MCAFEE ASSOCIATES INC, DEF 14A, 1996-05-07

MCAFEE ASSOCIATES INC
DEF 14A, 1996-05-07
PREPACKAGED SOFTWARE

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<PAGE> 1

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:

<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>

McAFEE ASSOCIATES, INC.
- --------------------------------------------------------------------------------
(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):

/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:

/X/ 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 ASSOCIATES, INC.
2710 WALSH AVENUE
SANTA CLARA, CALIFORNIA 95051-0963

May 8, 1996

TO THE STOCKHOLDERS OF MCAFEE ASSOCIATES, INC.

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders
(including any adjournments or reschedulings thereof, the "Annual Meeting") of
McAfee Associates, Inc. (the "Company") which will be held at the Marriott
Hotel, 2700 Mission College Blvd., Santa Clara, California, on Thursday, June
13, 1996, at 9:00 a.m.

Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.

It is important that your shares be represented and voted at the 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 automatically by voting in person at the meeting.

On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.

Sincerely,

William L. Larson
President, Chief Executive Officer
and Chairman of the Board
<PAGE> 3

MCAFEE ASSOCIATES, INC.
2710 WALSH AVENUE
SANTA CLARA, CA 95051-0963

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 1996

The annual meeting of the stockholders (including any adjournments or
reschedulings thereof, the "Annual Meeting") of McAfee Associates, Inc. (the
"Company"), will be held on June 13, 1996, at 9:00 a.m. Pacific time at the
Marriott Hotel, 2700 Mission College Blvd., Santa Clara, California 95054, for
the following purposes:

1. To elect two (2) Class I directors to hold office for a three-year term
and until their successors are elected and qualified.

2. To approve an amendment to Article Fourth of the Company's Restated
Certificate of Incorporation to increase the number of shares of Common
Stock that the Company is authorized to issue from 40,000,000 to
100,000,000.

3. To approve an amendment to Article Ninth of the Company's Restated
Certificate of Incorporation to decrease the percentage of the voting
power of the outstanding shares required to amend certain provisions of
the Company's Certificate of Incorporation from 66 2/3% to a majority.

4. To consider a proposal to ratify the appointment of Coopers & Lybrand
L.L.P. as the independent accountants of the Company for the fiscal year
ending December 31, 1996.

5. To transact such other business as may properly come before the meeting.

Stockholders of record at the close of business on April 29, 1996 are
entitled to notice of, and to vote at, this meeting and any adjournments or
reschedulings thereof. For ten days prior to the meeting, a complete list of the
stockholders entitled to vote at the meeting will be available for examination
by any stockholder for any purpose relating to the meeting during ordinary
business hours at the principal office of McAfee Associates, Inc.

By order of the Board of Directors,

R. TERRY DURYEA
Secretary

Santa Clara, California
May 8, 1996

IMPORTANT

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. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
<PAGE> 4

MCAFEE ASSOCIATES, INC.
2710 WALSH AVENUE
SANTA CLARA, CALIFORNIA 95051-0963

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

The accompanying proxy is solicited by the Board of Directors of McAfee
Associates, Inc., a Delaware corporation (the "Company"), for use at the annual
meeting of stockholders (including any adjournments or reschedulings thereof,
the "Annual Meeting") to be held June 13, 1996, for the purposes set forth in
the accompanying Notice of Annual Meeting. The date of this Proxy Statement is
May 8, 1996, the approximate date on which this Proxy Statement and the
accompanying form of proxy were first sent or given to stockholders.

GENERAL INFORMATION

ALL SHARE AND PER SHARE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS
ADJUSTED TO REFLECT THE 50% STOCK DIVIDEND TO BE DISTRIBUTED ON OR ABOUT MAY 16,
1996 TO HOLDERS OF RECORD OF THE COMPANY'S COMMON STOCK ON APRIL 29, 1996.

Annual Report. An annual report for the year ended December 31, 1995 is
enclosed with this Proxy Statement.

Voting Securities. Only stockholders of record as of the close of business
on April 29, 1996 will be entitled to vote at the Annual Meeting, including any
adjournment or rescheduling thereof. As of that date, there were 31,247,292
shares of Common Stock of the Company, par value $.01 per share, issued and
outstanding after giving effect to the 50% stock dividend to be distributed on
or about May 16, 1996 to holders of record on April 29, 1996. Stockholders may
vote in person or by proxy. Each holder of shares of Common Stock is entitled to
one vote for each share of stock held on the proposals presented in this Proxy
Statement. Shares of Common Stock may not be voted cumulatively. The Company's
bylaws provide that a majority of all of the shares of the stock entitled to
vote, whether present in person or represented by proxy, shall constitute a
quorum for the transaction of business at the meeting. All votes will be
tabulated by the inspector of elections appointed for the Annual Meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.

Solicitation of Proxies. The cost of soliciting proxies, including the
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional soliciting material furnished to stockholders, will be borne
by the Company. The Company has retained the services of MacKenzie Partners to
assist in the solicitation of proxies for which it will receive a fee from the
Company of approximately $6,000, plus out-of-pocket expenses. In addition to
soliciting stockholders by mail through its regular employees, the Company will
request banks and brokers, and other custodians, nominees and fiduciaries, to
solicit their customers who have stock of the Company registered in the names of
such persons and will reimburse them for their reasonable, out-of-pocket costs.
The Company may use the services of its officers, directors, and others to
solicit proxies, personally or by telephone, without additional compensation.
Except as described above, the Company does not presently intend to solicit
proxies other than by mail.

Voting of Proxies. All valid proxies received prior to the Annual Meeting
will be voted. All shares represented by a proxy will be voted, and where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke his
or her proxy, at any time prior to the time it is voted, by delivery to the
Secretary of the Company of a written instrument revoking the proxy or a duly
executed proxy with a later date, or by attending the meeting and voting in
person. A majority of the shares of Common Stock of the Company present at the
Annual Meeting, in person or by proxy, whether or not constituting a quorum, may
vote to, or the Company's Board in its discretion may, adjourn the Annual
Meeting from time to time without further notice, including for the purpose of
soliciting additional proxies. Proxies containing a vote against the proposals
presented in this Proxy Statement will not be used to vote in favor of any such
adjournment.

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PROPOSAL NO. 1 -- ELECTION OF DIRECTORS

The Company has a classified Board of Directors consisting of two Class I
directors (John C. Bolger and Edwin L. Harper), two Class II directors (Leslie
G. Denend and Walter G. Kortschak), and two Class III directors (Jeffrey T.
Chambers and William L. Larson), who have been elected to serve until the Annual
Meetings of Stockholders to be held in 1996, 1997 and 1998, respectively, and
until their respective successors are duly elected and qualified. At each Annual
Meeting of Stockholders, directors are elected for a full term of three years to
succeed those directors whose terms expire on the Annual Meeting dates.

The nominees of the Board of Directors for election to Class I of the Board
of Directors at the Annual Meeting of Stockholders are John C. Bolger and Edwin
L. Harper.

If elected, the Board of Director's nominees will serve as directors until
the Company's Annual Meeting of Stockholders in 1999, and until their successors
are elected and qualified. If a nominee declines to serve or becomes unavailable
for any reason, or if another vacancy occurs before the election (although
Management knows of no reason to anticipate that this will occur), the proxies
may be voted for such substitute nominee as Management may designate.

If a quorum is present and voting, the two nominees for Class I director
receiving the highest number of votes will be elected as the Class I directors.
Abstentions and shares held by brokers that are present, but not voted because
the brokers were prohibited from exercising discretionary authority, i.e.,
"broker non-votes" will be counted as present for purposes of determining if a
quorum is present.

The table below sets forth for the current directors and the Class I
nominees to be elected at this meeting, certain information with respect to age
and background.

<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
- ------------------------------------------ --------------------------------- --- --------
<S> <C> <C> <C>
Class I nominees to be elected at the 1996 Annual Meeting of Stockholders:
John C. Bolger............................ Director 49 1996
Edwin L. Harper........................... Director 50 1993
Class II directors whose terms expire at the 1997 Annual Meeting of Stockholders:
Leslie G. Denend.......................... Director 55 1995
Walter G. Kortschak....................... Director 37 1992
Class III directors whose terms expire at the 1998 Annual Meeting of Stockholders:
Jeffrey T. Chambers....................... Director 41 1992
William L. Larson......................... President, Chief Executive
Officer and Chairman of the Board 40 1993
</TABLE>

Mr. Bolger has been a director of the Company since April 18, 1996. Since
1992, Mr. Bolger has been a business consultant and private investor. Mr. Bolger
was Vice President of Finance and Administration of Cisco Systems, Inc., a
networking company, from May 1989 through December 1992. Mr. Bolger serves as a
director of Integrated Systems Inc., TCSI Corporation, Sanmina Corporation,
Integrated Device Technologies, and Access Line Technologies, Inc.

Mr. Denend has been a director of the Company since June 14, 1995. Since
June of 1993, Mr. Denend has been Chief Executive Officer and President of
Network General Corporation. From February of 1993 to June of 1993, Mr. Denend
was Senior Vice President of Network General Corporation, a networking company.
Mr. Denend was President of Vitalink, a manufacturer of inter-networking
products, from November 1990 to December 1992. Mr. Denend serves as a director
of Rational Software, Proxima Corporation and Network General Corporation.

Mr. Harper has been a director of the Company since January 1993. Since
June 1993, Mr. Harper has been employed as President and Chief Executive Officer
of ComByte, Inc., a privately-held PC peripherals company. Mr. Harper was
President and Chief Executive Officer of Colorado Memory Systems ("CMS"), a
manufacturer of computer peripherals, from June 1992 to April 1993, and served
as President and Chief Operating Officer of CMS from September 1990 through May
1992.

Mr. Kortschak has been a director of the Company since August 1992. Mr.
Kortschak has been a General Partner of Summit Partners since 1991 and has been
associated with Summit Partners since June 1989.

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<PAGE> 6

Summit Partners and its affiliates manage a number of venture capital funds. Mr.
Kortschak serves as a director of Diamond Multimedia Systems, Inc., HMT
Technology Corporation, Mecon, Inc., and several privately-held companies.

Mr. Chambers has been a director of the Company since August 1992. He has
been associated with TA Associates since 1980, has been a partner of affiliated
venture funds since 1984 and is currently a Managing Director of TA Associates,
Inc. TA Associates, Inc. is a private equity capital firm investing primarily in
high technology companies. Mr. Chambers is also a director of Technology
Solutions Company and Diamond Multimedia Systems, Inc.

Mr. Larson joined the Company in September 1993 as its Chief Executive
Officer. In October 1993 he was appointed as a director of the Company and was
elected to the additional office of President. In April 1995, Mr. Larson was
also elected Chairman of the Board of Directors. From August 1988 to September
1993, Mr. Larson was employed as a Vice President of SunSoft, Inc. a system
software subsidiary of Sun Microsystems, Inc., where he was responsible for
worldwide sales and marketing.

Meetings of the Board of Directors.

During the year ended December 31, 1995, the Board of Directors held seven
(7) meetings. No director serving on the Board during 1995 attended fewer than
75% of the aggregate of such meetings of the Board and the Committees of the
Board on which he served.

The Company does not have a standing Nominating Committee, but does have an
Audit Committee and a Compensation Committee.

The Audit Committee's function is to review with the Company's independent
accountants and management the annual financial statements and independent
accountants' opinion, review the scope and results of the examination of the
Company's financial statements by the independent accountants, approve all
professional services and related fees performed by the independent accountants,
recommend the retention of the independent accountants to the Board, subject to
ratification by the stockholders, and periodically review the Company's
accounting policies and internal accounting and financial controls. The members
of the Audit Committee are Messrs. Chambers, Harper and Kortschak. During the
year ended December 31, 1995, the Audit Committee held four (4) meetings.

The Compensation Committee's function is to review and approve salary
levels and stock option grants. The members of the Compensation Committee are
Messrs. Chambers, Denend and Kortschak. During the year ended December 31, 1995,
the Compensation Committee held Four (4) meetings. For additional information
concerning the Compensation Committee, see "EXECUTIVE COMPENSATION AND OTHER
MATTERS -- Compensation Committee Interlocks and Insider Participation in
Compensation Decisions" and "COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION."

PROPOSAL NO. 2 -- AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION

As a result of the 50% stock dividends distributed and to be distributed to
holders of record of the Company's Common Stock on October 16, 1995 and April
29, 1996, respectively, and the acquisition by the Company of Saber Software
Corporation effective August 30, 1995, the Company has issued or reserved for
issuance substantially all of its authorized Common Stock. Therefore, the Board
of Directors has determined that it is in the best interests of the Company and
its stockholders to amend the first paragraph of Article Fourth of the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock of the Company from 40,000,000 to 100,000,000 shares.
Accordingly, the Board of Directors has unanimously approved the proposed
amendment to the first paragraph of Article Four of the Restated Certificate of
Incorporation in the form set forth on Exhibit A attached hereto (the "First
Amendment") and hereby solicits the approval of the Company's stockholders of
the First Amendment. If the stockholders approve the First Amendment, the Board
of Directors currently intends to file a Second Restated Certificate of
Incorporation reflecting the First Amendment with the Secretary of State of the
State of Delaware as soon as practicable following such stockholder approval. If
the First Amendment is not approved by the stockholders, Article Fourth of the
existing Restated Certificate of Incorporation will continue in effect.

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The objective of the increase in the authorized number of shares of Common
Stock is to ensure that the Company has sufficient shares available for future
issuances. The Board of Directors believes that it is prudent to increase the
authorized number of shares of Common Stock to the proposed levels in order to
provide a reserve of shares available for issuance to meet business needs as
they arise. Such future activities may include, without limitation, effecting
stock splits or dividends, establishing strategic relationships with corporate
partners, providing equity incentives to employees, officers or directors or
financings. The additional shares of Common Stock authorized may also be used to
acquire or invest in complementary businesses or products or to obtain the right
to use complementary technologies. Although the Company has no present
obligation to issue additional shares of Common Stock (except pursuant to
employee and director stock incentive plans) the Company in the ordinary course
of its business evaluates potential acquisitions of companies, products and
technologies. The Company has no present commitments, agreements or ongoing
negotiations with respect to any such acquisitions other than preliminary
discussions regarding an immaterial acquisition which would result in the
issuance of significantly less than 1% of the Company's outstanding Common Stock
from existing reserves.

The Company acknowledged in public statements that it made a proposal to
acquire Cheyenne Software, Inc. ("Cheyenne") in exchange for shares of the
Company's Common Stock following Cheyenne's public disclosure of the Company's
privately communicated proposal. On May 1, 1996, the Company announced that it
had withdrawn its proposal to acquire Cheyenne in light of Cheyenne's continuing
rejection of the Company's friendly acquisition proposal and that it presently
intends to take no further action with respect to such proposal. In the event
the Company were to ever proceed in a transaction with Cheyenne involving the
issuance of McAfee Common Stock, such transaction would require separate
stockholder approval under the rules of the Nasdaq Stock Market.

The Company is also seeking to amend Article Ninth of the Company's
Certificate of Incorporation to decrease the percentage of the outstanding
voting power required to amend certain provisions of such Certificate of
Incorporation from 66 2/3% to a majority. See Proposal No. 3 below. If Proposal
No. 3 is approved, the number of authorized shares of Common Stock could be
increased with the approval of a majority of the outstanding voting power.

POSSIBLE EFFECTS OF THE PROPOSED FIRST AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION

If the stockholders approve the proposed First Amendment, the Board of
Directors may cause the issuance of additional shares of Common Stock without a
further vote of the stockholders of the Company, except as provided under
Delaware corporate law or under the rules of Nasdaq Stock Market or any
securities exchange on which shares of Common Stock of the Company are then
listed. The issuance of additional shares of Common Stock would decrease the
proportionate equity interest of the Company's current stockholders and,
depending upon the price paid for such additional shares, could result in
dilution to the Company's current stockholders.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION.

The affirmative vote of at least 66 2/3% of the outstanding shares of
Common Stock of the Company is required for approval of this proposal.
Abstentions and broker non-votes will each be counted as votes against the
proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE FIRST
AMENDMENT.

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PROPOSAL NO. 3 -- AMENDMENT TO ARTICLE NINTH OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION

The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to amend Article Ninth of the Company's
Certificate of Incorporation to decrease the percentage of the outstanding
voting power required to amend Article First, Article Second, Article Third and
Article Fourth of the Company's Certificate of Incorporation from 66 2/3% to a
majority. These provisions specify the name of the Company, its registered
agent, the purpose of the Company and the Company's authorized capital stock.
Accordingly, the Board of Directors has unanimously approved the proposed
amendment to Article Ninth of the Restated Certificate of Incorporation in the
form set forth on Exhibit A attached hereto (the "Second Amendment") and hereby
solicits the approval of the Company's stockholders of the Second Amendment. If
the stockholders approve the Second Amendment, the Board of Directors currently
intends to file a Second Restated Certificate of Incorporation reflecting the
Second Amendment with the Secretary of State of the State of Delaware as soon as
practicable following such stockholder approval. If the Second Amendment is not
approved by the stockholders, Article Ninth of the existing Restated Certificate
of Incorporation will continue in effect. If both the First Amendment and the
Second Amendment are approved by the stockholders, the Second Restated
Certificate of Incorporation would be filed in the form attached hereto as
Exhibit B.

The objective of the Second Amendment is to give the Company and its
stockholders greater flexibility to amend the Restated Certificate of
Incorporation as necessary to address future business needs. As of March 31,
1996, virtually all outstanding shares of the Company's Common Stock were held
by unaffiliated investors, primarily institutional holders who hold less than 5%
of the outstanding stock. As a result, the Company believes that the Second
Amendment is necessary to provide the requisite flexibility for the Company and
its stockholders.

POSSIBLE EFFECTS OF THE PROPOSED SECOND AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION

If the stockholders approve the proposed Second Amendment, the holders of a
majority of the Company's outstanding Common Stock could approve changes to the
Company's Second Restated Certificate of Incorporation which may not have
received the approval of 66 2/3% of the outstanding shares. Such changes could
include increases or decreases in the authorized Common Stock or Preferred
Stock. The Company has 5,000,000 shares of authorized, but undesignated,
Preferred Stock. The Company does not have any Preferred Stock issued or
reserved for issuance and has no current plans to issue any Preferred Stock.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION.

PROPOSAL NO. 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors of the Company has selected Coopers & Lybrand L.L.P.
as independent accountants to audit the financial statements of the Company for
the fiscal year ending December 31, 1996. Coopers & Lybrand L.L.P. has acted in
such capacity since its appointment during the fiscal year ended December 31,
1991. A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting with the opportunity to make a statement if the
representative desires to do so, and is expected to be available to respond to
appropriate questions.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION.

The affirmative vote of a majority of the votes cast at the Annual Meeting
of Stockholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum, but will not be counted as having been voted on the
proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1996.

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MANAGEMENT

EXECUTIVE OFFICERS

The executive officers of the Company as of April 29, 1996 are as follows:

<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
- ----------------------- -------------------------------------------------------- ---
<S> <C> <C>
William Larson......... President, Chief Executive Officer and Chairman of the
Board 40
Dennis Cline........... Vice President of Worldwide Channel Sales 35
R. Terry Duryea........ Vice President of Professional Services and Corporate
Development and Secretary 49
Prabhat Goyal.......... Vice President of Finance, Corporate Controller and
Treasurer 41
Richard D. Kreysar..... Vice President of Operations 40
Darrell Poteet......... Vice President of Electronic Commerce 42
Peter Watkins.......... Vice President of International Operations 41
Mark Woodward.......... Vice President of North American Direct Sales 37
</TABLE>

Mr. Larson joined the Company in September 1993 as its Chief Executive
Officer. In October 1993 he was appointed as a director of the Company and was
elected to the additional office of President. In April 1995, Mr. Larson was
also elected Chairman of the Board of Directors. From August 1988 to September
1993, Mr. Larson was employed as a Vice President of SunSoft, a system software
subsidiary of Sun Microsystems, Inc., where he was responsible for worldwide
sales and marketing.

Mr. Cline joined the Company in September 1994 as Vice President of North
American Sales. Mr. Cline was Vice President of North American Channel Sales
from October 1995 to April 1996 when he became Vice President of Worldwide
Channel Sales. From November 1993 to September 1994, Mr. Cline performed sales
consulting services for various companies. From January 1993 to November 1993,
Mr. Cline was Vice President of Worldwide Sales for Fifth Generation Systems, a
software utilities company. Mr. Cline was a Director of Sales for GCC
Technologies, Inc., a manufacturer of computer printers, from April 1992 to
January 1993. From June 1991 to March 1992, Mr. Cline served as Director for
Worldwide Sales for Alias Research, a graphics software company. Prior to that
time, from January 1988 to August 1991, Mr. Cline was a Sales Manager for Claris
Corporation, an applications software company.

Mr. Duryea joined the Company as Vice President of Finance and
Administration, Chief Financial Officer and Treasurer in May 1995. In April
1995, Mr. Duryea became Vice President of Professional Services and Corporate
Development and Secretary. From October 1992 to April 1995, Mr. Duryea served as
Senior Vice President of Finance and Administration and Secretary of Unify
Corporation, a client/server application development tool company. From December
1991 to August 1992, Mr. Duryea served as Vice President and Chief Financial
Officer of Chemtrak Incorporated, a medical diagnostics company. From June 1990
to June 1991, Mr. Duryea served as Vice President and General Manager of the
Advanced Systems Division of the Integrated Circuits Group at Mentor Graphics
Corporation. Mr. Duryea is a certified public accountant.

Mr. Goyal joined the Company in March 1996 and was elected as a Vice
President of Finance, Corporate Controller and Treasurer in April 1996. From
July 1994 to March 1996 Mr. Goyal was Director, Finance and OEM Development,
Solaris Products Group for SunSoft, Inc. From November 1991 to June 1994, Mr.
Goyal served as Director, Finance and Sales Operations of SunSoft, Inc. From
November 1988 to October 1991, Mr. Goyal served as Manager, Financial Planning,
Corporate Marketing for Sun MicroSystems Computer Co., a hardware development
subsidiary of Sun MicroSystems, Inc.

Mr. Kreysar joined the Company as Vice President of Marketing in January
1995 and became Vice President of Operations in April 1996. From December 1993
until December 1994, Mr. Kreysar was employed as Senior Vice President of
Marketing and Channel Sales of OpenVision Technologies, Inc., a supplier of
systems management applications. From June 1985 to December 1993, Mr. Kreysar
served in

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<PAGE> 10

various roles, ultimately as Vice President of Channel Sales, of Computer
Associates International Inc., a software company.

Mr. Poteet joined the Company as Manager of Support in April 1994 and
became Director of Support in August 1994. In April 1996, Mr. Poteet was elected
Vice President of Electronic Commerce. Mr. Poteet was National Sales Manager of
Automated Design Systems, Inc., a network management company, from January 1994
to April 1994 and its Director of Support from November 1990 to January 1994.

Mr. Watkins joined the Company in May 1995 as Vice President of
International Operations. From January 1991 to April 1995, Mr. Watkins was
employed in various capacities, ultimately serving as Managing Director of
European Operations, for SunSoft, Inc. a system software subsidiary of Sun
Microsystems, Inc.

Mr. Woodward joined the Company in October 1995 as Vice President of North
American Direct Sales. From July 1995 to October 1995, Mr. Woodward was Senior
Vice President of Sales at Computer Associates International, Inc., a software
company. From July 1989 to July 1995, Mr. Woodward was Vice President of Western
Area Operations for Legent Inc., a software company.

The Company's officers serve at the discretion of the Board of Directors.
There are no family relationships among any of the Company's directors and
executive officers.

7
<PAGE> 11

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information, as of March 31, 1996,
with respect to the beneficial ownership of the Company's Common Stock by (i)
all persons known by the Company to be the beneficial owners of more than 5% of
the outstanding Common Stock of the Company, (ii) each director and director-
nominee of the Company, (iii) each person named in the Summary Compensation
Table, and (iv) all executive officers and directors of the Company as a group.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENTAGE
BENEFICIAL OWNERS(1) OF SHARES OF CLASS
-------------------------------------------------------------- --------- ----------
<S> <C> <C>
Nicholas Applegate (2)
600 West Broadway, 29th Floor
San Diego, CA 92101......................................... 2,122,453 6.8.%
Pilgrim Baxter & Associates, Ltd.(3)
1255 Drummers Lane, Suite 300
Wayne, PA 19087............................................. 2,463,330 7.9%
William L. Larson(4)
President, Chief Executive Officer and Chairman of the Board
2710 Walsh Avenue
Santa Clara, CA 95051-0963.................................. 400,938 1.3%
John C. Bolger................................................ 0 0
Jeffrey T. Chambers........................................... 16,348 *
Leslie G. Denend.............................................. 0 0
Edwin L. Harper............................................... 0 0
Walter G. Kortschak........................................... 500 *
Dennis Cline(4)............................................... 14,063 *
Richard D. Kreysar(4)......................................... 15,477 *
Peter Watkins(4).............................................. 70,313 *
Executive officers and directors as a group (11 persons)
(5)......................................................... 598,031 1.9%
Former Executive Officer:
Robert S. Chappelear(6)..................................... 37,502 *
</TABLE>

- ---------------
* Less than 1%

(1) Except as indicated in the footnotes to this table, the Company believes
that the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable.

(2) According to a Schedule 13G filed with the Commission on February 12, 1996.

(3) According to a Schedule 13G filed with the Commission on February 15, 1996.

(4) Represents shares subject to stock options that are currently exercisable or
will become exercisable within 60 days of March 31, 1996.

(5) Includes 580,948 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days of March 31, 1996.

(6) Mr. Chappelear ceased to be an executive officer of the Company in January
1996.

8
<PAGE> 12

EXECUTIVE COMPENSATION AND OTHER MATTERS

The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and the four other executive officers
of the Company as of December 31, 1995 whose total salary and bonus for the year
ended December 31, 1995 exceeded $100,000, in all cases for services in all
capacities to the Company during the years ended December 31, 1995, 1994 and
1993:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ------------
OTHER SECURITIES
NAME AND PRINCIPAL ANNUAL UNDERLYING
POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS
- --------------------------------------- ----- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
William L. Larson(2)................... 1995 $ 220,008 $229,676 0 787,500
President, Chief Executive 1994 200,000 198,688 0 0
Officer and Chairman of 1993 63,590 125,000 0 1,125,000
the Board
Robert Chappelear(3)................... 1995 $ 150,005 $ 36,671 0 47,813
Vice President, 1994 139,584 34,234 0 191,250
Engineering 1993 -- -- -- --
Dennis Cline........................... 1995 $ 100,000 $ 92,642 0 0
Vice President, North 1994 33,333 32,674 0 225,000
American Channel Sales 1993 -- -- -- --
Richard D. Kreysar..................... 1995 $ 128,752 $ 37,011 0 247,500
Vice President, Marketing 1994 -- -- -- --
1993 -- -- -- --
Peter Watkins.......................... 1995 $ 123,259 $ 20,025 $ 56,949(4) 281,250
Vice President of 1994 -- -- -- --
International Operations 1993 -- -- -- --
</TABLE>

- ---------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.

(2) Mr. Larson joined the Company as Chief Executive Officer in September 1993
and was elected to the additional office of President in October 1993 and
Chairman of the Board in April 1995.

(3) Mr. Chappelear joined the Company as its Vice President of Engineering in
January 1994 and resigned as an officer of the Company in January 1996.

(4) Represents cost of living allowance for overseas assignment.

9
<PAGE> 13

The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the year ended
December 31, 1995 to the persons named in the Summary Compensation Table:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT
------------------------------------------------ ASSUMED ANNUAL RATES OF
% OF TOTAL STOCK
NUMBER OF OPTIONS PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION TERM
UNDERLYING EMPLOYEES IN (3)
OPTIONS FISCAL EXERCISE EXPIRATION ----------------------------
NAME GRANTED(1) YEAR PRICE(2) DATE 5% 10%
- -------------------------- --------- ------------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Larson......... 225,000(4) 5.5% $ 8.22 01/19/05 $ 1,163,140 $ 2,947,627
562,500(5) 13.8% $14.55 07/13/05 $ 5,147,109 $ 13,043,786
Robert S. Chappelear(6)... 47,813 1.2% $ 8.22 01/19/05 $ 247,170 $ 626,377
Dennis Cline.............. 0 -- -- -- -- --
Richard D. Kreysar........ 247,500 6 % $ 8.22 01/19/05 $ 1,279,455 $ 3,242,389
Peter Watkins............. 281,250 6.9% $12.55 04/13/05 $ 2,219,801 $ 5,625,413
</TABLE>

- ---------------
(1) Generally, initial grants of options granted in 1995 under the Company's
1995 Stock Incentive Plan (the "Option Plan") vest at the rate of one-fourth
on the first anniversary of the optionee's date of hire and 1/48 per month
thereafter for each full month of the optionee's continuous employment with
the Company; subsequent option grants vest over a four year period at the
rate of one-fourth on the first anniversary of the date of grant and 1/48
per month thereafter for each full month of the optionee's continuous
employment with the Company. Under the Option Plan, the Board retains
discretion to modify the terms of outstanding options. See also "Employment
and Change in Control Arrangements." Under the Option Plan, options will
become fully exercisable upon a transfer of control of the Company, unless
the option is assumed by the acquiring entity. See "Employment and Change in
Control Arrangements" below.

(2) All options were granted at an exercise price equal to the fair market value
of the Common Stock on the date of grant. The exercise price may be paid in
cash, in shares of Common Stock valued at fair market value on the exercise
date or through a cashless exercise procedure involving a same-day sale of
the purchased shares. The Company may also finance the option exercise by
loaning the optionee sufficient funds to exercise the option and pay any
withholding taxes incurred upon exercise

(3) Potential gains are net of exercise price, but before taxes associated with
the exercise. These amounts represent certain hypothetical gains based on
assumed rates of appreciation, based on the Securities and Exchange
Commission's rules, and do not represent the Company's estimate or
projection of future Common Stock prices. Actual gains, if any, on stock
option exercises are dependent on the future performance of the Company,
overall market conditions and the optionees' continued employment through
the vesting period. The amounts reflected in this table may not be achieved.

(4) This option vests over a period of three years commencing in January 1995 at
a rate of 1/36 per month.

(5) This option vests over a period of two years commencing in July 1997 at a
rate of 1/24 per month.

(6) Mr. Chappelear resigned from his position as an officer of the Company
effective January 3, 1996.

10
<PAGE> 14

The following table provides the specified information concerning exercises
of options to purchase the Company's Common Stock during the year ended December
31, 1995, and unexercised options held as of December 31, 1995, by the persons
named in the Summary Compensation Table:

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/95 12/31/95(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Larson......... 202,500 $3,751,737 387,499 1,187,499 $ 9,405,564 $ 22,381,971
Robert S. Chappelear(3)... 60,000 $1,305,347 31,639 147,421 $ 750,585 $ 3,300,611
Dennis Cline.............. 60,937 $1,281,005 9,375 154,687 $ 223,437 $ 3,686,719
Richard D. Kreysar........ 0 -- 0 247,500 $ 0 $ 4,853,755
Peter Watkins............. 0 -- 0 281,250 $ 0 $ 4,296,881
</TABLE>

- ---------------
(1) Based on the dividend adjusted closing price of $27.83 on December 31, 1995,
less exercise price.

(2) Market price on date of exercise, less exercise price.

(3) Mr. Chappelear resigned from his position as an officer of the Company
effective January 3, 1996. Effective April 24, 1996, Chappelear resigned
from his employment with the Company, resulting in the cancellation of
unexercisable options to purchase shares.

EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS.

William L. Larson currently serves as President and Chief Executive Officer
of the Company pursuant to an agreement dated April 14, 1995 which provides
that, in the event that Mr. Larson's employment is involuntarily terminated
other than for cause, he will be entitled to receive severance payments
consisting of his base salary and bonus for twelve (12) months after such
termination, which payment would cease in the event that he accepted employment
elsewhere.

Dennis Cline, the Company's Vice President of North American Channel Sales,
has entered into an agreement with the Company that provides that, in the event
his employment with the Company is terminated within three months of a merger of
the Company or a sale of substantially all of the Company's assets due to such
transaction, he would be entitled to receive his salary for nine months and
payment of his full target bonus over such period.

The terms of the Company's 1995 Stock Incentive Plan (the "Option Plan")
applicable to options granted after April 14, 1995 provide that in the event of
a "transfer of control" of the Company, the acquiring corporation shall assume
the options outstanding under the Option Plan or substitute options for the
acquiring corporation's stock for the outstanding options. Should the acquiring
corporation elect not to assume outstanding options or substitute new options
for outstanding options, then all outstanding options shall become immediately
exercisable and fully vested as of the date ten days prior to the date of the
"transfer of control." In addition, the Board has discretion to provide for
accelerated vesting of assumed options. In April 1995, the Board of Directors
authorized the Company to enter into agreements with each of its current
executive officers and all new executive officers since that date, that provide
that, in the event of a "transfer of control" of the Company, all stock options
held by the executive officer would become fully vested and immediately
exercisable as of the date ten days prior to the "transfer of control,"
conditioned upon consummation of the "transfer of control" event.

COMPENSATION OF DIRECTORS.

The employee directors of the Company did not receive any cash compensation
for their services as members of the Board of Directors of the Company in the
year ended December 31, 1995. The non-employee directors of the Company are
eligible to receive up to $15,000 each on an annual basis for their services as

11
<PAGE> 15

directors of the Company, based on attendance at meetings of the Company's Board
of Directors. The Company's Stock Option Plan for Outside Directors (the
"Directors Plan") provides for initial and annual automatic grants of
nonstatutory stock options to directors of the Company who are not employees of
the Company or of any affiliated corporation and who are not associated with any
entity or affiliated group of entities owning ten percent or more of the
Company's outstanding stock. Under the Directors Plan, each individual who first
becomes an outside Board member is granted an option to purchase 33,750 shares
on the date such individual joins the Board. In addition, on the anniversary
date of each grant, each outside director who received an initial grant will
receive an additional option grant to purchase 11,250 shares of Common Stock. In
1995, Mr. Harper received an option to purchase 11,250 shares and Mr. Denend
received an initial grant of an option to purchase 33,750 shares. On April 16,
1996, Mr. Bolger was granted an option to purchase 33,750 shares. Initial
options vest annually in equal installments over a three year period from the
date of grant. Annual options vest on the third anniversary of the date of
grant. All options granted under the Directors Plan become fully exercisable
upon certain mergers, sale of assets or sale of all or substantially all the
voting stock of the Company.

Directors who are also employees of the Company are eligible to receive
options and be issued shares of Common Stock directly under the 1995 Stock
Incentive Plan and are also eligible to participate in the Company's Employee
Stock Purchase Plan and, if an executive officer of the Company, the Executive
Bonus Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS.

Messrs. Kortschak, Chambers and Denend served as members of the Board of
Directors' Compensation Committee during 1995. None of the members of the
Compensation Committee was at any time during 1995 or at any other time an
officer of the Company. No executive officer of the Company serves as a member
of the board of directors of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company has entered into indemnification agreements with each of its
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as officers or
directors (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified and to obtain directors' and
officers' insurance if available on reasonable terms. The Company maintains an
insurance policy covering officers and directors under which the insurer has
agreed to pay the amount of any claim made against the officers or directors of
the Company for wrongful acts that such officers or directors may otherwise be
required to pay or for which the Company is required to indemnify such officers
and directors, subject to certain exclusions.

See "Employment and Change in Control Arrangements" for descriptions of
agreements regarding the employment of Mr. Larson and Mr. Cline and change of
control agreements entered into with each of the Company's executive officers.

12
<PAGE> 16

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors is comprised of three
non-employee directors. No member of the Compensation Committee is a current or
former officer or employee of the Company. The Compensation Committee is
responsible for setting and administering policies governing compensation of
executive officers, including the annual Executive Bonus Plan and the Stock
Incentive 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 PHILOSOPHY.

The Company applies a consistent compensation philosophy for all of its
employees, including its executive officers. The Company's compensation policy
is designed to enable the Company to attract, retain and reward executive
officers who are likely to contribute to the long-term success of the Company.
The Compensation Committee also believes that a strong correlation should exist
between executive compensation, business objectives and overall Company
performance.

In preparing the performance graph for this Proxy Statement, the Company
has selected the CRSP Total Return Industry Index for Nasdaq Computer and Data
Processing Services Stock Index ("CRSP Index"). The companies which the Company
uses 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 the Company for executive talent or because compensation
information was not available.

COMPONENTS OF COMPENSATION.

There are three components of the Company's executive compensation program
which support the goal of aligning compensation with the value created for the
Company's stockholders while providing incentives to further the Company's
strategic objectives.

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 the Company and changes in salary levels offered by comparable
companies. In determining executive officers' salaries, the Compensation
Committee considers information provided by the Company's Chief Executive
Officer with respect to individual officer responsibilities and performance, as
well as salary surveys and similar data available from independent sources.

William L. Larson joined the Company in September 1993 as Chief Executive
Officer. Mr. Larson's 1994 compensation package, including his annual base
salary of $200,000, was established by negotiation with Mr. Larson prior to his
commencement of employment in late 1993. The Compensation Committee therefore
did not adjust his compensation in 1994. In 1995, the Compensation Committee
increased Mr. Larson's base salary by ten percent (10%). In determining such
adjustment, the Compensation Committee considered, among other things,
compensation data for chief executives of comparable companies and Mr. Larson's
performance in 1994.

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.

Bonuses.

Awards under the Company's Executive Bonus Plan for fiscal 1995 were
contingent upon the Company 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 by the officers of
individual

13
<PAGE> 17

performance objectives. Target amounts of bonuses for each executive officer are
set annually by the Compensation Committee and are specifically weighted for
identified financial, management, strategic and operational goals. Performance
against the established goals is determined quarterly by the Compensation
Committee and, based on such determination, the Committee approves payment of
the bonuses. In 1995, bonuses awarded under the plan to Mr. Larson, the
Company's Chief Executive Officer, totalled $229,676. The bonus received by Mr.
Larson under the plan comprised approximately 51% of his total compensation.
Bonuses awarded under the plan to other executive officers in 1995 represented
between 14% and 54% of the total compensation of such officers.

Equity Incentives.

The Committee believes that employee equity ownership is highly motivating,
provides a major incentive to employees in building stockholder value and serves
to align the interests of employees with the interests of the Company's
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 the Company's performance, giving
primary weight to the officer's position and his expected future contributions.
In addition, the Company compares the stock ownership and options held by each
officer with the other officers' equity positions and the officer's experience
and value to the Company.

Option grants during 1995 are described under the heading "EXECUTIVE
COMPENSATION AND OTHER MATTERS" in the table entitled "OPTION GRANTS IN LAST
FISCAL YEAR." In 1995, Mr. Larson was granted options to purchase an aggregate
of 787,500 shares of Common Stock, including 225,000 shares which vest over
thirty-six months from January 20, 1995 and 562,500 shares which vest over two
years commencing in July 1997. The second of these options was granted to Mr.
Larson to provide him with longer term incentives through 1997 and 1998 when his
original 1993 grant would be fully vested. The Compensation Committee determined
to make this grant based upon its belief that Mr. Larson's continued leadership
was key to the Company's future. In addition, the option grant was intended to
place a significant portion of Mr. Larson's total compensation at risk since
options have no value unless the value of the Company's Common Stock appreciates
over the option term.

DEDUCTIBILITY OF EXECUTIVE COMPENSATION.

The Company has considered Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and related regulations that restrict the
deductibility for federal income tax purposes of compensation paid to the chief
executive officer and each of the four other most highly compensated executive
officers at the end of any fiscal year to the extent such compensation exceeds
$1,000,000 for any of such officers in any year, other than compensation that
qualifies for an exception under the Code or regulations. The stockholders
approved amendments to the Company's 1995 Stock Incentive Plan to enable
compensation recognized in connection with the exercise of options to qualify
for the "performance-based compensation" exception to the deduction limit. The
Committee does not believe that other components of the Company's compensation
will be likely to exceed $1,000,000 annually for any executive officer in the
foreseeable future and, therefore, concluded that no further action with respect
to qualifying such compensation for federal income tax deductibility was
necessary at this time. In the future, the Committee will continue to evaluate
the advisability of qualifying its executive compensation for such
deductibility. The Committee's policy is to qualify its executive compensation
for deductibility under applicable tax laws as practicable.

COMPENSATION COMMITTEE

Jeffrey T. Chambers
Leslie G. Denend
Walter G. Kortschak

14
<PAGE> 18

COMPARISON OF STOCKHOLDER RETURN

Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
Companies) ("Nasdaq US") and the CRSP Total Return Industry Index for Nasdaq
Computer and Data Processing Services Stocks ("C&DP Index") for the period
commencing on October 5, 1992(1) and ending on December 29, 1995(2). Stockholder
returns over the indicated period are based on historical data and the Company
cautions that the stock price performance shown in the graph is not indicative
of, nor intended to forecast, the potential future performance of the Company's
Common Stock.

COMPARISON OF CUMULATIVE TOTAL RETURN FROM OCTOBER 5, 1992 THROUGH DECEMBER 29,
1995(3):
MCAFEE ASSOCIATES, INC., NASDAQ US AND C&DP INDEX

<TABLE>
<CAPTION>
MCAFEE AS- NASDAQ COM-
MEASUREMENT PERIOD SOCIATES, NASDAQ STOCK PUTER & DATA
(FISCAL YEAR COVERED) INC. MARKET-US PROCES SING
<S> <C> <C> <C>
OCT. 5, 1992 100 100 100
DEC. 31, 1992 106 120 116
DEC. 31, 1993 47 138 122
DEC. 30, 1994(4) 127 135 149
DEC. 29, 1995(5) 411 191 227
</TABLE>

- ---------------
(1) The Company's initial public offering commenced on October 6, 1992. For
purposes of this presentation, the Company has assumed that its initial
offering price of $7.12 (as adjusted for subsequent stock dividends) would
have been the closing sales price on October 5, 1992, the day prior to
commencement of trading.

(2) December 29, 1994 was the last trading day in 1995.

(3) Assumes that $100.00 was invested on October 5, 1992 in the Company's Common
Stock at the Company's initial offering price of $7.12 (as adjusted for
subsequent stock dividends) and at the closing sales price for each index on
that date and that all cash dividends were reinvested. No cash dividends
have been declared on the Company's Common Stock.

(4) December 30, 1994 was the last trading day in 1994.

(5) December 29, 1995 was the last trading day in 1995.

Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, that might incorporate this Proxy
Statement or future filings made by the Company under those statutes, the
Compensation Committee Report and the Stock Performance Graph are not deemed
filed with the Securities and Exchange Commission and shall not be deemed
incorporated by reference into any of those prior filings or into any future
filings made by the Company under those statutes.

15
<PAGE> 19

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, which require them to file reports
with respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for the 1995 fiscal year
transactions in the Common Stock and their Common Stock holdings and (ii) the
written representations received from one or more of such persons that no annual
Form 5 reports were required to be filed by them for the 1995 fiscal year, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its executive officers, Board members
and greater than ten-percent stockholders, except for a late filing of a Form 4
by William L. Larson in connection with his sale of Common Stock in the
Company's secondary public offering in March 1995.

STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING

Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company at
its offices at 2710 Walsh Avenue, Santa Clara, California, 95051-0963, not later
than December 20, 1996, and satisfy the conditions established by the Securities
and Exchange Commission for stockholder proposals to be included in the
Company's proxy statement for that meeting.

TRANSACTION OF OTHER BUSINESS

At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.

By Order of the Board of Directors

R. TERRY DURYEA
Secretary

May 8, 1996

THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.

16
<PAGE> 20

(THIS PAGE INTENTIONALY LEFT BLANK)

17
<PAGE> 21

THIS PAGE INTENTIONALY LEFT BLANK)

18
<PAGE> 22

EXHIBIT A

FIRST AMENDMENT

FOURTH: The Corporation is authorized to issue a total of one hundred and
five million (105,000,000) shares of stock in two classes designated
respectively "Preferred Stock" and "Common Stock." The total number of shares of
Preferred Stock the Corporation shall have the authority to issue is five
million (5,000,000), par value one cent ($.01) per share, and the total number
of shares of Common Stock the Corporation shall have the authority to issue is
one hundred million (100,000,000), par value one cent ($.01).

SECOND AMENDMENT

NINTH: In addition to any vote of the holders of any class or series of
the stock of this Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal the provisions of ARTICLE
FIRST, ARTICLE SECOND, ARTICLE THIRD and ARTICLE FOURTH of this Certificate of
Incorporation. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any vote of the holders of any class or series of
the stock of this Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
amend or repeal any provision of this Certificate of Incorporation not specified
in the preceding sentence.

19
<PAGE> 23

EXHIBIT B

SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
MCAFEE ASSOCIATES, INC.

The undersigned, William L. Larson and R. Terry Duryea, hereby certify
that:

A. They are the duly elected and acting President and Secretary,
respectively, of McAfee Associates, Inc., a Delaware corporation (the
"Corporation").

B. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State on August 14, 1992 and restated on
October 15, 1992.

C. The Certificate of Incorporation is amended and restated to read in
full as follows:

FIRST: The name of Corporation is McAfee Associates, Inc. (hereinafter
sometimes referred to as the "Corporation").

SECOND: The address of the registered office of the Corporation in the
State of Delaware is 15 E. North Street, in the City of Dover, County of Kent.
The name of the registered agent at that address is Incorporating Services, Ltd.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.

FOURTH: The Corporation is authorized to issue a total of one hundred and
five million (105,000,000) shares of stock in two classes designated
respectively "Preferred Stock" and "Common Stock." The total number of shares of
Preferred Stock the Corporation shall have authority to issue is five million
(5,000,000), par value one cent ($.01) per share, and the total number of shares
of Common Stock the Corporation shall have authority to issue is one hundred
million (100,000,000), par value one cent ($.01) per share.

The Board of Directors is authorized, subject to any limitations prescribed
by law, to provide for the issuance of the shares of Preferred Stock in series,
and by filing a certificate pursuant to the applicable law of the state of
Delaware, to establish from time to time the number of shares to be included in
each such series, and to fix the designation powers, preferences, and rights of
the shares of each such series and any qualifications, limitations or
restrictions thereof. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
stock of the corporation, without the approval of the holders of the Preferred
Stock, or of any series thereof, unless the approval of any such holders is
required pursuant to the certificate or certificates establishing the series of
Preferred Stock.

FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:

A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.

B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.

C. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.

D. Special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time of
any such resolution is

20
<PAGE> 24

presented to the Board for adoption) or by the holders of shares entitled to
cast not less than 10% of the votes at the meeting.

SIXTH: A director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.

If the Delaware General Corporation Law is hereafter amended to authorize
corporate action further eliminating or limiting the personal liability of a
director, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.

Any repeal or modification of the foregoing provisions of this Article
SIXTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.

SEVENTH: The number of directors shall initially be six (6) and,
thereafter, shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption). The directors shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the 1993 annual meeting of stockholders, the term of
office of the second class to expire at the 1994 annual meeting of stockholders
and the term of office of the third class to expire at the 1995 annual meeting
of stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. All directors
shall hold office until the expiration of the term for which elected, and until
their respective successors are elected, except in the case of the death,
resignation or removal of any director.

Subject to the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, removal from office,
disqualification or other cause (other than removal from office by a vote of
stockholders) may be filled only by a majority vote of the directors then in
office, though less than a quorum, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been elected expires. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent directors.

Subject to the rights of the holders of any series of Preferred Stock then
outstanding, any directors, or the entire Board of Directors, may be removed
from office at any time, with or without cause, but only by the affirmative vote
of the holders of at least a majority of the voting power of all of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
Vacancies in the Board of Directors resulting from such removal may be filled by
a majority of the directors then in office, though less than a quorum, or the
stockholders at a special meeting of the stockholders properly called for that
purpose, by the vote of the holders of a majority of the shares entitled to vote
at such special meeting. Directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires.

EIGHTH: The Board of Directors is expressly empowered to adopt, amend or
repeal Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of
the Corporation by the Board of Directors shall require the approval of a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the Board). The
stockholders shall also have power to adopt, amend or repeal the

21
<PAGE> 25

Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the
Corporation by the stockholders shall require, in addition to any vote of the
holders of any class or series of stock of this Corporation required by law or
by this Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of
the then outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class.

D. The foregoing Second Restated Certificate of Incorporation has been
approved by the Board of Directors of the Corporation.

E. The foregoing Second Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 242 and Section 245 of
the Delaware General Corporation Law and the Corporation's Restated
Certificate of Incorporation by obtaining at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of all of the then outstanding shares
of the capital stock of the Corporation entitled to vote, voting together
as a single class.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by William L. Larson, its President, and attested to by R. Terry Duryea,
its Secretary, on June , 1996.

--------------------------------------
William L. Larson, President

ATTEST:

--------------------------------------
R. Terry Duryea, Secretary

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<PAGE> 26

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

MCAFEE ASSOCIATES, INC.
2710 WALSH AVENUE
SANTA CLARA, CA 95051

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned hereby appoints William L. Larson and R. Terry Duryea as
Proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote as designated below,
all the shares of common stock of McAfee Associates, Inc. held of
record by the undersigned on April 29, 1996, at the Annual Meeting of
Stockholders and any adjournments or reschedulings thereof to be held
on June , 1996, or any adjournment thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:

1. ELECTION OF CLASS I DIRECTORS

/ / FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE
CONTRARY BELOW)

/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW

(INSTRUCTION: To withhold authority to vote for nominee, strike a
line through the nominee's name in the list below.)
John C. Bolger, Edward L. Harper

2. TO APPROVE AN AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK THAT THE COMPANY IS AUTHORIZED TO ISSUE FROM
40,000,000 TO 100,000,000.

/ / FOR / / AGAINST /
/ ABSTAIN

3. TO APPROVE AN AMENDMENT TO ARTICLE NINTH OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO DECREASE THE PERCENTAGE OF THE
VOTING POWER OF THE OUTSTANDING SHARES REQUIRED TO AMEND CERTAIN
PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION FROM
66 2/3% TO A MAJORITY.
/ / FOR / / AGAINST /
/ ABSTAIN

(Continued, and to be signed on reverse side.)

4. TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND, L.L.P. AS THE
INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1996.
/ / FOR / / AGAINST /
/ ABSTAIN

5. AT THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS OR RESCHEDULINGS THEREOF.

/ / FOR / / AGAINST /
/ ABSTAIN

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 1, 2, 3 AND 4.

PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD IN
JOINT TENENCY, 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.

Dated: , 1996

-------------------------------
SIGNATURE

-------------------------------
SIGNATURE IF HELD JOINTLY

PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.