<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
McAfee.com Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[McAfee LOGO]
2000 NOTICE OF ANNUAL
STOCKHOLDERS' MEETING
AND PROXY STATEMENT
MAY 25, 2000
10:00 AM
TECHMART
5201 GREAT AMERICA PARKWAY
SANTA CLARA, CALIFORNIA 95054
<PAGE> 3
[MCAFEE LOGO]
MCAFEE.COM CORPORATION
2805 BOWERS AVENUE
SANTA CLARA, CALIFORNIA 95051
April 25, 2000
Dear McAfee.com Stockholder:
You are cordially invited to join us at the Annual Meeting of Stockholders
of McAfee.com on May 25, 2000, at 10:00 a.m. Pacific Time at the Techmart, 5201
Great America Parkway, Santa Clara, California, 95054.
At the Annual Meeting, you will be asked to consider and vote upon the
following:
1. To elect two directors for three-year terms; and
2. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent accountants for the 2000 fiscal year.
The attached Proxy Statement presents the details of these proposals.
FOR FURTHER INFORMATION REGARDING THE MATTERS TO BE VOTED ON AT THE ANNUAL
MEETING, I URGE YOU TO CAREFULLY READ THE ACCOMPANYING PROXY STATEMENT, DATED
APRIL 25, 2000. If you have questions about these proposals or would like
additional copies of the Proxy Statement, you should contact Evan Collins, Chief
Financial Officer and Secretary of McAfee.com Corporation, 2805 Bowers Avenue,
Santa Clara, California 95051; telephone: (408) 572-1500. It is important that
your shares are represented and voted at the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please complete, sign, date and promptly
return the accompanying proxy in the enclosed postage-paid envelope. Returning
the proxy does not deprive you of your right to attend the Annual Meeting. If
you decide to attend the Annual Meeting and wish to change your proxy vote, you
may do so by voting in person at the Annual Meeting.
On behalf of the Board of Directors, I would like to thank you for your
continued interest in the affairs of McAfee.com. We look forward to seeing you
at the Annual Meeting.
Sincerely,
/s/ Srivats Sampath
Srivats Sampath
Chief Executive Officer
<PAGE> 4
[McAfee LOGO]
MCAFEE.COM CORPORATION
2805 BOWERS AVENUE
SANTA CLARA, CALIFORNIA 95051
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 2000
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of
McAfee.com Corporation will be held on Thursday May 25, 2000, at 10:00 a.m.
Pacific time at the Techmart, 5201 Great America Parkway, Santa Clara,
California, 95054, for the following purposes:
1. To elect two directors for three-year terms;
2. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent accountants for the 2000 fiscal year; and
3. To transact any other business as may properly come before the meeting.
Only stockholders of record at the close of business on April 3, 2000 are
entitled to notice of and to vote at the meeting. For ten days prior to the
meeting, a complete list of these stockholders will be available during ordinary
business hours at our principal office.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to complete, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person, even though he or
she has previously returned a proxy.
By Order of the Board of Directors,
/s/ Evan S. Collins
Evan S. Collins
Secretary
Santa Clara, California
April 25, 2000
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PROCEDURAL INFORMATION...................................... 1
PROPOSALS TO BE VOTED ON.................................... 3
BOARD OF DIRECTORS.......................................... 3
Biographies............................................... 4
Meetings.................................................. 5
Compensation.............................................. 5
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 6
MANAGEMENT................................................
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 8
COMPARISON OF STOCKHOLDER RETURN............................ 10
EXECUTIVE COMPENSATION...................................... 11
Summary Compensation Table................................ 11
Option Grants in 1999..................................... 12
Option Exercises and Holdings............................. 12
OTHER INFORMATION........................................... 15
</TABLE>
i
<PAGE> 6
PROXY STATEMENT FOR THE 2000
ANNUAL MEETING OF STOCKHOLDERS
GENERAL
The accompanying proxy is solicited by our Board of Directors for use at
the 2000 Annual Meeting of Stockholders to be held May 25, 2000 at 10:00 a.m.,
Pacific time or any adjournment thereof. This proxy statement contains important
information for you to consider when deciding on how to vote on the matters
brought before the meeting. PLEASE READ IT CAREFULLY.
Our complete mailing address is McAfee.com Corporation, 3965 Freedom
Circle, Santa Clara, California 95054. Our principal office is located at 2805
Bowers Avenue, Santa Clara, California 95051 and our telephone number is (408)
572-1500.
This Proxy Statement and the accompanying form of proxy are first being
mailed to our stockholders on or about April 25, 2000.
STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED
Only stockholders owning our shares at the close of business on April 3,
2000 are entitled to notice of and to vote at the Annual Meeting. This date may
be referred to as the record date in this Proxy Statement. A complete list of
these stockholders entitled to notice of and to vote at the Annual Meeting will
be available during ordinary business hours at our principal office for ten days
prior to the meeting.
As of the record date, there were 7,696,505 shares of Class A common stock
issued and outstanding and 36,000,000 shares of Class B common stock issued and
outstanding. As of the record date, there were approximately 94 holders of
record of the Class A common stock. Network Associates, Inc. holds all of our
outstanding Class B common stock. Each holder of record of our Class A common
stock on the record date is entitled to one vote per share, which may be cast
either in person or by properly executed proxy, at the Annual Meeting. Each
holder of record of our Class B common stock on the record date is entitled to
three votes per share. Holders of Class A common stock and Class B common stock
will vote together as a single class in all matters. A plurality of the shares
present in person or represented by proxy at the meeting, entitled to vote in
the election and actually cast, will elect the directors. In all other matters
submitted to a vote of stockholders, a majority of the votes actually cast will
be required for approval.
Based on its ownership of approximately 82.4% of our outstanding common
stock and 93.4% of our outstanding voting power, Network Associates has the
voting power to adopt and approve all the proposals and elect all directors.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of common
stock issued and outstanding on the record date. Network Associates intends to
be present at the meeting and, provided they are, a quorum will be present for
all matters. Shares that are voted either in person or by proxy "FOR,"
"AGAINST," "WITHHELD" or "ABSTAIN" will be treated as being present at the
meeting for purposes of establishing a quorum and also will be treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
Although there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, we believe that abstentions should be
counted for the purposes of determining both (i) the presence or absence of a
quorum for the transaction of business and (ii) the total number of Votes Cast
with respect to a proposal (other than election of directors). In the absence of
controlling precedent to the contrary, we intend to treat abstentions in this
manner. Accordingly, abstentions will have the same effect as a vote against a
proposal (though will have no effect on the election of directors).
<PAGE> 7
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but such broker
non-votes will not be counted for purposes of determining the number of Votes
Cast with respect to the particular proposal on which the broker has expressly
not voted. Accordingly, a broker non-vote will not affect the outcome of the
voting on a proposal.
PROXIES
This Proxy Statement is being furnished to you in connection with the
solicitation of proxies by, and on behalf of, our board of directors for use at
the Annual Meeting, and is accompanied by a form of proxy. The attached proxy
card grants the proxy holders discretionary authority to vote on any matter
raised at the meeting.
All shares of our common stock which are entitled to vote and are
represented at the Annual Meeting by properly executed proxies received prior to
or at the Annual Meeting, and not revoked, will be voted at the Annual Meeting
in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted as recommended by our Board of Directors.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn such Annual Meeting to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies), the persons
named in the enclosed forms of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i)
delivering to the Secretary of McAfee.com, at or before the taking of the vote
at the Annual Meeting, a written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to McAfee.com before the taking of the vote at the Annual
Meeting or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of the proxy). Any written notice of revocation or subsequent proxy
should be sent to McAfee.com Corporation, 3965 Freedom Circle, Santa Clara,
California 95054, Attention: Secretary, or hand delivered to the Secretary of
McAfee.com at or before the taking of the vote at the Annual Meeting.
The cost of soliciting proxies, including the preparation, assembly,
printing and mailing of the Proxy Statement, the proxy material and any other
material provided to stockholders, will be borne by McAfee.com. In addition, we
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their reasonable expenses in forwarding solicitation material to
such beneficial owners. We may use the services of our officers, directors, and
others to solicit proxies, personally or by telephone, without additional
compensation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals by our stockholders which are intended to be presented by such
stockholders at our 2001 Annual Meeting must have been received by us no later
than December 28, 2000 in order to be considered for inclusion in the proxy
statement and form of proxy relating to that meeting.
If a stockholder intends to submit a proposal at the next annual meeting of
stockholders which is not eligible for inclusion in the proxy statement relating
to that meeting, the stockholder must give notice to us at our principal place
of business in accordance with our bylaws and the requirements set forth in the
Securities Exchange Act of 1934, no later than December 28, 2000. Stockholders
wishing to make nominations for directors should contact the Corporate Secretary
for details of the information to be included in such a nomination.
2
<PAGE> 8
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes of directors serving
staggered three-year terms that expire at successive annual meetings. This year,
we have nominated Mr. Frank Gill and Mr. Prabhat Goyal, the two directors whose
terms expire at the annual meeting, for additional three-year terms that will
expire at our annual meeting in 2003. The term of Mr. Srivats Sampath expires at
the annual meeting of stockholders in 2001. The terms of Mr. William Larson and
Mr. Richard Schell expire at the annual meeting of stockholders in 2002. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for Mr. Gill and Mr. Goyal. If either Mr. Gill or Mr. Goyal is unable to or
declines to serve as a director at the Annual Meeting, the proxies will be voted
for the nominee designated by the present Board of Directors to fill the
vacancy. It is not expected that either Mr. Gill or Mr. Goyal will be unable or
will decline to serve as a director.
The two nominees receiving the highest number of affirmative votes of the
shares entitled to vote on this matter shall be elected as Class I directors.
Votes withheld from any director will be counted for purposes of determining the
presence or absence of a quorum but are not counted as affirmative votes. A
broker non-vote will be counted for the purpose of determining the presence or
absence of a quorum, but, under Delaware law, it will have no legal effect upon
the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THESE NOMINEES.
PROPOSAL NO. 2 -- SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as
independent accountants to audit our financial statements for the fiscal year
ending December 31, 2000. A representative of PricewaterhouseCoopers LLP is
expected to attend the Annual Meeting in order to respond to questions from
stockholders and will have the opportunity to make a statement.
The affirmative vote of the holders of a majority of the shares of common
stock present or represented and voting at the Annual Meeting will be required
to approve this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT ACCOUNTANTS.
BOARD OF DIRECTORS
We have a classified Board of Directors, currently consisting of five
members, which is divided into three classes with staggered three-year terms. At
each annual meeting of stockholders, the term of one class of directors expires.
Directors in each class serve for terms of three years.
Under a voting agreement with Network Associates, for so long as Network
Associates owns at least 20% of our outstanding voting power, it will vote its
shares of our capital stock in favor of the election of two independent
directors.
3
<PAGE> 9
The table below shows our current directors.
<TABLE>
<CAPTION>
YEAR OF
EXPIRATION DIRECTOR
NAME AGE PRINCIPAL OCCUPATION OF TERM SINCE
---- --- -------------------- ---------- --------
<S> <C> <C> <C> <C>
Nominees for Class I Directors:
Frank Gill................... 56 Private Investor 2000 1999
Prabhat K. Goyal............. 45 Vice President of Finance and 2000 1999
Chief Financial Officer,
Networks Associates, Inc.
Continuing Class II Director:
Srivats Sampath.............. 42 President and Chief Executive 2001 1999
Officer, McAfee.com Corporation
Continuing Class III Directors:
William L. Larson............ 43 Chief Executive Officer and 2002 1998
Chairman of the Board, Networks
Associates, Inc.
Richard Schell............... 50 President and Chief Executive 2002 1999
Officer of iSharp, Inc.
</TABLE>
Except as described below, each director has engaged in his principal occupation
described above for the past five years. There are no family relationships among
any of our directors or executive officers.
BIOGRAPHIES
Frank Gill has served as a director at McAfee.com since September 1999. Mr.
Gill is a 23-year veteran of Intel Corporation where he held a variety of
positions in sales and marketing, product development, and manufacturing
operations. At the time of his retirement in June 1998, he was an Executive Vice
President of Intel. Mr. Gill also serves as a director of Inktomi Corporation,
Logitech, Inc., Niku, Inc., Tektronix, Inc. and Telecom Semiconductor. Mr. Gill
received his B.S. degree in electrical engineering from the University of
California at Davis.
Prabhat Goyal has served as a director at McAfee.com since September 1999.
Since March 1996, Mr. Goyal has served in various capacities at Network
Associates. Since July 1996, he has served as Vice President of Finance and
Chief Financial Officer, and from March 1996 to June 1996, he served as
Corporate Controller and Treasurer of Network Associates. From November 1991 to
March 1996, Mr. Goyal was employed in various capacities ultimately serving as
Director, Finance and OEM Development, of the Solaris Products Group of SunSoft,
Inc., a software company. Mr. Goyal received his B.S. in economics from the
London School of Economics and an MBA from the University of Chicago. Mr. Goyal
is also a Chartered Accountant and member of the Institute of Chartered
Accountants in England and Wales.
Srivats Sampath has served as our President and Chief Executive Officer
since December 1998. Mr. Sampath has over 15 years of experience serving in
management and executive roles in the computer industry. From June 1998 to
December 1998, Mr. Sampath served as the Vice President of Worldwide Marketing
of Network Associates. From June 1996 to December 1997, Mr. Sampath served as
the Vice President of Product Marketing for Netscape Communications, a provider
of Internet software and services. From June 1993 to June 1996, Mr. Sampath
served as the President and Chief Executive Officer of Discussions Corporation,
a company that he founded to develop e-mail based groupware solutions. From 1991
to 1993, Mr. Sampath served as the Director of Product Marketing for Network and
Security Products of Central Point Software, Inc. From 1984 to 1991, Mr. Sampath
managed the LAN Enhancement Operations and Microcomputer Communications Division
of Intel Corporation. Mr. Sampath also serves on the boards of WebTrends
Corporation and Cadabra.com. Mr. Sampath received his B.S. degree in electronics
and telecommunications engineering from Madras University in India.
William Larson has served as a Director and Chairman of the Board of
McAfee.com since our formation in December 1998. Since September 1993, Mr.
Larson has served as Chief Executive Officer of Network Associates, and since
October 1993 he has served as President and a director. Since April 1995, Mr.
Larson
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<PAGE> 10
has been the Chairman of the Board of Directors of Network Associates. Mr.
Larson also serves on the board of directors of BackWeb Technologies, an
Internet software company. Mr. Larson received his B.S. degree from the Wharton
School of the University of Pennsylvania and a J.D. from Stanford University.
Richard Schell has served as a director at McAfee.com since September 1999.
Dr. Schell has spent 20 years in the high-tech industry. Most recently, from
October 1994 to February 1998, Dr. Schell served as Senior Vice President at
Netscape Communications where he led the engineering team and then moved on to
head up the Client Product Division. Prior to Netscape, from January 1993 to
October 1994, Dr. Schell was Vice President of Engineering at Central Point
Software, now part of Symantec. From 1989 to 1992, Dr. Schell served as Vice
President of the Languages and Database business for Borland International. Dr.
Schell received his A.B., M.S. and Ph.D. in computer science from the University
of Illinois.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During 1999, the Board of Directors held 2 meetings. Each director attended
at least 75% of all Board and applicable meetings during 1999. Our Board of
Directors has an Audit Committee and a Compensation Committee.
THE AUDIT COMMITTEE reviews, acts and reports to our Board of Directors on
various auditing and accounting matters, including the appointment of our
independent accountants, the scope of our annual audits, fees to be paid to the
independent accountants, the performance of our independent accountants and our
accounting practices. As our initial public offering occurred in December 1999,
our Audit Committee held no meetings in 1999. Members: Frank Gill, Richard
Schell and Prabhat Goyal.
Mr. Gill and Mr. Schell are "independent" members of the Audit Committee as
defined under the National Association of Securities Dealers' listing standards.
Mr. Goyal is not "independent" due to his employment as Chief Financial Officer
of Network Associates. As of March 31, 2000, Network Associates owned 36,000,000
shares of our Class B common stock, representing approximately 82.4% of our
outstanding common stock and approximately 93.4% of the overall voting power of
our capital stock. Although our Board of Directors has determined that Mr. Goyal
is not independent, our Board of Directors has determined that Mr. Goyal's Audit
Committee membership is required by the best interests of our company and our
stockholders. This is so particularly in light of the exceptional and limited
circumstances surrounding Network Associates' ownership of our stock, licensing
of technology to us and from us, and the scope and nature of services provided
by Network Associates to us.
The Audit Committee has adopted a written charter which is attached to this
Proxy Statement as Annex A.
THE COMPENSATION COMMITTEE establishes salaries, incentives and other forms
of compensation for officers and other employees. The Committee also administers
our incentive compensation and benefit plans. The Compensation Committee held no
meetings during 1999. Members: William Larson; Frank Gill; Richard Schell.
COMPENSATION OF DIRECTORS
Our directors do not receive cash compensation for their services as
directors, but are reimbursed for their reasonable and necessary expenses for
attending board and board committee meetings.
Our director option plan was adopted by our board and approved by Network
Associates, our sole stockholder in September 1999. Members of the board who are
not our employees, or employees of any parent, subsidiary or affiliate of
McAfee.com, are eligible to participate in the plan unless they are
representatives of venture capital funds or corporate investors. The option
grants under the plan will be automatic and nondiscretionary, and the exercise
price of the options will be the fair market value of the Class A common stock
on the date of grant.
In connection with their addition to our board in September 1999, Messrs.
Gill and Schell were each granted an option to acquire 75,000 shares of our
Class A common stock under our 1999 stock plan. Each
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<PAGE> 11
eligible director, other than Messrs. Gill and Schell, who is or becomes a
member of the board will be granted an option to purchase 40,000 shares of our
Class A common stock under our director option plan. Each eligible director,
including Messrs. Gill and Schell, will automatically be granted an additional
option on the anniversary date of their service as a director to purchase 10,000
shares of Class A common stock if the director has served continuously as a
member of the board since the date of the director's initial grant.
The options will have ten-year terms, but will terminate three months after
the date the director ceases to be a director or six months after a termination
if the termination is due to death or disability.
All options granted under the directors plan will become exercisable over a
four year period with 25% of the shares exercisable after one year and the
remainder vesting at a rate of 2.083% each subsequent month, so long as the
optionee continues as a member of the board or as a consultant of McAfee.com. In
the event of our dissolution or liquidation, or a "change in control"
transaction, options granted under the plan will become fully vested and
immediately exercisable if not otherwise assumed or substituted by the acquiror,
or if the optionee does not continue to serve as a director.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table as of April 15, 2000 shows the number of shares of
common stock:
(a) owned by owners of more than 5% of any class of our outstanding capital
stock. This information is as of the latest reports by those entities,
received by us.
(b) owned by our Chief Executive Officer and our Chief Financial Officer
(who collectively we refer to in this Proxy Statement as the "Named
Officers"). We had no other executive officers during fiscal year 1999.
(c) each of our directors and nominees.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF ALL PERCENT OF
SHARES VESTED OUTSTANDING OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNED(1) OPTIONS(2) SHARES CLASS
------------------------------------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
Network Associates, Inc. Class B(3).............. 36,000,000 -- 82.4% 100%
3965 Freedom Circle
Santa Clara, CA 95054
The TCW Group, Inc. Class A(4)................... 1,637,808 -- 3.7% 21.3%
865 South Figueroa Street
Los Angeles, CA 90017
Putnam Investments, Inc. Class A(5).............. 809,000 -- 1.9% 10.5%
One Post Office Square
Boston, MA 02109
NAMED EXECUTIVE OFFICERS & DIRECTORS
Srivats Sampath(6)............................... 16,980 318,750 *
Evan Collins(7).................................. 3,980 -- *
William Larson(8)................................ 36,000,000 900,000 84.4%
Prabhat Goyal(9)................................. -- 360,000 *
Frank Gill(10)................................... -- -- --
Richard Schell(11)............................... -- -- --
Executive officers and directors as a group (6
persons)....................................... 36,020,960 1,578,750 86.1%
</TABLE>
- ---------------
* Less than 1%.
(1) Ownership includes direct and indirect (beneficial) ownership, as defined
by SEC rules. The ownership is shown as a percentage of all outstanding
shares and of the relevant class of common stock. To our knowledge, each
person, has sole voting and investment power over the shares unless
otherwise noted. The SEC rules for the determination of beneficial
ownership are very complex. However, generally
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<PAGE> 12
shares owned directly, plus those controlled (e.g. owned by members of
their immediate families), are considered beneficially owned. Excludes
shares that may be acquired through stock option exercises.
(2) Includes shares that are currently exercisable or will become exercisable
within 60 days of April 15, 2000.
(3) According to Schedule 13G filed with the Commission on February 10, 2000
Network Associates has the following power with respect to these shares:
<TABLE>
<S> <C>
- deemed to have sole power to vote or to direct the vote 36,000,000 Class B common
shares
- deemed to have sole power to dispose or direct the 36,000,000 Class B common
disposition shares
</TABLE>
(4) According to Schedule 13G filed with the Commission on March 16, 2000 The
TCW Group, Inc. has the following power with respect to these shares:
<TABLE>
<S> <C>
- deemed to have shared power to vote or to direct the 1,637,808 Class A common
vote shares
- deemed to have shared power to dispose or direct the 1,637,808 Class A common
disposition shares
</TABLE>
(5) According to Schedule 13G filed with the Commission on March 10, 2000
Putnam Investments, Inc. has the following power with respect to these
shares:
<TABLE>
<S> <C>
- deemed to have shared power to vote or to direct the 118,500 Class A common
vote shares
- deemed to have shared power to dispose or direct the 809,000 Class A common
disposition shares
</TABLE>
(6) Mr. Sampath has an option to purchase 900,000 shares of our Class A common
stock, 318,750 of which will be vested or exercisable as of June 15, 2000.
Mr. Sampath is also deemed the beneficial owner of 68,749 shares of common
stock of Network Associates, the parent company of McAfee.com, all of which
shares may be acquired by Mr. Sampath pursuant to presently exercisable
options. These shares represent less than 1% of the voting power of the
outstanding capital stock of Network Associates.
(7) Mr. Collins has options to purchase 170,000 shares of our Class A common
stock, none of which will be vested or exercisable as of June 15, 2000. Mr.
Collins is also deemed the beneficial owner of 61,222 shares of common
stock of Network Associates, the parent company of McAfee.com, all of which
shares may be acquired by Mr. Collins pursuant to presently exercisable
options. These shares represent less than 1% of the voting power of the
outstanding capital stock of Network Associates.
(8) Includes the 36,000,000 shares of Class B common stock owned by Network
Associates and the 900,000 shares of Class A common stock issuable upon
exercise of an immediately exercisable option issued to Mr. Larson on
January 15, 1999 and held in trusts for which Mr. Larson or his wife act as
trustee. Mr. Larson is chief executive officer, president and chairman of
the board of Network Associates. Excluding the shares attributed to him
which are owned by Network Associates, of which Mr. Larson disclaims
beneficial ownership, the number of shares Mr. Larson beneficially owned
would be 900,000, all of which shares may be acquired pursuant to presently
exercisable options. Mr. Larson is also deemed the beneficial owner of
2,032,542 shares of common stock of Network Associates, the parent company
of McAfee.com, 2,031,887 of which shares may be acquired by Mr. Larson
pursuant to presently exercisable options. These shares represent
approximately 1.5% of the voting power of the outstanding capital stock of
Network Associates.
(9) Consists of 360,000 shares of Class A common stock issuable upon exercise
of an immediately exercisable option issued to Mr. Goyal on January 15,
1999. Mr. Goyal is also deemed the beneficial owner of 634,830 shares of
common stock of Network Associates, the parent company of McAfee.com,
630,051 of which shares may be acquired by Mr. Goyal pursuant to presently
exercisable options. These shares represent less than 1% of the voting
power of the outstanding capital stock of Network Associates.
7
<PAGE> 13
(10) Mr. Gill has an option to purchase 75,000 shares of our Class A common
stock, none of which will be vested or exercisable as of June 15, 2000.
(11) Mr. Schell has an option to purchase 75,000 shares of our Class A common
stock, none of which will be vested or exercisable as of June 15, 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1999, the Compensation Committee of the Board of Directors consisted
of William Larson, Frank Gill and Richard Schell, none of whom has served as our
employee or officer at any time. The Compensation Committee is responsible for
setting and administering policies governing compensation of executive officers,
including the annual Bonus Plan and the 1999 Stock Plan. In addition, the
Compensation Committee reviews compensation levels of other management level
employees, evaluates the performance of management and reviews other
compensation-related issues.
COMPENSATION POLICIES
Our compensation policy is designed to enable us to attract, retain and
reward executive officers who are likely to contribute to our long-term success.
The Compensation Committee also believes that a strong correlation should exist
between executive compensation, business objectives and our overall performance.
In preparing the performance graph for this Proxy Statement, we have
selected the CRSP Total Return Industry Index for NASDAQ Computer and Data
Processing Services Stock Index ("CRSP Index"). The companies which we use for
comparison of salary and compensation information are not necessarily those
included in the CRSP Index, because they were determined not to be competitive
with us for executive talent or because compensation information was not
available.
COMPONENTS OF COMPENSATION
There are three components of our executive compensation program, which are
intended to attract and retain executive officers and to motivate them to
improve our financial position and to create value for our shareholders.
Salary
The Compensation Committee strives to offer salaries to its executive
officers, which are competitive with salaries offered by companies of similar
size and capitalization in the software industry. Base salaries are reviewed on
an annual basis and are subject to adjustment based upon the individual's
contribution to us and changes in salary levels offered by comparable companies.
In determining executive officers' salaries, the Compensation Committee
considers information provided by our Chief Executive Officer with respect to
individual officer responsibilities and performance, as well as salary surveys
and similar data available from independent sources.
Bonuses
Awards under our Bonus Plan for 1999 were contingent upon us achieving
certain performance goals established by the Board of Directors. For executive
officers other than the Chief Executive Officer, awards are also contingent on
the achievement of individual performance objectives. Target amounts of bonuses
for each executive officer are set annually by the Committee and are
specifically weighted for identified financial, management, strategic and
operational goals. The Committee reviews performance against the goals and
approves payment of the bonuses. In 1999, bonuses awarded under the plan to Mr.
Sampath, our Chief Executive Officer, totaled $62,608. The bonus received by Mr.
Sampath under the plan was 21% of his total cash compensation. Bonuses awarded
under the plan in 1999 to Mr. Collins, our Chief Financial Officer represented
31% of his total cash compensation.
8
<PAGE> 14
Equity Incentives
The Committee believes that employee equity ownership provides a major
incentive to employees in building stockholder value and serves to align the
interests of employees with the interests of our stockholders. In determining
the amount of equity compensation to be awarded to executive officers in any
fiscal year, the Committee considers the position of the officer, the current
stock ownership of the officer, the number of shares which continue to be
subject to vesting under outstanding options and the expected future
contribution of the officer to our performance, giving primary weight to the
officer's position and his or her expected future contributions. In addition, we
compare the stock ownership and options held by each officer with the other
officers' equity positions and the officer's experience and value to us.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Sampath's base salary did not increase in 1999. In determining his
salary, Network Associates, our sole stockholder until December 1999,
considered, among other things, compensation data for chief executives of
comparable companies.
The Chief Executive Officer evaluates the performance of all other
executive officers on an annual basis and recommends salary adjustments, which
are subject to review and approval by the Compensation Committee. Performance
evaluations for individual executive officers are based on predetermined
individual goals proposed by management and approved by the Compensation
Committee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code limits deductions for federal
income tax purposes, certain executive compensation exceeding $1,000,000 for any
executive officer in any year. Our 1999 Stock Plan enables compensation
recognized in connection with the exercise of options to qualify as an exception
to the deduction limit. The Committee will continue to evaluate the issues
relating to executive compensation and will take appropriate action where
necessary. The Committee's policy is to qualify its executive compensation for
deductibility under applicable tax laws where possible.
COMPENSATION COMMITTEE
William Larson
Frank Gill
Richard Schell
9
<PAGE> 15
COMPARISON OF STOCKHOLDER RETURN
The following graph compares the cumulative total returns for our Class A
Common Stock for the period commencing December 2, 1999 and ending December 31,
1999 to the CRSP Total Return Index for the NASDAQ Stock Market ("NASDAQ US")
and the CRSP Total Return Industry Index for NASDAQ Computer and Data Processing
Services Stocks ("C&DP Index"), each of which assumes an initial value of $100
and reinvestment of dividends. Historic stock price performance should not be
considered indicative of future stock price performance.
COMPARISON OF ONE MONTH CUMULATIVE TOTAL RETURN
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET - NASDAQ COMPUTER &
MCAFEE.COM CORPORATION US DATA PROCESSING
---------------------- --------------------- -----------------
<S> <C> <C> <C>
Dec 2, 1999 100 100 100
Dec 31, 1999 102 117 128
</TABLE>
Pursuant to the Proxy Rules, the Compensation Committee Report and the
Stock Performance Graph are not deemed filed with the SEC and are not deemed
incorporated by reference into any filings with the SEC. Performance for the
period from December 2, 1999 to December 31, 1999, reflects a December 31, 1999
closing market price on the Nasdaq National Market of $45.00. As of April 18,
2000, the closing market price for our Class A common stock was $22.875 and
therefore the cumulative return would have been 52 on the chart above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors, executive officers and persons who are 10% stockholders are
required to file reports with respect to their ownership and changes of
ownership of our common stock with the SEC. Based solely on our review of the
copies of such reports we received or on written representations from certain
reporting persons, we believe that during fiscal year 1999, all filing
requirements were satisfied.
10
<PAGE> 16
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to the Named Officers
as of December 31, 1999, based on salary and bonus. There were no other
executive officers as of December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NUMBER OF
MCAFEE.COM
SECURITIES NUMBER OF
UNDERLYING NAI SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY MCAFEE.COM UNDERLYING COMPENSATION
POSITION AGE YEAR ($)(1) BONUS($) OPTIONS(#) NAI OPTIONS # ($)(2)
------------------ --- ---- -------- -------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Srivats Sampath(3).......... 42 1999 $240,000 $62,608 900,000 -- $3,250
President and Chief
Executive 1998 $112,769 $15,652 -- 150,000 $1,695
Officer
Evan Collins(4)............. 37 1999 $ 87,500 $39,730 170,000 10,000 $1,140
Vice President, Chief
Financial Officer and
Secretary
</TABLE>
- ---------------
(1) Salary includes amounts deferred under the Network Associates 401(k) Plan.
(2) Represents contributions made by us pursuant to the Network Associates
401(k) Plan.
(3) Mr. Sampath's salary for 1998 is for the period from June 1998 through
December 31, 1998.
(4) Mr. Collins' salary is for the period from July 1, 1999 through December 31,
1999. Prior to July 1, 1999 Mr. Collins was employed by Network Associates.
Our officers serve at the discretion of the Board of Directors. There are
no family relationships among any of our directors and executive officers.
OPTION GRANTS
The table set forth below provides summary information regarding stock
options granted to our Named Officers in the year ended December 31, 1999.
All options granted to these Named Officers are non-qualified stock options
and are immediately exercisable. The options vest over four years at a rate of
25% of the shares subject to the option on the first anniversary of the date of
grant and 2.083% each subsequent month. The options expire ten years from the
date of grant and were granted at an exercise price equal to the fair market
value of our common stock on the date of grant. The fair value was based on
third party valuations at the date of grant.
Potential realizable values are computed by (a) multiplying the number of
shares of Class A common stock issuable upon exercise of a given option by the
exercise price per share, (b) assuming that the aggregate stock value derived
from that calculation compounds at the annual 5% or 10% rates shown in the table
for the entire ten year term of the option and (c) subtracting from that result
the aggregate option exercise price. In addition, potential realizable values do
not take into account taxes associated with exercise, if any. The 5% and
11
<PAGE> 17
10% assumed annual rates of stock price appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent our estimate or
projection of future common stock prices.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------- POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
COMPANY UNDERLYING EMPLOYEES EXERCISE OPTION TERM
GRANTING OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME OPTIONS GRANTED(#) YEAR ($/SH) DATE 5% 10%
---- ---------- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Srivats Sampath(1).... McAfee.com 900,000 25.8% $ 3.67 1/15/2009 $3,328,133 $6,996,434
Evan Collins.......... McAfee.com 100,000 2.9% $ 4.64 7/1/2009 $ 289,084 $ 731,041
McAfee.com 70,000 2.0% $ 7.33 10/1/2009 $ 322,466 $ 817,191
NAI 10,000 0.1% $11.06 4/20/2009 $ 180,196 $ 286,933
</TABLE>
OPTION EXERCISES AND HOLDINGS
There have been no McAfee.com option exercises to date.
The following table shows the value of unexercised stock options held by
the executive officers during the year ended December 31, 1999:
YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
COMPANY OPTIONS AT 12/31/99(#) AT 12/31/99($)(1)
GRANTING --------------------------- ---------------------------
NAME OPTION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Srivat Sampath...................... McAfee.com -- 900,000 -- $37,197,000
NAI 49,999 100,001 $ 0 $ 0
Evan Collins........................ McAfee.com -- 170,000 -- $ 6,673,250
NAI 45,000 62,267 $703,148 $ 972,953
</TABLE>
- ------------------------
(1) Calculated by taking the closing market price on December 31, 1999 of $45.00
for McAfee.com and $26.688 for Network Associates, less the exercise price,
multiplied by the number of options exercisable or unexercisable. The
amounts in these columns may not represent amounts actually realized by
these executive officers.
OFFICERS AND DIRECTORS INSURANCE
We maintain an insurance policy covering officers and directors to cover
any claims made against them for wrongful acts that they may otherwise be
required to pay or for which we are required to indemnify them, subject to
certain exclusions.
CERTAIN TRANSACTIONS
We have entered into certain agreements with Network Associates for the
purpose of defining their ongoing relationship. These agreements were developed
in the context of a parent/subsidiary relationship and therefore are not the
result of arms-length negotiations between independent parties. Although the
terms of these agreements or the transactions contemplated by these agreements
may be less favorable to us than terms we could have obtained from unaffiliated
third parties, we believe that these agreements taken as a whole are fair to
both parties and that the amount of the expenses contemplated by the agreements
would not be materially different if we operated on a stand-alone basis.
12
<PAGE> 18
Corporate Management Services Agreement. On January 1, 1999, we entered
into a Corporate Management Services Agreement with Network Associates under
which Network Associates provides us services relating to tax, accounting,
insurance, employee benefits administration, corporate record-keeping, payroll,
information technology infrastructure, and facilities management. In addition,
we may request certain additional services to be provided from time-to-time in
the future, with the fee for such additional services subject to negotiation
between the parties. The initial monthly fee that we are required to pay for
these services under the agreement is a portion of the costs to Network
Associates (based on headcount) plus a 10% mark-up. During the year ended
December 31, 1999, Network Associates charged us $3.7 million under this
agreement. For the fiscal periods prior to 1999, general and administrative
expenses allocated to us were based on a similar calculation.
The Corporate Management Services Agreement may be terminated either by us
upon 30 days notice, or by Network Associates when it ceases to own a majority
of the our outstanding voting stock. Following a termination of this agreement,
we may be unable to secure these services from others on acceptable terms. If we
are unsuccessful in obtaining acceptable provision of these services upon
termination of the corporate management services agreement, our future financial
performance could be adversely affected.
Cross License Agreement. We entered into a technology cross license
agreement with Network Associates through one of Network Associates'
wholly-owned subsidiaries. Under this agreement, Network Associates has granted
us worldwide non-exclusive patent licenses and exclusive copyright licenses for
the sale or licensing of software products or software services to certain OEMs
and end users solely via the Internet. Eligible end users include only
single-node, individual consumers. In consideration for the license and rights
granted under this license, we are required to pay Network Associates a royalty
on revenues from related product and subscription sales, initially at a rate of
20% commencing on January 1, 1999 and declining 1.625% per quarter until the
rate is 7% in the quarter beginning January 1, 2001, and remaining at 7%
thereafter. Also under this agreement, we have granted Network Associates
non-exclusive patent licenses and exclusive copyright licenses for the sale of
products to enterprise customers through any method of distribution including
the Internet and to end users through any method excluding the Internet. In
consideration for the rights granted under this license, Network Associates is
required to pay us a royalty of $250,000 per quarter. Under this cross
technology agreement, Network Associates will provide end user support to the
our customers. Charges for such support will be equal to a portion of the costs
to Network Associates plus a 10% markup.
During the year ended December 31, 1999, we were charged $2.4 million and
$4.4 million for royalties and support services, respectively. Had the
technology agreement been in effect in prior years, royalties, exclusive of the
royalty payable from Network Associates, would have been $1.2 million and
$478,000 for 1998 and 1997, respectively.
Asset Contribution and Receivables Settlement Agreement. We entered into an
asset contribution agreement with Network Associates effective as of January 1,
1999 that transfers ownership of certain assets to us. Among the assets
transferred to us were: a number of co-hosting and technology agreements to
which Network Associates is a party; revenues from advertising and sponsorship
agreements involving us; ownership rights in 3 patent applications; computers
and Internet infrastructure hardware; and any other assets which both Network
Associates and our board of directors agree to transfer at a future date. All
assets transferred from Network Associates have been recorded as a permanent
contribution to capital, at Network Associates' carryover basis. No liabilities
were transferred to us except for those directly resulting from the assets
transferred.
Revolving Loan Agreement. In January 1999, we entered into a revolving loan
agreement with Network Associates. Under the agreement, Network Associates has
agreed to make available to us up to $30 million in cash as a revolving loan.
The interest rate under this revolving loan is equal to the one-month LIBOR
rate. The revolving loan is repayable in full on January 1, 2001, the
termination date of the agreement. As of December 31, 1999, no amounts were
outstanding under this agreement.
Tax Sharing Agreement. We have entered into a tax-sharing agreement with
Network Associates under which we calculate our income taxes on a separate
return basis. We will be included in Network Associates'
13
<PAGE> 19
consolidated group for federal income tax purposes for so long as Network
Associates beneficially owns at least 80% of the total voting power and the
value of the outstanding common stock. Each member of a consolidated group is
jointly and severally liable for the federal income tax liability of each other
member of the consolidated group. Accordingly, although the tax-sharing
agreement allocates tax liabilities between Network Associates and us, during
the period in which we are included in Network Associates' consolidated group,
we could be liable in the event that any federal tax liability is incurred, but
not discharged, by any other members of Network Associates' consolidated group.
Under the tax sharing agreement, Network Associates and each other member
has agreed to indemnify us if we are required to pay any tax liability amount in
excess of its hypothetical separate income tax liability, provided we are not in
default of our obligation to pay our hypothetical separate income tax liability
to Network Associates.
The tax sharing agreement will terminate if we are no longer eligible to
join Network Associates in the filing of a consolidated federal income tax
return. In the event of such termination, any net operating losses or other
carryforward amounts would not be available to us upon departure from the group.
Under the tax sharing agreement, we will not be reimbursed for any such loss of
tax benefits.
Joint Cooperation Agreement. We have entered into a Joint Cooperation and
Master Services Agreement with Network Associates which governs the provision of
technology services among the parties. Under this agreement, Network Associates'
anti-virus emergency response team (AVERT) will provide us with research and
solutions for virus events. The agreement also contains standard terms and
conditions governing the provision of technology services from one party to the
other under statements of work that may be negotiated from time to time.
Currently we have entered into one such statement of work under which we provide
Network Associates the infrastructure and technical support services for Network
Associates' web site (www.Network Associates.com). Network Associates pays us a
fee for these services in an amount equal to ten percent of our total quarterly
technology costs plus a ten percent service charge. We are obligated to provide
these services until December 31, 2000 under this statement of work. During the
year ended December 31, 1999, the charge to Network Associates was $834,000.
This amount has been offset against technology costs. For the fiscal periods
prior to 1999, we provided similar services to Network Associates, which were
allocated and accounted for in the same manner.
Indemnification and Voting Agreement. We have entered into an
Indemnification and Voting Agreement with Network Associates which became
effective on December 2, 1999. Except under certain specified circumstances,
Network Associates will indemnify us for all losses related to any third party
claims relating to events or circumstances arising out of actions or inaction of
Network Associates, including its subsidiaries and officers and directors, on or
prior to December 2, 1999. Additionally, for so long as Network Associates owns
at least 20% of our outstanding voting power, it will vote its shares of our
common stock in favor of the election of two independent directors.
Registration Rights Agreement. We have entered into a registration rights
agreement with Network Associates that entitles Network Associates to include
the shares of common stock it owns in us in any future registration of common
stock we make, other than any registration statement relating to an acquisition
or a stock option plan. In addition, at any time after six months from December
2, 1999, Network Associates or certain transferees can request that we file a
registration statement so they can publicly sell their shares. We have agreed
pursuant to the terms of this registration rights agreement to pay all costs and
expenses, other than underwriting discounts and commissions, related to shares
to be sold by Network Associates or certain transferees in connection with any
such registration.
Option Grants to Network Associates Officers, Directors and Employees. In
January 1999, we granted options for a total 3,420,000 shares of our Class A
common stock to four executive officers and one non-executive officer of Network
Associates at exercise price of $3.67 per share. At the time the options were
granted, they vested 25% on January 15, 2000 with 2.083% vesting each month
thereafter for the following 36 months. Vesting is based on service to Network
Associates or any subsidiary thereof. In September 1999, the aggregate number of
options granted and the amount of each individual grant, was reduced by 50%. In
exchange for this reduction, we agreed to vest in full the remaining options.
Included in these grants, as so
14
<PAGE> 20
reduced, is a grant to William Larson of 900,000 shares, to Prabhat Goyal of
360,000 shares, to Peter Watkins of 180,000 shares, to Zachary Nelson of 180,000
shares and to Joanne Evans of 90,000 shares, all of which are for our Class A
common stock. Mr. Larson is an executive officer and director of Network
Associates and a McAfee.com director and Mr. Goyal is an executive officer of
Network Associates and a McAfee.com director.
In addition to the above option grants, in 1999 we granted to approximately
187 other employees of Network Associates options for an additional 387,750
shares of Class A common stock at an average exercise price of $7.09 per share.
These options are fully vested.
OTHER INFORMATION
We know of no other matters to be submitted at the annual meeting. If any
other matters properly come before the annual meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as our Board of Directors may recommend.
By Order of the Board of Directors
/s/ Evan S. Collins
Evan S. Collins
Secretary
April 25, 2000
15
<PAGE> 21
ANNEX A
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
MCAFEE.COM CORPORATION
PURPOSE:
The purpose of the Audit Committee of the Board of Directors of McAfee.com
Corporation and its subsidiaries (the "Company"), shall be to make such
examinations as are necessary to monitor the Company's system of internal
controls, to provide the Company's Board of Directors with the results of its
examinations and recommendations derived therefrom, to outline to the Board of
Directors improvements made, or to be made, in internal accounting controls, to
nominate to the Board of Directors independent auditors to audit the Company's
financial statements and to provide to the Board of Directors such additional
information and materials as it may deem necessary to make the Board of
Directors aware of significant financial matters which require the Board of
Director's attention. In addition, the Audit Committee will undertake those
specific duties and responsibilities listed below and such other duties as the
Board of Directors from time to time prescribe.
MEMBERSHIP:
The Audit Committee members will be appointed by, and will serve at the
discretion of, the Board of Directors and will consist of at least three members
of the Board of Directors, meeting the following criteria:
1. Each member will be an independent director, as defined in NASDAQ
Rule 4200;
2. Each member will be able to read and understand fundamental
financial statements, in accordance with the NASDAQ National Market Audit
Committee requirements; and
3. At least one member will have past employment experience in finance
or accounting, requisite professional certification in accounting, or other
comparable experience or background, including a current or past position
as a chief executive or financial officer or other senior officer with
financial oversight responsibilities.
Notwithstanding the foregoing, one director who is not an independent director
may serve on the Audit Committee if the required determination and other
requirements of NASD Rule 4310(c)(26)(B) are complied with.
RESPONSIBILITIES:
The responsibilities of the Audit Committee shall include:
1. Reviewing on a continuing basis the adequacy of the Company's
system of internal controls.
2. Reviewing the independent auditors' proposed audit scope and
approach;
3. Reviewing and managing the external audit and the Company's
relationship with its external auditors by (i) selecting, and evaluating
the performance of the independent auditors; (ii) reviewing the independent
auditors' proposed fee arrangements, audit scope and approach; (iii)
obtaining a formal written statement from the independent auditors
regarding relationships and services with the Company which may impact
independence and presenting this statement to the board, and to the extent
there are relationships, monitoring and investigating them; (iv) reviewing
the independent auditors' peer review conducted every three years; and (v)
discussing with the Company's independent auditors the financial statements
and audit findings, including any significant adjustments, management
judgments and accounting estimates, significant new accounting policies and
disagreements with management and any other matters described in SAS No.
61, as may be modified or supplemented;
4. Conducting a post-audit review of the financial statements and
audit findings, including any significant suggestions for improvements
provided to management by the independent auditors;
A-1
<PAGE> 22
5. Reviewing before release, and recommending to the Board of
Directors for inclusion in the Company's annual report on Form 10-K, the
audited financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations;
6. Ensuring that the Company's independent auditors review the
Company's interim financial statements included in quarterly reports on
Form 10-Q, using professional standards and procedures for conducting such
reviews;
7. Reviewing before release the unaudited quarterly operating results
in the Company's quarterly earnings release;
8. Overseeing compliance with the requirements of the Securities and
Exchange Commission for disclosure of auditor's services and audit
committee members and activities;
9. Reviewing management's monitoring of compliance with the Company's
standards of business conduct and with the Foreign Corrupt Practices Act;
10. Reviewing, in conjunction with counsel, any legal matters that
could have a significant impact on the Company's financial statements;
11. Providing oversight and review of the Company's asset management
policies, including an annual review of the Company's investment policies
and performance for cash and short-term investments;
12. If necessary, instituting special investigations and, if
appropriate, hiring special counsel or experts to assist;
13. Reviewing related party transactions for potential conflicts of
interest;
14. Reviewing its own structure, processes and membership
requirements;
15. Providing a report in the Company's proxy statement in accordance
with the requirements of Item 306 of Regulation S-K and Item 7(e) (3) of
Schedule 14A; and
16. Performing other oversight functions as requested by the full
Board of Directors.
17. Renewing the Company's compliance with employee benefit plans.
18. Overseeing and reviewing the Company's policies regarding
information technology and management information systems.
In addition to the above responsibilities, the Audit Committee will
undertake such other duties as the Board of Directors delegates to it.
MEETINGS:
The Audit Committee will meet at least three times each year. The Audit
Committee may establish its own schedule, which it will provide to the Board of
Directors in advance.
The Chief Executive Officer, Chief Financial Officer, and the independent
auditors shall be invited to attend all meetings. The Audit Committee will meet
separately with the Chief Financial Officer of the Company at least annually to
review the financial affairs of the Company. The Audit Committee will meet with
the independent auditors of the Company, at such times as it deems appropriate,
to review the independent auditors' examination and management report.
MINUTES:
The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
REPORTS:
The Audit Committee will summarize its examinations and recommendations to
the Board as may be appropriate, consistent with the Committee's charter.
A-2
<PAGE> 23
MCAF-PS-2000
<PAGE> 24
DETACH HERE
PROXY
MCAFEE.COM CORPORATION
2805 Bowers Avenue
Santa Clara, California 95051
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Srivats Sampath and Evan Collins as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote as designated on the reverse side, all
the shares of common stock of McAfee.com Corporation held of record by the
undersigned on April 3, 2000, at the Annual Meeting of Stockholders to be held
on May 25, 2000, or any adjournment thereof.
- --------------------------------------------------------------------------------
SEE REVERSE SIDE (Continued and to be signed on reverse side) SEE REVERSE SIDE
DETATCH HERE
[X] Please mark votes as in this example.
This Proxy, when properly executed, will be voted in the manner directed
herein by the assigned stockholder. If no direction is taken this proxy will be
voted for Proposals 1and 2.
1. Election of Class I Directors.
Nominees: (01) Frank Gill and (02) Prabhat Goyal
For Withheld
[ ] [ ]
[ ] _______________________________________
For both nominees except as noted below
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants for the fiscal year ended December 31, 2000.
For Against Abstain
[ ] [ ] [ ]
At their discretion, the proxies are authorized to vote upon other business as
may properly come before the meeting.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
<PAGE> 25
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears to the left. When shares are held in
joint tenancy, all of such persons should sign. When signing as attorney,
executor,administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature:__________________________________________ Date:_____________
Signature:__________________________________________ Date:_____________
