S-8

As filed with the Securities and Exchange Commission on June 28, 2002

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
(State or other jurisdiction of
incorporation or organization) 77-0316593
(I.R.S. Employer
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
2002 Employee Stock Purchase Plan
(Full title of the plans)

George Samenuk
Chairman and Chief Executive Officer
Networks Associates, Inc.
3965 Freedom Circle
Santa Clara, California 95054
(408) 988-3832
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copy to:
Jeffrey D. Saper, Esq.
Kurt J. Berney, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
(650) 493-9300

CALCULATION OF REGISTRATION FEE

		Amount		Proposed Maximum			Proposed Maximum
Title Securities to		to be		Offering Price			Aggregate Offering			Amount of
be Registered		Registered		Per Share			Price			Registration Fee
Common Stock to be issued under the Networks Associates, Inc. 1997 Stock Incentive Plan			5,000,000	$	17.90	(1)	$	89,500,000	(1)	$	8,234	(1)
Common Stock available for issuance under the 2002 Employee Stock Purchase Plan			2,000,000	$	15.22	(2)	$	30,440,000	(2)	$	2,801	(2)
	TOTAL:		7,000,000	$	17.13		$	119,940,000		$	11,035

(1)

Estimated in accordance with Rule 457(h) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee, based on the average between the high and low prices per share of the Common Stock as reported on the New York Stock Exchange on June 26, 2002.

(2)

Estimated in accordance with Rule 457(a) solely for the purpose of calculating the registration fee based upon 85% of the average between the high and low prices per share of the Common Stock as reported on the New York Stock Exchange on June 26, 2002. Pursuant to the 2002 Employee Stock Purchase Plan, the purchase price of a share of Common Stock shall mean an amount equal to 85% of the lower of the fair market value of a share of Common Stock at the beginning of an offering period or after a purchase period ends.

TABLE OF CONTENTS

PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
	ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
	ITEM 4. DESCRIPTION OF SECURITIES.
	ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
	ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
	ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
	ITEM 8. EXHIBITS.
	ITEM 9. UNDERTAKINGS.
SIGNATURES
Exhibit Index
EXHIBIT 4.1
EXHIBIT 4.2
EXHIBIT 5.1
EXHIBIT 23.1

REGISTRATION STATEMENT ON FORM S-8

PART II

INFORMATION REQUIRED IN REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

     The Securities 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 Annual Report on Form 10-K/A for the year ended December 31, 2001, filed with the Commission on June 28, 2002;
(3)	Our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2002, filed with the Commission on June 28, 2002;
(4)	Our Current Report on Form 8-K filed with the Commission on May 17, 2002; and
(5)	Our Current Report on Form 8-K filed with the Commission on April 25, 2002.

     You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:

     Stephen C. Richards
     Chief Operating Officer and Chief Financial Officer
     Networks Associates, Inc.
     3965 Freedom Circle
     Santa Clara, CA 95054
     (408) 988-3832

     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.

ITEM 4. DESCRIPTION OF SECURITIES.

     Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

     Not applicable.

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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.

ITEM 8. EXHIBITS.

Exhibit
Number	Description
4.1	Networks Associates, Inc. 1997 Stock Incentive Plan, as amended.
4.2	Networks Associates, Inc. 2002 Employee Stock Purchase Plan.
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 5)

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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:
(2)	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.
(3)	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;
(4)	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.
(5)	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.
(6)	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.

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.

-4-

SIGNATURES

     Pursuant to the requirements 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 June 28, 2002.

NETWORKS ASSOCIATES, INC.
By:	/s/ Stephen C. Richards
	Stephen C. Richards Chief Financial Officer

POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints George Samenuk and Stephen C. Richards, and each of them acting individually, as his or her attorney-in-fact, each 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 of said attorneys-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:

Signature	Title	Date
/s/ George Samenuk George Samenuk	Chairman of the Board and Chief Executive Officer	June 28, 2002
/s/ Stephen C. Richards Stephen C. Richards	Chief Financial Officer	June 28, 2002
/s/ Leslie Denend Leslie Denend	Director	June 28, 2002
/s/ Robert Dutkowsky Robert Dutkowsky	Director	June 28, 2002
/s/ Robert Pangia Robert Pangia	Director	June 28, 2002
/s/ Liane Wilson Liane Wilson	Director	June 28, 2002

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Exhibit Index

Exhibit
Number	Description
4.1	Networks Associates, Inc. 1997 Stock Incentive Plan, as amended.
4.2	Networks Associates, Inc. 2002 Employee Stock Purchase Plan.
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 5)

-6- EX-4.1 3 f82601exv4w1.txt EXHIBIT 4.1 EXHIBIT 4.1 Networks Associates, Inc. 1997 Stock Incentive Plan (as amended through May 15, 2002) 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, 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) 32,475,000 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 -2- 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 -3- 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 -4- 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. -5- 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 -6- 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 -7- 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. -8- 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: -9- (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 -10- 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. -11- 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. -12- 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 -13- 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. -14- 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. Networks Associates, Inc. By: /s/ Kent Roberts ------------------------------- NETWORKS ASSOCIATES, INC. 1997 STOCK INCENTIVE PLAN APPENDIX A PERFORMANCE CRITERIA 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 EX-4.2 4 f82601exv4w2.txt EXHIBIT 4.2 EXHIBIT 4.2 NETWORK ASSOCIATES, INC. 2002 EMPLOYEE STOCK PURCHASE PLAN 1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN. 1.1 ESTABLISHMENT. The Network Associates, Inc. 2002 Employee Stock Purchase Plan (the "PLAN") is hereby established effective as of April 10, 2002, subject to approval by the Company's stockholders. 1.2 PURPOSE. The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward Eligible Employees of the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan provides such Eligible Employees with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock. The Company intends that the Plan 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. In addition, this Plan authorizes the grant of Purchase Rights which do not qualify under Section 423 of the Code pursuant to rules, procedures or sub-plans adopted by the Board designed to achieve desired tax or other objectives in particular locations outside the United States. 1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued. 2. DEFINITIONS AND CONSTRUCTION. 2.1 DEFINITIONS. Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. Whenever used herein, the following terms shall have their respective meanings set forth below: (a) "BOARD" means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, "Board" also means such Committee(s). (b) "CODE" means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. (c) "COMMITTEE" means a committee of the Board duly appointed to administer the Plan and having such powers as specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board 1 granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. (d) "COMPANY" means Network Associates, Inc., a Delaware corporation, or any successor corporation thereto. (e) "COMPENSATION" means, with respect to any Offering Period, 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 or, for Participants outside the United States, equivalent amounts as determined by the Board. Accordingly, Compensation may include, without limitation, salaries, commissions, bonuses, overtime, and salary deferrals under section 401(k) of the Code. Compensation shall be limited to amounts actually payable in cash directly to the Participant or deferred by the Participant during the Offering Period. 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, or any other compensation not included above. (f) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan. (g) "EMPLOYEE" means a person treated as an employee of a Participating Company for purposes of Section 423 of the Code. A Participant shall be deemed to have ceased to be an Employee either upon an actual termination of employment or upon the corporation employing the Participant ceasing to be a Participating Company. For purposes of the Plan, an individual shall not be deemed to have ceased to be an Employee while on any military leave, sick leave, or other bona fide leave of absence approved by the Company of ninety (90) days or less. If an individual's leave of absence exceeds ninety (90) days, the individual shall be deemed to have ceased to be an Employee on the ninety-first (91st) day of such leave unless the individual's right to reemployment with the Participating Company Group is guaranteed either by statute or by contract. (h) "FAIR MARKET VALUE" means, as of any date: (i) If the Stock is then listed on a national or regional securities exchange or market system or is regularly quoted by a recognized securities dealer, the closing sale price of a share of Stock (or the mean of the closing bid and asked prices if the Stock is so quoted instead) as quoted on the Nasdaq National Market, the Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, or by such recognized securities dealer, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system or has been quoted by such securities dealer, the date on which the Fair Market Value is established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as determined by the Board, in its discretion. 2 (ii) If, on the relevant date, the Stock is not then listed on a national or regional securities exchange or market system or regularly quoted by a recognized securities dealer, the Fair Market Value of a share of Stock shall be as determined in good faith by the Board. (i) "OFFERING" means an offering of Stock as provided in Section 6.1. (j) "OFFERING DATE" means, for any Offering, the first day of the Offering Period. (k) "OFFERING PERIOD" means a period established in accordance with Section 6. (l) "PARENT CORPORATION" means any present or future "parent corporation" of the Company, as defined in Section 424(e) of the Code. (m) "PARTICIPANT" means an Eligible Employee who has become a participant in an Offering Period in accordance with Section 7 and remains a participant in accordance with the Plan. (n) "PARTICIPATING COMPANY" means the Company or any Parent Corporation or Subsidiary Corporation designated by the Board as a corporation the Employees of which may, if Eligible Employees, participate in the Plan. The Board shall have the sole and absolute discretion to determine from time to time which Parent Corporations or Subsidiary Corporations shall be Participating Companies. (o) "PARTICIPATING COMPANY GROUP" means, at any point in time, the Company and all other corporations collectively which are then Participating Companies. (p) "PURCHASE DATE" means, for any Purchase Period, the last day of such period. (q) "PURCHASE PERIOD" means a period established in accordance with Section 6.2. (r) "PURCHASE PRICE" means the price at which a share of Stock may be purchased under the Plan, as determined in accordance with Section 9. (s) "PURCHASE RIGHT" means an option granted to a Participant pursuant to the Plan to purchase such shares of Stock as provided in Section 8, which the Participant may or may not exercise during the Offering Period in which such option is outstanding. Such option arises from the right of a Participant to withdraw any accumulated payroll deductions of the Participant not previously applied to the purchase of Stock under the Plan and to terminate participation in the Plan at any time during an Offering Period. 3 (t) "STOCK" means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2. (u) "SUBSCRIPTION AGREEMENT" means a written agreement in such form as specified by the Company, stating an Employee's election to participate in the Plan and authorizing payroll deductions under the Plan from the Employee's Compensation. (v) "SUBSCRIPTION DATE" means the last business day prior to the Offering Date of an Offering Period or such earlier date as the Company shall establish. (w) "SUBSIDIARY CORPORATION" means any present or future "subsidiary corporation" of the Company, as defined in Section 424(f) of the Code. 2.2 CONSTRUCTION. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise. 3. ADMINISTRATION. 3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the Board. All questions of interpretation of the Plan, of any form of agreement or other document employed by the Company in the administration of the Plan, or of any Purchase Right shall be determined by the Board, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or the Purchase Right, unless fraudulent or made in bad faith. Subject to the provisions of the Plan, the Board shall determine all of the relevant terms and conditions of Purchase Rights; provided, however, that all Participants granted Purchase Rights pursuant to an Offering which are intended to comply with Section 423 of the Code shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code. Any and all actions, decisions and determinations taken or made by the Board in the exercise of its discretion pursuant to the Plan or any agreement thereunder (other than determining questions of interpretation pursuant to the second sentence of this Section 3.1) shall be final, binding and conclusive upon all persons having an interest therein. 3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the officer has apparent authority with respect to such matter, right, obligation, determination or election. 3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The Company may, from time to time, consistent with the Plan and the requirements of Section 423 of the Code, establish, change or terminate such rules, guidelines, policies, procedures, limitations, or adjustments as deemed advisable by the Company, in its discretion, for the proper administration of the Plan, 4 including, without limitation, (a) a minimum payroll deduction amount required for participation in an Offering, (b) a limitation on the frequency or number of changes permitted in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld in a currency other than United States dollars, (d) a payroll deduction greater than or less than the amount designated by a Participant in order to adjust for the Company's delay or mistake in processing a Subscription Agreement or in otherwise effecting a Participant's election under the Plan or as advisable to comply with the requirements of Section 423 of the Code, and (e) determination of the date and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan. All such actions by the Company shall be taken consistent with the requirement under Section 423(b)(5) of the Code that all Participants granted Purchase Rights pursuant to an Offering (which are intended to comply with the requirements of Section 423 of the Code) shall have the same rights and privileges within the meaning of such section. 3.4 INDEMNIFICATION. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. 4. SHARES SUBJECT TO PLAN. 4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be 2,000,000, and shall consist of authorized but unissued or reacquired shares of Stock, or any combination thereof. If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of that Purchase Right shall again be available for issuance under the Plan. 4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, or in the event of any merger (including a merger effected for the purpose of changing the Company's domicile), sale of assets or other reorganization in which the Company is a party, appropriate adjustments shall be made in the number and class of shares subject to the Plan and each Purchase Right, and in the Purchase Price. If a majority of the 5 shares of the same class as the shares subject to outstanding Purchase Rights are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the "NEW SHARES"), the Board may unilaterally amend the outstanding Purchase Rights to provide that such Purchase Rights are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the Purchase Price of, the outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the Purchase Price be decreased to an amount less than the par value, if any, of the stock subject to the Purchase Right. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive. 5. ELIGIBILITY. 5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a Participating Company is eligible to participate in the Plan and shall be deemed an Eligible Employee, except the following excluded employees: (a) any Employee who has not completed thirty (30) days of continuous employment with a Participating Company as of the Offering Date, or (b) any Employee who is customarily employed by the Participating Company Group for less then twenty (20) hours per week unless, for Participants outside the United States, such exclusion is not permitted under foreign law. 5.2 EXCLUSION OF CERTAIN STOCKHOLDERS. Notwithstanding any provision of the Plan to the contrary, no Employee shall be treated as an Eligible Employee and granted a Purchase Right under the Plan if, immediately after such grant, the Employee would own or hold options to purchase stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation, as determined in accordance with Section 423(b)(3) of the Code. For purposes of this Section 5.2, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of such Employee. 5.3 DETERMINATION BY COMPANY. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee or an Eligible Employee and the effective date of such individual's attainment or termination of such status, as the case may be. For purposes of an individual's participation in or other rights, if any, under the Plan as of the time of the Company's determination, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination. 6. OFFERINGS. 6.1 OFFERING PERIODS. The Plan shall be implemented on and after the Effective Date by sequential and overlapping Offerings of approximately twenty four (24) months duration or such other duration as the Board shall determine (an "OFFERING PERIOD"); provided, however, that the first Offering Period shall commence on August 1, 2002 and end on or about July 31, 2004. 6 Subsequent Offering Periods shall commence on or about February 1 and August 1 of each year and end on or about the last days of the second January and July, respectively, occurring thereafter. Notwithstanding the foregoing, the Board may establish a different duration for one or more Offering Periods or different commencing or ending dates for such Offering Periods; provided, however, that no Offering Period may have a duration exceeding twenty-seven (27) months. If the first or last day of an Offering Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Offering Period. 6.2 PURCHASE PERIODS. Each Offering Period shall consist of four (4) consecutive purchase periods of approximately six (6) months duration, or such other number or duration as the Board shall determine (individually, a "PURCHASE PERIOD"). A Purchase Period commencing on or about February 1 shall end on or about the next July 31. A Purchase Period commencing on or about August 1 shall end on or about the next January 31. Notwithstanding the foregoing, the Board may establish a different duration for one or more Purchase Periods or different commencing or ending dates for such Purchase Periods. If the first or last day of a Purchase Period is not a day on which the national securities exchanges or Nasdaq Stock Market are open for trading, the Company shall specify the trading day that will be deemed the first or last day, as the case may be, of the Purchase Period. 7. PARTICIPATION IN THE PLAN. 7.1 INITIAL PARTICIPATION. An Eligible Employee may become a Participant in an Offering Period by delivering a properly completed Subscription Agreement to the office designated by the Company not later than the close of business for such office on the Subscription Date established by the Company for that Offering Period. An Eligible Employee who does not deliver a properly completed Subscription Agreement to the Company's designated office on or before the Subscription Date for an Offering Period shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless the Eligible Employee subsequently delivers a properly completed Subscription Agreement to the appropriate office of the Company on or before the Subscription Date for such subsequent Offering Period. An Employee who becomes an Eligible Employee after the Offering Date of an Offering Period shall not be eligible to participate in that Offering Period but may participate in any subsequent Offering Period provided the Employee is still an Eligible Employee as of the Offering Date of such subsequent Offering Period. 7.2 CONTINUED PARTICIPATION. A Participant shall automatically participate in the next Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates provided that the Participant remains an Eligible Employee on the Offering Date of the new Offering Period and has not either (a) withdrawn from the Plan pursuant to Section 12.1 or (b) terminated employment as provided in Section 13. A Participant who may automatically participate in a subsequent Offering Period, as provided in this Section, is not required to deliver any additional Subscription Agreement for the subsequent Offering Period in order to continue participation in the Plan. However, a Participant may deliver a new Subscription Agreement for a subsequent Offering Period in accordance with the procedures set forth in Section 7 7.1 if the Participant desires to change any of the elections contained in the Participant's then effective Subscription Agreement. 8. RIGHT TO PURCHASE SHARES. 8.1 GRANT OF PURCHASE RIGHT. Except as otherwise specified by the Board prior to the Offering Date or of an Offering Period, on the Offering Date of each Offering Period, each Participant in that Offering Period shall be granted automatically a Purchase Right consisting of an option to purchase the lesser of (a) that number of whole shares of Stock determined by dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value of a share of Stock on such Offering Date or (b) ten thousand (10,000) shares of Stock. No Purchase Right shall be granted on an Offering Date to any person who is not, on such Offering Date, an Eligible Employee. 8.2 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any provision of the Plan to the contrary, no Participant shall be granted a Purchase Right which permits his or her right to purchase shares of Stock under the Plan to accrue at a rate which, when aggregated with such Participant's rights to purchase shares under all other employee stock purchase plans of a Participating Company intended to meet the requirements of Section 423 of the Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if any, as may be imposed by the Code) for each calendar year in which such Purchase Right is outstanding at any time. For purposes of the preceding sentence, the Fair Market Value of shares purchased during a given Offering Period shall be determined as of the Offering Date for such Offering Period. The limitation described in this Section shall be applied in conformance with applicable regulations under Section 423(b)(8) of the Code. 9. PURCHASE PRICE. The Purchase Price at which each share of Stock may be acquired in an Offering Period upon the exercise of all or any portion of a Purchase Right shall be established by the Board; provided, however, that the Purchase Price on each Purchase Date shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period or (b) the Fair Market Value of a share of Stock on the Purchase Date. Unless otherwise provided by the Board prior to the commencement of an Offering Period, the Purchase Price on each Purchase Date during that Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date. 10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares of Stock acquired pursuant to the exercise of all or any portion of a Purchase Right may be paid for by means of payroll deductions from the Participant's Compensation accumulated during the Offering Period for which such Purchase Right was granted or, if authorized by the Board for Participants outside the United States, by means of contribution other than payroll deductions, subject to the following: 8 10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided herein, the amount to be deducted under the Plan from a Participant's Compensation on each payday during an Offering Period shall be determined by the Participant's Subscription Agreement. The Subscription Agreement shall set forth the percentage of the Participant's Compensation to be deducted on each payday during an Offering Period in whole percentages of not less than one percent (1%) (except as a result of an election pursuant to Section 10.3 to stop payroll deductions effective following the first payday during an Offering) or more than ten percent (10%). The Board may change the foregoing limits on payroll deductions effective as of any Offering Date. 10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. 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 herein. 10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an Offering Period, a Participant may elect to increase or decrease the rate of or to stop deductions from his or her Compensation by delivering to the Company's designated office an amended Subscription Agreement authorizing such change on or before the Change Notice Date, as defined below. A Participant who elects, effective following the first payday of an Offering Period, to decrease the rate of his or her payroll deductions to one percent (1%) shall nevertheless remain a Participant in the current Offering Period unless such Participant withdraws from the Plan as provided in Section 12.1. The "CHANGE NOTICE DATE" shall be the day immediately prior to the beginning of the first pay period for which such election is to be effective, unless a different date is established by the Company and announced to the Participants. 10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company may, in its sole discretion, suspend a Participant's payroll deductions under the Plan as the Company deems advisable to avoid accumulating payroll deductions in excess of the amount that could reasonably be anticipated to purchase the maximum number of shares of Stock permitted (a) under the Participant's Purchase Right or (b) during a calendar year under the limit set forth in Section 8.2. Payroll deductions shall be resumed at the rate specified in the Participant's then effective Subscription Agreement at the beginning, respectively, of (a) the next Offering Period the first Purchase Date of which falls in the following calendar year, provided that the individual is a Participant in such Offering Period or (b) the next Purchase Period the Purchase Date of which falls in the following calendar year, unless the Participant has either withdrawn from the Plan as provided in Section 12.1 or has ceased to be an Eligible Employee. 10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall be maintained for each Participant. All payroll deductions from a Participant's Compensation shall be credited to such Participant's Plan account and shall be deposited with the general funds of the Company unless prohibited by foreign law for Participants outside the United States. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose. 10.6 NO INTEREST PAID. Interest shall not be paid on sums deducted from a Participant's Compensation pursuant to the Plan unless required by foreign law for Participants outside the United States. 9 10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may withdraw all of the payroll deductions credited to his or her Plan account and not previously applied toward the purchase of Stock by delivering to the Company's designated office a written notice on a form provided by the Company for such purpose. Amounts withdrawn shall be returned to the Participant as soon as practicable after the Company's receipt of the notice of withdrawal and may not be applied to the purchase of shares in any Offering under the Plan. The Company may from time to time establish or change limitations on the frequency of withdrawals permitted under this Section, establish a minimum dollar amount that must be retained in the Participant's Plan account, or terminate the withdrawal right provided by this Section. 11. PURCHASE OF SHARES. 11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Plan and whose participation in the Offering has not otherwise terminated before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant's Purchase Right the number of whole shares of Stock determined by dividing (a) the total amount of the Participant's payroll deductions accumulated in the Participant's Plan account during the Offering Period and not previously applied toward the purchase of Stock by (b) the Purchase Price. However, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant's Purchase Right. No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated before such Purchase Date. 11.2 PRO RATA ALLOCATION OF SHARES. If the number of shares of Stock which might be purchased by all Participants in the Plan on a Purchase Date exceeds the number of shares of Stock available in the Plan as provided in Section 4.1, the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as practicable and as the Company determines to be equitable. Any fractional share resulting from such pro rata allocation to any Participant shall be disregarded. 11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each Purchase Date, the Company shall arrange the delivery to each Participant of a certificate representing the shares acquired by the Participant on such Purchase Date; provided that the Company may deliver such shares to a broker designated by the Company that will hold such shares for the benefit of the Participant. Shares to be delivered to a Participant under the Plan shall be registered in the name of the Participant, or, if requested by the Participant, in the name of the Participant and his or her spouse, or, if applicable, in the names of the heirs of the Participant. 11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a Participant's Plan account following any Purchase Date shall be refunded to the Participant as soon as practicable after such Purchase Date. However, if the cash balance to be returned to a Participant pursuant to the preceding sentence is less than the amount that would have been necessary to purchase an additional whole share of Stock on such Purchase Date, the Company may retain the cash balance in the Participant's Plan account to be applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period, as the case may be. 10 11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right is granted or exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the federal, state, local and foreign income, social insurance and other payroll tax withholding obligations, if any, of the Participating Company Group which arise upon the grant or exercise of the Purchase Right or upon such disposition of shares, respectively. The Participating Company Group may, but shall not be obligated to, withhold from the Participant's compensation the amount necessary to meet such withholding obligations. 11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's Purchase Right remaining unexercised after the end of the Offering Period to which the Purchase Right relates shall expire immediately upon the end of the Offering Period. 11.7 PROVISION OF REPORTS AND STOCKHOLDER INFORMATION TO PARTICIPANTS. Each Participant who has exercised all or part of his or her Purchase Right shall receive, as soon as practicable after the Purchase Date, a report of such Participant's Plan account setting forth the total payroll deductions accumulated prior to such exercise, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the cash balance, if any, remaining immediately after such purchase that is to be refunded or retained in the Participant's Plan account pursuant to Section 11.4. The report required by this Section may be delivered in such form and by such means, including by electronic transmission, as the Company may determine. In addition, each Participant shall be provided information concerning the Company equivalent to that information provided generally to the Company's common stockholders. 12. WITHDRAWAL FROM PLAN OR OFFERING. 12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the Plan by signing and delivering to the Company's designated office a written notice of withdrawal on a form provided by the Company for this purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, that if a Participant withdraws from the Plan after a Purchase Date, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date. A Participant who voluntarily withdraws from the Plan is prohibited from resuming participation in the Plan in the same Offering from which he or she withdrew, but may participate in any subsequent Offering by again satisfying the requirements of Sections 5 and 7.1. The Company may impose, from time to time, a requirement that the notice of withdrawal from the Plan be on file with the Company's designated office for a reasonable period prior to the effectiveness of the Participant's withdrawal. 12.2 AUTOMATIC WITHDRAWAL FROM AN OFFERING PERIOD. If the Fair Market Value of a share of Stock on the first day of an Offering Period is higher than the Fair Market Value of a share of Stock on the first day of any subsequent Purchase Period, then every Participant automatically shall be (a) withdrawn from such Offering after the acquisition of shares of Stock on the Purchase Date of that Offering Period and (b) enrolled in the new Offering commencing immediately following such Purchase Date. A Participant may elect not to be automatically withdrawn from an Offering pursuant to this Section 12.2 by delivering to the Company's designated 11 office not later than the close of business on the Purchase Date a written notice indicating such election. 12.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary withdrawal from the Plan pursuant to Section 12.1 or automatic withdrawal from an Offering pursuant to Section 12.2, the Participant's accumulated payroll deductions which have not been applied toward the purchase of shares of Stock (except, in the case of an automatic withdrawal pursuant to Section 12.2, for an amount necessary to purchase an additional whole share of Stock as provided in Section 11.4) shall be refunded to the Participant as soon as practicable after the withdrawal, without the payment of any interest, and the Participant's interest in the Plan or the Offering, as applicable, shall terminate. Such accumulated payroll deductions to be refunded in accordance with this Section may not be applied to any other Offering under the Plan. 13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Upon a Participant's ceasing, prior to a Purchase Date, to be an Employee of the Participating Company Group for any reason, including retirement, disability or death, or upon the failure of a Participant to remain an Eligible Employee, the Participant's participation in the Plan shall terminate immediately. In such event, the Participant's accumulated payroll deductions which have not been applied toward the purchase of shares shall, as soon as practicable, be returned to the Participant or, in the case of the Participant's death, to the Participant's beneficiary designated in accordance with Section 20, if any, or legal representative, and all of the Participant's rights under the Plan shall terminate. Interest shall not be paid on sums returned pursuant to this Section 13 unless required by foreign law for Participants outside the United States. A Participant whose participation has been so terminated may again become eligible to participate in the Plan by satisfying the requirements of Sections 5 and 7.1. 14. CHANGE IN CONTROL. 14.1 DEFINITIONS. (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. (b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the "TRANSACTION") wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company's voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting securities of the Company or, in the case of a Transaction described in Section 14.1(a)(iii), the corporation or 12 other business entity to which the assets of the Company were transferred (the "TRANSFEREE"), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Board shall have the right to determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive. 14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the "ACQUIRING CORPORATION"), may, without the consent of any Participant, assume the Company's rights and obligations under the Plan. If the Acquiring Corporation elects not to assume the Company's rights and obligations under the Plan, the Purchase Date of the then current Purchase Period shall be accelerated to a date before the date of the Change in Control specified by the Board, but the number of shares of Stock subject to outstanding Purchase Rights shall not be adjusted. All Purchase Rights which are neither assumed by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. 15. NONTRANSFERABILITY OF PURCHASE RIGHTS. Neither payroll deductions credited to a Participant's Plan account nor a Participant's Purchase Right may be assigned, transferred, pledged or otherwise disposed of in any manner other than as provided by the Plan or by will or the laws of descent and distribution. (A beneficiary designation pursuant to Section 20 shall not be treated as a disposition for this purpose.) Any such attempted assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from the Plan as provided in Section 12.1. A Purchase Right shall be exercisable during the lifetime of the Participant only by the Participant. 16. COMPLIANCE WITH SECURITIES LAW. The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. A Purchase Right may not be granted or exercised if the grant of such Purchase Right or issuance of shares upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any securities exchange or market system upon which the Stock may then be listed. In addition, no Purchase Right may be exercised unless (a) 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 (b) 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. 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 lawful issuance and sale of any shares under the Plan shall relieve the Company of 13 any liability in respect of the failure to grant such Purchase Right or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the grant or 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. 17. RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall have no rights as a stockholder by virtue of the Participant's participation in the Plan until the date of the issuance of a certificate for the shares purchased pursuant to the exercise of the Participant's Purchase Right (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 4.2. Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant's employment at any time. 18. LEGENDS. The Company may at any time place legends or other identifying symbols referencing any applicable federal, state or foreign securities law 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 Section. 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 AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE UNITED STATES 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. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)." 19. NOTIFICATION OF DISPOSITION 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. The 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 (or, if elected by the Participant, in the name of the Participant and his or her spouse but not in the name of any nominee) until the later of 14 two years after the date of grant of such Purchase Right or one year after the date of exercise of such Purchase Right. 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. 20. DESIGNATION OF BENEFICIARY. 20.1 DESIGNATION PROCEDURE. Unless otherwise restricted by the Board for participants outside the United States, a Participant may file a written designation of a beneficiary who is to receive (a) shares and cash, if any, from the Participant's Plan account if the Participant dies subsequent to a Purchase Date but prior to delivery to the Participant of such shares and cash or (b) cash, if any, from the Participant's Plan account if the Participant dies prior to the exercise of the Participant's Purchase Right. If a married Participant designates a beneficiary other than the Participant's spouse, the effectiveness of such designation shall be subject to the consent of the Participant's spouse. A Participant may change his or her beneficiary designation at any time by written notice to the Company. 20.2 ABSENCE OF BENEFICIARY DESIGNATION. If a Participant dies without an effective designation pursuant to Section 20.1 of a beneficiary who is living at the time of the Participant's death, the Company shall deliver any shares or cash credited to the Participant's Plan account to the Participant's legal representative. 21. NOTICES. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 22. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time amend or terminate the Plan, except that (a) no such amendment or termination shall affect Purchase Rights previously granted under the Plan unless expressly provided by the Board and (b) no such amendment or termination may adversely affect a Purchase Right previously granted under the Plan without the consent of the Participant, 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 comply with any applicable law, regulation or rule. In addition, an amendment to the Plan must be approved by the stockholders 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 then authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Board as Participating Companies. 23. RULES FOR FOREIGN JURISDICTIONS. 15 23.1 SPECIAL RULES OR PROCEDURES. Notwithstanding any provision to the contrary in this Plan, the Board may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States. Without limiting the generality of the foregoing, the Board is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of Compensation, handling of payroll deductions, making of contributions to the Plan in forms other than payroll deductions, establishment of bank or trust accounts to hold payroll deductions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates which vary with local requirements. 23.2 NON-423 PLAN RULES, PROCEDURES OR SUB-PLANS. The Board may also adopt rules, procedures or sub-plans applicable to particular Subsidiary Corporations or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code. The rules of such sub-plans may take precedence over other provisions of this Plan, with the exception of Sections 4.1 and 22, but unless otherwise superseded by the terms of such sub-plan, the provisions of this Plan shall govern the operation of such sub-plan. To the extent inconsistent with the requirements of Section 423 of the Code, the Purchase Rights granted under such sub-plans shall not be considered to comply with Section 423 of the Code. 16 PLAN HISTORY April 10, 2002 Board adopts Plan with an initial reserve of 2,000,000 shares. May 15, 2002 Stockholders approve the Plan with an initial reserve of 2,000,000 shares. 1 EX-5.1 5 f82601exv5w1.txt EXHIBIT 5.1 EXHIBIT 5.1 June 28, 2002 Networks 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 June 28, 2002, in connection with the registration under the Securities Act of 1933, as amended, of 5,000,000 shares of Common Stock to be issued under the Company's 1997 Stock Incentive Plan, as amended and 2,000,000 shares of Common Stock to be issued under the Company's 2002 Employee Stock Purchase Plan. Such shares are, collectively, referred to herein as the "Shares" and the 1997 Stock Incentive Plan, as amended, and the 2002 Employee Stock Purchase Plan are referred to herein as 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 nonassessable. 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 --------------------------------------- EX-23.1 6 f82601exv23w1.txt EXHIBIT 23.1 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 January 17, 2002, except as to Note 3, which is as of May 17, 2002, relating to the consolidated financial statements and financial statement schedule of Networks Associates, Inc., which appear in Networks Associates Inc.'s Annual Report on Form 10-K/A for the year ended December 31, 2001. PRICEWATERHOUSECOOPERS LLP San Jose, California June 26, 2002 -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     EXHIBIT 4.1



                            Networks Associates, Inc.

                            1997 Stock Incentive Plan
                        (as amended through May 15, 2002)


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,





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) 32,475,000 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




                                                                             -2-


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




                                                                             -3-


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




                                                                             -4-


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.




                                                                             -5-


        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




                                                                             -6-


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




                                                                             -7-


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.




                                                                             -8-


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:




                                      -9-


            (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




                                                                            -10-


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.




                                                                            -11-


        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.




                                                                            -12-


        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




                                                                            -13-


        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.





                                                                            -14-


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.



                                        Networks Associates, Inc.




                                        By: /s/ Kent Roberts
                                           -------------------------------






               NETWORKS ASSOCIATES, INC. 1997 STOCK INCENTIVE PLAN

                                   APPENDIX A

                              PERFORMANCE CRITERIA


         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

EX-4.2

                                                                     EXHIBIT 4.2



                            NETWORK ASSOCIATES, INC.
                        2002 EMPLOYEE STOCK PURCHASE PLAN



        1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

           1.1 ESTABLISHMENT. The Network Associates, Inc. 2002 Employee Stock
Purchase Plan (the "PLAN") is hereby established effective as of April 10, 2002,
subject to approval by the Company's stockholders.

           1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Company and its stockholders by providing an incentive to attract, retain
and reward Eligible Employees of the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan provides such Eligible Employees with an
opportunity to acquire a proprietary interest in the Company through the
purchase of Stock. The Company intends that the Plan 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. In addition,
this Plan authorizes the grant of Purchase Rights which do not qualify under
Section 423 of the Code pursuant to rules, procedures or sub-plans adopted by
the Board designed to achieve desired tax or other objectives in particular
locations outside the United States.

1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier of its
termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued.

        2. DEFINITIONS AND CONSTRUCTION.

           2.1 DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:

               (a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).

               (b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

               (c) "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as specified by the Board. Unless the
powers of the Committee have been specifically limited, the Committee shall have
all of the powers of the Board




                                                                               1


granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.

               (d) "COMPANY" means Network Associates, Inc., a Delaware
corporation, or any successor corporation thereto.

               (e) "COMPENSATION" means, with respect to any Offering Period,
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 or, for Participants outside the United States, equivalent amounts as
determined by the Board. Accordingly, Compensation may include, without
limitation, salaries, commissions, bonuses, overtime, and salary deferrals under
section 401(k) of the Code. Compensation shall be limited to amounts actually
payable in cash directly to the Participant or deferred by the Participant
during the Offering Period. 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, or any other compensation not
included above.

               (f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the Plan.

               (g) "EMPLOYEE" means a person treated as an employee of a
Participating Company for purposes of Section 423 of the Code. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while on any military
leave, sick leave, or other bona fide leave of absence approved by the Company
of ninety (90) days or less. If an individual's leave of absence exceeds ninety
(90) days, the individual shall be deemed to have ceased to be an Employee on
the ninety-first (91st) day of such leave unless the individual's right to
reemployment with the Participating Company Group is guaranteed either by
statute or by contract.

               (h) "FAIR MARKET VALUE" means, as of any date:

                   (i) If the Stock is then listed on a national or regional
securities exchange or market system or is regularly quoted by a recognized
securities dealer, the closing sale price of a share of Stock (or the mean of
the closing bid and asked prices if the Stock is so quoted instead) as quoted on
the Nasdaq National Market, the Nasdaq SmallCap Market or such other national or
regional securities exchange or market system constituting the primary market
for the Stock, or by such recognized securities dealer, as reported in The Wall
Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system or has been quoted by such securities
dealer, the date on which the Fair Market Value is established shall be the last
day on which the Stock was so traded or quoted prior to the relevant date, or
such other appropriate day as determined by the Board, in its discretion.




                                                                               2


                   (ii) If, on the relevant date, the Stock is not then listed
on a national or regional securities exchange or market system or regularly
quoted by a recognized securities dealer, the Fair Market Value of a share of
Stock shall be as determined in good faith by the Board.

               (i) "OFFERING" means an offering of Stock as provided in Section
6.1.

               (j) "OFFERING DATE" means, for any Offering, the first day of the
Offering Period.

               (k) "OFFERING PERIOD" means a period established in accordance
with Section 6.

               (l) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (m) "PARTICIPANT" means an Eligible Employee who has become a
participant in an Offering Period in accordance with Section 7 and remains a
participant in accordance with the Plan.

               (n) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation designated by the Board as a corporation
the Employees of which may, if Eligible Employees, participate in the Plan. The
Board shall have the sole and absolute discretion to determine from time to time
which Parent Corporations or Subsidiary Corporations shall be Participating
Companies.

               (o) "PARTICIPATING COMPANY GROUP" means, at any point in time,
the Company and all other corporations collectively which are then Participating
Companies.

               (p) "PURCHASE DATE" means, for any Purchase Period, the last day
of such period.

               (q) "PURCHASE PERIOD" means a period established in accordance
with Section 6.2.

               (r) "PURCHASE PRICE" means the price at which a share of Stock
may be purchased under the Plan, as determined in accordance with Section 9.

               (s) "PURCHASE RIGHT" means an option granted to a Participant
pursuant to the Plan to purchase such shares of Stock as provided in Section 8,
which the Participant may or may not exercise during the Offering Period in
which such option is outstanding. Such option arises from the right of a
Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.




                                                                               3


               (t) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

               (u) "SUBSCRIPTION AGREEMENT" means a written agreement in such
form as specified by the Company, stating an Employee's election to participate
in the Plan and authorizing payroll deductions under the Plan from the
Employee's Compensation.

               (v) "SUBSCRIPTION DATE" means the last business day prior to the
Offering Date of an Offering Period or such earlier date as the Company shall
establish.

               (w) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

           2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

        3. ADMINISTRATION.

           3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan, of any form of agreement
or other document employed by the Company in the administration of the Plan, or
of any Purchase Right shall be determined by the Board, and such determinations
shall be final, binding and conclusive upon all persons having an interest in
the Plan or the Purchase Right, unless fraudulent or made in bad faith. Subject
to the provisions of the Plan, the Board shall determine all of the relevant
terms and conditions of Purchase Rights; provided, however, that all
Participants granted Purchase Rights pursuant to an Offering which are intended
to comply with Section 423 of the Code shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. Any and all actions,
decisions and determinations taken or made by the Board in the exercise of its
discretion pursuant to the Plan or any agreement thereunder (other than
determining questions of interpretation pursuant to the second sentence of this
Section 3.1) shall be final, binding and conclusive upon all persons having an
interest therein.

           3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.

           3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The Company
may, from time to time, consistent with the Plan and the requirements of Section
423 of the Code, establish, change or terminate such rules, guidelines,
policies, procedures, limitations, or adjustments as deemed advisable by the
Company, in its discretion, for the proper administration of the Plan,




                                                                               4


including, without limitation, (a) a minimum payroll deduction amount required
for participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements of Section 423 of the Code, and (e) determination of the date and
manner by which the Fair Market Value of a share of Stock is determined for
purposes of administration of the Plan. All such actions by the Company shall be
taken consistent with the requirement under Section 423(b)(5) of the Code that
all Participants granted Purchase Rights pursuant to an Offering (which are
intended to comply with the requirements of Section 423 of the Code) shall have
the same rights and privileges within the meaning of such section.

           3.4 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

        4. SHARES SUBJECT TO PLAN.

           4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be 2,000,000, and shall consist of authorized
but unissued or reacquired shares of Stock, or any combination thereof. If an
outstanding Purchase Right for any reason expires or is terminated or canceled,
the shares of Stock allocable to the unexercised portion of that Purchase Right
shall again be available for issuance under the Plan.

           4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company, or
in the event of any merger (including a merger effected for the purpose of
changing the Company's domicile), sale of assets or other reorganization in
which the Company is a party, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and each Purchase Right, and in
the Purchase Price. If a majority of the




                                                                               5


shares of the same class as the shares subject to outstanding Purchase Rights
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change Event) shares of another corporation (the "NEW SHARES"),
the Board may unilaterally amend the outstanding Purchase Rights to provide that
such Purchase Rights are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the Purchase Price of, the
outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as
determined by the Board, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 4.2 shall
be rounded down to the nearest whole number, and in no event may the Purchase
Price be decreased to an amount less than the par value, if any, of the stock
subject to the Purchase Right. The adjustments determined by the Board pursuant
to this Section 4.2 shall be final, binding and conclusive.

        5. ELIGIBILITY.

           5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be deemed
an Eligible Employee, except the following excluded employees: (a) any Employee
who has not completed thirty (30) days of continuous employment with a
Participating Company as of the Offering Date, or (b) any Employee who is
customarily employed by the Participating Company Group for less then twenty
(20) hours per week unless, for Participants outside the United States, such
exclusion is not permitted under foreign law.

           5.2 EXCLUSION OF CERTAIN STOCKHOLDERS. Notwithstanding any provision
of the Plan to the contrary, no Employee shall be treated as an Eligible
Employee and granted a Purchase Right under the Plan if, immediately after such
grant, the Employee would own or hold options to purchase stock of the Company
or of any Parent Corporation or Subsidiary Corporation possessing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of such corporation, as determined in accordance with Section 423(b)(3) of the
Code. For purposes of this Section 5.2, the attribution rules of Section 424(d)
of the Code shall apply in determining the stock ownership of such Employee.

           5.3 DETERMINATION BY COMPANY. The Company shall determine in good
faith and in the exercise of its discretion whether an individual has become or
has ceased to be an Employee or an Eligible Employee and the effective date of
such individual's attainment or termination of such status, as the case may be.
For purposes of an individual's participation in or other rights, if any, under
the Plan as of the time of the Company's determination, all such determinations
by the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary
determination.

        6. OFFERINGS.

           6.1 OFFERING PERIODS. The Plan shall be implemented on and after the
Effective Date by sequential and overlapping Offerings of approximately twenty
four (24) months duration or such other duration as the Board shall determine
(an "OFFERING PERIOD"); provided, however, that the first Offering Period shall
commence on August 1, 2002 and end on or about July 31, 2004.




                                                                               6


Subsequent Offering Periods shall commence on or about February 1 and August 1
of each year and end on or about the last days of the second January and July,
respectively, occurring thereafter. Notwithstanding the foregoing, the Board may
establish a different duration for one or more Offering Periods or different
commencing or ending dates for such Offering Periods; provided, however, that no
Offering Period may have a duration exceeding twenty-seven (27) months. If the
first or last day of an Offering Period is not a day on which the national
securities exchanges or Nasdaq Stock Market are open for trading, the Company
shall specify the trading day that will be deemed the first or last day, as the
case may be, of the Offering Period.

        6.2 PURCHASE PERIODS. Each Offering Period shall consist of four (4)
consecutive purchase periods of approximately six (6) months duration, or such
other number or duration as the Board shall determine (individually, a "PURCHASE
PERIOD"). A Purchase Period commencing on or about February 1 shall end on or
about the next July 31. A Purchase Period commencing on or about August 1 shall
end on or about the next January 31. Notwithstanding the foregoing, the Board
may establish a different duration for one or more Purchase Periods or different
commencing or ending dates for such Purchase Periods. If the first or last day
of a Purchase Period is not a day on which the national securities exchanges or
Nasdaq Stock Market are open for trading, the Company shall specify the trading
day that will be deemed the first or last day, as the case may be, of the
Purchase Period.

        7. PARTICIPATION IN THE PLAN.

           7.1 INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the Subscription Date established by
the Company for that Offering Period. An Eligible Employee who does not deliver
a properly completed Subscription Agreement to the Company's designated office
on or before the Subscription Date for an Offering Period shall not participate
in the Plan for that Offering Period or for any subsequent Offering Period
unless the Eligible Employee subsequently delivers a properly completed
Subscription Agreement to the appropriate office of the Company on or before the
Subscription Date for such subsequent Offering Period. An Employee who becomes
an Eligible Employee after the Offering Date of an Offering Period shall not be
eligible to participate in that Offering Period but may participate in any
subsequent Offering Period provided the Employee is still an Eligible Employee
as of the Offering Date of such subsequent Offering Period.

        7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the next Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
provided that the Participant remains an Eligible Employee on the Offering Date
of the new Offering Period and has not either (a) withdrawn from the Plan
pursuant to Section 12.1 or (b) terminated employment as provided in Section 13.
A Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section




                                                                               7


7.1 if the Participant desires to change any of the elections contained in the
Participant's then effective Subscription Agreement.

        8. RIGHT TO PURCHASE SHARES.

           8.1 GRANT OF PURCHASE RIGHT. Except as otherwise specified by the
Board prior to the Offering Date or of an Offering Period, on the Offering Date
of each Offering Period, each Participant in that Offering Period shall be
granted automatically a Purchase Right consisting of an option to purchase the
lesser of (a) that number of whole shares of Stock determined by dividing Fifty
Thousand Dollars ($50,000) by the Fair Market Value of a share of Stock on such
Offering Date or (b) ten thousand (10,000) shares of Stock. No Purchase Right
shall be granted on an Offering Date to any person who is not, on such Offering
Date, an Eligible Employee.

           8.2 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any provision
of the Plan to the contrary, no Participant shall be granted a Purchase Right
which permits his or her right to purchase shares of Stock under the Plan to
accrue at a rate which, when aggregated with such Participant's rights to
purchase shares under all other employee stock purchase plans of a Participating
Company intended to meet the requirements of Section 423 of the Code, exceeds
Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other
limit, if any, as may be imposed by the Code) for each calendar year in which
such Purchase Right is outstanding at any time. For purposes of the preceding
sentence, the Fair Market Value of shares purchased during a given Offering
Period shall be determined as of the Offering Date for such Offering Period. The
limitation described in this Section shall be applied in conformance with
applicable regulations under Section 423(b)(8) of the Code.

        9. PURCHASE PRICE.

           The Purchase Price at which each share of Stock may be acquired in an
Offering Period upon the exercise of all or any portion of a Purchase Right
shall be established by the Board; provided, however, that the Purchase Price on
each Purchase Date shall not be less than eighty-five percent (85%) of the
lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of
the Offering Period or (b) the Fair Market Value of a share of Stock on the
Purchase Date. Unless otherwise provided by the Board prior to the commencement
of an Offering Period, the Purchase Price on each Purchase Date during that
Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair
Market Value of a share of Stock on the Offering Date of the Offering Period, or
(b) the Fair Market Value of a share of Stock on the Purchase Date.

       10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.

           Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for by means of payroll deductions from
the Participant's Compensation accumulated during the Offering Period for which
such Purchase Right was granted or, if authorized by the Board for Participants
outside the United States, by means of contribution other than payroll
deductions, subject to the following:




                                                                               8


            10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided
herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by the
Participant's Subscription Agreement. The Subscription Agreement shall set forth
the percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent (1%)
(except as a result of an election pursuant to Section 10.3 to stop payroll
deductions effective following the first payday during an Offering) or more than
ten percent (10%). The Board may change the foregoing limits on payroll
deductions effective as of any Offering Date.

            10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. 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
herein.

            10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the Change Notice Date, as defined below. A Participant who elects,
effective following the first payday of an Offering Period, to decrease the rate
of his or her payroll deductions to one percent (1%) shall nevertheless remain a
Participant in the current Offering Period unless such Participant withdraws
from the Plan as provided in Section 12.1. The "CHANGE NOTICE DATE" shall be the
day immediately prior to the beginning of the first pay period for which such
election is to be effective, unless a different date is established by the
Company and announced to the Participants.

            10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company
may, in its sole discretion, suspend a Participant's payroll deductions under
the Plan as the Company deems advisable to avoid accumulating payroll deductions
in excess of the amount that could reasonably be anticipated to purchase the
maximum number of shares of Stock permitted (a) under the Participant's Purchase
Right or (b) during a calendar year under the limit set forth in Section 8.2.
Payroll deductions shall be resumed at the rate specified in the Participant's
then effective Subscription Agreement at the beginning, respectively, of (a) the
next Offering Period the first Purchase Date of which falls in the following
calendar year, provided that the individual is a Participant in such Offering
Period or (b) the next Purchase Period the Purchase Date of which falls in the
following calendar year, unless the Participant has either withdrawn from the
Plan as provided in Section 12.1 or has ceased to be an Eligible Employee.

            10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such Participant's Plan account and shall be
deposited with the general funds of the Company unless prohibited by foreign law
for Participants outside the United States. All payroll deductions received or
held by the Company may be used by the Company for any corporate purpose.

            10.6 NO INTEREST PAID. Interest shall not be paid on sums deducted
from a Participant's Compensation pursuant to the Plan unless required by
foreign law for Participants outside the United States.




                                                                               9


            10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may
withdraw all of the payroll deductions credited to his or her Plan account and
not previously applied toward the purchase of Stock by delivering to the
Company's designated office a written notice on a form provided by the Company
for such purpose. Amounts withdrawn shall be returned to the Participant as soon
as practicable after the Company's receipt of the notice of withdrawal and may
not be applied to the purchase of shares in any Offering under the Plan. The
Company may from time to time establish or change limitations on the frequency
of withdrawals permitted under this Section, establish a minimum dollar amount
that must be retained in the Participant's Plan account, or terminate the
withdrawal right provided by this Section.

        11. PURCHASE OF SHARES.

            11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not otherwise terminated before such Purchase
Date shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole shares of Stock determined by dividing (a)
the total amount of the Participant's payroll deductions accumulated in the
Participant's Plan account during the Offering Period and not previously applied
toward the purchase of Stock by (b) the Purchase Price. However, in no event
shall the number of shares purchased by the Participant during an Offering
Period exceed the number of shares subject to the Participant's Purchase Right.
No shares of Stock shall be purchased on a Purchase Date on behalf of a
Participant whose participation in the Offering or the Plan has terminated
before such Purchase Date.

            11.2 PRO RATA ALLOCATION OF SHARES. If the number of shares of Stock
which might be purchased by all Participants in the Plan on a Purchase Date
exceeds the number of shares of Stock available in the Plan as provided in
Section 4.1, the Company shall make a pro rata allocation of the remaining
shares in as uniform a manner as practicable and as the Company determines to be
equitable. Any fractional share resulting from such pro rata allocation to any
Participant shall be disregarded.

            11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each
Purchase Date, the Company shall arrange the delivery to each Participant of a
certificate representing the shares acquired by the Participant on such Purchase
Date; provided that the Company may deliver such shares to a broker designated
by the Company that will hold such shares for the benefit of the Participant.
Shares to be delivered to a Participant under the Plan shall be registered in
the name of the Participant, or, if requested by the Participant, in the name of
the Participant and his or her spouse, or, if applicable, in the names of the
heirs of the Participant.

            11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash balance to be returned to a Participant pursuant to the preceding sentence
is less than the amount that would have been necessary to purchase an additional
whole share of Stock on such Purchase Date, the Company may retain the cash
balance in the Participant's Plan account to be applied toward the purchase of
shares of Stock in the subsequent Purchase Period or Offering Period, as the
case may be.




                                                                              10


            11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right is
granted or exercised, in whole or in part, or at the time a Participant disposes
of some or all of the shares of Stock he or she acquires under the Plan, the
Participant shall make adequate provision for the federal, state, local and
foreign income, social insurance and other payroll tax withholding obligations,
if any, of the Participating Company Group which arise upon the grant or
exercise of the Purchase Right or upon such disposition of shares, respectively.
The Participating Company Group may, but shall not be obligated to, withhold
from the Participant's compensation the amount necessary to meet such
withholding obligations.

            11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which the Purchase Right relates shall expire immediately upon the end of the
Offering Period.

            11.7 PROVISION OF REPORTS AND STOCKHOLDER INFORMATION TO
PARTICIPANTS. Each Participant who has exercised all or part of his or her
Purchase Right shall receive, as soon as practicable after the Purchase Date, a
report of such Participant's Plan account setting forth the total payroll
deductions accumulated prior to such exercise, the number of shares of Stock
purchased, the Purchase Price for such shares, the date of purchase and the cash
balance, if any, remaining immediately after such purchase that is to be
refunded or retained in the Participant's Plan account pursuant to Section 11.4.
The report required by this Section may be delivered in such form and by such
means, including by electronic transmission, as the Company may determine. In
addition, each Participant shall be provided information concerning the Company
equivalent to that information provided generally to the Company's common
stockholders.

        12. WITHDRAWAL FROM PLAN OR OFFERING.

            12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may withdraw
from the Plan by signing and delivering to the Company's designated office a
written notice of withdrawal on a form provided by the Company for this purpose.
Such withdrawal may be elected at any time prior to the end of an Offering
Period; provided, however, that if a Participant withdraws from the Plan after a
Purchase Date, the withdrawal shall not affect shares of Stock acquired by the
Participant on such Purchase Date. A Participant who voluntarily withdraws from
the Plan is prohibited from resuming participation in the Plan in the same
Offering from which he or she withdrew, but may participate in any subsequent
Offering by again satisfying the requirements of Sections 5 and 7.1. The Company
may impose, from time to time, a requirement that the notice of withdrawal from
the Plan be on file with the Company's designated office for a reasonable period
prior to the effectiveness of the Participant's withdrawal.

            12.2 AUTOMATIC WITHDRAWAL FROM AN OFFERING PERIOD. If the Fair
Market Value of a share of Stock on the first day of an Offering Period is
higher than the Fair Market Value of a share of Stock on the first day of any
subsequent Purchase Period, then every Participant automatically shall be (a)
withdrawn from such Offering after the acquisition of shares of Stock on the
Purchase Date of that Offering Period and (b) enrolled in the new Offering
commencing immediately following such Purchase Date. A Participant may elect not
to be automatically withdrawn from an Offering pursuant to this Section 12.2 by
delivering to the Company's designated




                                                                              11


office not later than the close of business on the Purchase Date a written
notice indicating such election.

            12.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary
withdrawal from the Plan pursuant to Section 12.1 or automatic withdrawal from
an Offering pursuant to Section 12.2, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares of Stock
(except, in the case of an automatic withdrawal pursuant to Section 12.2, for an
amount necessary to purchase an additional whole share of Stock as provided in
Section 11.4) shall be refunded to the Participant as soon as practicable after
the withdrawal, without the payment of any interest, and the Participant's
interest in the Plan or the Offering, as applicable, shall terminate. Such
accumulated payroll deductions to be refunded in accordance with this Section
may not be applied to any other Offering under the Plan.

        13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.

            Upon a Participant's ceasing, prior to a Purchase Date, to be an
Employee of the Participating Company Group for any reason, including
retirement, disability or death, or upon the failure of a Participant to remain
an Eligible Employee, the Participant's participation in the Plan shall
terminate immediately. In such event, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares shall, as
soon as practicable, be returned to the Participant or, in the case of the
Participant's death, to the Participant's beneficiary designated in accordance
with Section 20, if any, or legal representative, and all of the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned pursuant to this Section 13 unless required by foreign law for
Participants outside the United States. A Participant whose participation has
been so terminated may again become eligible to participate in the Plan by
satisfying the requirements of Sections 5 and 7.1.

        14. CHANGE IN CONTROL.

            14.1 DEFINITIONS.

                 (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.

                 (b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 14.1(a)(iii), the corporation or




                                                                              12


other business entity to which the assets of the Company were transferred (the
"TRANSFEREE"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting securities of one or more corporations or
other business entities which own the Company or the Transferee, as the case may
be, either directly or through one or more subsidiary corporations or other
business entities. The Board shall have the right to determine whether multiple
sales or exchanges of the voting securities of the Company or multiple Ownership
Change Events are related, and its determination shall be final, binding and
conclusive.

                 14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the
event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or other business entity or parent thereof, as the case
may be (the "ACQUIRING CORPORATION"), may, without the consent of any
Participant, assume the Company's rights and obligations under the Plan. If the
Acquiring Corporation elects not to assume the Company's rights and obligations
under the Plan, the Purchase Date of the then current Purchase Period shall be
accelerated to a date before the date of the Change in Control specified by the
Board, but the number of shares of Stock subject to outstanding Purchase Rights
shall not be adjusted. All Purchase Rights which are neither assumed by the
Acquiring Corporation in connection with the Change in Control nor exercised as
of the date of the Change in Control shall terminate and cease to be outstanding
effective as of the date of the Change in Control.

        15. NONTRANSFERABILITY OF PURCHASE RIGHTS.

            Neither payroll deductions credited to a Participant's Plan account
nor a Participant's Purchase Right may be assigned, transferred, pledged or
otherwise disposed of in any manner other than as provided by the Plan or by
will or the laws of descent and distribution. (A beneficiary designation
pursuant to Section 20 shall not be treated as a disposition for this purpose.)
Any such attempted assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw from the Plan as provided in Section 12.1. A Purchase Right shall be
exercisable during the lifetime of the Participant only by the Participant.

        16. COMPLIANCE WITH SECURITIES LAW.

            The issuance of shares under the Plan shall be subject to compliance
with all applicable requirements of federal, state and foreign law with respect
to such securities. A Purchase Right may not be granted or exercised if the
grant of such Purchase Right or issuance of shares upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any securities exchange
or market system upon which the Stock may then be listed. In addition, no
Purchase Right may be exercised unless (a) 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 (b) 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. 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 lawful issuance and sale of any shares under the Plan shall
relieve the Company of




                                                                              13


any liability in respect of the failure to grant such Purchase Right or sell
such shares as to which such requisite authority shall not have been obtained.
As a condition to the grant or 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.

        17. RIGHTS AS A STOCKHOLDER AND EMPLOYEE.

            A Participant shall have no rights as a stockholder by virtue of the
Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.

        18. LEGENDS.

            The Company may at any time place legends or other identifying
symbols referencing any applicable federal, state or foreign securities law
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 Section. 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 AN EMPLOYEE STOCK PURCHASE
PLAN AS DEFINED IN SECTION 423 OF THE UNITED STATES 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. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY
NOMINEE)."

        19. NOTIFICATION OF DISPOSITION 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.
The 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 (or, if elected by the Participant, in the name
of the Participant and his or her spouse but not in the name of any nominee)
until the later of




                                                                              14


two years after the date of grant of such Purchase Right or one year after the
date of exercise of such Purchase Right. 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.

        20. DESIGNATION OF BENEFICIARY.

            20.1 DESIGNATION PROCEDURE. Unless otherwise restricted by the Board
for participants outside the United States, a Participant may file a written
designation of a beneficiary who is to receive (a) shares and cash, if any, from
the Participant's Plan account if the Participant dies subsequent to a Purchase
Date but prior to delivery to the Participant of such shares and cash or (b)
cash, if any, from the Participant's Plan account if the Participant dies prior
to the exercise of the Participant's Purchase Right. If a married Participant
designates a beneficiary other than the Participant's spouse, the effectiveness
of such designation shall be subject to the consent of the Participant's spouse.
A Participant may change his or her beneficiary designation at any time by
written notice to the Company.

            20.2 ABSENCE OF BENEFICIARY DESIGNATION. If a Participant dies
without an effective designation pursuant to Section 20.1 of a beneficiary who
is living at the time of the Participant's death, the Company shall deliver any
shares or cash credited to the Participant's Plan account to the Participant's
legal representative.

        21. NOTICES.

            All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.

        22. AMENDMENT OR TERMINATION OF THE PLAN.

            The Board may at any time amend or terminate the Plan, except that
(a) no such amendment or termination shall affect Purchase Rights previously
granted under the Plan unless expressly provided by the Board and (b) no such
amendment or termination may adversely affect a Purchase Right previously
granted under the Plan without the consent of the Participant, 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 comply
with any applicable law, regulation or rule. In addition, an amendment to the
Plan must be approved by the stockholders 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 then authorized for issuance under the Plan or
would change the definition of the corporations that may be designated by the
Board as Participating Companies.

        23. RULES FOR FOREIGN JURISDICTIONS.




                                                                              15


            23.1 SPECIAL RULES OR PROCEDURES. Notwithstanding any provision to
the contrary in this Plan, the Board may adopt rules or procedures relating to
the operation and administration of the Plan to accommodate the specific
requirements of local laws and procedures for jurisdictions outside of the
United States. Without limiting the generality of the foregoing, the Board is
specifically authorized to adopt rules and procedures regarding eligibility to
participate, the definition of Compensation, handling of payroll deductions,
making of contributions to the Plan in forms other than payroll deductions,
establishment of bank or trust accounts to hold payroll deductions, payment of
interest, conversion of local currency, obligations to pay payroll tax,
determination of beneficiary designation requirements, withholding procedures
and handling of stock certificates which vary with local requirements.

            23.2 NON-423 PLAN RULES, PROCEDURES OR SUB-PLANS. The Board may also
adopt rules, procedures or sub-plans applicable to particular Subsidiary
Corporations or locations, which sub-plans may be designed to be outside the
scope of Section 423 of the Code. The rules of such sub-plans may take
precedence over other provisions of this Plan, with the exception of Sections
4.1 and 22, but unless otherwise superseded by the terms of such sub-plan, the
provisions of this Plan shall govern the operation of such sub-plan. To the
extent inconsistent with the requirements of Section 423 of the Code, the
Purchase Rights granted under such sub-plans shall not be considered to comply
with Section 423 of the Code.





                                                                              16


                                  PLAN HISTORY



April 10, 2002    Board adopts Plan with an initial reserve of 2,000,000 shares.

May 15, 2002      Stockholders approve the Plan with an initial reserve of
                  2,000,000 shares.



                                                                               1

EX-5.1

                                                                     EXHIBIT 5.1



                                  June 28, 2002


Networks 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 June 28, 2002, in
connection with the registration under the Securities Act of 1933, as amended,
of 5,000,000 shares of Common Stock to be issued under the Company's 1997 Stock
Incentive Plan, as amended and 2,000,000 shares of Common Stock to be issued
under the Company's 2002 Employee Stock Purchase Plan. Such shares are,
collectively, referred to herein as the "Shares" and the 1997 Stock Incentive
Plan, as amended, and the 2002 Employee Stock Purchase Plan are referred to
herein as 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 nonassessable.

        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
                                        ---------------------------------------

EX-23.1

                                                                    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 January 17, 2002, except as to Note 3,
which is as of May 17, 2002, relating to the consolidated financial statements
and financial statement schedule of Networks Associates, Inc., which appear in
Networks Associates Inc.'s Annual Report on Form 10-K/A for the year ended
December 31, 2001.



PRICEWATERHOUSECOOPERS LLP

San Jose, California
June 26, 2002