Sample Business Contracts

Employment Agreement - Networks Associates Inc. and Zachary Nelson

Employment Forms

  • Employment Agreement. Employers can customize an employment agreement that states the salary, benefits, working hours and other important provisions for their new or existing employee.
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  • Executive Employment Agreement. Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.
  • Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.
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                              EMPLOYMENT AGREEMENT

        This Employment Agreement (the "Agreement") is made and entered into as
of May 11, 1999 (the "Effective Date"), by and between Networks Associates,
Inc., a Delaware corporation (the "Company") and Zachary Nelson ("Executive").


        WHEREAS, on or about March 20, 1997, McAfee Associates, Inc. and
Executive entered into a Change of Control Agreement (the "Previous Change of
Control Agreement"); and

        WHEREAS, the McAfee Associates, Inc. merged to form the Company; and

        WHEREAS, the parties desire to amend the Previous Change of Control 
Agreement in its entirety; and

        WHEREAS, the Company recognizes that the possibility of a change of
control or other event may occur which may change the nature and structure of
the Company and that uncertainty regarding the consequences of such events may
adversely affect the Company's ability to retain its key employees. The Company
also recognizes that the Executive possesses an intimate and essential knowledge
of the Company upon which the Company may need to draw for objective advice and
continued services in connection with any acquisition of the Company or other
change of control that is potentially advantageous to the Company's
stockholders. The Company believes that the existence of this Agreement will
serve as an incentive to Executive to remain in the employ of the Company and
will enhance its ability to call on and rely upon the Executive in connection
with a change of control. On February 22, 1998, the Board of Directors of the
Company met and approved the implementation of the Change of Control Agreement
for its key employees; and

        WHEREAS, the Company and the Executive desire to enter into this
Agreement in order to provide additional compensation and benefits to the
Executive and to encourage Executive to continue to devote his full attention
and dedication to the Company and to continue his employment with the Company.

        NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the parties agree as follows:

        1. Definitions. As used in this Agreement, unless the context requires a
different meaning, the following terms shall have the meanings set forth herein:

               (a) "Cause" means:

                      (i) theft, a material act of dishonesty, fraud, the
intentional falsification of any employment or Company records or the commission
of any criminal act which impairs Executive's ability to perform his duties
under this Agreement;

<PAGE>   2

                      (ii) improper disclosure of the Company's confidential,
business or proprietary information by Executive in violation of the Employee
Inventions and Proprietary Rights Assignment Agreement signed on March 24, 1997;

                      (iii) any action by the Executive which the Company's
Board of Directors (the "Board") reasonably believes has had or will have a
material detrimental effect on the Company's reputation or business;

               (b) "Change of Control" means:

                      (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than a trustee or other fiduciary holding securities of the
Company under an employee benefit plan of the Company, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company representing fifty percent (50%) or
more of (A) the outstanding shares of common stock of the Company or (B) the
combined voting power of the Company's then-outstanding securities;

                      (ii) the Company is party to a merger or consolidation
which results in the holders of voting securities of the Company outstanding
immediately prior thereto failing to continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least fifty percent (50%)of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation;

                      (iii) the sale or disposition of all or substantially all
of the Company's assets (or any transaction having similar effect is
consummated); or

                      (iv) the dissolution or liquidation of the Company.

Notwithstanding any other provision herein to the contrary, for purposes of this
Agreement no Change of Control shall be deemed to have occurred as a result of
any ownership change which may occur as a result of an underwritten public
offering or private placement of the Company's stock.

               (c) "Good Reason" means the occurrence of any of the following
conditions, without Executive's written consent, which condition(s) remain(s) in
effect twenty (20) days after written notice to the Board from Executive of such

                      (i) a five percent (5%) decrease in Executive's base
salary and/or a ten percent (10%) decrease in Executive's bonus compensation or
employee benefits following a Change of Control;

                      (ii) a demotion, a material reduction in Executive's
position, responsibilities or duties, or a material, adverse change in
Executive's substantive functional responsibilities or duties, as measured
against Executive's position, responsibilities or duties immediately prior to
such change causing it to be of materially less stature or responsibility;
<PAGE>   3

                      (iii) in the event of the relocation of Executive's work
place for the Company to a location more than fifty (50) miles from the
Executive's principal place of employment immediately prior to the Change of

                      (iv) any material breach of this Agreement by the Company;

                      (v) any failure or refusal of a successor company to
assume the Company's obligations under this Agreement as required by Section 14.

               (d) "Permanent Disability" means that:

                      (i) the Executive has been incapacitated by bodily injury
or disease so as to be prevented thereby from engaging in the performance of the
Executive's duties;

                      (ii) such total incapacity shall have continued for a
period of six consecutive months; and

                      (iii) such incapacity will, in the opinion of a qualified
physician, be permanent and continuous during the remainder of the Executive's
life with or without reasonable accommodation.

               (e) "Termination Upon a Change of Control" means:

                      (i) any termination of the employment of the Executive by
the Company without Cause within twenty-four (24) months after the date of the
closing of the Change of Control; or

                      (ii) any resignation by the Executive for Good Reason
within twelve (12) months after the occurrence of any Change of Control.

        "Termination Upon Change of Control" shall not include any termination
of the employment of the Executive (a) by the Company for Cause; (b) by the
Company as a result of the Permanent Disability of the Executive; (c) as a
result of the death of the Executive; or (d) as a result of the voluntary
termination of employment by the Executive for reasons other than Good Reason
within twenty-four (24) months after the occurrence of any Change of Control.

               (f) "Total Annual Earnings" means the sum of the Executive's
annual salary and targeted annual bonus.

        2. Position and Duties. Executive shall continue to be an at-will
Executive of the Company employed in his current position at his then current
salary rate. Executive shall also be entitled to continue to participate in and
to receive benefits on the same basis as other executive or senior staff members
under any of the Company's employee benefit plans as in effect from time to
time. In addition, Executive shall be entitled to the benefits afforded to other
employees similarly situated under the Company's vacation, holiday and business
expense reimbursement policies. Executive agrees to devote his full business
time, energy and skill to his duties at the Company. These duties shall include,
but not be limited to, any duties consistent with his position which may be
assigned to Executive from time to time.

<PAGE>   4

        3. Benefits Upon Executive's Voluntary Termination, Permanent Disability
or Death. In the event that Executive voluntarily terminates his employment
relationship with the Company at any time and such termination is not for nor
deemed for Good Reason, or in the event that Executive's employment terminates
as a result of death or Permanent Disability, Executive shall be entitled to no
compensation or benefits from the Company other than those earned under Section
2 above through the date of his termination of employment.

        4. Benefits Upon Change of Control. In the event that if an acquiring or
successor company does not assume all stock options granted by the Company to
the Executive prior to the Change of Control, then the vesting of such stock
options shall immediately accelerate and such options shall become fully vested
and immediately exercisable in full.

        5. Termination Upon Change of Control. In the event of the Executive's
Termination Upon Change of Control, Executive shall be entitled to the following
separation benefits:

                      (i) all salary, accrued but unused vacation earned through
the date of Executive's termination and Executive's target bonus for the year in
which termination occurs, pro rated through the date of Executive's termination;

                      (ii) twelve (12) months of Executive's Total Annual
Earnings as in effect as of the date of such termination, less applicable
withholding, paid in accordance with the Company's then normal payroll

                      (iii) all stock options granted by the Company to the
Executive prior to the Change of Control shall become fully vested and
immediately exercisable in full to the extent such stock options remain
outstanding and unexercised at the time of such Termination Upon Change of

                      (iv) within reasonable time following submission of proper
expense reports by the Executive, the Company shall reimburse the Executive for
all expenses reasonably and necessarily incurred by the Executive in connection
with the business of the Company prior to his termination of employment;

                      (v) continued provision of the Company's standard employee
group health insurance coverages for twelve (12) months following termination.
If such coverage included the Executive's dependents immediately prior to the
date of termination, such dependents shall also be covered at Company expense.
For purposes of title X of the Consolidated Budget Reconciliation Act of 1985,
the date of the "qualifying event" for Executive and his dependents shall be the
date upon which the Company-paid coverage terminates. Notwithstanding the above,
in the event Executive becomes covered under another employer's group health
plan during the period provided for herein, the Company shall cease provision of
continued group health insurance for Executive; and

                      (vi) Executive shall receive the benefits, if any, under
the Company's 401(k) Plan and other Company benefit plans to which he may be
entitled pursuant to the terms of such plans.

<PAGE>   5

        6. Conflict of Interest.

               (a) In the event that Executive accepts employment with, or
provides any services to (whether as a partner, consultant, joint venturer or
otherwise), any person or entity which offers products or services that are
competitive with any products or services offered by the Company or with any
products or services that Executive is aware the Company intends to offer,
Executive shall be deemed to have voluntarily terminated employment with the
Company not for Good Reason, such termination effective immediately upon such
acceptance of employment or provision of services. Upon such voluntary
termination, Executive shall not be entitled to any further payments or benefits
as provided under Section 5.

               (b) In the event that Executive accepts employment with, or
provides any services to (whether as a partner, consultant, joint venturer or
otherwise), any person or entity while Executive continues to receive any
separation benefits pursuant to Section 5, Executive shall immediately notify
the Company of such acceptance and provide to the Company information with
respect to such person or entity as the Company may reasonably request in order
to determine if that person's or entity's products or services are competitive
with the Company's.

               (c) Executive agrees that for a period of two (2) year following
termination of his employment with the Company, he will not, directly or
indirectly, solicit the services of or in any manner persuade employees or
customers of the Company to discontinue that person's or entity's relationship
with or to the Company as an employee or customer, as the case may be.

        7. Payment of Taxes. All payments made to Executive under this Agreement
shall be subject to all applicable federal state local and foreign (if
applicable) income, employment and payroll taxes.

        8. Exclusive Remedy. Under any claim for breach of this Agreement or
wrongful termination, the payments and benefits provided for in Section 5 shall
constitute the Executive's sole and exclusive remedy for any alleged injury or
other damages arising out of the cessation of the employment relationship
between the Executive and the Company in the event of Executive's termination.
Except as expressly set forth herein, the Executive shall be entitled to no
other compensation, benefits, or other payments from the Company as a result of
any termination of employment with respect to which the payments and/or benefits
described in Section 5 have been provided to the Executive.

        9. Proprietary and Confidential Information. The Executive agrees to
continue to abide by the terms and conditions of the Company's confidentiality
and/or proprietary rights agreement between the Executive and the Company.

        10. Arbitration. Pursuant to the Federal Arbitration Act, any claim,
dispute or controversy arising out of this Agreement, the interpretation,
validity or enforceability of this Agreement or the alleged breach thereof shall
be submitted by the parties to binding arbitration in Santa Clara County,
California or elsewhere by mutual agreement. The selection of the arbitrator and
procedure shall be governed by the Employment Arbitration Rules of the American
Arbitration Association. The arbitrator shall be someone with an employment law
<PAGE>   6

background and from the AAA Commercial Arbitration Panel, or if both parties
agree, the Judicial Arbiters Group. Notwithstanding the above, this arbitration
provision shall not preclude the Company from seeking injunctive relief from any
court having jurisdiction with respect to any disputes or claims relating to or
arising out of the misuse or misappropriation of the Company's trade secrets or
confidential and proprietary information or the breach of any provisions by
Executive of the Company's confidentiality and/or proprietary rights agreement
between the Executive and Company. All costs and expenses of arbitration or
litigation, including but not limited to attorneys fees and other costs
reasonably incurred by the Executive, shall be paid by the Company. Judgment may
be entered on the award of the arbitration in any court having jurisdiction.

        11. Limitation of Payments and Benefits. If, due to the benefits
provided under this Agreement, Executive is subject to any excise tax due to
characterization of any amounts payable hereunder as excess parachute payments
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company agrees to reimburse the Executive for the amount of such
excise tax; provided, however, that, no reimbursement shall be made for any
excise tax payable with respect to the reimbursement made pursuant to this
Section 11. The excise tax reimbursement made pursuant to this Section 11 shall
be subject to all applicable withholding. The foregoing shall be conditioned
upon the Executive cooperating with the Company in such manner as may be
reasonably requested (other than reducing amounts payable hereunder) so as to
minimize the amount of such excise tax.

Unless the Company and Executive otherwise agree in writing, any determination
required under this Section 11 shall be made in writing by independent public
accountants agreed to by the Company and the Executive (the "Accountants"),
whose determination shall be conclusive and binding upon Executive and the
Company for all purposes. For purposes of making the calculations required by
this Section 11, the Accountants may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section 11. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 11.

        12. Interpretation. Executive and the Company agree that this Agreement
shall be interpreted in accordance with and governed by the laws of the State of
California, without regard to such state's conflict of laws rules.

        13. Conflict in Benefits. This Agreement shall supersede all prior
arrangements, whether written or oral, and understandings regarding the subject
matter of this Agreement and shall be the exclusive agreement for the
determination of any payments and accelerated option vesting due upon
Executive's termination of employment or a Change of Control; provided, however,
that this Agreement is not intended to and shall not affect, limit or terminate
(i) any plans, programs, or arrangements of the Company that are regularly made
available to similarly-situated employees of the Company, (ii) any agreement or
arrangement with the Executive that has been reduced to writing and which does
not relate to the subject matter hereof, (iii) any 

<PAGE>   7

indemnification rights described below, or (iv) any agreements or arrangements
hereafter entered into by the parties in writing, except as otherwise expressly
provided herein.

        14. Release of Claims. No severance benefits shall be paid to Executive
under this Agreement unless and until the Executive shall, in consideration of
the payment of such severance benefit, execute a release of claims in a form
satisfactory to the Company; provided, however, that such release shall not
apply to any right of Executive to be indemnified by the Company.

        15. Successors and Assigns.

               (a) Successors of the Company. The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, expressly, absolutely and unconditionally to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession transaction shall be a breach of this
Agreement and shall entitle the Executive to terminate his employment with the
Company within three months thereafter and to receive the benefits provided
under Section 5 of this Agreement in the event of Termination Upon Change of
Control. As used in this Agreement, "Company" shall mean the Company as defined
above and any successor or assign to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in this Section 14 or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.

               (b) Heirs of Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devises and

        16. Notices. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:

              if to the Company:        Networks Associates, Inc.
                                        3965 Freedom Circle
                                        Santa Clara, CA  95054
                                        Attn: Vice President and General Counsel

and if to the Executive at the address specified at the end of this Agreement.
Notice may also be given at such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.

<PAGE>   8

        17. No Representations. Executive acknowledges that he/she is not
relying and has not relied on any promise, representation or statement made by
or on behalf of the Company which is not set forth in this Agreement.

        18. Validity. If any one or more of the provisions (or any part thereof)
of this Agreement shall be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
(or any part thereof) shall not in any way be affected or impaired thereby.

        19. Modification. This Agreement may only be modified or amended by a
supplemental written agreement signed by Executive and the Company.

<PAGE>   9

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year written below.


Date: May 11, 1999                           By: /s/ WILLIAM L. LARSON
     -------------------                        --------------------------------

                                             Title: CHAIRMAN AND CEO -- NAI


Date: May 11, 1999                           /s/ ZACHARY NELSON
     -------------------                     -----------------------------------
                                             Executive's Signature
Address for Notice:

CA 95054