with the
Commission
3
<PAGE> 4
on February 25, 1998; and
(13) The description of our Common Stock contained in our Registration
Statement on Form 8-A, filed on August 21, 1992, including any
amendments or reports filed for the purpose of updating such
description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Prabhat K. Goyal
Vice President of Administration and Chief Financial Officer
Network Associates, Inc.
3965 Freedom Circle
Santa Clara, CA 95054
(408) 988-3932
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have authorized no
one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or the prospectus supplement is
accurate as of any date other than the date on the front of the document.
4
<PAGE> 5
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Second Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except for liability (i) for any breach of their duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
The Registrant's Restated Bylaws provide that the Registrant shall
indemnify its directors and officers and may indemnify its employees and other
agents to the fullest extent permitted by law. The Registrant believes that
indemnification under its Restated Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. The Registrant's Restated Bylaws
also permit the Registrant to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the Registrant would have the
power to indemnify him or her against such liability under the General
Corporation Law of Delaware. The Registrant currently has secured such
insurance on behalf of its officers and directors.
The Registrant has entered into agreements to indemnify its directors and
officers, in addition to indemnification provided for in the Registrant's
Bylaws. Subject to certain conditions, these agreements, among other things,
indemnify the Registrant's directors and officers for certain expenses
(including attorney's fees), judgments, fines and settlement amounts incurred
by any such person in any action or proceeding, including any action by or in
the right of the Registrant, arising out of such person's services as a
director or officer of the Registrant, any subsidiary of the Registrant or any
other company or enterprise to which the person provides services at the
request of the Registrant.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities and Exchange Act of 1933, as amended.
The Registrant's Certificate of Incorporation, as amended, and Bylaws provide
for indemnification of its officers, directors, employees and other agents to
the maximum extent permitted by the Delaware Law.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
5
<PAGE> 6
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4.1 Amended 1994 Employee Stock Option Plan
4.2 Amended 1997 Stock Incentive Purchase Plan
4.3 Amended 1993 Stock Option Plan for Outside Directors
5.1 Opinion of Counsel as to legality of securities being registered.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (see page 9).
</TABLE>
6
<PAGE> 7
ITEM 9. UNDERTAKINGS.
The undersigned 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 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.
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the 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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, the 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.
(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.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
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.
(5) 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 Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Exchange 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 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
Exchange Act and will be governed by the final adjudication of such issue.
7
<PAGE> 8
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, as amended, 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 Santa Clara, State of California, on this
September 30 day of, 1999.
NETWORK ASSOCIATES, INC.
By: /s/ PRABHAT K. GOYAL
---------------------------------
Prabhat K. Goyal
Chief Financial Officer
8
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Prabhat Goyal, as his or her
attorney-in-fact, with full power of substitution, for him or her in any and all
capacities, to sign any and all amendments to this Registration Statement on
Form S-8, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each that said attorney-in-fact, or any
substitute, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ WILLIAM L. LARSON Chairman of the Board and October 4, 1999
- --------------------- Chief Executive Officer
William L. Larson
/s/ PRABHAT GOYAL Chief Financial Officer October 4, 1999
- ---------------------
Prabhat Goyal
/s/ LESLIE DENEND Director October 4, 1999
- ---------------------
Leslie Denend
/s/ VIRGINIA GEMMELL Director October 4, 1999
- ---------------------
Virginia Gemmell
/s/ EDWIN HARPER Director October 4, 1999
- ---------------------
Edwin Harper
/s/ ENZO TORRESI Director October 4, 1999
- ---------------------
Enzo Torresi
</TABLE>
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
4.1 Amended 1994 Employee Stock Option Plan
4.2 Amended 1997 Stock Incentive Purchase Plan
4.3 Amended 1993 Stock Option Plan for Outside Directors
5.1 Opinion of Counsel as to legality of securities being registered.
23.1 Consent of Independent Accountants.
23.2 Consent of Counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (see page 9).
</TABLE>
10
<PAGE> 1
EXHIBIT 4.1
NETWORK ASSOCIATES, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED ON JANUARY 20, 1997 AND JUNE 24, 1999)
1. Purpose. The Network Associates, Inc. 1994 Employee Stock Purchase
Plan (the "PLAN") is established, effective August 1, 1994, to provide eligible
employees of Network Associates, Inc., a Delaware corporation, and any successor
corporation thereto (collectively, "NETWORK ASSOCIATES"), and any current or
future parent corporation or subsidiary corporations of Network Associates which
the Board of Directors of Network Associates (the "BOARD") determines should be
included in the Plan (collectively referred to as the "COMPANY"), with an
opportunity to acquire a proprietary interest in the Company by the purchase of
common stock of Network Associates. Network Associates and any parent or
subsidiary corporation designated by the Board as a corporation included in the
Plan shall be individually referred to as a "PARTICIPATING COMPANY." The Board
shall have the sole and absolute discretion to determine from time to time what
parent corporations and/or subsidiary corporations shall be Participating
Companies. For purposes of the Plan, a parent corporation and a subsidiary
corporation shall be as defined in sections 424(e) and 424(f), respectively, of
the Internal Revenue Code of 1986, as amended (the "CODE").
The Company intends that the Plan shall qualify as an "employee stock
purchase plan" under section 423 of the Code (including any amendments or
replacements of such section), and the Plan shall be so construed. Any term not
expressly defined in the Plan but defined for purposes of section 423 of the
Code shall have the same definition herein.
An employee participating in the Plan (a "PARTICIPANT") may withdraw
such Participant's accumulated payroll deductions (if any) and terminate
participation in the Plan or any Offering (as defined below) therein at any time
during a Purchase Period (as defined below). Accordingly, each Participant is,
in effect, granted an option pursuant to the Plan (a "PURCHASE RIGHT") which may
or may not be exercised at the end of a Purchase Period.
2. Administration. The Plan shall be administered by the Board and/or by
a duly appointed committee of the Board having such powers as shall be specified
by the Board. Any subsequent references to the Board shall also mean the
committee if a committee has been appointed. All questions of interpretation of
the Plan or of any Purchase Right shall be determined by the Board and shall be
final and binding upon all persons having an interest in the Plan and/or any
Purchase Right. Subject to the provisions of the Plan, the Board shall determine
all of the relevant terms and conditions of Purchase Rights granted pursuant to
the Plan; provided, however, that all Participants granted Purchase Rights
pursuant to the Plan shall have the same rights and privileges within the
meaning of section 423(b)(5) of the Code. All expenses incurred in connection
with the administration of the Plan shall be paid by the Company.
3. Share Reserve. The maximum number of shares which may be issued under the
Plan shall be three million eight hundred thousand (3,800,000) shares of Network
Associates' authorized but unissued common stock (the "Shares"). In the event
that any Purchase Right for any reason
<PAGE> 2
expires or is canceled or terminated, the Shares allocable to the unexercised
portion of such Purchase Right may again be subjected to a Purchase Right.
4. Eligibility. Any employee of a Participating Company is eligible to
participate in the Plan except the following:
(a) employees who are customarily employed by the Company for
twenty (20) hours or less per week;
(b) employees who have not completed thirty (30) days of
continuous employment with the Company as of the commencement of an Offering
Period;
(c) employees who own or hold options to purchase or who, as a
result of participation in the Plan, would own or hold options to purchase,
stock of the Company possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company within the meaning
of section 423(b)(3) of the Code.
Notwithstanding anything herein to the contrary, any individual
performing services for a Participating Company solely through a leasing agency
or employment agency shall not be deemed an "EMPLOYEE" of such Participating
Company.
5. Offering Dates.
(a) Offering Periods. Except as otherwise set forth below, the
Plan shall be implemented by offerings (individually, an "OFFERING") of
approximately twelve (12) months duration (an "OFFERING PERIOD"). The first
Offering shall commence on August 1, 1994 and end on July 31, 1995 (the "INITIAL
OFFERING PERIOD"). Subsequent Offerings shall commence on February 1 and August
1 of each year and end on the first January 31 and July 31, respectively,
occurring thereafter. Notwithstanding the foregoing, the Board may establish a
different term for one or more Offerings and/or different commencing and/or
ending dates for such Offerings. An employee who becomes eligible to participate
in the Plan after an Offering Period has commenced shall not be eligible to
participate in such Offering but may participate in any subsequent Offering
provided such employee is still eligible to participate in the Plan as of the
commencement of any such subsequent Offering. Eligible employees may not
participate in more than one Offering at a time. The first day of an Offering
Period shall be the "OFFERING DATE" for such Offering Period. In the event the
first and/or last day of an Offering Period is not a business day, Network
Associates shall specify the business day that will be deemed the first or last
day, as the case may be, of the Offering Period.
(b) Purchase Periods. Each Offering Period shall consist of two
(2) consecutive purchase periods of approximately six (6) months duration
(individually, a "PURCHASE PERIOD"). The last day of each Purchase Period shall
be the "Purchase Date" for such Purchase Period. A Purchase Period commencing on
February 1 shall end on the next July 31. A Purchase Period commencing on August
1 shall end on the next January 31. Notwithstanding the foregoing, the Board may
establish a different term for one or more Purchase Periods and/or different
commencing
-2-
<PAGE> 3
dates and/or Purchase Dates for such Purchase Periods. In the event the first
and/or last day of a Purchase Period is not a business day, Network Associates
shall specify the business day that will be deemed the first or last day, as the
case may be, of the Purchase Period.
(c) Governmental Approval, Shareholder Approval. Notwithstanding
any other provision of the Plan to the contrary, any Purchase Right granted
pursuant to the Plan shall be subject to (i) obtaining an necessary governmental
approvals and/or qualifications of the sale and/or issuance of the Purchase
Rights and/or the Shares, and (ii) obtaining shareholder approval of the Plan.
Notwithstanding the foregoing, shareholder approval shall not be necessary in
order to grant any Purchase Right granted in the Plan's Initial Offering Period;
provided, however, that the exercise of any such Purchase Right shall be subject
to obtaining shareholder approval of the Plan.
6. Participation in the Plan.
(a) Initial Participation. An eligible employee shall become a
Participant on the first Offering Date after satisfying the eligibility
requirements and delivering to the Company's payroll office not later than the
close of business for such payroll office on the last business day before such
Offering Date (the "SUBSCRIPTION DATE") a subscription agreement indicating the
employee's election to participate in the Plan and authorizing payroll
deductions. An eligible employee who does not deliver a subscription agreement
to the Company's payroll office on or before the Subscription Date shall not
participate in the Plan for that Offering Period or for any subsequent Offering
Period unless such employee subsequently enrolls in the Plan by filing a
subscription agreement with the Company by the Subscription Date for such
subsequent Offering Period. Network Associates may, from time to time, change
the Subscription Date as deemed advisable by Network Associates in its sole
discretion for proper administration of the Plan.
(b) Continued Participation. A Participant shall automatically
participate in the Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
until such time as such Participant (i) ceases to be eligible as provided in
paragraph 4, (ii) withdraws from the Plan pursuant to paragraph 11(b) or (iii)
terminates employment as provided in paragraph 12. If a Participant is
automatically withdrawn from an Offering at the end of a Purchase Period of such
Offering pursuant to paragraph 11(d), then the Participant shall automatically
participate in the Offering Period commencing on the next business day. If a
Participant automatically may participate in a subsequent Offering Period
pursuant to this paragraph 6(b), then the Participant is not required to file
any additional subscription agreement for such subsequent Offering Period in
order to continue participation in the Plan. However, a Participant may file a
subscription agreement with respect to a subsequent Offering Period if the
Participant desires to change any of the Participant's elections contained in
the Participant's then effective subscription agreement.
7. Right to Purchase Shares. Except as set forth below, during an
Offering Period each Participant in such Offering Period shall have a Purchase
Right consisting of the right to purchase that number of whole Shares arrived at
by dividing Twenty-Five Thousand Dollars ($25,000) by the fair market value of a
share of the common stock of Network Associates on the Offering Date of
-3-
<PAGE> 4
such Offering Period; provided, however, that such number shall not exceed five
thousand (5,000) Shares. The fair market value of such share shall be determined
in accordance with paragraph 8 below. Shares may only be purchased through a
Participant's payroll withholding pursuant to paragraph 9 below.
8. Purchase Price. The purchase price at which Shares may be acquired in
a given Purchase Period pursuant to the exercise of all or any portion of a
Purchase Right granted under the Plan (the "Offering Exercise Price") shall be
set by the Board; provided, however, that the Offering Exercise Price shall not
be less than eighty-five percent (85%) of the lesser of (a) the fair market
value of the Shares on the Offering Date of the Offering Period of which the
Purchase Period is a part, or (b) the fair market value of the Shares on the
Purchase Date for such Purchase Period. Unless otherwise provided by the Board
prior to the commencement of an Offering Period, the Offering Exercise Price for
each Purchase Period in that Offering Period shall be eighty-five percent (85%)
of the lesser of (a) the fair market value of the Shares on the Offering Date of
such Offering Period or (b) the fair market value of the Shares on the given
Purchase Date. The fair market value per share of the common stock of Network
Associates on any relevant date shall be the closing price (or the mean of the
closing bid and asked prices if such stock is so quoted instead) of the common
stock of Network Associates quoted on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System or as reported on such other
national or regional securities exchange or market system constituting the
primary market for such stock, or as determined by the Board ff such stock is
not so reported. If the relevant date does not fall on a day on which the common
stock of Network Associates is quoted on NASDAQ or such other national or
regional securities exchange or market system, the date on which the fair market
value per share of such stock shall be established shall be the last day on
which the common stock of Network Associates was so quoted prior to such
relevant date.
9. Payment of Purchase Price. Shares which are acquired pursuant to the
exercise of all or any portion of a Purchase Right may be paid for only by means
of payroll deductions from the Participant's Compensation accumulated during the
Offering Period. For purposes of the Plan, a Participant's "COMPENSATION" with
respect to an Offering shall include all amounts paid in cash and includable as
"wages" subject to tax under section 3101(a) of the Code without applying the
dollar limitation of section 3121(a) of the Code. Accordingly, Compensation
shall include, without limitation, salaries, commissions, bonuses, overtime, and
salary deferrals under section 401(k) of the Code. Notwithstanding the
foregoing, Compensation shall not include reimbursements of expenses,
allowances, or any amount deemed received without the actual transfer of cash or
any amounts directly or indirectly paid pursuant to the Plan or any other stock
purchase or stock option plan. Except as set forth below, the amount of
Compensation to be withheld from a Participant's Compensation during each pay
period shall be determined by the Participant's subscription agreement.
(a) Election to Decrease or Stop Withholding. During an Offering
Period, a Participant may elect to decrease the amount withheld or stop
withholding from his or her Compensation by filing an amended subscription
agreement with the Company on or before the
-4-
<PAGE> 5
"CHANGE NOTICE DATE." The "CHANGE NOTICE DATE" shall initially be the seventh
(7th) day prior to the end of the first pay period for which such election is to
be effective; however, the Company may change such Change Notice Date from time
to time. A Participant may not elect to increase the amount withheld from the
Participant's Compensation during an Offering Period.
(b) Limitations on Payroll Withholding. The amount of payroll
withholding with respect to the Plan for any Participant during any pay period
shall not exceed fifteen percent (15%) of the Participant's Compensation for
such pay period. Amounts shall be withheld in whole percentages only.
Notwithstanding the foregoing, the Board may change the limits on payroll
withholding effective as of a future Offering Date, as determined by the Board.
Amounts withheld shall be reduced by any amounts contributed by the Participant
and applied to the purchase of Company stock pursuant to any other employee
stock purchase plan qualifying under section 423 of the Code.
(c) Payroll Withholding. Payroll deductions shall commence on the
first payday following the Offering Date and shall continue to the end of the
Offering Period unless sooner altered or terminated as provided in the Plan.
(d) Participant Accounts. Individual accounts shall be maintained
for each Participant. All payroll deductions from a Participant's Compensation
shall be credited to such account and shall be deposited with the general funds
of the Company. AR payroll deductions received or held by the Company may be
used by the Company for any corporate purpose.
(e) No Interest Paid. Interest shall not be paid on sums withheld
from a Participant's Compensation.
(f) Exercise of Purchase Right. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Offering or
whose participation in the Offering has not terminated on or before such
Purchase Date shall automatically acquire pursuant to the exercise of the
Participant's Purchase Right the number of whole Shares arrived at by dividing
the total amount of the Participant's accumulated payroll deductions for the
Purchase Period by the Offering Exercise Price; provided, however, in no event
shall the number of Shares purchased by the Participant exceed the number of
Shares subject to the Participant's Purchase Right. No Shares shall be purchased
on a Purchase Date on behalf of a Participant whose participation in the
Offering or the Plan has terminated on or before such Purchase Date.
(g) Return of Cash Balance. Any cash balance remaining in the
Participant's account shall be refunded to the Participant as soon as
practicable after the Purchase Date. In the event the cash to be returned to a
Participant pursuant to the preceding sentence is an amount less than the amount
necessary to purchase a whole Share, the Company may establish procedures
whereby such cash is maintained in the Participant's account and applied toward
the purchase of Shares in the subsequent Purchase Period or Offering Period.
-5-
<PAGE> 6
(h) Tax Withholding. At the time the Purchase Right is exercised,
in whole or in part, or at the time some or all of the Shares are disposed of,
the Participant shall make adequate provision for the foreign, federal and state
tax withholding obligations of the Company, if any, which arise upon exercise of
the Purchase Right and/or upon disposition of Shares, respectively. The Company
may, but shall not be obligated to, withhold from the Participant's Compensation
the amount necessary to meet such withholding obligations.
(i) Company Established Procedures. The Company may, from time to
time, establish or change (i) a minimum required withholding amount for
participation in an Offering, (ii) limitations on the frequency and/or number of
changes in the amount withheld during an Offering, (iii) an exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, (iv)
payroll withholding in excess of or less than the amount designated by a
Participant in order to adjust for delays or mistakes in the Company's
processing of subscription agreements, (v) the date(s) and manner by which the
fair market value of the Shares is determined for purposes of administration of
the Plan and/or (vi) such other limitations or procedures as deemed advisable by
the Company in the Company's sole discretion which are consistent with the Plan
and in accordance with the requirements of Section 423 of the Code.
(j) Expiration of Purchase Right. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which such Purchase Right relates shall expire immediately upon the end of such
Offering Period.
10. Limitations on Purchase of Shares, Rights as a Stockholder.
(a) Fair Market Value Limitation. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase Shares under
the Plan (or any other employee stock purchase plan which is intended to meet
the requirements of section 423 of the Code sponsored by Network Associates or a
parent or subsidiary corporation of Network Associates) at a rate which exceeds
$25,000 in fair market value, which fair market value is determined for Shares
purchased during a given Offering Period as of the Offering Date for such
Offering Period (or such other limit as may be imposed by the Code), for each
calendar year in which the Participant participates in the Plan (or any other
employee stock purchase plan described in this sentence).
(b) Pro Rata Allocation. In the event the number of Shares which
might be purchased by all Participants in the Plan exceeds the number of Shares
available in the Plan, the Company shall make a pro rata allocation of the
remaining Shares in as uniform a manner as shall be practicable and as the
Company shall determine to be equitable.
(c) Rights as a Shareholder and Employee. A Participant shall
have no rights as a shareholder by virtue of the Participant's participation in
the Plan until the date of the issuance of a stock certificate(s) for the Shares
being purchased pursuant to the exercise of the Participant's Purchase Right. No
adjustment shall be made for cash dividends or distributions or other rights for
which the record date is prior to the date such stock certificate(s) are issued.
Nothing herein shall
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<PAGE> 7
confer upon a Participant any right to continue in the employ of the Company or
interfere in any way with any right of the Company to terminate the
Participant's employment at any time.
11. Withdrawal.
(a) Withdrawal From an Offering. A Participant may withdraw from
an Offering by signing and delivering to the Company's payroll office a written
notice of withdrawal on a form provided by the Company for such purpose. Such
withdrawal may be elected at any time prior to the end of an Offering Period;
provided, however, ff a Participant withdraws after the Purchase Date for a
Purchase Period of an Offering, the withdrawal shall not affect Shares acquired
by the Participant in such Purchase Period. Unless otherwise indicated,
withdrawal from an Offering shall not result in a withdrawal from the Plan or
any succeeding Offering therein. A Participant is prohibited from again
participating in an Offering at any time upon withdrawal from such Offering. The
Company may impose, from time to time, a requirement that the notice of
withdrawal be on file with the Company's payroll office for a reasonable period
prior to the effectiveness of the Participant's withdrawal from an Offering.
(b) Withdrawal from the Plan. A Participant may withdraw from the
Plan by signing and delivering to the Company's payroll office a written notice
of withdrawal on a form provided by the Company for such purpose. Withdrawals
made after a Purchase Date for a Purchase Period shall not affect Shares
acquired by the Participant on such Purchase Date. In the event a Participant
voluntarily elects to withdraw from the Plan, the Participant may not resume
participation in the Plan during the same Offering Period, but may participate
in any subsequent Offering under the Plan by again satisfying the requirements
of paragraphs 4 and 6(a) above. The Company may impose, from time to time, a
requirement that the notice of withdrawal be on file with the Company's payroll
office for a reasonable period prior to the effectiveness of the Participant's
withdrawal from the Plan.
(c) Return of Payroll Deductions. Upon withdrawal from an
Offering or the Plan pursuant to paragraphs 11(a) or 11(b), respectively, the
withdrawn Participant's accumulated payroll deductions which have not been
applied toward the purchase of Shares shall be returned as soon as practicable
after the withdrawal, without the payment of any interest, to the Participant,
and the Participant's interest in the Offering and/or the Plan, as applicable,
shall terminate. Such accumulated payroll deductions may not be applied to any
other Offering under the Plan.
(d) Automatic Withdrawal From an Offering. If the fair market
value of the Shares on a Purchase Date of an Offering (other than the last such
Purchase Date) is less than the fair market value of the Shares on the Offering
Date for such Offering, then every Participant shall automatically (i) be
withdrawn from such Offering at the close of such Purchase Date and after the
acquisition of Shares for such Purchase Period and (ii) be enrolled in the
Offering commencing on the first business day subsequent to such Purchase
Period. A Participant may elect not to be automatically withdrawn from an
Offering Period pursuant to this paragraph 11(d) by delivering to the Company
not later than the close of business on the last day before the Purchase Date a
written notice indicating such election.
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<PAGE> 8
(e) Limitation Following Cessation of Participation by Certain
Employees. Notwithstanding any provision herein to the contrary, an employee
shall be prohibited from again participating in the Plan for at least six months
after the date on which such employee is deemed to "cease participation" in the
Plan (as defined below) if such employee is:
(1) an officer or director of the Company subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"); and
(2) deemed to have "CEASED PARTICIPATION" in the Plan
within the meaning of Rule 16b-3, promulgated under the Exchange Act, as amended
from time to time or any successor rule or regulation ("RULE 16b-3") as a
consequence of such employee's election to (i) withdraw from an Offering
pursuant to paragraph 11(a) above, (ii) withdraw from the Plan pursuant to
paragraph 11(b) above, or (iii) stop or decrease to a nominal level the amount
withheld from such employee's Compensation pursuant to paragraph 9(a) above.
(f) Waiver of Withdrawal Right. The Company may, from time to
time, establish a procedure pursuant to which a Participant may elect (an
"IRREVOCABLE ELECTION"), at least six (6) months prior to a Purchase Date, to
have all payroll deductions accumulated in such Participant's Plan account as of
such Purchase Date applied to purchase shares under the Plan, and (1) to waive
such Participant's right to withdraw from the Offering or the Plan and (2) to
waive such Participant's right to increase, decrease, or cease payroll
deductions under the Plan from such Participant's Compensation during the
Offering Period ending on such Purchase Date. An Irrevocable Election shall be
made in writing on a form provided by the Company for such purpose and must be
delivered to the Company not later than the close of business on the day
preceding the date which is six (6) months before the Purchase Date for which
such election is to be first effective.
12. Termination of Employment. Termination of a Participant's employment
with the Company for any reason, including retirement, disability or death or
the failure of a Participant to remain an employee eligible to participate in
the Plan, shall terminate the Participant's participation in the Plan
immediately. In such event, the payroll deductions credited to the Participant's
account since the last Purchase Date shall, as soon as practicable, be returned
to the Participant or, in-the case of the Participant's death, to the
Participant's legal representative, and all of the Participant's rights under
the Plan shall terminate. Interest shall not be paid on sums returned to a
Participant pursuant to this paragraph 13. A Participant whose participation has
been so terminated may again become eligible to participate in the Plan by again
satisfying the requirements of paragraphs 4 and 6(a) above.
13. Transfer of Control. A "TRANSFER OF CONTROL" shall be deemed to have
occurred in the event any of the following occurs with respect to the Network
Associates:
(a) the direct or indirect sale or exchange by the shareholders
of Network Associates of all or substantially all of the stock of Network
Associates where the shareholders of Network Associates before such sale or
exchange do not retain, directly or indirectly, at least a
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<PAGE> 9
majority of the beneficial interest in the voting stock of Network Associates
after such sale or exchange;
(b) a merger or consolidation where the shareholders of Network
Associates before such merger or consolidation do not retain, directly or
indirectly, at least a majority of the beneficial interest in the voting stock
of Network Associates after such merger;
(c) the sale, exchange, or transfer of all or substantially all
of Network Associates' assets (other than a sale, exchange, or transfer to one
(1) or more subsidiary corporations (as defined in paragraph 1 above) of Network
Associates); or
(d) a liquidation or dissolution of Network Associates.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under the Plan. All
Purchase Rights shall terminate effective as of the date of the Transfer of
Control to the extent that the Purchase Right is neither exercised as of the
date of the Transfer of Control nor assumed by the Acquiring Corporation.
14. Capital Changes. In the event of changes in the common stock of the
Company due to a stock split, reverse stock split, stock dividend,
recapitalization, combination, reclassification, or like change in the Company's
capitalization, or in the event of any merger (including a merger effected for
the purpose of changing Network Associates' domicile), sale of assets or other
reorganization, appropriate adjustments shall be made by the Company in the
securities subject to purchase under a Purchase Right the Plan's share reserve,
the number of shares subject to a Purchase Right, and in the purchase price per
share.
15. Non-Transferable. A Purchase Right may not be transferred in any
manner otherwise than by will or the laws of descent and distribution and shall
be exercisable during the lifetime of the Participant only by the Participant.
The Company, in its absolute discretion, may impose such restrictions on the
transferability of the Shares purchasable upon the exercise of a Purchase Right
as it deems appropriate and any such restriction shall be set forth in the
respective subscription agreement and may be referred to on the certificates
evidencing such Shares.
16. Reports. Each Participant who exercised all or part of his or her
Purchase Right for a Purchase Period shall receive, as soon as practicable after
the Purchase Date of such Purchase Period, a report of such Participant's
account setting forth the total payroll deductions accumulated, the number of
Shares purchased, the fair market value of such Shares, the date of purchase and
the remaining cash balance to be refunded or retained in the Participant's
account pursuant to paragraph 9(g) above, if any. Each Participant shall be
provided information concerning the Company equivalent to that information
generally made available to the Company's common stockholders. Notwithstanding
the preceding sentence, at any such time as securities offered or sold pursuant
to the Plan are required to be qualified pursuant to the California Corporations
Code, copies
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<PAGE> 10
of the Company's balance sheet and income statement for the just completed
fiscal year shall be made available annually to the Participants.
17. Plan Term. This Plan shall continue until terminated by the Board or
until all of the Shares reserved for issuance under the Plan have been issued or
until ten (10) years from the date the Plan is adopted, whichever shall first
occur.
18. Restriction on Issuance of Shares. The issuance of shares under the
Plan shall be subject to compliance with all applicable requirements of foreign,
federal or state law with respect to such securities. A Purchase Right may not
be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable foreign, federal or state securities laws or other
law or regulations. In addition, no Purchase Right may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (ii) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
19. Legends. The Company may at any time place legends or other
identifying symbols referencing any applicable foreign, federal and/or state
securities restrictions or any provision convenient in the administration of the
Plan on some or all of the certificates representing shares of stock issued
under the Plan. The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to a Purchase Right in the possession of the Participant in order to
carry out the provisions of this paragraph. Unless otherwise specified by the
Company, legends placed on such certificates may include but shall not be
limited to the following:
THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION
TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER THE EMPLOYEE
STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED
HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE
SHARES BY THE REGISTERED HOLDER HEREOF MADE ON OR BEFORE _______, 19__.
THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE OPTION
IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)
PRIOR TO THIS DATE."
20. Notification of Sale of Shares. The Company may require the
Participant to give the Company prompt notice of any disposition of Shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise
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<PAGE> 11
of such Purchase Right. ne Company may require that until such time as a
Participant disposes of shares acquired upon exercise of a Purchase Right, the
Participant shall hold all such shares in the Participant's name (and not in the
name of any nominee) until the lapse of the time periods with respect to such
Purchase Right referred to in the preceding sentence. The Company may direct
that the certificates evidencing Shares acquired by exercise of a Purchase Right
refer to such requirement to give prompt notice of disposition.
21. Amendment or Termination of the Plan. The Board may at any time
amend or terminate the Plan, except that (i) such termination shall not affect
Purchase Rights previously granted under the Plan, except as permitted under the
Plan, and (ii) no amendment may adversely affect a Purchase Right previously
granted under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the Shares
under applicable foreign, federal or state securities laws). In addition, an
amendment to the Plan must be approved by the shareholders of the Company within
twelve (12) months of the adoption of such amendment if such amendment would
authorize the sale of more shares than are authorized for issuance under the
Plan or would change the definition of the corporations that may be designated
by the Board as Participating Companies. Furthermore, the approval of the
Company's shareholders shall be sought for any amendment to the Plan for which
the Board deems shareholder approval necessary in order to comply with Rule
16b-3.
IN WITNESS WHEREOF, the undersigned Secretary of Network Associates,
Inc. certifies that the foregoing Network Associates, Inc. 1994 Employee Stock
Purchase Plan was duly adopted by the Board of Directors of Network Associates
on April 14, 1994 and amended by the Board of Directors of Network Associates on
January 20, 1997.
-----------------------------
Secretary
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<PAGE> 1
EXHIBIT 4.2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 1. INTRODUCTION........................................................1
ARTICLE 2. ADMINISTRATION......................................................1
2.1 Committee Composition...........................................1
2.2 Committee Responsibilities......................................2
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.........................................2
3.1 Basic Limitation................................................2
3.2 Additional Shares...............................................2
3.3 Dividend Equivalents............................................2
ARTICLE 4. ELIGIBILITY.........................................................2
4.1 Incentive Stock Options.........................................2
4.2 Other Grants....................................................2
4.3 Prospective Employees and Consultants...........................2
ARTICLE 5. OPTIONS.............................................................3
5.1 Stock Option Agreement..........................................3
5.2 Number of Shares................................................3
5.3 Exercise Price..................................................3
5.4 Exercisability and Term.........................................3
5.5 Effect of Transfer of Control...................................3
5.6 Substitution of Options.........................................4
5.7 Buyout Provisions...............................................4
ARTICLE 6. PAYMENT FOR OPTION SHARES...........................................4
6.1 General Rule....................................................4
6.2 Surrender of Stock..............................................4
6.3 Exercise/Sale...................................................4
6.4 Exercise/Pledge.................................................4
6.5 Promissory Note.................................................5
6.6 Other Forms of Payment..........................................5
ARTICLE 7. STOCK APPRECIATION RIGHTS...........................................5
7.1 SAR Agreement...................................................5
7.2 Number of Shares................................................5
7.3 Exercise Price..................................................5
7.4 Exercisability and Term.........................................5
7.5 Effect of Transfer of Control...................................6
7.6 Exercise of SARs................................................6
7.7 Modification or Assumption of SARs..............................6
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 8. RESTRICTED SHARES...................................................6
8.1 Restricted Stock Agreement......................................6
8.2 Payment for Awards..............................................6
8.3 Vesting Conditions..............................................6
8.4 Effect of Transfer of Control...................................7
8.5 Voting and Dividend Rights......................................7
ARTICLE 9. STOCK UNITS.........................................................7
9.1 Stock Unit Agreement............................................7
9.2 Payment for Awards..............................................7
9.3 Vesting Conditions..............................................7
9.4 Effect of Transfer of Control...................................8
9.5 Voting and Dividend Rights......................................8
9.6 Form and Time of Settlement of Stock Units......................8
9.7 Death of Recipient..............................................8
9.8 Creditors' Rights...............................................8
ARTICLE 10. PROTECTION AGAINST DILUTION........................................9
10.1 Adjustments.....................................................9
10.2 Dissolution or Liquidation......................................9
10.3 Reorganizations.................................................9
ARTICLE 11. DEFERRAL OF AWARDS.................................................9
ARTICLE 12. AWARDS UNDER OTHER PLANS..........................................10
ARTICLE 13. LIMITATION ON RIGHTS..............................................10
13.1 Retention Rights...............................................10
13.2 Stockholders' Rights...........................................10
13.3 Regulatory Requirements........................................11
ARTICLE 14. WITHHOLDING TAXES.................................................11
14.1 General........................................................11
14.2 Share Withholding..............................................11
ARTICLE 15. FUTURE OF THE PLAN................................................11
15.1 Term of the Plan...............................................11
15.2 Amendment or Termination.......................................11
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 16. DEFINITIONS.......................................................11
ARTICLE 17. EXECUTION.........................................................15
</TABLE>
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<PAGE> 4
Network Associates, Inc.
1997 Stock Incentive Plan
(as amended on June 24, 1999)
ARTICLE 1. INTRODUCTION
The Plan was adopted by the Board effective December 1, 1997. The
purpose of the Plan is to promote the long-term success of the Company and the
creation of stockholder value by (a) encouraging Employees, Outside Directors
and Consultants to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Employees, Outside Directors and Consultants with
exceptional qualifications and (c) linking Employees, Outside Directors and
Consultants directly to stockholder interests through increased stock ownership.
The Plan seeks to achieve this purpose by providing for Awards in the form of
Restricted Shares, Stock Units, Options (which may constitute incentive stock
options or nonstatutory stock options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION
2.1 COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission
may establish for administrators acting under plans intended to qualify
for exemption under Rule 16b-3 (or its successor) under the Exchange
Act; and
(b) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify
for exemption under section 162(m)(4)(C) of the Code.
The Board may also appoint one or more separate committees of the Board, each
composed of one or more directors of the Company who need not satisfy the
foregoing requirements, who may administer the Plan with respect to Employees
and Consultants who are not considered officers or directors of the Company
under section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all terms of such Awards.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the type,
<PAGE> 5
number, vesting requirements and other features and conditions of such Awards,
(c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS
3.1 BASIC LIMITATION. Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares. The aggregate number of
Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall
not exceed (a) 16,480,000 plus (b) the additional Common Shares described in
Section 3.2. The limitation of this Section 3.1 shall be subject to adjustment
pursuant to Article 10.
3.2 ADDITIONAL SHARES. If Restricted Shares, Stock Units, Options or
SARs granted under this Plan or the Predecessor Plan are forfeited or if Options
or SARs granted under this Plan or the Predecessor Plan terminate for any other
reason before being exercised, then the corresponding Common Shares shall become
available for Awards under this Plan. If Stock Units are settled, then only the
number of Common Shares (if any) actually issued in settlement of such Stock
Units shall reduce the number available under Section 3.1 and the balance shall
again become available for Awards under the Plan. If SARs are exercised, then
only the number of Common Shares (if any) actually issued in settlement of such
SARs shall reduce the number available under Section 3.1 and the balance shall
again become available for Awards under the Plan. The foregoing notwithstanding,
the aggregate number of Common Shares that may be issued under the Plan upon the
exercise of ISOs shall not be increased when Restricted Shares are forfeited.
3.3 DIVIDEND EQUIVALENTS. Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY
4.1 INCENTIVE STOCK OPTIONS. Only Employees who are common-law
employees of the Company, a Parent or a Subsidiary on the date of grant shall be
eligible for the grant of ISOs. In addition, an Employee who owns more than 10%
of the total combined voting power of all classes of outstanding stock of the
Company or any of its Parents or Subsidiaries shall not be eligible for the
grant of an ISO unless the requirements set forth in section 422(c)(6) of the
Code are satisfied.
4.2 OTHER GRANTS. Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs.
4.3 PROSPECTIVE EMPLOYEES AND CONSULTANTS. For purposes of this
Article 4, (a) "Employees" shall include prospective Employees to whom Awards
are granted in connection with written offers of employment from the Company, a
Parent or a Subsidiary and (b) "Consultants" shall include prospective
Consultants to whom Awards are granted in connection with written offers of
engagement from the Company, a Parent or a Subsidiary. If an ISO is granted
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<PAGE> 6
to a prospective Employee, the date when his or her service as an Employee
commences shall be deemed to be the date of grant of such ISO for all purposes
under the Plan (including, without limitation, Section 5.3). No Award granted to
a prospective Employee or prospective Consultant shall become exercisable or
vested unless and until his or her service as an Employee or Consultant
commences.
ARTICLE 5. OPTIONS
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a reduction in
the Optionee's other compensation. A Stock Option Agreement may provide that a
new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10. Options granted to any
Optionee in a single fiscal year of the Company shall not cover more than
1,000,000 Common Shares, except that Options granted to a new Employee in the
fiscal year of the Company in which his or her service as an Employee first
commences shall not cover more than 1,500,000 Common Shares. The limitations set
forth in the preceding sentence shall be subject to adjustment in accordance
with Article 10.
5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a Common Share on the date of
grant and the Exercise Price under an NSO shall in no event be less than 85% of
the Fair Market Value of a Common Share on the date of grant. In the case of an
NSO, a Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding.
5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service. Options may be awarded in
combination with SARs, and such an Award may provide that the Options will not
be exercisable unless the related SARs are forfeited.
5.5 EFFECT OF TRANSFER OF CONTROL. The Committee may determine, at
the time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Common Shares subject to such Option in the
event that a Transfer of Control occurs with respect to
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<PAGE> 7
the Company, except that the exercisability of an ISO shall not be accelerated
without the Optionee's written consent. In addition, a separate agreement
between the Optionee and the Company may provide that such Optionee's Options
shall become exercisable as to all or part of the Common Shares subject to such
Options in the event that a Transfer of Control occurs with respect to the
Company.
5.6 SUBSTITUTION OF OPTIONS. The Committee may accept the
cancellation of outstanding options granted by another issuer in return for the
grant of new Options under the Plan for the same or a different number of Common
Shares and at the same or a different Exercise Price.
5.7 BUYOUT PROVISIONS. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
ARTICLE 6. PAYMENT FOR OPTION SHARES
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash or cash equivalents at the time
when such Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment
may be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Shares that are already owned by the
Optionee. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. The Optionee shall
not surrender, or attest to the ownership of, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.
6.3 EXERCISE/SALE. To the extent that this Section 6.3 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Common
Shares being purchased under the Plan and to deliver all or part of the sales
proceeds to the Company.
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the
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<PAGE> 8
Company) an irrevocable direction to pledge all or part of the Common Shares
being purchased under the Plan to a securities broker or lender approved by the
Company, as security for a loan, and to deliver all or part of the loan proceeds
to the Company.
6.5 PROMISSORY NOTE. To the extent that this Section 6.5 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) a full-recourse
promissory note; provided that the par value of the Common Shares being
purchased under the Plan shall be paid in cash or cash equivalents.
6.6 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 SAR AGREEMENT. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.
7.2 NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 10. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than 1,000,000 Common
Shares, except that SARs granted to a new Employee in the fiscal year of the
Company in which his or her service as an Employee first commences shall not
pertain to more than 1,500,000 Common Shares. The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with Article 10.
7.3 EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.
7.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Transfer of Control.
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<PAGE> 9
7.5 EFFECT OF TRANSFER OF CONTROL. The Committee may determine, at
the time of granting an SAR or thereafter, that such SAR shall become
exercisable as to all or part of the Common Shares subject to such SAR in the
event that a Transfer of Control occurs with respect to the Company. In
addition, a separate agreement between the Optionee and the Company may provide
that such Optionee's SARs shall become exercisable as to all or part of the
Common Shares subject to such SARs in the event that a Transfer of Control
occurs with respect to the Company.
7.6 EXERCISE OF SARS. Upon exercise of an SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
7.7 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
ARTICLE 8. RESTRICTED SHARES
8.1 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical. Restricted Shares
may be granted in consideration of a reduction in the recipient's other
compensation.
8.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the
form of newly issued Restricted Shares, the Award recipient, as a condition to
the grant of such Award, shall be required to pay the Company in cash or cash
equivalents an amount equal to the par value of such Restricted Shares. To the
extent that an Award is granted in the form of Restricted Shares from the
Company's treasury, no cash consideration shall be required of the Award
recipients. Any amount not paid in cash may be paid with a full-recourse
promissory note.
8.3 VESTING CONDITIONS. Each Award of Restricted Shares may or may
not be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. The
Committee may include among such conditions the requirement that the performance
of the Company or a business unit of the Company for a specified period of one
or more years equal or exceed a target determined in advance by the Committee.
Such
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<PAGE> 10
performance shall be determined by the Company's independent auditors. Such
target shall be based on one or more of the criteria set forth in Appendix A.
The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Restricted Shares which are subject to
performance-based vesting conditions and which are granted to any Participant in
a single calendar year exceed 300,000, subject to adjustment in accordance with
Article 10. A Restricted Stock Agreement may provide for accelerated vesting in
the event of the Participant's death, disability or retirement or other events.
8.4 EFFECT OF TRANSFER OF CONTROL. The Committee may determine, at
the time of granting Restricted Shares or thereafter, that all or part of such
Restricted Shares shall become vested in the event that a Transfer of Control
occurs with respect to the Company. In addition, a separate agreement between
the Participant and the Company may provide that all or part of such
Participant's Restricted Shares shall become vested in the event that a Transfer
of Control occurs with respect to the Company.
8.5 VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.
ARTICLE 9. STOCK UNITS
9.1 STOCK UNIT AGREEMENT. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.
9.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
9.3 VESTING CONDITIONS. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. The
Committee may include among such conditions the requirement that the performance
of the Company or a business unit of the Company for a specified period of one
or more years equal or exceed a target determined in advance by the Committee.
Such performance shall be determined by the Company's independent auditors. Such
target shall be based on one or more of the criteria set forth in Appendix A.
The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Stock Units which are subject to
performance-based vesting conditions and which are granted to any Participant in
a single calendar year exceed 300,000, subject to adjustment in accordance with
Article 10. A Stock Unit Agreement
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<PAGE> 11
may provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events.
9.4 EFFECT OF TRANSFER OF CONTROL. The Committee may determine, at
the time of granting Stock Units or thereafter, that all or part of such Stock
Units shall become vested in the event that a Transfer of Control occurs with
respect to the Company. In addition, a separate agreement between the
Participant and the Company may provide that all or part of such Participant's
Stock Units shall become vested in the event that a Transfer of Control occurs
with respect to the Company.
9.5 VOTING AND DIVIDEND RIGHTS. The holders of Stock Units shall have
no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the Stock Unit
is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to distribution,
any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.
9.6 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 10.
9.7 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units that become payable after the recipient's
death shall be distributed to the recipient's estate.
9.8 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
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<PAGE> 12
ARTICLE 10. PROTECTION AGAINST DILUTION
10.1 ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of:
(a) The number of Options, SARs, Restricted Shares and Stock
Units available for future Awards under Article 3;
(b) The limitations set forth in Sections 5.2, 7.2, 8.3 and 9.3;
(c) The number of Common Shares covered by each outstanding
Option and SAR;
(d) The Exercise Price under each outstanding Option and SAR; or
(e) The number of Stock Units included in any prior Award which
has not yet been settled.
Except as provided in this Article 10, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
10.2 DISSOLUTION OR LIQUIDATION. To the extent not previously
exercised or settled, Options, SARs and Stock Units shall terminate immediately
prior to the dissolution or liquidation of the Company.
10.3 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (d) full exercisability or vesting and accelerated
expiration of the outstanding Awards or (e) settlement of the full value of the
outstanding Awards in cash or cash equivalents followed by cancellation of such
Awards.
ARTICLE 11. DEFERRAL OF AWARDS
The Committee (in its sole discretion) may permit or require a
Participant to:
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<PAGE> 13
(a) Have cash that otherwise would be paid to such Participant as
a result of the exercise of an SAR or the settlement of Stock Units
credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's books;
(b) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted
into an equal number of Stock Units; or
(c) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR, or the
settlement of Stock Units, converted into amounts credited to a deferred
compensation account established for such Participant by the Committee
as an entry on the Company's books. Such amounts shall be determined by
reference to the Fair Market Value of such Common Shares as of the date
when they otherwise would have been delivered to such Participant.
A deferred compensation account established under this Article 11 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Article 11.
ARTICLE 12. AWARDS UNDER OTHER PLANS
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.
ARTICLE 13. LIMITATION ON RIGHTS
13.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant. The Company and its Parents, Subsidiaries and
Affiliates reserve the right to terminate the service of any Employee or
Consultant at any time, with or without cause, subject to applicable laws and a
written employment agreement (if any).
13.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the time when a stock
certificate for such Common Shares is issued or, if applicable, the time when he
or she becomes entitled to receive such Common Shares by filing any required
notice of
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<PAGE> 14
exercise and paying any required Exercise Price. No adjustment shall be made for
cash dividends or other rights for which the record date is prior to such time,
except as expressly provided in the Plan.
13.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 14. WITHHOLDING TAXES
14.1 GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
14.2 SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that otherwise
would be issued to him or her or by surrendering all or a portion of any Common
Shares that he or she previously acquired. Such Common Shares shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash.
ARTICLE 15. FUTURE OF THE PLAN
15.1 TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on June 5, 1997. The Plan shall remain in effect until it is
terminated under Section 15.2, except that no ISOs shall be granted on or after
the 10th anniversary of the later of (a) the date when the Board adopted the
Plan or (b) the date when the Board adopted the most recent increase in the
number of Common Shares available under Article 3 which was approved by the
Company's stockholders.
15.2 AMENDMENT OR TERMINATION. The Board or the Committee may, at any
time and for any reason, amend or terminate the Plan. An amendment of the Plan
shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules. No Awards shall be
granted under the Plan after the termination thereof. The termination of the
Plan, or any amendment thereof, shall not affect any Award previously granted
under the Plan.
ARTICLE 16. DEFINITIONS
16.1 "AFFILIATE" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of such entity.
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<PAGE> 15
16.2 "AWARD" means any award of an Option, an SAR, a Restricted Share
or a Stock Unit under the Plan.
16.3 "BOARD" means the Company's Board of Directors, as constituted
from time to time.
16.4 "CODE" means the Internal Revenue Code of 1986, as amended.
16.5 "COMMITTEE" means a committee of the Board, as described in
Article 2.
16.6 "COMMON SHARE" means one share of the Common Stock of the
Company.
16.7 "COMPANY" means Network Associates, Inc., a Delaware corporation.
16.8 "CONSULTANT" means a consultant or adviser who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in Section 4.1.
16.9 "EMPLOYEE" means a common-law employee of the Company, a Parent,
a Subsidiary or an Affiliate.
16.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
16.11 "EXERCISE PRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
16.12 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in The Wall Street Journal. Such determination
shall be conclusive and binding on all persons.
16.13 "ISO" means an incentive stock option described in section 422(b)
of the Code.
16.14 "NSO" means a stock option not described in sections 422 or 423
of the Code.
16.15 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase Common Shares.
16.16 "OPTIONEE" means an individual or estate who holds an Option or
SAR.
16.17 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan, except as provided in Section 4.1.
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<PAGE> 16
16.18 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
16.19 "PARTICIPANT" means an individual or estate who holds an Award.
16.20 "PLAN" means this Network Associates, Inc. 1997 Stock Incentive
Plan, as amended from time to time.
16.21 "PREDECESSOR PLAN" means the Network Associates, Inc. 1995 Stock
Incentive Plan, as amended.
16.22 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
16.23 "RESTRICTED STOCK AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
16.24 "SAR" means a stock appreciation right granted under the Plan.
16.25 "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
16.26 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.
16.27 "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
16.28 "STOCK UNIT AGREEMENT" means the agreement between the Company
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
16.29 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
16.30 "TRANSFER OF CONTROL" shall mean:
(a) The direct or indirect sale or exchange by the stockholders
of the Company of all or substantially all of the voting stock of the
Company wherein the stockholders of the
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Company immediately before such sale or exchange do not retain in
substantially the same proportions as their ownership of shares of the
Company's voting stock immediately before such event, directly or
indirectly (including, without limitation, through their ownership of
shares of the voting stock of a corporation which, as a result of such
sale or exchange, owns the Company either directly or through one or
more subsidiaries), at least a majority of the beneficial interest in
the voting stock of the Company immediately after such sale or exchange;
(b) A merger or consolidation wherein the stockholders of the
Company immediately before such merger or consolidation do not retain in
substantially the same proportions as their ownership of shares of the
Company's voting stock immediately before such event, directly or
indirectly (including, without limitation, through their ownership of
shares of the voting stock of a corporation which, as a result of such
merger or consolidation, owns the Company either directly or through one
or more subsidiaries), at least a majority of the beneficial interest in
the voting stock of the Company immediately after such merger or
consolidation;
(c) The sale, exchange, or transfer of all or substantially all
of the assets of the Company (other than a sale, exchange, or transfer
to one or more corporations (the "Transferee Corporation(s)") wherein
the stockholders of the Company immediately before such sale, exchange,
or transfer retain in substantially the same proportions as their
ownership of shares of the Company's voting stock immediately before
such event, directly or indirectly (including, without limitation,
through their ownership of shares of the voting stock of a corporation
which owns the Transferee Corporation(s) either directly or through one
or more subsidiaries), at least a majority of the beneficial interest in
the voting stock of the Transferee Corporation(s) immediately after such
event; or
(d) A liquidation or dissolution of the Company.
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ARTICLE 17. EXECUTION
To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to execute this document in the name of the Company.
Network Associates, Inc.
By:
-----------------------------------
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NETWORK ASSOCIATES, INC. 1997 STOCK INCENTIVE PLAN
APPENDIX A
PERFORMANCE CRITERIA
<TABLE>
<S> <C>
Cash Flow Expense Reduction
Earnings per Share Growth in Bookings
Gross Margin Growth in Revenue
Net Income Stock Price Increase
Operating Income
Operating Margin
Pre-Tax Profit
Return on Assets
Return on Capital
Return on Stockholder Equity
Growth in any of the above
measures
</TABLE>
<PAGE> 20
NETWORK ASSOCIATES, INC. 1997 STOCK INCENTIVE PLAN
APPENDIX B
OPTION GRANTS IN THE NETHERLANDS
This Appendix B to the Network Associates, Inc. 1997 Stock Incentive
Plan (the "Plan") sets forth special rules under which Options may be granted to
Employees and Consultants in The Netherlands who are subject to Dutch tax laws
on the date of option grant, as specified in the applicable Stock Option
Agreement (the "Date of Option Grant"). Such Employees and Consultants are
referred to herein as the "Dutch Residents." To the extent that the rules in
this Appendix B are not consistent with the provisions of the Plan, this
Appendix B shall govern. In all other respects, the provisions of the Plan
(including its definitions) shall apply to this Appendix B.
1. EXERCISE PRICE. The Exercise Price of an Option granted to a Dutch
Resident, as specified in the applicable Stock Option Agreement (the "Exercise
Price"), shall not be less than the Fair Market Value of a Common Share on the
Date of Option Grant.
2. EXERCISABILITY. Options granted to a Dutch Resident shall be
exercisable immediately upon grant.
3. RIGHT OF REPURCHASE. If a Dutch Resident ceases to be an Employee or
Consultant for any reason before the fourth anniversary of the Date of Option
Grant, the Company shall have the right to repurchase all or a portion of the
Common Shares (if any) that such Dutch Resident acquired by exercising such
Option. The repurchase price per share shall be equal to the Exercise Price per
share. Prior to the first anniversary of the Date of Option Grant, the right of
repurchase shall apply to all of the Common Shares that the Dutch Resident
acquired by exercising the Option. After 12 months of continuous service as an
Employee or Consultant following the Date of Option Grant, the right of
repurchase shall lapse with respect to 25% of the Common Shares subject to the
Option. Thereafter, the right of repurchase shall lapse with respect to an
additional 2.08333% of the Common Shares subject to the Option for each
additional month of continuous service as an Employee or Consultant. A Dutch
Resident shall not sell, pledge or otherwise transfer the Common Shares that he
or she acquired by exercising an Option as long as such Common Shares remain
subject to the Company's right of repurchase.
4. EXPIRATION DATE. All Options granted to Dutch Residents shall expire
on the fifth anniversary of the Date of Option Grant.
<PAGE> 1
EXHIBIT 4.3
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE I INTRODUCTION.........................................................1
I.1 Establishment...................................................1
I.2 Purposes........................................................1
I.3 Effective Date..................................................1
ARTICLE II DEFINITIONS.........................................................2
II.1 Definitions.....................................................2
ARTICLE III OPTIONS............................................................3
III.1 Participation...................................................3
III.2 Grant...........................................................4
III.3 Terms and Conditions............................................4
ARTICLE IV AUTHORIZED STOCK....................................................7
IV.1 The Stock.......................................................7
IV.2 Adjustments.....................................................7
IV.3 No Rights as Stockholder........................................8
IV.4 Fractional Shares...............................................8
ARTICLE V TRANSFER OF CONTROL..................................................9
V.1 Definition......................................................9
V.2 Effect on Options...............................................9
ARTICLE VI GENERAL PROVISIONS.................................................10
VI.1 Administration.................................................10
VI.2 Expiration.....................................................10
VI.3 Amendments, Etc................................................11
VI.4 Treatment of Proceeds..........................................11
VI.5 Paragraph Headings.............................................11
VI.6 Severability...................................................11
VI.7 Rule 16b-3.....................................................11
VI.8 Continuation of Initial Plan as to Outstanding Options.........11
</TABLE>
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<PAGE> 2
AMENDED AND RESTATED
McAFEE ASSOCIATES, INC
STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
ARTICLE I
INTRODUCTION
I.1 Establishment. On January 19, 1993, McAfee Associates, Inc., a
Delaware corporation (together with any successor corporation thereto, the
"Company"), established the McAfee Associates, Inc. Stock Option Plan for
Outside Directors (the "Initial Plan") for certain members of its Board (as
defined in Section 2.1(d)) who are not employees of the Company or any
Affiliated Corporation (as defined in Section 2.1(b)) and who are eligible to
participate in the Plan based upon the definition of an Outside Director set
forth in Section 2.1(i). The Initial Plan is hereby amended and restated in its
entirety as the Amended and Restated McAfee Associates, Inc. Stock Option Plan
for Outside Directors (the "Plan").
I.2 Purposes.
The purpose of the Plan is to provide certain directors of the Company
who are not also employees of the Company or an Affiliated Corporation (as
defined in Section 2.1(b)) added incentive to continue in the service of the
Company and a more direct interest in the future success of the operations of
the Company.
I.3 Effective Date.
The effective date of the Plan shall be January 1, 1993 (the "Effective
Date"), subject to approval by the affirmative votes of the holders of a
majority of the shares of the Company present or represented and entitled to
vote at a meeting duly held (in person or through written consent) in accordance
with governing law within one year following the Effective Date. If the
stockholders of the Company do not approve the Plan as specified above, Options
granted under the Plan shall be deemed to be rescinded without any further
action by the Board or the Company, and the Plan shall automatically terminate,
notwithstanding any other provision in the Plan to the contrary.
ARTICLE II
DEFINITIONS
II.1 Definitions.
For purposes of the Plan:
<PAGE> 3
(a) "Affiliate" and "Associate" shall have the meanings
specified in Rule 12b-2 or any successor regulation under the Exchange Act.
(b) "Affiliated Corporation" means any corporation or other
entity (including but not limited to a partnership) that is affiliated with the
Company through stock ownership or otherwise and is treated as a common employer
under the provisions of Sections 414(b) and (c) of the Code.
(c) "Annual Meeting" means the annual meeting of the Company's
stockholders.
(d) "Board" means the Board of Directors of the Company. If a
committee of the Board has been appointed to administer the Plan, "Board" also
means such committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Disabled" or "Disability" shall have the meaning given to
such terms in Section 22(e)(3) of the Code.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(h) "Fair Market Value" of a share of Stock shall be the last
reported sale price of the Stock on the NASDAQ National Market System on the day
the determination is to be made, or if no sale took place on such day, the
average of the closing bid and asked prices of the Stock on the NASDAQ National
Market System on such day, or if the market is closed on such day, on the last
day prior to the date of determination on which the market was open for the
transaction of business, as reported by NASDAQ. If, however, the Stock should be
listed or admitted for trading on a national securities exchange, the Fair
Market Value of a share of the Stock shall be the last reported sale price on
such securities exchange on the date the determination is to be made, or if no
sale took place on such day, the average of the closing bid and asked prices on
such day, or if the market is closed on such day, on the last day prior to the
date of determination on which the market was open for the transaction of
business, as reported in the principal consolidated transaction reporting system
for the principal national securities exchange on which the Stock is listed or
admitted for trading. If the Stock is not listed or traded on the NASDAQ
National Market System or on any national securities exchange, the Fair Market
Value of the Stock for purposes of the grant of Options under the Plan shall be
determined by the Board in good faith.
(i) "Outside Director" is an individual who is (i) a member of
the Board and (ii) not an employee of the Company or an Affiliated Corporated.
For purposes of the Plan, an employee is an individual whose wages are subject
to the withholding of federal income tax under Section 3401 of the Code.
Furthermore, any individual who performs services, whether as an employee,
partner, sole proprietor, director, trustee, independent contractor, or
consultant, for any entity or group of affiliated entities which own at least
ten percent (10%) of the total combined
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<PAGE> 4
voting power of all classes of stock of the Company shall not be considered to
be a "Outside Director" for purposes of the Plan.
(j) "Holder" means an Outside Director who has received one or
more Options under the terms of the Plan.
(k) "Option" means a right granted under the Plan to purchase
Stock at a stated price for a specified period of time. The Options granted
under the Plan shall be nonstatutory stock options, that is options that do not
satisfy the requirements of Section 422 of the Code.
(l) "Option Agreement" means a written agreement between the
Company and the Holder of an Option as described in Section 3.2(c) hereof.
(m) "Option Price" means the price at which shares of Stock
subject to an Option may be purchased, determined in accordance with Section
3.3(b).
(n) "Share" means a share of Stock.
(o) "Stock" means the common stock of the Company.
ARTICLE III
OPTIONS
III.1 Participation. Each Outside Director who is elected or re-elected
at an Annual Meeting or at any other time (such as an individual who becomes an
Outside Director by filling a vacancy on the Board or a newly created
directorship) shall receive an Option as of the date of such election. Each
Outside Director who is elected or re-elected for a term longer than one year,
including Outside Directors elected or re-elected prior to the Effective Date,
shall receive Options as of the date of his or her election and as of each
anniversary date during his or her term. Options shall be granted in accordance
with Section 3.2 on the terms and conditions herein described.
III.2 Grant.
(a) Annual Grants. Each Outside Director of the Company shall
automatically receive, on the date of that Outside Director's initial election
to the Board, an Option to purchase 33,750 Shares (the "Initial Grant"). Each
Outside Director of the Company who has already received an Initial Grant shall
automatically receive, on each anniversary date of the Initial Grant, an Option
to purchase 11,250 Shares.
(b) Date of Grant. The date on which an Outside Director
receives an Option hereunder is referred to as the date of grant of such Option.
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<PAGE> 5
(c) Option Agreement. Each Option granted under the Plan shall
be evidenced by an Option Agreement which shall incorporate and conform to the
terms and conditions set forth in Section 3.3 of the Plan.
III.3 Terms and Conditions. Options issued pursuant to the Plan shall
have the following terms and conditions:
(a) Number and Timing. Each Outside Director shall receive
under the Plan Options to purchase the number of Shares determined as specified
in Section 3.2, subject to adjustment as provided in Section 4.2. Such grants
shall be made at the times specified in Section 3.2.
(b) Price. The price at which each Share covered by the Option
may be purchased by each Outside Director shall be the Fair Market Value of a
share of the Stock on the date of grant, subject to adjustment as provided in
Section 4.2.
(c) Duration of Options. Each Option shall expire ten years
from the date the Option is granted (the "Option Period"), unless terminated
sooner pursuant to Section 3.3(d) below or fully exercised prior to the end of
such period.
(d) Termination of Service, Death, Etc. An Option shall
terminate in the following circumstances in the Holder ceases to be a director
of the Company:
(i) Removal for Cause. If the Holder is removed as a
director of the Company during the Option Period for cause, the Option shall be
void thereafter for all purposes, including as to Shares for which the Option
was otherwise exercisable according to Section 3.3(g) prior to the Holder's
removal as a director of the Company.
(ii) Disability. If the Holder ceases to be a director of
the Company on account of Disability, the Option may be exercised by the Holder
(or, in case of death thereafter, by the persons specified in Section
3.3(d)(iii)) within one year following the date on which the Holder ceased to be
a director (if otherwise within the Option Period), but not thereafter. In any
such case, the Option may be exercised only as to Shares for which the Option
had become exercisable on or before the date the Holder ceased to be a director
on account of Disability.
(iii) Death. If the Holder dies during the Option Period
while still serving as a director or within the three-month period referred to
in Section 3.3(d)(iv) below, the Option may be exercised by those entitled to do
so under the Holder's will or by the laws of descent and distribution within one
year following the Holder's death (if otherwise within the Option Period), but
not thereafter. In any such case, the Option may be exercised only as to the
Shares for which the Option had become exercisable on or before the date of the
Holder's death.
(iv) Other Termination. If the Holder ceases to be a
director within the Option Period for any reason other than removal for cause.
Disability or death, the Option may be exercised by the Holder within three
months following the date of such termination (if otherwise
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<PAGE> 6
within the Option Period), but not thereafter. In any such case, the Option may
be exercised only as to the Shares for which the Option had become exercisable
on or before the date the Holder ceased to be a director.
(v) Extension if Holder Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Sections 3.3(d)(i), (ii), (iii), or (iv) of Shares acquired upon the
exercise of the Option would subject the Holder to suit under Section 16(b) of
the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
Shares by the Holder would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Holder's termination of service as a
director, or (iii) the expiration of the Option Period.
(vi) Extension if Exercise Prevented by Law.
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth in Section 3.3(d)(i), (ii), (iii) or (iv) is
prevented by the provisions of Section 3.3(e)(iv), the Option shall remain
exercisable until three (3) months after the date the Holder is notified by the
Company that the Option is exercisable, but in any event no later than the
expiration of the Option Period.
(e) Transferability, Exercisability.
(i) Each Option granted under the Plan shall not be
transferable by a Holder other than by will or the laws of descent and
distribution.
(ii) Each Option granted under the Plan shall be
exercisable during the Holder's lifetime only by the Holder or, in the event of
disability or incapacity, by the Holder's guardian or legal representative.
(iii) Notwithstanding any other provision of the Plan, no
Option may be unconditionally granted unless and until the Plan is approved by
the stockholders of the Company in accordance with Section 1.3, and for any
Option granted prior to the time of such stockholder approval which is subject
to such approval, the date of grant of the Option shall be the date on which the
stockholders of the Company approve the Plan.
(iv) The grant of an Option and the issuance of Shares
upon exercise of an Option shall be subject to compliance with all applicable
requirements of federal and state law with respect to such securities. An Option
may not be exercised if the issuance of Shares upon exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations or the requirements of any stock exchange or market system upon
which the Stock may then be listed. In addition, no Option may not be exercised
unless (i) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), shall at the time of exercise of the Option be in effect
with respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company's legal counsel to be necessary to the
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<PAGE> 7
lawful issuance and sale of any shares subject to an Option shall relieve the
Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained. As a
condition to the exercise of an Option, the Company may require the Holder to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(f) Exercise, Payments, Etc.
(i) Method of Exercise. The method for exercising each
Option granted shall be by delivery to the Company of written notice specifying
the number of shares with respect to which the Option is exercised. The purchase
of Stock pursuant to the Option shall take place at the principal office of the
Company within thirty days following delivery of such notice, at which time the
purchase price of the Stock shall be paid in full by any of the methods set
forth in Section 3.3(f)(ii) or a combination thereof. A properly executed
certificate or certificates representing the Stock shall be delivered to the
Holder upon payment therefor.
(ii) Payment of Option Price. The Option Price shall be
paid by any of the following methods or any combination of such methods, at the
option of the Holder: (A) cash; (B) certified, cashier's or other check
acceptable to the Company, payable to the order of the Company; (C) delivery to
the Company of certificates representing a number of shares of Stock then owned
by the Holder, the Fair Market Value of which (determined as of the date the
notice of exercise is delivered to the Company) equals the price of the Stock to
be purchased pursuant to the Option, properly endorsed for transfer to the
Company; or (D) by the assignment of the proceeds of a sale of some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) ("Immediate Sales Proceeds"). No Option may be exercised by delivery to
the Company of certificates representing Stock that has been held by the Option
Holder for less than six months or such other period as shall be sufficient for
the Company to avoid, if possible, the recognition of expense with respect to
the Option for accounting purposes. The payment of the exercise price with
Immediate Sales Proceeds shall comply with procedures established by the
Company, which procedures may be changed from time to time in the Company's sole
discretion. The Company retains the right to discontinue the availability of
payment with Immediate Sales Proceeds at any time.
(g) Service Required for Exercise. Except as set forth in
Section 1.3 and 3.3(d), the Initial Grant made to an Outside Director under the
Plan shall become exercisable (i) for one-third (1/3) of the total number of
shares subject to such Option after one year of continuous service by the Holder
as a director of the Company after the date of grant and (ii) for an additional
one-third (1/3) of the total number of shares subject to the Option at the end
of each full year of continuous service as a director of the Company thereafter,
in each case rounded to the nearest whole number of shares. Except as set forth
in Sections 1.3 and 3.3(d), each subsequent Option granted to an Outside
Director under the Plan shall be exercisable in its entirety after three (3)
years of continuous service by the Holder as a director of the Company after the
date of grant. Except as set forth in Section 5.2,
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<PAGE> 8
the Option shall not be exercisable as to any Shares as to which the applicable
continuous service requirements has not been satisfied, regardless of the
circumstances under which the Holder ceased to be a director.
ARTICLE IV
AUTHORIZED STOCK
IV.1 The Stock. Subject to adjustment pursuant to Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan
shall be 1,132,813 and shall consist of authorized but unissued shares or
treasury shares of Stock or any combination thereof. Shares of Stock underlying
expired or canceled and unexercised Options shall again be available for
issuance under the Plan. However, shares surrendered to the Company in payment
of the Option Price of an Option shall not be available for issuance under the
Plan.
IV.2 Adjustments.
(a) Stock Splits, Stock Dividends, Etc. If the Company at any
time increases or decreases the number of its outstanding shares of Stock, or
changes in any way the rights and privileges of such shares, by means of the
payment of a stock dividend or the making of any other distribution upon such
shares payable in Stock, or through a stock split or subdivision of shares, or a
consolidation or combination of shares, or through a reclassification or
recapitalization involving the Stock, then the class, numbers, rights and
privileges of the following shall be increased, decreased or changed in like
manner as if the Stock issuable upon exercise of the Option had been validly
issued and outstanding, fully paid and nonassessable at the time of such
occurrence: (i) the number and class of shares issuable pursuant to the Plan as
provided in Section 4.1, (ii) the number and class of shares for which Options
may be granted under the Plan pursuant to Section 3.2, (iii) the number and
class of shares then subject to each outstanding Option granted under the Plan,
and (iv) the Option Price for each outstanding Option.
If a majority of the shares which are of the same class as the shares
that are subject to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to a Transfer of Control (as defined
in Section 5.1) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the Option Price of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in its sole
discretion.
(b) Adjustments for Certain Distributions of Property. If the
Company shall at any time distribute with respect to its outstanding Stock,
assets or securities of other persons (excluding cash dividends, distributions
payable out of capital surplus, and dividends or other distributions referred to
in Sections 4.2(a) and (c)), then the Option Price of outstanding Options shall
be adjusted to reflect the fair market value of the assets or securities
distributed, the Company shall provide for the delivery upon exercise of such
Options of cash in an amount equal to the
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<PAGE> 9
appropriate portion of the fair market value of the assets or securities
distributed, or a combination of such actions shall be taken, all as determined
by the Company in its discretion. Fair market value of the assets or securities
distributed for this purpose shall be as determined by the Company.
(c) Distributions of Capital Stock and Indebtedness. If the
Company at any time distributes to all holders of Stock shares of its capital
stock (other than Stock), or evidences of its indebtedness, then a proportionate
part of such capital stock and evidences of indebtedness shall be set aside for
each outstanding Option and, upon exercise of the Option, delivered to the
Holder of such Option.
IV.3 No Rights as Stockholder. A Holder shall have none of the rights
of a stockholder with respect to the shares subject to an Option until such
shares are transferred to the Holder upon exercise of such Option. Except as
provided in Section 4.2, no adjustments shall be made for dividends, rights or
other property distributed to stockholders (whether ordinary or extraordinary)
for which the record date is prior to the date such shares are so transferred.
IV.4 Fractional Shares. No adjustments or substitution provided for in
this Article IV shall require the Company to sell a fractional share. The total
substitution or adjustment with respect to each Option shall be limited by
deleting any fractional share. In no event may the Option Price of any Option be
decreased to an amount less than the par value, if any, of the stock subject to
the Option.
ARTICLE V
TRANSFER OF CONTROL
V.1 Definition. A "Transfer of Control" shall be deemed to have occurred
in the event any of the following occurs with respect to the Company.
(a) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the voting stock of
the Company wherein the stockholders of the Company immediately before such sale
or exchange do not retain in substantially the same proportions as their
ownership of shares of the Company's voting stock immediately before such event,
directly or indirectly (including without limitation, through their ownership of
shares of the voting stock of a corporation which, as a result of such sale or
exchange, owns the Company either directly or through one or more subsidiaries),
at least a majority of the beneficial interest in the voting stock of the
Company's immediately after such sale or exchange;
(b) a merger or consolidation wherein the stockholders of the
Company immediately before such merger or consolidation do not retain in
substantially the same proportions as their ownership of shares of the Company's
voting stock immediately before such event, directly or indirectly (including,
without limitation, through their ownership of shares of the voting stock of a
corporation which, as a result of such merger or consolidation, owns the Company
either directly or
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<PAGE> 10
through one or more subsidiaries), at least a majority of the beneficial
interest in the voting stock of the Company immediately after such merger or
consolidation;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one or more corporations (the "Transferee Corporation(s)") wherein the
stockholders of the Company immediately before such sale, exchange, or transfer
retain in substantially the same proportions as their ownership of shares of the
Company's voting stock immediately before such event, directly or indirectly
(including, without limitation, through their ownership of shares of the voting
stock of a corporation which owns the Transferee Corporation(s) either directly
or through one or more subsidiaries, at least a majority of the beneficial
interest in the voting stock of the Transferee Corporation(s) immediately after
such event); or
(d) a liquidation or dissolution of the Company.
V.2 Effect on Options. In the event of a Transfer of Control, any
unexercisable or unvested portion of the outstanding Options shall be
immediately exercisable and vested in full as of the date ten (10) days prior to
the date of the Transfer of Control, and the Company shall provide each Holder
of an outstanding Option with at least ten (10) days advance written notice of
the pending Transfer of Control prior to the consummation thereof. The exercise
or vesting of any Option that was permissible solely by reason of this Section
5.2 shall be conditioned upon the consummation of the Transfer of Control. In
addition, the Board, in its sole discretion, may arrange with the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "Acquiring Corporation"), for the Acquiring Corporation
to either assume the Company's rights and obligations under outstanding Options
or substitute substantially equivalent options for the Acquiring Corporation's
stock for such outstanding Options. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of the Option Agreement evidencing such Option except
as otherwise provided in such Option Agreement. If the corporation the stock of
which is subject to the outstanding Options immediately prior to a Transfer of
Control described in Section 8.1(a) is the surviving or continuing corporation,
the outstanding Options shall be deemed to have been assumed by the Acquiring
Corporation for purposes of this Section 5.2
ARTICLE VI
GENERAL PROVISIONS
VI.1 Administration. The Plan shall be administered by the Board
and/or any duly appointed committee of the Board having such powers as shall be
specified by the Board. Unless the powers of the committee have been
specifically limited, the committee shall have all of the powers
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of the Board granted herein, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law. The Board shall have no authority,
discretion, or power to select the Outside Directors who will receive Options
under the Plan, to set the Option Price of the Options, to determine the number
of Shares to be granted under option or the time at which such Options are to be
granted, to establish the duration of Options, or alter any other terms or
conditions specified in the Plan, except in the sense of administering the Plan
subject to the provisions of the Plan. All questions of interpretation of the
Plan or of any Options granted under the Plan shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan and/or any Option. Any officer of the Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
VI.2 Expiration. The Plan shall terminate whenever the Board adopts a
resolution to that effect. After termination, no additional Options shall be
granted under the Plan, but the Company shall continue to recognize Options
previously granted.
VI.3 Amendments, Etc. The Board may from time to time amend, modify,
suspend or terminate the Plan. Nevertheless, no such amendment, modification,
suspension or termination shall impair any Option theretofore granted under the
Plan or deprive any Holder of any Shares that he may have acquired through or as
a result of the Plan without the consent of the Holder. The Plan may not be
amended more than once every six months with respect to the persons entitled to
be granted Options hereunder, the timing of grants to Outside Directors, the
number of Shares subject to an Option or the Option Price thereof, other than
amendments necessary to comport with changes in the Code, ERISA or the rules and
regulations thereunder. The Company shall obtain the approval of stockholders to
any amendment or modification of the Plan to the extent required by Rule 16b-3
under the Exchange Act or by the listing requirements of the National
Association of Securities Dealers, Inc. or any stock exchange on which the
Company's securities are quoted or listed for trading.
VI.4 Treatment of Proceeds. Proceeds from the sale of Stock pursuant
to Options granted under the Plan shall constitute general funds of the Company.
VI.5 Paragraph Headings. The paragraph headings are included herein
only for convenience, and they shall have no effect on the interpretation of the
Plan.
VI.6 Severability. If any article, section, subsection or specific
provision is found to be illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining provisions of the Plan, and the Plan
shall be construed and enforced as if such illegal and invalid provision had
never been set forth in the Plan.
VI.7 Rule 16b-3. This Plan is intended to comply with the requirements
of Rule 16b.3 under the Exchange Act. To the extent the Plan does not conform to
such requirements, it shall be
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deemed amended to so conform without any further action on the part of the Board
of Directors or stockholders.
VI.8 Continuation of Initial Plan as to Outstanding Options.
Notwithstanding any other provision of the Plan to the contrary, the terms of
the Initial Plan shall remain in effect and apply to all Options granted
pursuant to the Initial Plan.
IN WITNESS WHEREOF, the undersigned Secretary of McAfee Associates,
Inc., a Delaware corporation, certifies that the foregoing Amended and Restated
McAfee Associates, Inc. Stock Option Plan for Outside Directors was duly adopted
by the Board of Directors of McAfee Associates, Inc. on April 14, 1995.
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Plan History
<TABLE>
<S> <C>
January 1993 Board of Directors adopts Initial
Plan with a share reserve of 125,000 shares.
June 1993 Stockholders approve Initial Plan
with a share reserve of 125,000 shares.
April 1995 Board of Directors amends and
restates Plan to conform change of control
provisions to those contained in the 1995
Stock Incentive Plan and to provide for
automatic acceleration of exercisability
upon a change of control, to provide for
certain extensions to the post-termination
exercise period, to eliminate restriction
on exercise within 6 months of date of
grant, to change Plan share limit to a
limit on issuance of treasury shares, to
add a provision regarding administration by
the Board, and to reflect other minor
clarifications.
June 1995 Stockholders approve amended and
restated Plan.
October 1995 Board declares a 3-for-2 stock
dividend, resulting in a share reserve of
187,500 shares.
May 1996 Board declares a 3-for-2 stock
dividend, resulting in a share reserve of
281,250 shares.
September 1996 Board declares a 3-for-2 stock
dividend, resulting in a share reserve of
421,875.
May 1998 Board declares a 3-for-2 stock
dividend, resulting in a share reserve of
632,813.
June 1999 Stockholders approve increase in
share reserve by 500,000 shares, resulting
in a share reserve of 1,132,813.
</TABLE>
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EXHIBIT 5.1
October 4, 1999
Network Associates, Inc.
3965 Freedom Circle
Santa Clara, California 95054
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about October 4, 1999, in
connection with the registration under the Securities Act of 1933, as amended,
of (i) 4,700,000 shares of Common Stock to be issued under the Networks
Associates, Inc. (the "Company") 1997 Stock Incentive Plan, (ii) 1,500,000
shares of Common Stock to be issued under the Company's 1994 Employee Stock
Purchase plan, and (iii) 500,000 shares of Common Stock to be issued under the
Company's 1993 Stock Option Plan for Outside Directors (collectively the
"Shares") (collectively the "Plans").
As your legal counsel, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with
the sale and issuance of the Shares under the Plans.
It is our opinion that the Shares, when issued and sold in the manner
referred to in the Plans, and pursuant to the agreements which accompany the
Plans, will be legally and validly issued, fully paid and not assessable.
We consent to the use of this opinion as an exhibit to said Registration
Statement and further consent to the use of our name wherever appearing in said
Registration Statement and any amendments thereto.
Sincerely,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 31, 1999, except for the
matters discussed in Note 17, as to which the date is April 7, 1999, relating
to the financial statements and financial statement schedule, which appear in
Networks Associates, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
San Jose, California
October 4, 1999
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