As filed with the Securities and Exchange Commission on August __, 1998
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SECURE COMPUTING CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 7371 52-1637226
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation organization) Classification Code Number) Identification
Number)
One Almaden Blvd., Suite 400
San Jose, California 95113
(408) 918-6100
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
----------------------
JEFFREY WAXMAN
Chief Executive Officer
SECURE COMPUTING CORPORATION
One Almaden Blvd., Suite 400
San Jose, California 95113
(408) 918-6100
(Name, address, including zip code and telephone number, including area code,
of agent for service)
----------------------
COPY TO:
JEFFREY D. SAPER, ESQ.
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
Title of Proposed Maximum Proposed Maximum
Securities to Amount to be Offering Price Per Aggregate Offering Amount of
be Registered Registered(2) Share(1) Price(1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 1,990,994 $11.375 $22,647,557 $6681
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee,
based on the average of the high and low sales prices of the Common
Stock as reported on the Nasdaq National Market on August 7, 1998 in
accordance with Rule 457 under the Securities Act of 1933.
(2) Includes shares of Common Stock which may be offered pursuant to this
Registration Statement issuable upon conversion of 1,453,224 shares of
Series C Convertible Preferred Stock (the "Series C Preferred") and
upon exercise of warrants to purchase up to 174,464 shares of Common
Stock (the "Warrants"). The number of shares of Common Stock included
in this Registration Statement is based on the sum of the number of
shares subject to the Warrants plus 125% of the estimated number of
shares of Common Stock issuable in connection with the conversion of
the Company's Series C Preferred (based on an assumed conversion price
of $11.01 which is the average closing price of the Common Stock
reported on the Nasdaq National Market for the fifteen (15) consecutive
trading days ending July 30, 1998). Because of the possibility of
antidilution adjustments to the conversion price of the Preferred Stock
(which is based on the market price of the Common Stock), the number of
shares of Common Stock issuable upon such conversion or exercise and
subject to this Registration Statement is indeterminate and this
Registration Statement relates to the resale of such entire
indeterminate number of shares of Common Stock. However, the number of
shares issuable upon conversion of the Preferred Stock is initially
limited to 3,235,085 shares unless the Company obtains shareholder
approval of the issuance of additional shares of Common Stock upon
conversion of the Preferred Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION
PROSPECTUS
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
State.
1,990,994 SHARES
SECURE COMPUTING CORPORATION
--------------------
COMMON STOCK
($0.001 PAR VALUE)
-------------------------------------------
This Prospectus relates to the public offering, which is not being
underwritten, of shares of the common stock ("Common Stock") of Secure Computing
Corporation, a Delaware corporation (the "Company"), offered from time to time
by certain stockholders of the Company or their donees or certain other
permitted transferees (the "Selling Stockholders") for their own benefit. It is
anticipated that the Selling Stockholders will generally offer shares of Common
Stock for sale at prevailing prices on the Nasdaq National Market on the date of
sale. The Company will receive no part of the proceeds of sales made hereunder.
All expenses of registration incurred in connection with this offering are being
borne by the Company, but all selling and other expenses incurred by Selling
Stockholders will be borne by such Selling Stockholders. None of the shares
offered pursuant to this Prospectus have been registered prior to the filing of
the Registration Statement of which this Prospectus is a part.
The Common Stock of the Company is traded on the Nasdaq National
Market (Nasdaq Symbol: SCUR). On August 7, 1998, the closing price of the
Company's Common Stock was $11.25.
SEE "RISK FACTORS" COMMENCING ON PAGE 4 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
The Selling Stockholders and any broker executing selling orders on
behalf of the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act. Commissions received by any such broker may be
deemed to be underwriting commissions under the Securities Act.
-------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------------------
The date of this Prospectus is August __, 1998.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus is delivered, upon written or oral
request of any such person, a copy of any and all of the information that has
been or may be incorporated by reference in this Prospectus, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such copies should be directed to
Secure Computing Corporation, One Almaden Blvd, Suite 400, San Jose, California
95113, Attn: Investor Relations (telephone (408) 918-6100).
The Company is subject to the informational reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at Seven World Trade Center,
13th Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Web
site that contains reports, proxy statements and other information regarding
registrants, including the Company, that file such information electronically
with the Commission. The address of the Commission's Web site is
http://www.sec.gov. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports, proxy and information statements and other information
concerning the Company may be inspected at The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006. Information, as of particular dates,
concerning directors and officers of the Company, their remuneration, options
granted to them, and the principal holders of securities of the Company has been
disclosed in the proxy statements distributed to shareholders of the Company and
filed with the Commission.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the shares of Common Stock offered hereby, reference
is hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any document are not necessarily complete, and each
such statement is qualified in its entirety by reference to the copy of such
document filed with the Commission.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated by reference in this Prospectus: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, filed pursuant to
Section 13 of the Exchange Act; (ii) the Company's quarterly reports on Form
10-Q for the quarters ended March 31, 1998 and June 30, 1998, filed pursuant to
Section 13 of the Exchange Act; and (iii) the Company's current report on Form
8-K dated as of July 15, 1998.
All reports and other documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY
Secure Computing Corporation (the "Company") designs, develops,
markets and sells a comprehensive offering of interoperable, standards-based
products for end-to-end network solutions, including firewalls, Web filters,
devices for identification, authentication, authorization and encryption,
extranet technologies and related network security services. The Company's
executive offices are located at One Almaden Blvd., Suite 400, San Jose,
California 95113. Its telephone number at that address is (408) 918-6100.
3
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K AND IN THE OTHER DOCUMENTS INCORPORATED
HEREIN BY REFERENCE (THE "INCORPORATED DOCUMENTS"), THE FOLLOWING FACTORS SHOULD
BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS. STATEMENTS IN
THIS "RISK FACTORS" SECTION REGARDING EXPECTATIONS OR FUTURE EVENTS AND CERTAIN
SECTIONS OF THE INCORPORATED DOCUMENTS (IDENTIFIED WITH MORE PARTICULARITY IN
SUCH INCORPORATED DOCUMENTS) MAY CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH FORWARD-LOOKING STATEMENTS AS A
RESULT OF THE FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS DOCUMENT AND THE
INCORPORATED DOCUMENTS.
RISK OF PRODUCT DEVELOPMENT; RELIANCE ON SOLE SOURCE SUPPLIERS
The Company's success is highly dependent on its ability to enhance
its existing products and to develop and introduce new products in a timely
manner. If the Company were to fail to introduce new products on a timely basis,
the Company's operating results could be adversely affected. To date,
substantially all of the Company's revenues have been attributable to sales of
its enterprise network and data security products and the provision of related
services, and existing and new versions of such products are expected to
continue to represent a high percentage of the Company's revenue for the
foreseeable future. As a result, any factor adversely affecting sales of these
products and services could have a material adverse effect on the Company's
financial condition and results of operations.
Certain components of the Company's products are currently purchased
from a single or limited sources and any interruption in the supply of such
components could adversely affect the Company's operating results.
FLUCTUATIONS IN OPERATING RESULTS
The Company's quarterly operating results may vary significantly
depending on a number of factors, including the timing of the introduction or
enhancement of products by the Company or its competitors, the sizes, timing and
shipment of individual orders, market acceptance of new products, changes in the
Company's operating expenses, personnel changes, mix of products sold, changes
in product pricing, development of the Company's direct and indirect
distribution channels and general economic conditions.
DEPENDENCE ON PRINCIPAL PRODUCTS
The Company currently derives substantially all of its revenue from
sales of its enterprise network and data security products, the provision of
related services, and existing and new versions of such products are expected to
continue to represent a high percentage of the Company's revenue for the
foreseeable future. As a result, any factor adversely affecting sales of these
products and services, or any factor impeding or delaying the Company's ability
to diversify its products
4
<PAGE>
offerings to lessen its dependency on those products, would have a material
adverse effect on the Company's financial condition and results of operations.
RISKS ASSOCIATED WITH ENTERPRISE NETWORK AND DATA SECURITY MARKET
The rapid development of enterprise-wide and remote computing as
well as increased use of the Internet, intranets and extranets has enhanced the
ability of users to access proprietary information and resources and has in
recent years increased demand for enterprise network and data security products.
Declines in demand for the Company's products, whether as a result of
competition, technological change, the public's perception of the need for
security products, developments in the hardware and software environments in
which these products operate, general economic conditions or other factors,
could have a material adverse effect on the Company's financial condition and
results of operations.
A well-publicized actual or perceived breach of enterprise network
or data security could trigger a heightened awareness of computer abuse,
resulting in an increased demand for security products such as those offered by
the Company. Similarly, an actual or perceived breach of enterprise network or
data security at one of the Company's customers, regardless of whether such
breach is attributable to the Company's products, could adversely affect the
market's perception of the Company and the Company's financial condition or
results of operations.
TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for security products, especially in the Internet,
intranet and extranet markets, is characterized by rapidly changing technology,
emerging and evolving industry standards, new product introductions, relatively
short product life cycles and rapid and constant changes in customer
requirements and preferences. To the extent that specific methods other than
those employed by the Company are adopted as standards for implementing
enterprise network data security, sales of the Company's existing and planned
products in those market segments may be adversely impacted, which could have a
material adverse effect on the Company's financial condition and results of
operations.
Software products may also contain undetected errors or bugs when
first introduced or as new versions are released, and software products or media
may contain undetected viruses. Errors or bugs may also be present in software
licensed by the Company from third parties and incorporated into the Company's
products. Errors, bugs or viruses may result in loss of or delay in market
acceptance, recalls of hardware products incorporating the software or loss of
data. Delays or difficulties associated with new product introductions or
product enhancements could have a material adverse effect on the Company's
financial condition and results of operations.
COMPETITION
The market for enterprise network and data security products is
highly competitive and subject to rapid change. The Company believes that the
principal competitive factors affecting the market for enterprise network and
data security products include technical features, ease of use,
quality/reliability, level of security, customer service and support,
distribution channels and price. The Company's competitors and potential
competitors include organizations that provide or may seek to provide enterprise
network and data security products based upon approaches similar to and
different from those employed by the Company, and could in the future include
operating systems or network suppliers not currently offering competitive
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<PAGE>
enterprise-wide security products. There can be no assurance that the market for
enterprise network and data security products will not ultimately be dominated
by approaches other than the approach marketed by the Company.
Certain of the Company's potential competitors have significantly
greater financial, marketing, technical and other competitive resources than the
Company. As a result, they may be able to leverage an installed customer base
and/or other existing or future enterprise-wide products, adapt more quickly to
new or emerging technologies and changes in customer requirements, or devote
greater resources to the promotion and sale of their products than can the
Company. Competition could increase if new companies enter the market or if
existing competitors expand their product lines. Any reduction in gross margins
resulting from competitive factors could have a material adverse effect on the
Company's financial condition and results of operations.
POTENTIAL VOLATILITY OF STOCK PRICE
The trading of the Company's Common Stock has been and may continue
to be subject to wide fluctuations in response to quarter to quarter variations
in operating results, announcements of technological innovations or new products
by the Company or its competitors, developments with respect to patents or
proprietary rights, general conditions in the information security systems
industry, changes in earnings estimates by analysts, or other events or factors.
In addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
technology companies and which have often been unrelated to the operating
performance of such companies. The Company's sales or operating results in
future quarters may be below the expectations of public market securities
analysts and investors. In such event, the price of the Company's Common Stock
would likely decline, perhaps substantially. These Company-specific factors or
broad market fluctuations may have a material adverse effect on the market price
of the Company's Common Stock. Securities such as the Company's Series C
Preferred Stock, which provide for the issuance of Common Stock based upon the
share price at the time of conversion, may be susceptible to financial
speculators who engage in short sales of such securities in order to drive the
price down. Such speculative transactions may, under certain circumstances,
result in downward pressure on the price of the Company's Common Stock in
anticipation of increasing dilution on conversion of the Series C Preferred
Stock.
LENGTHY SALES CYCLE
Sales of the Company's products generally involve a significant
commitment of capital by customers, with the attendant delays frequently
associated with large capital expenditures. For these and other reasons, the
sales cycle associated with the Company's product is typically lengthy and
subject to a number of significant risks over which the Company has little or no
control. The Company is often required to ship products shortly after it
receives orders and consequently, order backlog at the beginning of any period
has in the past represented only a small portion of that period's expected
revenue. As a result, product revenue in any period is substantially dependent
on orders booked and shipped in that period. The Company typically plans its
production and inventory levels based on internal forecasts of customer demand,
which are highly unpredictable and can fluctuate substantially. If revenue falls
significantly below anticipated levels, the Company's financial condition and
results of operations would be materially and adversely affected. In addition,
the Company's operating expenses are based on anticipated revenue levels and a
high percentage of the Company's expenses are generally fixed in the short term.
Based on these factors, a small fluctuation in the timing of sales can cause
operating results to vary significantly from period to period.
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<PAGE>
PRODUCT LIABILITY RISKS
Customers rely on the Company's information security products to
prevent unauthorized access to their networks and data transmissions. A
malfunction or the inadequate design of the Company's products could result in
tort or warranty claims. Although the Company seeks to reduce the risk of such
losses by attempting to negotiate warranty disclaimers and liability limitation
clauses in its sales agreements and by maintaining product liability insurance,
there can be no assurance that such measures will be effective in limiting the
Company's liability for such damages. Any liability for damages resulting from
security breaches could be substantial and could have a material adverse effect
on the Company's financial condition and results of operations.
EVOLVING INFORMATION SECURITY MARKET
The market for the Company's information security products is only
beginning to emerge. This market is characterized by rapidly changing
technology, emerging industry standards, new product introductions and changes
in customer requirements and preferences. The Company's future success will
depend in part upon end users' demand for information security products in
general and upon the Company's ability to enhance its existing products and to
develop and introduce new products and technologies that meet customer
requirements. To the extent that a specific method other than the Company's is
adopted as the standard for implementing information security in any segment of
the information security market, sales of the Company's existing and planned
products in that market segment may be adversely impacted, which could have a
material adverse effect on the Company's financial condition and results of
operations. There can be no assurance that information security-related products
or technologies developed by others will not adversely affect the Company's
competitive position or render its products or technologies noncompetitive or
obsolete.
In addition, a portion of the sales of the Company's information
security products will depend upon a robust industry and infrastructure for
providing access to public switched networks, such as the Internet. There can be
no assurance that the infrastructure or complementary products necessary to make
these networks into viable commercial marketplaces will be developed, or, if
developed, that these networks will become viable commercial marketplaces.
RISKS ASSOCIATED WITH PREFERRED STOCK FINANCING
In June 1998, the Company raised net proceeds of $16.0 million
through the issuance of a newly designated Series C Convertible Preferred Stock
(the "Series C Preferred"). While the issuance of the Series C Preferred in this
transaction provided the Company with additional working capital required to
fund the Company's continuing operations, the Company's agreements with the
purchasers of the Series C Preferred contain covenants that could impair the
Company's ability to engage in various corporate transactions in the future,
including financing transactions and certain transactions involving a
change-in-control or acquisition of the Company, or that could otherwise
disadvantage the Company and the holders of its Common Stock. In particular, any
"leveraged buy-out," and certain consolidations, mergers or other business
combinations with or into another entity that has a trading volume equal to less
than 90% of the Company's average daily trading volume over a specified 90-day
period, will give rise to a right of redemption in the holders of the Series C
Preferred. These provisions may make an acquisition of the Company more
difficult and expensive and could discourage some potential acquirors. Certain
covenants of the Company made in connection with the issuance of the Preferred
Stock may also have the effect of limiting the Company's ability to obtain
additional financing by, for example, providing the holders of Series C
Preferred Stock certain rights of first offer. In addition, certain protective
provisions set forth in the Certificate of Designation
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prohibit the Company, without the consent of holders of two-thirds of the
outstanding Series C Preferred, from (a) increasing the authorized Preferred
Stock of the Company, (b) issuing securities with a liquidation preference which
is senior to or pari-passu with the Series C Preferred (other than debt
securities which are not convertible into or exchangeable for Common Stock or
any other equity or convertible security of the Company), or (c) creating any
new class or series of capital stock having a liquidation preference senior to
or pari-passu with the Series C Preferred.
The terms of the financing agreements pursuant to which the
Preferred Stock was issued also include certain penalty provisions that are
triggered in the event the Company fails to satisfy certain obligations. In
particular, the holders of the Series C Preferred shall have the right to
require the Corporation to redeem all or any portion of the Series C Preferred
at a price equal to the greater of: (a) 125% of the $1,000 stated price of each
share of Series C Preferred (the "Stated Price") and (b) an amount determined by
dividing the Stated Price by the Conversion Price (as defined in the Series C
Certificate of Designation) and multiplying the resulting quotient by the
average closing bid price for the Common Stock on the five (5) days preceding
the date of redemption. Such redemption obligation arises upon certain events,
including breach by the Company of representations and warranties and covenants,
including (i) the failure to have a registration statement covering the Common
Stock issuable upon conversion of the Series C Preferred declared effective by
the Commission by the 135th day following the earlier of: (A) August 15, 1998
and (B) the date of the filing of a registration statement with the Commission;
and (ii) the failure to obtain stockholder approval of the transactions
contemplated in the agreements providing for the issuance of the Series C
Preferred within 180 days of June 30, 1998. In the event that the holders of
Series C Preferred Stock become entitled to have their Series C Preferred Stock
redeemed, there can be no assurances that the Company will be able to fund such
redemption, and even if funding is available, the substantial payment required
to fund such redemption could have a material adverse effect on the Company's
business and financial condition.
The Series C Preferred is convertible into shares of the Company's
Common Stock based on the trading prices of the Common Stock during future
periods that are described in the financing agreement. The number of shares of
Common Stock that may ultimately be issued upon conversion is therefore
presently indeterminable. If, in accordance with the terms of the financing
agreements, the conversion price of the Preferred Stock is determined during a
period when the trading price of the Common Stock is low, the resulting number
of shares of Common Stock issuable upon conversion of the Preferred Stock could
result in substantial dilution to the holders of the Common Stock.
YEAR 2000 COMPLIANCE.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements. The Company has completed testing of its products and
systems and believes that its products and systems sold after December 31, 1998
will be Year 2000 compliant. The Company has also verified compliance of third
party computer software and hardware utilized by the Company.
The Company has not verified Year 2000 compliance of certain
semiconductors embedded in other third-party equipment used by the Company, nor
has the Company established the costs and risks associated with such third party
equipment. Failure of such third-party equipment to operate properly with regard
to the Year 2000 and thereafter could require the Company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business, operating results and financial condition. The business,
operating results and financial condition of the Company's customers could be
adversely affected to the extent that they utilize third-party software and
other products which are not Year 2000 compliant.
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<PAGE>
Further, the purchasing patterns of customers or potential customers
may be affected by Year 2000 issues as companies expend significant resources to
correct their current systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase products and services such as
those offered by the Company, which could have a material adverse effect on the
Company's business, operating results and financial condition.
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<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders received or will receive the shares offered
by this prospectus upon conversion of shares of Series C Preferred Stock of the
Company (the "Series C Preferred") or exercise of warrants to purchase Common
Stock (the "Warrants"). No Selling Stockholder holds shares of Common Stock of
the Company other than those offered pursuant to this Prospectus.
The following table sets forth the aggregate number of shares of
Common Stock held by each Selling Stockholder and offered by each Selling
Stockholder hereunder and the percentage of all shares of Common Stock held by
such Selling Stockholder after giving effect to the offering (based on
16,222,879 shares of Common Stock outstanding as of July 31, 1998). The share
numbers set forth in the table below include an aggregate of 174,464 shares of
Common issuable upon the exercise price of the Warrants held by the Selling
Stockholders, and an estimated 1,453,224 shares issuable upon conversion of the
shares of Series C Preferred held by the Selling Stockholders. The estimated
number of shares issuable upon conversion of the shares of Series C Preferred is
based on an estimated conversion price of $11.01 per share of Common Stock,
which would have been the applicable conversion price of the Series C Preferred
had all shares of Series C Preferred been converted into Common Stock on July
31, 1998 (based on the lower of: (a) of the average closing bid price for the
Common Stock on the Nasdaq National Market for the five (5) trading day period
ended July 30, 1998, and (b) the average of the closing bid prices for the
Common Stock for the fifteen (15) day period ended July 30, 1998). The actual
number of shares of Common Stock issuable upon conversion of Series C Preferred
currently is indeterminable, is subject to adjustment and could be materially
less or more than such estimated number depending on factors which cannot be
predicted by the Company at this time, including, among other factors, the
future market price of the Common Stock. Other than their ownership of Company
securities, none of the Selling Stockholders has had any material relationship
with the Company within the past three years. Because of the possibility of
antidilution adjustments to the conversion price of the Preferred Stock (which
is based on the market price of the Common Stock), the number of shares of
Common Stock issuable upon such conversion or exercise and subject to this
Registration Statement is indeterminate and this Registration Statement relates
to the resale of such entire indeterminate number of shares of Common Stock.
However, the number of shares issuable upon conversion of the Preferred Stock is
initially limited to 19.99% of the outstanding shares of Common Stock on the
date of issuance of the Series C Preferred, or 3,235,085 shares, unless the
Company obtains shareholder approval of the issuance of additional shares of
Common Stock upon conversion of the Preferred Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES PERCENT OF OUTSTANDING
NAME OF SELLING STOCKHOLDER BENEFICIALLY OWNED PRIOR TO OFFERED COMMON STOCK OWNED
--------------------------- --------------------------- ------- ------------------
OFFERING AFTER OFFERING(1)
-------- -----------------
<S> <C> <C>
Marshall Capital Management, Inc. 813,844(2) 813,844 *
CC Investments, LDC 813,844(2) 813,844 *
</TABLE>
- ------------------------------------
(*)Less than 1%.
1. Because the Selling Stockholders may offer all or some of the Common Stock
pursuant to the offering contemplated by this Prospectus, no estimate can be
given as to the amount of shares of Common Stock that will be held by the
Selling Stockholders after completion of this offering. See "Plan of
Distribution."
2. Includes 726,612 shares of Common Stock issuable upon the conversion of
Series C Preferred and 87,232 shares of Common Stock issuable upon the exercise
of Warrants.
10
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they or
their pledgees, donees, transferees or other successors in interest intend to
sell all or a portion of the shares offered hereby from time to time in the
over-the-counter market and that sales will be made at prices prevailing at the
times of such sales. Such persons may also make private sales directly or
through a broker or brokers, who may act as agent or as principal. In connection
with any sales, the Selling Stockholders and any brokers or dealers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act. The Company will receive no part of the proceeds of sales
made hereunder.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Stockholders and/or purchasers of the
shares offered hereby (and, if it acts as agent for the purchaser of such
shares, from such purchaser). Usual and customary brokerage fees will be paid by
the Selling Stockholders. Broker-dealers may agree with the Selling Stockholders
to sell a specified number of shares at a stipulated price per share, and, to
the extent such a broker-dealer is unable to do so acting as agent for a Selling
Stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to such Selling Stockholder. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions (which may involve cross and block transactions and which
may involve sales to and through other broker-dealers, including transactions of
the nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
The Company has advised the Selling Stockholders that Regulation M
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), may apply to its sales in the market, has furnished the Selling
Stockholders with a copy of this regulation and has informed it of the need for
delivery of copies of this Prospectus. The Selling Stockholders may indemnify
any broker-dealer that participates in transactions involving the sale of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such broker-dealers, and any profits received on the resale of such shares,
may be deemed to be underwriting discounts and commissions under the Securities
Act if any such broker-dealers purchase shares as principal. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
Any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule rather
than pursuant to this Prospectus.
There can be no assurance that the Selling Stockholders will sell any or
all of the shares of Common Stock offered by them hereunder.
11
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered pursuant to this Prospectus and
certain other legal matters will be passed upon for the Company by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The financial statements of Secure Computing Corporation appearing in
Secure Computing Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
12
<PAGE>
================================================================================
-----------------
TABLE OF CONTENTS
-----------------
Page
----
Available Information..........................................
Incorporation of Certain Documents by
Reference....................................................
The Company....................................................
Risk Factors...................................................
Selling Stockholders...........................................
Plan of Distribution...........................................
Indemnification................................................
Legal Matters..................................................
Experts........................................................
================================================================================
1,990,994 SHARES
[SECURE COMPUTING
CORPORATION]
COMMON STOCK
-----------------
PROSPECTUS
-----------------
AUGUST ___, 1998
================================================================================
<PAGE>
SECURE COMPUTING CORPORATION
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
- ------
Item 14 Other Expenses of Issuance and Distribution.
The following table sets forth costs and expenses of the sale and
distribution of the securities being registered. All amounts except Securities
and Exchange Commission and Nasdaq Stock Market Listing fees are estimates.
Registration Statement--Securities and Exchange Commission........... $ 6,681
Accounting fees...................................................... $ 4,500
Legal fees .......................................................... $15,000
Miscellaneous........................................................ $ 3,819
Total................................................................ $30,000
Item 15 Indemnification of Directors and Officers.
The Company's Certificate of Incorporation limits, to the maximum
extent permitted by Delaware law, the personal liability of directors for
monetary damages for breach of their fiduciary duties as a director. The
Company's Bylaws provide that the Company shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
permitted by Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which are in
some respects broader than the specific indemnification provisions contained in
the Delaware General Corporation Law. The indemnification agreements 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
directors or officers (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 believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him or her in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation and with respect to any criminal action, had no reasonable cause
to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-1
<PAGE>
Item 16 Exhibits.
Exhibit
Number
------
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.4 Consent of Wilson Sonsini Goodrich & Rosati (included
in Exhibit 5.1).
24.1 Power of Attorney (contained on page II-4 hereof).
Item 17 Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(b) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b), if in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(c) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (a) and (b)
above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant
II-2
<PAGE>
of expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
Registration Statement as of the time it was declared effective. For the purpose
of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Secure Computing Corporation, a corporation organized and existing
under the laws of the State of Delaware, certifies that it has reasonable cause
to believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on the _____ day of August, 1998.
SECURE COMPUTING CORPORATION
By: /s/ Jeffrey Waxman
----------------------------------------
Jeffrey Waxman, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Jeffrey Waxman and Timothy McGurran,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendment to
this Registration Statement on Form S-3, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on August ___, 1998 by the
following persons on behalf of the Registrant and in the capacities indicated.
SIGNATURE TITLE DATE
- -------------------------- -------------------------------------- -----------
/s/ Jeffrey Waxman Chief Executive Officer (Principal
- -------------------------- Executive Officer) and Chairman
(Jeffrey Waxman) of the Board of Directors
/s/ Timothy McGurran Senior Vice President of Operations
- -------------------------- and Chief Financial Officer (Principal
(Timothy McGurran) Financial and Accounting Officer)
/s/ Betsy S. Atkins Director
- --------------------------
(Betsy S. Atkins)
/s/ Steven M. Puricelli Director
- --------------------------
(Steven M. Puricelli)
/s/ Eric P. Rundquist Director
- --------------------------
(Eric P. Rundquist)
/s/ Robert J. Frankenberg Director
- --------------------------
(Robert J. Frankenberg)
II-4
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------------
EXHIBITS
------------------------------------------------------
Registration Statement on Form S-3
SECURE COMPUTING CORPORATION
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
-------
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of PricewaterhouseCoopers LLP (Canada)
23.3 Consent of PricewaterhouseCoopers LLP (USA)
23.4 Consent of Wilson Sonsini, Goodrich & Rosati (included
in Exhibit 5.1).
24.1 Power of Attorney (contained on Page II-4).
- -----------------------------------
II-6
EXHIBIT 5.1
August 13, 1998
Secure Computing Corporation
One Almaden Blvd., Suite 400
San Jose, California 95113
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed
by you with the Securities and Exchange Commission on or about August 13, 1998
(the "Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 1,990,994 shares of your
Common Stock (the "Shares"), to be offered for sale for the benefit of certain
selling stockholders. The Shares are issuable upon the conversion of the
Company's Series C Preferred Stock (the "Series C Preferred") and upon the
exercise of Warrants (the "Warrants"), in each case as further described in the
Registration Statement. The Shares may be offered and sold from time to time on
the Nasdaq National Market at prevailing prices or as otherwise described in the
Registration Statement. As your legal counsel, we have examined the proceedings
taken or proposed to be taken by you in connection with the sale and issuance of
the Series C Preferred, the Warrants and the Shares.
It is our opinion that upon conclusion of the proceedings being
taken or contemplated by us, as your counsel, to be taken prior to the issuance
of the Shares, the Shares, when issued in the manner described in the
Registration Statement, will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement, including the prospectus constituting a part thereof,
and further consent to the use of our name wherever it appears in the
Registration Statement and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
II-7
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Secure Computing
Corporation for the registration of 1,990,994 shares of its common stock and to
the incorporation by reference therein of our report dated January 26, 1998,
with respect to the consolidated financial statements and schedule of Secure
Computing Corporation included in its Annual Report (Form 10-K) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
August 10, 1998
II-8
EXHIBIT 23.2
CONSENT OF PRICEWATERHOUSECOOPERS (CANADA)
We consent to the incorporation by reference in the Prospectus constituting
part of this Registration Statement on Form S-3 of the report dated March 29,
1996 issued by Price Waterhouse with respect to the consolidated financial
statements of Border Network Technologies Inc., included in the Annual Report
(Form 10-K) of Secure Computing Corporation for the year ended December 31,
1997.
/s/ PricewaterhouseCoopers LLP
Toronto, Canada
August 10, 1998
EXHIBIT 23.3
CONSENT OF PRICEWATERHOUSECOOPERS (USA)
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3, respectively, of
the report dated March 1, 1996 issued by Price Waterhouse, relating to the
financial statements of Enigma Logic, Inc. for the year ended December 31, 1995,
included in the Annual Report on Form 10-K of Secure Computing Corporation for
the year ended December 31, 1997.
/s/ PricewaterhouseCoopers LLP
San Jose, California
August 13, 1998
