<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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
CyberGuard Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CyberGuard Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CYBERGUARD (LOGO)
November 4, 1996
Dear CyberGuard Corporation Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
to be held on December 4, 1996, at 10:00 a.m., at the Doubletree Guest Suites,
555 N.W. 62nd Street, Fort Lauderdale, Florida, 33309.
The Annual Meeting will include a report on Company operations and
discussion and voting on the matters described in the accompanying Notice of
Annual Meeting and Proxy Statement.
Whether or not you plan to attend, you can ensure that your shares are
represented at the Annual Meeting by promptly completing, signing, dating and
returning the enclosed proxy card in the envelope provided.
Sincerely,
(sig)Robert L. Carberry
Robert L. Carberry
Chairman, President and Chief
Executive Officer
<PAGE> 3
CYBERGUARD CORPORATION
2101 WEST CYPRESS CREEK ROAD
FORT LAUDERDALE, FLORIDA 33309
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 4, 1996
---------------------
The Annual Meeting of Shareholders (the "Annual Meeting") of CyberGuard
Corporation, a Florida corporation (the "Company"), will be held on December 4,
1996, at 10:00 a.m., local time, at Doubletree Guest Suites, 555 N.W. 62nd
Street, Fort Lauderdale, Florida, 33309, for the following purposes:
1. To elect two directors to serve for a term of three years and until
their respective successors are duly elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP, independent
certified public accountants, to audit the books and accounts of the
Company for the year ending June 30, 1997; and
3. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments and postponements thereof.
The Board of Directors has fixed the close of business on October 29, 1996
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Annual Meeting.
A complete list of the shareholders entitled to vote at the Annual Meeting
will be available during ordinary business hours for examination by any
shareholder, for any purpose germane to the Annual Meeting, for a period of at
least ten days prior to the Annual Meeting, at the Company's corporate offices,
2101 West Cypress Creek Road, Fort Lauderdale, Florida 33309.
The Board of Directors urges you to complete, sign, date and return the
enclosed proxy card promptly. You are cordially invited to attend the Annual
Meeting in person. The return of the enclosed proxy card will not affect your
right to revoke your proxy or to vote in person if you do attend the Annual
Meeting.
By order of the Board of Directors,
Brian Foremny
Secretary and General Counsel
Fort Lauderdale, Florida
November 4, 1996
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES YOU OWNED ON THE RECORD
DATE. PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING YOUR PROXY PROMPTLY.
<PAGE> 4
CYBERGUARD CORPORATION
2101 WEST CYPRESS CREEK ROAD
FORT LAUDERDALE, FLORIDA 33309
---------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CyberGuard Corporation, a Florida
corporation, ("CyberGuard" or the "Company"), for use at the Company's 1996
Annual Meeting of Shareholders (together with any and all adjournments and
postponements thereof, the "Annual Meeting") to be held on December 4, 1996, at
10:00 a.m., local time, at the Doubletree Guest Suites, 555 N.W. 62nd Street,
Fort Lauderdale, Florida, 33309, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. This Proxy Statement, together with
the foregoing Notice and the enclosed proxy card, are first being sent to
shareholders on or about November 4, 1996.
The Board of Directors has fixed the close of business on October 29, 1996
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. On the record date, there were 6,999,477
shares of Common Stock of the Company, par value $.01 per share ("Common
Stock"), outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote per share on each matter properly brought before the Annual
Meeting. Shares can be voted at the Annual Meeting only if the shareholder is
present in person or is represented by proxy. The presence, in person or by
proxy, at the Annual Meeting of shares of Common Stock representing at least a
majority of the total number of shares of Common Stock outstanding on the record
date will constitute a quorum for purposes of the Annual Meeting.
The Board of Directors knows of no matters which are to be brought before
the Annual Meeting other than those set forth in the accompanying Notice of
Annual Meeting of Shareholders. If any other matters properly come before the
Annual Meeting, the persons named in the enclosed proxy card, or their duly
appointed substitutes acting at the Annual Meeting, will be authorized to vote
or otherwise act thereon in accordance with their judgment on such matters. If
the enclosed proxy card is properly executed and returned prior to voting at the
Annual Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. In the absence of instructions, shares
represented by executed proxies will be voted as recommended by the Board of
Directors.
Any proxy may be revoked at any time prior to its exercise by attending the
Annual Meeting and voting in person, by notifying the Secretary of the Company
of such revocation in writing or by delivering a duly executed proxy bearing a
later date, provided that such notice or proxy is actually received by the
Company prior to the taking of any vote at the Annual Meeting.
The cost of solicitation of proxies for use at the Annual Meeting will be
borne by the Company. Solicitations will be made primarily by mail or by
facsimile, but regular employees of the Company may solicit proxies personally
or by telephone.
Brokers, banks and other nominee holders will be requested to obtain voting
instructions of beneficial owners of stock registered in their names. Shares
represented by a duly completed proxy submitted by a nominee holder on behalf of
beneficial owners will be counted for quorum purposes, and will be voted to the
extent instructed by the nominee holder on the proxy card. The rules applicable
to a nominee holder may preclude it from voting the shares that it holds on
certain kinds of proposals unless it receives voting instructions from the
beneficial owners of the shares (sometimes referred to as "broker non-votes").
Abstentions will be counted for purposes of determining the presence or absence
of a quorum, but will not be counted for a proposal as to which a beneficial
owner abstains.
2
<PAGE> 5
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation and the By-Laws of
the Company provides that the number of directors (which is to be not less than
three) is to be determined from time to time by resolution of the Board of
Directors. The Board is currently comprised of six persons. On June 27, 1996,
the Company sold its real-time business and 683,178 shares of its common stock
(the "Real-time Sale") to Concurrent Computer Corporation ("Concurrent"). In
connection with the Real-time Sale, the Company executed a "Share Holding
Agreement" with Concurrent containing certain provisions regarding the
composition of the Company's board of directors. See "Certain Transactions."
Pursuant to the Company's Amended and Restated Certificate of
Incorporation, the members of the Board of Directors are divided into three
classes. Each class is to consist, as nearly as may be possible, of one-third of
the whole number of members of the Board. The terms of two of the Company's
directors expire at the Annual Meeting. The terms of the remaining classes of
directors will expire at the 1997 and 1998 annual meetings of shareholders,
respectively. At each annual meeting, the directors elected to succeed those
whose terms expire are of the same class as the directors they succeed and are
elected for a term to expire at the third annual meeting of shareholders after
their election and until their successors are duly elected and qualified. A
director elected to fill a vacancy is elected to the same class as the director
he succeeds, and a director elected to fill a newly created directorship holds
office until the next election of the class to which such director is elected.
Two directors are nominees for election this year for a three-year term
expiring at the 1999 annual meeting of Shareholders. In the election, the two
persons who receive the highest number of votes actually cast will be elected.
The proxies named in the proxy card intend to vote for the election of the two
nominees listed below unless otherwise instructed. If a holder does not wish his
or her shares to be voted for a particular nominee, the holder must identify the
exception in the appropriate space provided on the proxy card, in which event
the shares will be voted for the other listed nominees. If any nominee becomes
unable to serve, the proxies may vote for another person designated by the Board
of Directors or the Board may reduce the number of directors. The Company has no
reason to believe that any nominee will be unable to serve.
Set forth below is certain information with regard to each of the nominees
for election at the Annual Meeting and each continuing director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES FOR
DIRECTOR LISTED BELOW. NOMINEES
Michael F. Maguire. Age 70. Since 1984, Mr. Maguire has served as
President, director and sole shareholder of Maguire Investment Management, Inc.,
a management consulting company. For more than 13 years, Mr. Maguire served as
an executive at Harris Corporation, most recently as Senior Vice President from
1979 to 1986. Mr. Maguire serves on the board of directors of Autosight, Inc.,
as well as several non-profit corporations. Mr. Maguire also serves as a
director of Paravant Computer Systems, Inc. and as a director of Concurrent as
the Company's nominee pursuant to the Share Holding Agreement between the
Company and Concurrent.
Leland R. Reiswig, Jr. Age 50. Mr. Reiswig, who joined the Company's Board
of Directors in October 1996, held numerous positions during his 30-year career
at IBM. He was the General Manager, Technical Strategy for the IBM Software
Group before his retirement in July 1, 1996. While General Manager of IBM's
Personal Software Products Division from 1990 to 1995, he was responsible for
worldwide development, marketing, sales, and support for OS/2, PC-DOS, OS/2 LAN
Server and several other PC-based software offerings. His years at IBM also
included services as ESD Vice President of Programming; ESD Austin Lab Director;
System Manager, ESD Communications and Data Management Systems Software; and
Product Manager of Business and Personal Information Products.
3
<PAGE> 6
CONTINUING DIRECTORS
The terms of the following directors do not expire at the Annual Meeting.
These directors are expected to hold office until their terms expire and their
successors duly elected and qualified.
Robert L. Carberry. Age 53. Mr. Carberry was appointed President of the
Company's Trusted Systems Division in April 1996 in anticipation of the
Real-time Sale. He was appointed President and Chief Executive Officer of the
Company upon the consummation of that sale. Before joining the Company, Mr.
Carberry was Vice President, New Technology at Blockbuster/Viacom Group and Vice
President, Managing Executive for Blockbuster Technology Holding Corporation
from 1994 and, before that, was President of Multimedia Investment Organization,
a division of IBM. Mr. Carberry's term expires at the 1998 annual meeting of the
Company's shareholders.
Brian Foremny. Age 47. Mr. Foremny is an attorney and has served as the
Company's Secretary since October 1994 and as its General Counsel since March
1996. Prior to joining the Company as General Counsel, Mr. Foremny was a partner
with the law firm of Holland & Knight (1995 to 1996) and a partner with the law
firm of Kirkpatrick & Lockhart, LLP (1983 to 1995). Mr. Foremny's term expires
at the 1998 annual meeting of the Company's shareholders.
C. Shelton James. Age 57. Since May 1991, Mr. James has served as Chief
Executive Officer of Elcotel, Inc., a public company that manufactures
telecommunications equipment. Mr. James is President of Fundamental Management
Corporation, an investment management firm specializing in active investment in
small capitalization companies, where he was Executive Vice President from 1990
to April 1993. Prior to 1990, Mr. James was Executive Vice President of Gould,
Inc., a diversified electronics company, and President of Gould's Computer
Systems Division. Mr. James is Chairman of the Board of Directors of Elcotel,
Inc. and serves on the boards of directors of CSPI, NAI Technologies, Inc.,
Fundamental Management Corporation and SK Technologies, Inc. Mr. James also
serves as a director of Concurrent as the Company's nominee pursuant to the
Share Holding Agreement between the Company and Concurrent. Mr. James's term
expires at the 1997 annual meeting of the Company's shareholders.
Richard P. Rifenburgh. Age 64. Mr. Rifenburgh joined the Company's Board
of Directors in June 1996 following the Real-time Sale. Mr. Rifenburgh serves as
the nominee of Concurrent pursuant to the Share Holding Agreement. Mr.
Rifenburgh is Chairman of the Board of Moval Management Corporation, a privately
held company specializing in restoring companies in financial distress. He is,
or in the past five years has been, a member of the Board of Directors of the
following public companies: Concurrent Computer Corporation since 1991; Tristar
Corporation (formerly known as Ross Cosmetics Distribution Centers, Inc.) since
June 1992 and Chairman since August 1992; Miniscribe Corporation (manufacturer
of disc drives for personal computers), Chairman and CEO from 1989 to 1991; and
Library Bureau (manufacturer of library furniture) from 1976 to 1995. Mr.
Rifenburgh's term expires at the 1997 annual meeting of the Company's
shareholders.
GENERAL INFORMATION RELATING
TO THE BOARD OF DIRECTORS
The Company's Board of Directors met 13 times during fiscal year ended June
30, 1996 and acted one time by unanimous written consent.
COMMITTEES OF THE BOARD
The Board has a Compensation and Stock Option Committee and an Audit
Committee. The Company's Compensation and Stock Option Committee consists of
members of the Board of Directors who are not executive officers of the Company.
The Compensation and Stock Option Committee is responsible for setting and
approving the salaries, bonuses and other compensation for the Company's
executive officers, establishing compensation programs, and determining the
amounts and conditions of all grants of awards under the Company's Stock
Incentive Plan. During the nine months ended June 30, 1996, the Compensation and
Stock Option Committee consisted of C. Shelton James, Michael F. Maguire, and
Brian Foremny. Mr. Foremny
4
<PAGE> 7
resigned from the committee on March 1, 1996 upon becoming the Company's General
Counsel. The Compensation and Stock Option Committee held five meetings during
the nine months ended June 30, 1996 and acted once by unanimous written consent.
The Audit Committee of the Board of Directors recommends to the Board of
Directors the independent accountants to be nominated for selection by the
Company's shareholders, reviews the scope of the accountants' engagement,
including the remuneration to be paid, and reviews the independence of the
accountants. The Audit Committee, with the assistance of the Company's Chief
Financial Officer and other appropriate personnel, reviews the Company's annual
financial statements and the independent auditor's report, including significant
reporting or operational issues; corporate policies and procedures as they
relate to accounting and financial reporting and financial controls; litigation
in which the Company is a party; and use by the Company's executive officers of
expense accounts and other non-monetary perquisites, if any. The Audit Committee
may direct the Company's legal counsel, independent auditors and internal audit
staff to inquire into and report to it on any matter having to do with the
Company's accounting or financial procedures or reporting. During the nine
months ended June 30, 1996, the members of the Audit Committee were C. Shelton
James, Michael F. Maguire and, until his appointment at the Company's General
Counsel, Brian Foremny. The Audit Committee held two meetings during the nine
months ended June 30, 1996.
As of June 30, 1996, the Company did not have a standing nominating
committee of the Board of Directors nor a committee performing similar
functions.
EXECUTIVE OFFICERS
Certain biographical information concerning the Company's executive
officers is presented below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Robert L. Carberry......................... 53 President, Chief Executive Officer and
Chairman of the Board of Directors(1)
Patrick O. Wheeler......................... 37 Chief Financial Officer and Vice President
Finance
Frank Gelbart.............................. 34 Vice President Marketing and Sales, North
America
Katherine K. Hutchison..................... 38 Vice President Corporate Development
Bradley C. Lesher.......................... 60 Vice President International Operations
Robert F. Perks............................ 52 Vice President North American Operations
Rick A. Siebenaler......................... 33 Vice President Software Development
</TABLE>
- ---------------
(1) For biographical information on Mr. Carberry see "Election of
Directors -- Continuing Directors."
Patrick O. Wheeler. Mr. Wheeler was appointed Chief Financial Officer and
Vice President Finance of the Company's Trusted Systems Division in April 1996
in anticipation of the Real-time Sale, and he continues in such position for the
Company. Prior thereto, Mr. Wheeler held various positions with the Company
including Director of Accounting, Senior Account Manager and most recently,
Midwest Regional Sales Manager. Mr. Wheeler joined the Company following its
spin-off from Harris Corporation, which Mr. Wheeler joined in 1984 from Price
Waterhouse LLP.
Frank Gelbart. Mr. Gelbart joined the Company in June 1996. Prior, from
November 1993, Mr. Gelbart was Director of Sales, Rest of World at Cheyenne
Software, Inc. From April 1992, Mr. Gelbart was Director of World-wide Sales and
Director of International Sales for Equinox Systems, Inc., a data communications
hardware manufacturer in Plantation, Florida, and from April 1989 to April 1992,
was Vice President, Latin America and Vice President Commercial Sales for
Uniplex, Inc., a UNIX office automation software company headquartered in
Irving, Texas.
Katherine K. Hutchison. Ms. Hutchison was appointed Vice President
Corporate Development of the Company's Trusted Systems Division in April 1996 in
anticipation of the Real-time Sale, and she continues in
5
<PAGE> 8
such position for the Company. Prior thereto, Ms. Hutchison served in positions
of increasing responsibility, most recently as Director of Marketing for the
Company's Trusted Systems Division. Ms. Hutchison joined Harris Corporation in
1993 from a position as Program Manager and Technical Marketing Manager in the
Information Technology Group of Texas Instruments.
Bradley C. Lesher. Mr. Lesher joined Harris Corporation in July 1994 from
IBM where he had been General Manager of Latin American Caribbean operations
since November 1991. From 1988 to 1991 Mr. Lesher served as Director of General
Business systems in IBM's Latin American Headquarters Operation where he was
responsible for developing and supporting a distribution channel network of over
200 dealer and agent organizations selling IBM PC's and mid-range proprietary
and UNIX-based open systems. He joined IBM in 1957 and has over 30 years of
diverse international management experience including 19 years of living abroad.
Robert F. Perks. Mr. Perks was appointed Vice President Sales of the
Company's Trusted Systems Division in April 1996 in anticipation of the
Real-time Sale, and he continues in such position for the Company. Mr. Perks
joined the Computer Systems Division of Harris Corporation in 1977. He was
employed by Real Time Products Corporation from 1992 to 1995 as Director,
Customer Support and rejoined the Company in May 1995 as Director of Trusted
Sales for the Company.
Rick A. Siebenaler. Mr. Siebenaler was appointed Vice President Software
Development of the Company's Trusted Systems Division in April 1996 in
anticipation of the Real-time Sale and continues in such position for the
Company. Prior thereto, Mr. Siebenaler served as Director of Software
Development of the Company's Trusted Systems Division from 1994 and, before
that, as Chief Engineer from 1991. Mr. Siebenaler joined Harris Corporation in
1991 from the NCSC where he was a Commercial Products Evaluator in the Trusted
Products Evaluation Division.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
annual and long-term compensation of the Company's Chief Executive Officer and
the Company's other executive officers for the nine months ended June 30, 1996,
and the fiscal years ended September 30, 1995 and June 30, 1994. In July 1996,
the Company's Board of Directors voted to change the Company's fiscal year end
from September 30 to June 30. Accordingly, the table below sets forth with
respect to fiscal year 1996 only such compensation as was received by the
executive officers named during the nine months ended June 30, 1996.
On June 27, 1996, the Company sold the assets and liabilities related to
its real-time computer business to Concurrent. As of such date, a number of the
Company's executive officers, including its then Chairman, President and Chief
Executive Officer, resigned to assume similar executive positions at Concurrent.
Such officers are indicated below by footnote.
Prior to October 7, 1994, the Company was a wholly-owned subsidiary of
Harris Corporation, at which time the Company's common stock was distributed on
a pro-rata basis to Harris Corporation's shareholders. During certain of the
periods presented, the individuals were compensated in accordance with Harris
Corporation's plans and policies. All references in the following tables to
stock and stock options relate to awards of stock and stock options of the
Company.
6
<PAGE> 9
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUT
- -------------------------------------------------------------------------- -------------------- ------
OTHER RESTRICTED ALL OTHER
ANNUAL STOCK LTIP COMPEN-
FISCAL BONUS($) COMPEN- AWARD(S) OPTIONS PAYOUT SATION(6)
NAME AND PRINCIPAL POSITION YEAR(3) SALARY($) (4) SATION($) ($)(5) (#) ($) ($)
- ------------------------------ ------- --------- -------- --------- ---------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Carberry............ 1996 39,229 -- -- -- 339,000 -- --
Chairman, President and
Chief Executive Officer
Patrick O. Wheeler(1)......... 1996 94,128 -- -- -- 75,000 -- 5,676
Vice President Finance and
Chief Financial Officer
Bradley C. Lesher............. 1996 88,628 25,000 -- -- 39,000 -- 5,318
Vice President International 1995 110,001 12,500 -- -- 60,000 -- 1,015
Operations
Robert F. Perks............... 1996 81,499 -- -- -- 60,000 -- 4,890
Vice President North
American Operations
E. Courtney Siegel(2)......... 1996 161,152 50,000 -- -- 57,000 -- 1,404,771
Former Chairman, President 1995 200,013 20,000 -- 100,750 120,000 -- 11,389
and Chief Executive Officer 1994 140,206 37,200 6,720 -- -- -- 9,104
Daniel S. Dunleavy(2)......... 1996 96,697 20,000 -- -- 18,000 -- 289,738
Former Vice President, Chief 1995 120,016 10,000 -- 35,650 75,000 -- 7,132
Financial Officer and Chief 1994 93,463 34,275 1,344 -- -- -- 7,242
Administrative Officer
Robert T. Menzel(2)........... 1996 88,660 25,000 -- -- 30,000 -- 5,318
Former Vice President and 1995 110,001 6,520 -- -- 60,000 -- 6,542
General Manager, Trusted 1994 87,511 16,791 448 -- -- -- 6,341
Systems Division
</TABLE>
- ---------------
(1) Includes salary and sales commissions earned during the nine months ended
June 30, 1996 in connection with Mr. Wheeler's employment with the Company
prior to his appointment as the Company's Vice President Finance and Chief
Financial Officer.
(2) Resigned as of June 27, 1996.
(3) For the nine months ended June 30, 1996, and the fiscal years ending
September 30, 1995, and June 30, 1994. Bonuses for the nine months ended
June 30, 1996 were accrued during such period but were paid in August 1996.
(4) Amounts for 1994 represent bonuses achieved and accrued under Harris
Corporation but paid after September 28, 1994.
(5) Amounts reflect restricted stock awards in the amount of 39,000 and 13,800
shares of Common Stock owned, respectively, by Messrs. Siegel and Dunleavy,
the restrictions on which have lapsed.
(6) Amounts reported for the nine months ended June 30, 1996 and for the year
ended September 30, 1995 represent contributions to the Company's
Retirement Plan. Amounts for Messrs. Siegel and Dunleavy for the period
ended June 30, 1996 also include (i) payments in the amount of $200,000
(for Mr. Siegel) and $80,000 (for Mr. Dunleavy) representing severance
payouts incurred as the result of the Real-time Sale pursuant to their
employment agreements with the Company and (ii) payments of common stock
having a value (based on a closing stock price of $14.75 on June 27, 1996)
of $1,150,500 (for Mr. Siegel) and $203,550 (for Mr. Dunleavy) as
consideration for noncompetition agreements with the Company.
7
<PAGE> 10
OPTION GRANTS IN THE NINE-MONTHS ENDED JUNE 30, 1996
The following table shows all grants during the nine months ended June 30,
1996 and thereafter of stock options under the Company's Stock Incentive Plan to
the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------
PERCENT POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(1)
OPTION IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED (#) YEAR (%) ($/SH) DATE 5%($) 10%($)
- ------------------------------- ----------- --------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Carberry............. 339,000 32.09 10.67 3/5/01 999,346 2,208,294
Patrick O. Wheeler............. 75,000 7.10 5.50 2/5/01 113,966 163,904
Bradley C. Lesher.............. 9,000 0.85 4.71 2/5/01 11,712 25,880
30,000 2.84 5.50 2/5/01 45,586 100,734
Robert F. Perks................ 60,000 5.40 5.50 2/5/01 91,173 201,468
E. Courtney Siegel............. 57,000 5.40 4.71 6/26/99 42,318 88,864
Daniel S. Dunleavy............. 18,000 1.70 4.71 6/26/98 8,690 17,804
Robert T. Menzel............... 15,000 1.42 4.71 6/26/97 3,532 7,065
15,000 1.42 5.50 6/26/97 4,125 8,250
</TABLE>
- ---------------
(1) The potential realizable values set forth under these columns result from
calculations assuming 5% and 10% annualized stock price growth rates from
grant dates to expiration dates and are not intended to forecast future
price appreciation of the Company's Common Stock based upon growth at these
prescribed rates. The Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
factors. Actual gains, if any, on stock option exercises are dependent on
the future performance of the Company. There can be no assurance that the
amounts reflected in this table will be achieved.
OPTION EXERCISES AND PERIOD-END VALUES
The following table provides information as to the number and value of
unexercised options to purchase the Company's Common Stock held by the named
executive officers at June 30, 1996, based on a closing sale price of $17.25 on
June 28, 1996. None of the named executive officers exercised any options during
the nine months ended June 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES VALUE YEAR-END (#) YEAR-END($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
- --------------------------------------- ------------ -------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Carberry..................... -- -- -- / 339,000 -- / 2,230,620
Patrick O. Wheeler..................... -- -- 3,000/ 75,000 44,010/ 881,250
Bradley C. Lesher...................... -- -- 69,000/ 30,000 993,060/ 352,500
Robert F. Perks........................ -- -- 6,000/ 60,000 88,020/ 705,000
E. Courtney Siegel..................... -- -- 177,000/ -- 2,475,180/ --
Daniel S. Dunleavy..................... -- -- 93,000/ -- 1,325,970/ --
Robert T. Menzel....................... -- -- 90,000/ -- 1,244,550/ --
</TABLE>
- ---------------
(1) Based on the difference between the closing price of the Company's common
stock on June 28, 1996 and the exercise price of the options.
8
<PAGE> 11
COMPENSATION PLANS
The Company and Mr. Carberry entered into an agreement dated as of March 5,
1996 (the "Carberry Employment Agreement"), effective as of April 12, 1996. The
Carberry Employment Agreement provides for the employment of Mr. Carberry as
Chairman of the Board, President and Chief Executive Officer of the Company at
an annual base salary of $200,000, $225,000 and $250,000 for the first, second
and third twelve-month periods, respectively, of the Carberry Employment
Agreement. The Carberry Employment Agreement provides, as of March 5, 1996, for
Mr. Carberry to be granted options to purchase 339,000 shares of the Company's
Common Stock having an exercise price of $10.67 per share and becoming
exercisable in three equal installments of 113,000 on each of March 5, 1997,
1998, and 1999. The Carberry Employment Agreement provides for Mr. Carberry to
have a target bonus for the achievement of certain performance objectives to be
established by the Company of 50% of his annual base salary.
The Company may terminate the Carberry Employment Agreement for "cause."
The Carberry Employment Agreement defines "cause" as willful acts against the
Company intended to enrich Mr. Carberry at the expense of the Company, the
conviction of Mr. Carberry for a felony involving moral turpitude, willful and
gross neglect by Mr. Carberry of his duties or the intentional failure of Mr.
Carberry to observe policies of the Company's Board of Directors that have or
will have a material adverse effect on the Company. If the Carberry Employment
Agreement is terminated by the Company (other than for "cause" or the death,
disability or normal retirement of Mr. Carberry) or by Mr. Carberry for "good
reason," Mr. Carberry will receive severance pay of two times his annual base
salary and two times his target bonus as in effect immediately prior to
termination, and all of Mr. Carberry's stock options and stock appreciation
rights will be exercisable at termination. If Mr. Carberry's employment is
terminated by the Company within one year following a "change in control" of the
Company (other than for "cause" or the death, disability or normal retirement of
Mr. Carberry) or by Mr. Carberry for "good reason," Mr. Carberry will receive
severance pay of three times his annual base salary and three times his target
bonus as in effect immediately prior to termination, and all of Mr. Carberry's
stock options and stock appreciation rights will become exercisable at
termination. If Mr. Carberry's employment is terminated at any time by the
Company for "cause" or by Mr. Carberry other than for "good reason," the
Carberry Employment Agreement prohibits Mr. Carberry from engaging in any
business competitive with the business of the Company for a one-year period
following the effective date of termination. If Mr. Carberry's employment is
terminated by the Company (other than for "cause" or the death, disability or
normal retirement of Mr. Carberry) or by Mr. Carberry for "good reason," other
than within one year of a "change in control," the Carberry Employment Agreement
prohibits Mr. Carberry from engaging in any business competitive with the
business of the Company for a two-year period following the effective date of
termination (subject to the payment by the Company of the severance obligations
described above).
In addition to the Carberry Employment Agreement, the Company has
employment agreements with its other executive officers. Such employment
agreements, other than the Carberry Employment Agreement, are referred to herein
as the "Executive Employment Agreements." The initial base salaries under such
Employment Agreements are $115,000 for Mr. Wheeler, $115,500 for Mr. Gelbart,
$90,000 for Ms. Hutchison, $90,000 for Mr. Perks, $90,000 for Mr. Siebenaler,
and $115,500 for Mr. Lesher. Certain of the Executive Employment Agreements also
provide for bonuses based on certain Company performance targets in initial
amounts based upon the following percentages of base salary: Mr. Wheeler -- 40%;
Mr. Gelbart -- 50%; Ms. Hutchison -- 50%; Mr. Perks -- 50%; Mr.
Siebenaler -- 40%; and Mr. Lesher -- 50%.
The Executive Employment Agreements may be terminated by either the Company
or the respective executive officer at any time. In the event the executive
officer resigns without "good reason" or is terminated for "cause," compensation
under the employment agreements will end. In the event any such employment
agreement is terminated by the Company without "cause" or the executive officer
resigns for "good reason," the terminated executive officer will receive, among
other things, severance compensation equal to a specified multiple of such
employee's annual base salary and target bonus under the Company's bonus
program. In addition, upon termination without "cause" or resignation without
"good reason," all non-statutory options and stock appreciation rights of all
such executive officers will be immediately exercisable upon termination of
employment and certain other awards previously made under any of the Company's
compensation plans or
9
<PAGE> 12
programs and previously not paid will immediately vest on the date of such
termination. Termination by the Company or by the executive (except for such
terminations occurring within three years after a change of control) give rise
to certain noncompetition and nonsolicitation provisions.
The Executive Employment Agreements contain severance provisions that apply
if the executive officer's employment is terminated within three years after the
occurrence of a change of control. In the event that any such employee is
terminated by the Company within three years following the occurrence of a
change in control or by such employee for "good reason," such employee will be
entitled to receive on the date of such termination an amount equal to, among
other things, a specific multiple of such employee's base salary, target bonus
under the Company's bonus program, and any performance award payable under the
Stock Incentive Plan or similar plan, as well as any other benefits which any
such employee would be entitled to where termination was without "cause" or with
"good reason" by employee.
Prior to their resignation from the Company, Messrs. Siegel, Dunleavy and
Menzel also were parties to employment agreements with the Company. These
employment agreements contained provisions relating to severance, vesting of
options, payments of restricted stock awards, and continuation of other benefits
upon termination of these executives' employment following a change of control.
These employment agreements terminated on June 27, 1996 as a result of the
Real-time Sale, a transaction that was a change of control for purposes of these
executives' employment agreements. As a result, all options and restricted stock
awards held by such persons vested and certain severance payments became due and
payable. In addition, the Company entered into noncompetition agreements with
Messrs. Seigel and Dunleavy. See Executive Compensation -- Summary Compensation
Table.
Stock Incentive Plan. The Company has adopted the CyberGuard Corporation
Stock Incentive Stock Plan, as amended, pursuant to which 2,025,000 shares of
Common Stock have been authorized for issuance. The primary purpose of the Stock
Incentive Plan is to attract and retain capable executives and employees by
offering them a greater personal interest in the Company's business through
stock ownership. The Stock Incentive Plan is administered by the Compensation
and Stock Option Committee of the Company's Board of Directors, which
determines, among other things, the nature and the terms of any award granted
thereunder. The Stock Incentive Plan provides for the granting of stock options
(including incentive stock options meeting the requirements of the Internal
Revenue Code), restricted stock, stock appreciation rights, performance awards,
and other stock-based awards. In the case of stock options, the Stock Incentive
Plan provides that the exercise price of any stock option granted under the
Stock Incentive Plan must be equal to the fair market value of the shares
underlying the option on the date of grant. Any stock options granted under the
Stock Incentive Plan expire no later than ten years from the date of their
granting. No award under the Stock Incentive Plan is transferable except upon
the death of the optionee. The Compensation and Stock Option Committee has the
power to impose additional limitations, conditions and restrictions in
connection with the grant of any option. In the event of a change of control of
the Company, all outstanding awards become immediately exercisable prior to the
occurrence of the change in control, in the manner determined by the
Compensation and Stock Option Committee. A change in control is deemed to occur
if any person or entity acquires 20% or more of the outstanding shares of the
Company or if, as a result of any tender or exchange offer, merger or other
business combination, sale of assets or contested election, there is a change of
a majority of the directors.
Director Compensation. Upon joining the Board of Directors, all
non-employee directors receive 6,000 options to purchase Common Stock of the
Company. In addition, on the date of each annual meeting of shareholders, each
director who is not an employee of the Company is automatically granted an
option to purchase 1,500 shares of common stock of the Company. Non-employee
directors who served in such capacity on February 4, 1996 each received options
to purchase 15,000 shares of Common Stock at a price of $5.50 per share. All
such options are non-statutory stock options and priced at 100% of the fair
market value on the date of grant. In the event of a director's retirement, the
options which are exercisable at the date of retirement will be exercisable for
three months thereafter, and, in the event of a director's death, the options
which are exercisable at the date of death will be exercisable for the next
succeeding twelve months. Neither the Board of Directors nor any committee of
the Board of Directors has any discretion with respect to options granted to
non-employee directors pursuant to the Stock Incentive Plan.
10
<PAGE> 13
In addition to grants pursuant to the Stock Incentive Plan, non-employee
directors of the Company receive a $15,000 annual retainer payable upon election
as a director of the Company at an annual meeting of shareholders (and a pro
rata amount to any non-employee who becomes a director of the Company
thereafter, payable at the time of becoming a director) and $1,000 per Board of
Directors meeting attended. In addition, directors receive $750 ($1,000 for the
Chairman) for attendance at any meeting of a committee of the Board of
Directors, payable at any such meeting, except for committee meetings held on
the same day as Board of Directors meetings, in which case no such fee will be
payable. Directors are also reimbursed for travel and lodging expenses in
connection with Board of Directors and committee meetings.
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee is responsible for setting and
approving the salaries, bonuses and other compensation for the Company's
executive officers, establishing compensation programs, and determining the
amounts and conditions of all grants of awards under the Stock Incentive Plan.
The Compensation and Stock Option Committee Objectives. The Compensation
and Stock Option Committee believes that the objectives of executive
compensation are to attract, motivate and retain the highest quality executives,
to align the interests of these executives with those of the Company
shareholders and to motivate the Company executives to increase shareholder
value by improving corporate performance and profitability. To meet these
objectives, the Compensation and Stock Option Committee seeks to provide
competitive salary levels and compensation incentives that attract and retain
qualified executives, to recognize individual performances and achievements as
well as performance of the Company relative to its peers, and to encourage
ownership of the Company stock.
Executive Salaries. Base salaries for executives are determined initially
by evaluating the responsibilities of the position, the experience of the
individual, internal comparability considerations, as appropriate, the
competition in the marketplace for management talent, and the compensation
practices among public companies of the size of, or in businesses similar to,
the Company. Salary adjustments are determined and normally made at 12-month
intervals.
Annual Bonuses. The Company offers a bonus program for executives designed
to provide year-end incentive bonuses to executives who contributed materially
to the Company's success during the most recently completed fiscal year. The
bonus program is intended to enable the Company executives to participate in the
Company's success as well as to provide incentives for future performance.
Generally, in determining amounts to be awarded as bonuses, the Compensation and
Stock Option Committee takes into account a number of factors, including the
Company's gross revenue, net income, cash flow, and individual performance and
achievement. For the nine months ended June 30, 1996, bonuses were granted to
the five executive officers who resigned their positions on June 27, 1996 to
become the Concurrent management team. The amounts of the bonuses are stated in
the Summary Compensation Table, above. The bonus amounts were set by the
Compensation Committee principally in recognition of services performed during
the fiscal period ended on June 30, 1996, based on several factors, including
these executives' successful completion of the sale of the real-time division to
Concurrent and their implementation of the Company's strategy in the transition
from a two-division to a single division company.
Compensation of the Chief Executive Officer. Mr. Carberry joined the
Company during April 1996 with an initial salary set at $200,000 per year. This
compensation level was determined based upon negotiations with Mr. Carberry
prior to his becoming an employee of the Company and upon the factors regarding
executive salaries described above. During the nine months ended June 30, 1996,
Mr. Siegel's base salary increased by 5% to $210,000 consistent with the
increase granted to the other executives of the Company. As referenced above,
Mr. Siegel was awarded a bonus during June 1996 principally in recognition of
services performed in connection with the sale of the real-time division to
Concurrent. During this same period, the Compensation Committee authorized a
grant to Mr. Siegel of options to acquire 57,000 shares of the Company's common
stock, effective October 1995.
11
<PAGE> 14
Long Term Incentives. Under the Stock Incentive Plan, the Compensation and
Stock Option Committee may grant to certain employees of the Company a variety
of long-term incentives, including non-qualified stock options, incentive stock
options, stock appreciation rights, exercise payment rights, grants of stock or
performance awards. During the nine months ended June 30, 1996, the Company
Compensation Committee approved grants of stock options that had an exercise
price of not less than the fair market value of the underlying stock on the date
of the grant.
SUBMITTED BY THE COMPENSATION AND
STOCK OPTION COMMITTEE:
C. SHELTON JAMES, CHAIRMAN
MICHAEL F. MAGUIRE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the nine months ended June 30, 1996, E. Courtney Siegel, the
Company's then Chairman, President and Chief Executive Officer and Chairman of
the Board, participated in deliberations of the Compensation and Stock Option
Committee, as requested by such Committee, concerning executive officer
compensation. Brian Foremny, who is a director and who serves as the Company's
General Counsel, was a partner at the law firm of Holland & Knight, which serves
as the Company's counsel.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following sets forth, as of October 29, 1996 information with respect
to the beneficial ownership of the Company's Common Stock by: (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of the Company's Common Stock; (ii) each director of the Company; (iii) each of
the Company's named executive officers; and (iv) all directors and executive
officers as a group. Unless otherwise indicated, each of the shareholders named
in this table: (a) has sole voting and investment power with respect to all
shares of Common Stock beneficially owned and (b) has the same address as the
Company.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME/ADDRESS SHARES OF CLASS
- --------------------------------------------------------------------------- --------- --------
<S> <C> <C>
Concurrent Computer Corporation............................................ 591,678 8.45%
2 Crescent Place
Oceanport, New Jersey 07757
Okabena Partnership K...................................................... 522,300 7.46%
5140 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Paul Tudor Jones II........................................................ 451,500 6.45%
c/o Tudor Investment Corporation
One Liberty Plaza, 51st Floor
New York, New York 10006(1)
Robert L. Carberry (2)..................................................... 2,500 *
Patrick O. Wheeler(3)...................................................... 3,000 *
Katherine K. Hutchinson(3)................................................. 12,900 *
Bradley C. Lesher(3)....................................................... 70,596 1.00%
Robert F. Perks(3)......................................................... 6,000 *
Rick A. Siebenaler(3)...................................................... 11,301 *
Brian Foremny(3)........................................................... 30,000 *
C. Shelton James(3)(4)..................................................... 21,000 *
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME/ADDRESS SHARES OF CLASS
- --------------------------------------------------------------------------- --------- --------
<S> <C> <C>
Michael F. Maguire(3)...................................................... 21,000 *
Leland R. Reiswig, Jr.(3).................................................. 7,000 *
Richard P. Rifenburgh...................................................... 6,000 *
All directors and officers as a group (11) persons......................... 192,876 2.68%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 146,600 shares of Common Stock owned by The Raptor Global Fund Ltd.
("Raptor Ltd."); 77,400 shares of Common Stock owned by The Raptor Global
Fund L.P. ("Raptor L.P."); 30,100 shares of Common Stock owned by Tudor
Arbitrage Partners L.P. ("TAP"); 30,100 shares of Common Stock owned by
Tudor Global Trading LLC ("TGT") and 197,400 shares of Common Stock owned
by Tudor BVI Futures, Ltd. ("Tudor BVI"). Tudor Investment Corporation
("TIC"), Raptor L.P.'s general partner, shares voting and investment power
with respect to shares owned by Raptor Ltd., Raptor L.P., TAP and Tudor
BVI. In addition, Paul Tudor Jones II, the principal shareholder and
executive officer of TIC, shares voting and investment power with respect
to shares owned by TIC. TGT, sole general partner of TAP, shares voting and
investment power with respect to shares owned by TAP.
(2) Does not include 339,000 options to purchase common stock of the Company
granted in connection with the Carberry Employment Agreement.
(3) Includes options that are currently exercisable to purchase Common Stock in
the following amounts: Mr. Wheeler -- 3,000 shares; Ms. Hutchison -- 12,600
shares; Mr. Lesher -- 69,000 shares; Mr. Perks -- 6,000 shares; Mr.
Siebenaler -- 11,301 shares; Mr. Foremny -- 30,000 shares; Mr.
James -- 21,000 shares; and Mr. Maguire -- 21,000 shares; Mr. Reiswig --
6,000 shares; and Mr. Rifenburgh -- 6,000 shares.
(4) Does not include 255,000 shares that are deemed beneficially owned by Mr.
James as a result of his serving as an executive officer and director of
various investment limited partnerships.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph shows the Company's cumulative total return to
shareholders compared to Standard & Poor's 500 Index and the Self-determined
Peer Group (defined below) over the period from October 10, 1994, the first day
that the Company was traded publicly, and the end of the fiscal 1996, based on
an initial investment of $100. Total shareholder return assumes dividend
reinvestment. The stock performance shown on the following graph is not
indicative of future price performance. The Self-determined Peer Group is
comprised of Digital Equipment Corporation, Secure Computing Corporation, Raptor
Systems, Inc., and Security Dynamics Technology, Inc.
COMPARISON OF ONE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500 AND PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) CYBERGUARD S&P 500 PEER GROUP(3)
<S> <C> <C> <C>
OCTOBER-94 100.00 100.00 100.00
SEPTEMBER-95 217.83 131.82 216.40
JUNE-96 668.61 153.87 432.80
</TABLE>
(1) Assumes an initial investment of $100 on October 10, 1994. Total return
assumes reinvestment of dividends.
(2) During fiscal year 1995, the Company changed its fiscal year end to
September 30, 1996. During fiscal year 1996, the Company changed its fiscal
year end to June 30.
(3) Shares of Secure Computing Corporation were first publicly traded on
November 17, 1995. Shares of Raptor Systems, Inc. were first publicly
traded on February 2, 1996.
14
<PAGE> 17
CERTAIN TRANSACTIONS
On June 27, 1996 the Company consummated the Real-time Sale pursuant to
which the Company sold the assets and liabilities that comprised the Company's
real-time computer division. In connection with the Real-time Sale, the Company
entered into numerous agreements with Concurrent, several of which govern
certain matters between the Company and Concurrent after the Real-time Sale. The
principal agreements that continue in effect are reciprocal reseller agreements
by which each of Concurrent and the Company sell the other's computer products
at prices that are more favorable than those that would be available from
unaffiliated third parties; a shared services agreement under which Concurrent
provides certain plant and facilities maintenance, bookkeeping, and other
similar services; the Share Holding Agreement that is described below; and lease
agreements under which Concurrent leases to the Company its Fort Lauderdale
headquarters and plant facilities.
In connection with the Real-time Sale, the Company and Concurrent entered
into the Share Holding Agreement, which relates to the shares of stock of each
company received by the other in the transaction. The Share Holding Agreement
permits each company to nominate one or more members of the board of directors
of the other depending on number of shares held by the nominating company. So
long as the Share Holding Agreement is in effect, the Company has agreed to
limit the number of its directors to seven. The Share Holding Agreement also
requires the Company to maintain in effect for three years a registration
statement relating to the shares of the Company's common stock held by
Concurrent following the Real-time Sale. Concurrent common stock held by the
Company is subject to a similar registration statement maintained by Concurrent.
The sale of common stock of either company by the other is subject to certain
restrictions on transfer contained in the Share Holding Agreement.
APPROVAL OF
INDEPENDENT CERTIFIED ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP to serve as the
Company's principal accountants for the year ending June 30, 1997. In the event
the appointment of KPMG Peat Marwick LLP for fiscal year 1997 is ratified, it is
expected that KPMG Peat Marwick LLP will also audit the books and accounts of
certain subsidiaries of the Company at the close of their current fiscal years.
A representative of KPMG Peat Marwick LLP will be present at the Annual Meeting
and will have the opportunity to make a statement, if such person desires to do
so, and to respond to appropriate questions.
The proposal to ratify the appointment of KPMG Peat Marwick LLP will be
approved by the shareholders if it receives the affirmative vote of a majority
of the votes cast by shareholders entitled to vote on the proposal. If a proxy
card is specifically marked as abstaining from voting on the proposal, the
shares represented thereby will not be counted as having been voted for or
against the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS.
OTHER MATTERS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, shareholders may present proper proposals for inclusion in the
Company's proxy statement and for consideration at the next Annual Meeting of
Shareholders by submitting such proposals to the Company in a timely manner. In
order to be so included for the 1997 Annual Meeting, shareholder proposals must
be received by the Company no later than July 7, 1997 and must otherwise comply
with the requirements of Rule 14a-8.
Under federal securities laws, the Company's directors, certain officers,
and persons holding more than 10% of the Common Stock of the Company are
required to report, within specified monthly and annual due dates, their initial
ownership and all subsequent acquisitions, dispositions or other transfers of
interest in Common Stock, if and to the extent reportable events occur which
require reporting of such due dates. The Company is required to describe in this
Proxy Statement whether it has knowledge that any person required to
15
<PAGE> 18
file such report may have failed to do so in a timely manner. To the Company's
knowledge, all such filing requirements of the Company's directors, officers and
each beneficial owner of more than 10% of the Common Stock were satisfied in
full the nine months ended June 30, 1996. The foregoing is based upon reports
furnished to the Company and written representations and information provided to
the Company by the persons required to make such filings.
Shareholders may obtain a copy (without exhibits) of the Company's Annual
Report on Form 10-K for the nine months ended June 30, 1996 as filed with the
Securities and Exchange Commission without charge by writing to: Investor
Relations, CyberGuard Corporation, 2101 West Cypress Creek Road, Fort
Lauderdale, Florida 33309.
16
<PAGE> 19
APPENDIX
CYBERGUARD CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING DECEMBER 4, 1996
PROXY
The undersigned stockholder hereby appoints Robert L. Carberry, Patrick O.
Wheeler, and Brian Foremny, or any of them, attorneys and proxies for the
undersigned with power of substitution in each to act for and to vote, as
designated below, with the same force and effect as the undersigned, all shares
of CyberGuard Corporation Common Stock standing in the name of the undersigned
at the Annual Meeting of Shareholders to be held at the Doubletree Guest Suites,
555 N.W. 62nd Street, Fort Lauderdale, Florida at 10:00 a.m. on December 4, 1996
and at any adjournments thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER IF NO DIRECTION IS GIVEN, THIS PROXY WILL
GRANT AUTHORITY TO THE PROXY HOLDERS TO VOTE ON BEHALF OF THE UNDERSIGNED
SHAREHOLDER AND WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR AND "FOR" THE
OTHER PROPOSAL.
IN THEIR DISCRETION, THE PROXY HOLDERS ARE AUTHORIZED TO VOTE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF. THE
PROXY WILL BE VOTED IN ACCORDANCE WITH THE PROXY HOLDERS' BEST JUDGMENT AS TO
ANY OTHER MATTER.
(Continued and to be signed on reverse side)
ELECTION OF DIRECTORS.
1. Nominees:
Michael F. Maguire
Leland R. Reiswig, Jr.
[ ] FOR ALL [ ] WITHHOLD ALL
EXCEPT AS LISTED BELOW:
List Exceptions:
-----------------------------------------
-----------------------------------------
2. Ratify KPMG Peat Marwick LLP as independent auditors for fiscal year 1997
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ] MARK HERE IF YOU PLAN TO
ATTEND THE MEETING
Dated: , 1996
------------------
------------------------------
SIGNATURE
Please mark, date and sign
exactly as your name appears
hereon. Joint owners should
each sign. If the signer is a
corporation, please sign in
full corporate name by a duly
authorized officer. Executors,
administrators, trustees etc.
should give full title as
such.
