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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1997
REGISTRATION NO. 333-28693
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYBERGUARD CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 65-510339
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2101 WEST CYPRESS CREEK ROAD
FORT LAUDERDALE, FLORIDA 33309
(954) 974-5124
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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ROBERT L. CARBERRY
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CYBERGUARD CORPORATION
2101 WEST CYPRESS CREEK ROAD
FORT LAUDERDALE, FLORIDA 33309
(954) 974-1700
(Name, Address Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
Copies to:
D. RONALD SURBEY, ESQ.
HOLLAND & KNIGHT LLP
1 EAST BROWARD BOULEVARD
FORT LAUDERDALE, FL 33301
(954) 468-7953
TELECOPIER NO. (954) 463-2030
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement and from
time to time thereafter.
If the only securities being registered on this form are 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, 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, please 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. [ ]
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HERE IN 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 BE SOLD NOR MAY OFFER
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 REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION DATED JUNE 12, 1996
PROSPECTUS
1,470,085 SHARES
CYBERGUARD CORPORATION
COMMON STOCK
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All 1,470,085 shares (the "Shares") of common stock, par value $.01 per
share ("Common Stock") of CyberGuard Corporation (the "Company") are being
offered by the Selling Shareholder named herein. See "Selling Shareholder" and
"Plan of Distribution." The Company will not receive any of the proceeds of
sales of Common Stock offered hereby. See "Use of Proceeds."
The Shares are included for quotation on the Nasdaq National Market System
under the symbol "CYBG." On June 11, 1997, the last reported sale price of the
Common Stock as reported by the Nasdaq National Market was $9 1/4 per share.
THE SHARES OFFERED HEREBY REPRESENT A HIGH DEGREE OF RISK. INVESTORS
SHOULD CAREFULLY CONSIDER CERTAIN RISKS AND OTHER CONSIDERATIONS RELATING TO
THE COMMON STOCK AND THE COMPANY. SEE "RISK FACTORS" COMMENCING ON PAGE 4.
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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.
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The Shares may be sold from time to time by the Selling Shareholder or its
pledgees or donees. Such sales may be made in the over-the-counter market or
in negotiated transactions, at prices and on terms then prevailing or at prices
related to the then current market price or at negotiated prices. The Shares
may be sold by means of (a) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus
and/or (b) ordinary brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, brokers or dealers engaged by the
Selling Shareholder may arrange for other brokers or dealers to participate.
Brokers or dealers will receive commissions or discounts from the Selling
Shareholder in amounts to be negotiated immediately prior to the sale, which
amounts will not be greater than that normally paid in connection with ordinary
trading transactions. The Selling Shareholder is subject to certain volume
limitations on resale. See "Plan of Distribution."
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THE DATE OF THIS PROSPECTUS IS JUNE 12, 1997.
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No person has been authorized in connection with any offering made hereby
to give any information or to make any representations other than those
contained in this Prospectus or any Prospectus Supplement, and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Company, the Selling Shareholder, or any underwriter,
dealer or agent. This Prospectus or any Prospectus Supplement does not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which it relates or any offer to sell
or the solicitation of an offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus or any Prospectus Supplement nor any sale hereunder or thereunder
shall, under any circumstances, create any implication that the information
contained herein or therein is correct as of any time subsequent to the date
hereof and thereof.
AVAILABLE INFORMATION
The Company is subject to the informational 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"). Copies of such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Seven World Trade Center, 13th
Floor, New York, NY 10048 and Citicorp Center, 500 West Madison Street (Suite
1400), Chicago, Illinois 60661. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a
Worldwide Web site at http://www.sec.gov which contains reports, proxy
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission. The Common Stock is traded on
the NASDAQ NMS (Symbol: CYBG). In addition, material filed by the Company can
be inspected at the offices of NASDAQ NMS, Reports Section, 1735 K Street N.W.,
Washington, D.C. 20006.
This Prospectus constitutes part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") and does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement and to the exhibits and schedules thereto.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and such statement is qualified in
its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the Commission by the
Company pursuant to the Exchange Act (Commission File No. 0-24544) are
incorporated by reference in this Prospectus: (i) Annual Report on Form 10-K
for the fiscal year ended June 30, 1996, as amended on the Annual Report on
Form 10-K/A filed October 31, 1996; (ii) Quarterly Reports on Form 10-Q for the
fiscal quarters ended September 30, 1996, December 31, 1996 and March 31, 1997;
(iii) Current Reports on Form 8-K dated June 26, 1996, August 8, 1996, and
April 9, 1997; and (iv) the description of the Common Stock contained in the
Company's Registration Statement on Form 10.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock made hereby shall
be deemed to be incorporated by reference in the Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference 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
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 hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon written or oral request
of such person to CyberGuard Corporation, 2101 West Cypress Creek Road, Fort
Lauderdale, Florida 33309 (telephone (954) 974-1700), Attention: Investor
Relations, a copy of any or all documents referred to above (other than
exhibits to such documents) that have been incorporated by reference in this
Prospectus.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors--Limited Operating History in the Commercial Network Security Market;
Unpredictability of Operating Results; --Liquidity and Capital Requirements;
Possible Need for Additional Financing; --Dependence on Principal Product;
Uncertainty of Product Acceptance; --Competition; --Recent and Potential
Acquisitions; --Dependence on the Internet and Intranets; --Changes in
Technology and Industry Standards; Significant Research and Development
Expenditures; and --Dependence on Resellers; Need to Establish Collaborative
Marketing Arrangements."
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RISK FACTORS
Investment in the Shares offered hereby involves a high degree of risk.
In addition to the other information contained in this Prospectus and
incorporated by reference herein, prospective investors should consider
carefully the following factors in evaluating the Company before purchasing any
Shares.
LIMITED OPERATING HISTORY IN THE COMMERCIAL NETWORK SECURITY MARKET;
UNPREDICTABILITY OF OPERATING RESULTS
Although the Company has been developing network security products since
1989, the Company has operated in the commercial network security market only
since October 1994. In view of, among other things, the Company's short
operating experience in, and the rapidly changing and intensely competitive
nature of, the commercial network security market, the uncertainty of
acceptance of the Company's products, the reliance of such products on the
Internet, and the mix of distribution channels through which the Company's
products are sold, there is no assurance that the Company will be profitable in
future years. The Company's results of operations may become increasingly
unpredictable from quarter to quarter as a result of numerous other factors,
including market acceptance of the Company's products, fluctuations in the
development and growth of the commercial network security industry in general,
the timing of orders and shipments of products, the introduction of new
products by the Company, or the introduction or the announcement of competitive
products. In addition, a substantial portion of the Company's sales occurs
during the last few weeks of each quarter; therefore, any delays in orders or
shipments are more likely to result in revenue not being recognized until the
following quarter. The Company's current and planned expense levels are based
in part on its expectations of future sales and, as a result, net income for a
given period could be disproportionately affected by any reduction in sales.
There can be no assurance that the Company will be able to achieve significant
sales of products in the future or that the level of sales in the future will
not decrease from past levels. There can be no assurance that in future
quarters the Company's sales or operating results will meet the expectations of
stock market securities analysts and investors.
LIQUIDITY AND CAPITAL REQUIREMENTS; POSSIBLE NEED FOR ADDITIONAL FINANCING
At present, funds generated from the Company's operations are insufficient
to satisfy the Company's anticipated cash requirements. The Company's cash
requirements have increased since the TradeWave Acquisition described below.
See "Risk Factors--Recent and Potential Acquisitions." The Company has relied
on the sales of securities of Concurrent Computer Corporation ("Concurrent")
received by the Company in connection with the June 1996 sale to Concurrent of
the Company's real-time computer business. As of the date hereof, the Company
retains no shares of Concurrent common stock and approximately 200,000 shares
of Concurrent preferred stock for future sale. There is currently no public
market for Concurrent preferred stock and it is not anticipated that a trading
market will ever develop. However, the preferred stock is convertible into
common stock of Concurrent that trades on the Nasdaq National Market. Due to
the convertibility of the Concurrent preferred stock into Concurrent common
stock, the Concurrent preferred stock is expected to fluctuate in value based
on factors which are substantially similar to the factors that influence the
price of the Concurrent common stock.
On May 15, 1997, the Company and the Selling Shareholder entered into a
Private Securities Subscription Agreement (the "Subscription Agreement")
pursuant to which the Selling Shareholder agreed to purchase, and the Company
agreed to sell, up to $7,500,000 (up to a maximum of 1,470,085) shares of
Common Stock at a negotiated price based on the average per-share closing bid
price as reported by Bloomberg, L.P. ("Closing Bid Price") over a period
preceding a "call for proceeds" by the Company. Pursuant to the Subscription
Agreement, the Company either (i) must make a call for proceeds of at least
$3,750,000 by May 14, 1998 and for all of the proceeds by November 15, 1998 or
(ii) issue to the Selling Shareholder warrants with respect to a maximum of
170,000 shares of the Company's common stock at an exercise price equal to the
market price of common stock on the target dates for these minimum calls. The
Subscription Agreement places a number of constraints on the Company's ability
to call for proceeds. Among other things (i) the average amount of each call
for proceeds (other than the first call for proceeds) may not be more than 1.5
times the Trading Volume (as defined below); (ii) there must be at least 15
business days between the dates that the Company calls for proceeds (except
that if the Closing Bid Price is below $8.00 on the date of the Company's first
call for proceeds and such call for proceeds exceeds 1.5 times the Trading
Volume, there must be at least 40 business days between the date the Company
makes the first call for proceeds and the next succeeding call for proceeds);
and (iii) the Company may call for proceeds only when the closing bid price on
the day of the call is equal to or greater than the average Closing Bid Price
over the five trading days immediately preceding the Company's call for
proceeds. The "Trading Volume," for purposes of the Subscription Agreement,
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means the average closing bid price and the average daily trading volume of the
20 day period preceding each call for proceeds, in each case as reported by
Bloomberg, L.P. The issuance of Common Stock, and possibly warrants to
purchase Common Stock, to the Selling Shareholder could result in dilution of
the interests of existing and future security holders. There can be no
assurance that the Company will make the minimum calls for proceeds under the
Subscription Agreement, that the various conditions to closing following each
call for proceeds will be met, or that that the funds received by the Company
pursuant to the Subscription Agreement will be adequate to fund the Company's
ongoing cash requirements.
The Company may in the future seek a line of credit that is likely to be
secured by all the assets of the Company and to be subject to financial
covenants, restrictions on indebtedness, asset dispositions, and investments
and corporate transactions, all of which may affect the operating flexibility
of the Company and subject the Company's assets to seizure upon default. These
limitations and conditions may affect the Company's flexibility in generating
cash through sales of Concurrent securities and may require the Company to seek
alternative sources of cash, including borrowings and equity sales. In the
event that the Company requires financing from additional outside sources,
there can be no assurance that any additional financing will be available to
the Company on acceptable terms, or at all. Any additional financing may
involve dilution of the interests of the Company's then existing shareholders.
If adequate funds are not available, the Company may be required to curtail
certain activities, including product development, marketing and sales
activities.
DEPENDENCE ON PRINCIPAL PRODUCT; UNCERTAINTY OF PRODUCT ACCEPTANCE
Sales of the Company's CyberGuard Firewall in the commercial network
security market account for a substantial portion of the Company's sales, and
the Company expects the portion of its sales attributable to the CyberGuard
Firewall to increase. As a result, any factor adversely affecting sales of this
product could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's future success
depends on the continued adoption of the Company's CyberGuard Firewall and
other network security products by users. The market acceptance of the
Company's products is difficult to estimate due in large measure to the recent
emergence of the market for network security products and the effect of a
number of new products, applications or product enhancements that have been
introduced into the market. Competitive products are currently available that
have comparable or more favorable price characteristics and that may be
perceived to have comparable performance characteristics. There can be no
assurance that the Company's products, particularly its CyberGuard Firewall,
will continue to achieve acceptance in the network security market, and the
failure of the Company's products to achieve such continued market acceptance
could have a material adverse effect on the Company's business, operating
results and financial condition. Moreover, the Company anticipates that its
existing and new competitors will introduce additional competitive products,
particularly if demand for enterprise-wide network security products increases,
which could reduce future market acceptance of the Company's products.
As the network security industry continues to evolve, the Company's future
financial performance will depend in part on the successful development,
introduction and market acceptance of new products, applications and product
enhancements. There can be no assurance that the Company will be able to
develop new products or that such products will satisfy evolving user
preferences and achieve market acceptance or, if market acceptance is achieved,
that the Company will be able to maintain such acceptance for a significant
period of time. Any significant delay in the introduction of the Company's
future products could result in loss of market share and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
RISKS ASSOCIATED WITH NETWORK SECURITY MARKET
The market for the Company's products is only beginning to emerge. The
rapid development of the Internet, corporate intranets and enterprise-wide
computing has increased the vulnerability of proprietary information to access
by unauthorized persons and has in recent years increased demand for computer
and network security products. However, there is no assurance that demand for
network security products will continue at current levels or increase.
Moreover, because the market for network security products is only beginning to
develop, it is difficult to assess the size of this market and the product
features and prices, the optimal distribution strategy and the competitive
environment that will develop in this market. Declines in demand for network
security products, whether as a result of technological change, the public's
perception of the need for network security products, developments in the
hardware and software environments in which these products operate, general
economic
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conditions or other factors, could have a material adverse effect on the
Company's business, financial condition and results of operations.
COMPETITION
The market for network security products and services is intensely
competitive, rapidly evolving and characterized by frequent technological
change. The Company expects competition to persist and intensify in the future.
The Company's principal current competitors include, Check Point Software
Technologies Ltd ("Check Point"), Raptor Systems, Inc., Secure Computing
Corporation, and Trusted Information Systems, Inc. In addition, companies such
as Digital Equipment Corporation, International Business Machines, McAfee
Associates, Inc., and Sun Microsystems, Inc. sell products with similar
features and functions that could be considered competitors of the Company.
Several other companies offering other network and other computer-related
products, including Microsoft Corporation, are expected to enter the commercial
network security market in the near future. Many of the Company's current and
potential competitors have greater name recognition, larger installed customer
bases and significantly greater financial, technical or marketing resources
than the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies or changes in customer requirements or to devote greater
resources to the promotion and sale of their products than the Company. In
addition, certain of the Company's competitors may determine, for strategic
reasons, to consolidate, substantially lower the price of their network
security products or bundle their products with other products, such as
hardware products or other enterprise software products. In addition, current
and potential competitors have established or may establish financial or
strategic relationships among themselves, with existing or potential customers,
resellers or other third parties. Competition could increase if new companies
enter the market or if existing competitors expand their product lines. An
increase in competition could result in price reductions and loss of market
share for the Company. Such competition and any resulting reduction in pricing
and gross margins could have a material adverse effect on the Company's
business, financial condition and results of operations.
There can be no assurance that the Company's competitors will not develop
network security products using approaches substantially similar to or
different from the Company's that may be more effective than the Company's
current or future products or that the Company's technologies and products
would not be rendered obsolete by such developments. At present, the
CyberGuard Firewall is the only commercially available firewall built on
integrated secure operating system and secure networking software components
that are rated as high as B1 by the National Computer Security Center ("NCSC")
and E-3 in the United Kingdom against the Information Technology Security
Evaluation Criteria ("ITSEC"). However, certain of the Company's competitors
have also submitted, or could submit, their commercial network firewall
products for evaluation by the NCSC and against the ITSEC, and certain of these
products could receive B1 and E-3 or higher ratings upon completion of these
processes. Competitors may also employ litigation or the threat of litigation
relating to patents and other intellectual property to gain a competitive
advantage.
DEPENDENCE ON THE INTERNET AND INTRANETS
The Company's products are designed primarily for computer network
environments, such as the Internet and certain enterprise-wide networks that
are based upon the Transmission Control Protocol/Internet Protocol ("TCP/IP")
network protocol. Accordingly, sales of the Company's current products will
depend in large part upon a robust industry and infrastructure for providing
Internet access and carrying Internet traffic. Because global commerce and the
exchange of information on the Internet and other similar open wide area
networks are new and evolving, it is difficult to predict with any assurance
whether the complementary products or other factors necessary to make the
Internet a viable commercial marketplace will be developed. The failure of the
Internet to become a viable commercial marketplace could have a material
adverse effect on the Company's business, financial condition and results of
operations. Additionally, the Company plans to continue to develop products for
use by customers with TCP/IP-based enterprise-wide intranet applications. The
failure of the TCP/IP protocol to gain wide acceptance as an enterprise-wide
network protocol could have a material adverse effect on the Company's
business, financial condition and results of operations.
RECENT AND POTENTIAL ACQUISITIONS
In the normal course of its business, the Company evaluates potential
acquisitions of businesses, products and technologies that could complement or
expand the Company's network security business. For example, on April 9,
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1997, the Company purchased (the "TradeWave Acquisition") substantially all the
assets of TradeWave Corporation, a Delaware corporation ("TradeWave").
TradeWave is based in Austin, Texas and is engaged in the design, production
and marketing of a suite of software products that enable businesses to design
and implement public-key security network security systems for use across
TCP/IP-based networks. In the event the Company were to identify another
appropriate acquisition candidate, there is no assurance that the Company would
be able to successfully negotiate the terms of any such acquisition, finance
such acquisition and integrate such acquired business, products or technologies
into the Company's existing business and operations. Furthermore, the
integration of an acquired business could cause a diversion of management time
and resources. The TradeWave Acquisition, for example, is expected to result
in considerable demands on the Company for cash, managerial support and
technological assistance. There can be no assurance that a given acquisition,
when consummated, including without limitation the TradeWave Acquisition, would
not materially adversely affect the Company's business, financial condition and
results of operations. If the Company proceeds with one or more significant
acquisitions in which the consideration consists of cash, a substantial portion
of the Company's available cash could be used to consummate the acquisitions.
If the Company consummates one or more significant acquisitions in which the
consideration consists of stock, or is financed with the proceeds of the
issuance of stock, stockholders of the Company could suffer a significant
dilution of their interests in the Company. See "Use of Proceeds."
INTERNATIONAL SALES RISKS
For the nine months ended March 31, 1997 and the fiscal years ended June
30, 1996 and September 30, 1995, approximately 61%, 45.5% and 31%,
respectively, of the Company's sales for security products were attributable to
sales outside the United States. The Company expects to continue to expand its
marketing efforts abroad. International sales are subject to certain risks,
such as currency fluctuations, that could make the Company's products less
competitive in foreign markets and contribute to fluctuations in the Company's
operating results. Other risks affecting international sales include political
instability, difficulties in staffing and managing international operations,
potential insolvency of international resellers, longer receivable collection
periods and difficulty in collecting accounts receivable. In addition, the laws
of certain countries do not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States. There can
be no assurance that these factors would not have a material adverse effect on
the Company's business, financial condition and results of operations.
CHANGES IN TECHNOLOGY AND INDUSTRY STANDARDS; SIGNIFICANT RESEARCH AND
DEVELOPMENT EXPENDITURES
The network security industry is characterized by rapid changes, including
evolving industry standards, frequent new product introductions, continuing
advances in technology and changes in customer requirements and preferences.
The introduction of new technologies could render the Company's existing
products obsolete or unmarketable. Advances in techniques employed by
individuals and entities seeking to gain unauthorized access to networks could
expose the Company's existing products to new and unexpected attacks and
require accelerated development of new products. There can be no assurance that
the Company will be able to counter challenges to its current products, that
the Company's future product offerings will keep pace with technological
changes implemented by competitors or persons seeking to breach network
security, that the Company will be able to establish and maintain any strategic
technical alliances necessary to achieve a competitive advantage or that the
Company will be successful in developing and marketing products for any future
technology. The development cycle for the Company's new products may be
significantly longer than the Company's historical product development cycle or
significantly longer than anticipated, resulting in higher development costs or
a loss in market share. Failure to develop and introduce new products and
product enhancements on a timely basis could have a material adverse effect on
the Company's business, financial condition and results of operations.
Moreover, the costs of developing new products, and related sales and marketing
expenses, are expected to be significant before such products are in a position
to deliver significant sales or cash flow to the Company. There can be no
assurance that new product introduction will be executed without materially and
adversely affecting the Company's business, financial condition and results of
operations.
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DEPENDENCE ON RESELLERS; NEED TO ESTABLISH COLLABORATIVE MARKETING ARRANGEMENTS
In marketing its products, the Company depends substantially, and expects
to increase its dependence, upon the performance of indirect sales channels,
including systems integrators and value added resellers (or "VARs"), over which
the Company does not have complete authority. The Company's relationships with
most of its resellers have been established within the last two years, and the
Company is unable to predict with accuracy the extent to which its resellers
will be successful in marketing and selling the Company's products. Moreover,
the Company's future success will depend in part on its ability to establish
collaborative marketing relationships in other indirect sales channels. There
can be no assurance that the Company's existing or contemplated collaborative
relationships will be commercially successful, that the Company will be able to
negotiate additional collaborative relationships, that such additional
collaborations will be available to the Company on acceptable terms or that any
such relationships, if established, will be commercially successful. In
addition, there can be no assurance that parties with whom the Company has
established collaborative relationships will not pursue alternative
technologies or develop alternative products in addition to or in lieu of the
Company's products either on their own or with others, including the Company's
competitors. The loss of any of the Company's major resellers, either to
competitive products offered by other companies or to products developed
internally by the resellers, could have a material adverse effect on the
Company's business, financial condition or results of operations. If the
Company is successful in expanding its network of indirect sales channels, the
Company will need to add substantially to its pre-sales, field support, and
marketing staffs in order to support the sales activities of an expanded
distribution network. There can be no assurance that such internal expansion
will be successfully completed, that the cost of such expansion will not exceed
the sales generated thereby, or that the Company's sales and marketing
organization will successfully compete against the more extensive and
well-funded sales and marketing operations of many of the Company's current and
future competitors.
RISK OF ERRORS OR FAILURES
Products as complex as those offered by the Company may contain undetected
errors when first introduced or when new versions are released. The Company has
in the past discovered software errors in certain of its product offerings
after their introduction and has experienced delays in revenue recognition
during the period required to correct these errors. There can be no assurance
that errors will not be found in new products or releases after commencement of
commercial shipments by the Company. A computer break-in or other disruption
experienced by one of the Company's customers, if caused by errors or failures
in the Company's products, could result in product recalls and liability under
the Company's warranties or otherwise. A well publicized actual or perceived
breach of network security at a customer site could adversely affect the
market's perception of the Company or its products. Alleviating such problems
could require significant expenditures of capital and resources by the Company,
could cause interruptions, delays or cessation of service to the Company's
customers and could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company attempts to limit
its liability to customers, including liability arising from a failure of the
security features contained in the Company's products, through contractual
limitations of warranties and remedies. However, some courts have held similar
contractual limitations of liability, or the "shrinkwrap licenses" in which
they are often embodied, to be unenforceable. Accordingly, there can be no
assurance that such limitations will be enforced. Moreover, to the extent such
limitations are enforced as to licensees, there can be no assurance that they
will be enforceable as to other users of the Company's products or as against
parties who have an interest in data stored on networks that might be
compromised by a failure of the Company's product. While the Company currently
has product liability insurance to protect against these risks, there can be no
assurance that such insurance will cover all losses from failures of the
Company's products or will continue to be available to the Company on
commercially reasonable terms or at all.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends in large part on its ability to attract and
retain highly qualified engineering, management and marketing personnel.
Although the Company maintains key man life insurance on the Company's Chief
Executive Officer, the loss of the services of the Company's Chief Executive
Officer or other key employees of the Company could have a material adverse
effect on the Company. Competition for such personnel is intense and there can
be no assurance that the Company will be able to attract and retain all
personnel necessary for the development and operation of its business. The loss
of the services of key personnel could have a material adverse effect on the
Company's business, financial condition and results of operations.
8
<PAGE> 10
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; RISK OF
LITIGATION
The Company relies upon license agreements with customers, trademark,
copyright and trade secret laws, and employee conflict of interest and
third-party non-disclosure agreements and other methods to protect its
proprietary rights. Although the Company's wholly owned subsidiary, TradeWave
Corporation, has certain patents and has filed a patent application with
respect to certain proprietary technology, the Company currently does not hold
any patents in its own right and has no pending patent applications to cover
any aspects of its technology. The Company intends to file patent applications
in relevant jurisdictions to protect aspects of its technology; however, there
can be no assurance that any future patent applications will be granted or that
any future patents will not be challenged, invalidated or circumvented or that
the rights granted thereunder will provide competitive advantages to the
Company. There can also be no assurance that the Company's conflict of interest
or non-disclosure agreements will provide meaningful protection of the
Company's proprietary information. Further, the Company may be subject to
additional risk as it enters into transactions in countries where intellectual
property laws are not well developed or are poorly enforced. The Company's
inability to maintain a competitive advantage based on proprietary rights could
have a material adverse effect on the Company's business, financial condition
and results of operations.
As the number of network security products in the industry increases and
the functionality of these products further overlaps, software developers and
publishers may increasingly become subject to infringement claims. There can be
no assurance that others will not independently develop similar technologies or
duplicate any technology developed by the Company or that the Company's
technology will not infringe upon patents or other rights owned by others. For
example, during the first quarter of calendar 1997 a competitor of the Company
announced that it had been awarded a patent by the U.S. Patent and Trademark
Office covering elements of its firewall product. In response to this
announcement, the Company sought the counsel of its patent advisors and has
received the preliminary written confirmation from its patent counsel that the
CyberGuard Firewall does not infringe the competitor's patent. There can be no
assurance, however, that the competitor or other third parties will not assert
infringement claims against the Company in the future with respect to current
or future products. Although the Company is not currently the subject of any
intellectual property litigation, there has been substantial litigation
regarding patent, copyright, trademark and other intellectual property rights
involving computer software companies. Any claims or litigation, with or
without merit, could be costly and could result in a diversion of management's
attention, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Adverse determinations
in such claims or litigation could also have a material adverse effect on the
Company's business, financial condition and results of operations.
EFFECT OF GOVERNMENT REGULATION OF TECHNOLOGY EXPORTS
The Company's international sales and operations are subject to
governmental export requirements and could be subject to risks such as the
imposition of further governmental controls, denial or revocation of export
licensure status, restrictions on the export of critical technology, trade
restrictions and changes in tariffs. In particular, because of governmental
controls on the exportation of encryption technology, the Company may be unable
to export its most robust network security products. As a result, foreign
competitors that face less stringent controls on their products may be able to
compete more effectively than the Company in the global network security
market. There can be no assurance that these factors would not have a material
adverse effect on the Company's business, financial condition and results of
operations.
SHARES ELIGIBLE FOR FUTURE SALE
No assurance can be given as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares of Common Stock for
future sales, will have on the market price of the Common Stock from time to
time. Future sales of shares of Common Stock (including shares issued upon
exercise of stock options), or the possibility that such sales could occur,
could adversely affect the prevailing market price of the Common Stock and
could also impair the Company's ability to raise capital through an offering of
its equity securities. As of June 11, 1997 there were 7,432,662 shares of
Common Stock outstanding, substantially all of which will be immediately
tradable without restriction under the Securities Act of 1933, as amended (the
"Securities Act"). Approximately 1,689,000 additional shares of Common Stock
are issuable upon exercise of currently outstanding options, and 200,000 shares
are issuable upon the exercise of outstanding warrants to purchase Common
Stock. Approximately 344,000 shares of Common Stock or options thereon are
available for future issuance under the Company's Stock Incentive Plan.
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<PAGE> 11
The information provided in this paragraph does not include the shares that may
in the be issued by the Company to the Selling Shareholder under the
Subscription Agreement.
ABSENCE OF DIVIDENDS
The Company does not intend to pay any cash dividends for the foreseeable
future. The Company intends to follow a policy of retaining earnings, if any,
to finance the development and expansion of its business.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation and By-laws contain certain
anti-takeover provisions that could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
a majority of the outstanding voting stock of the Company. These provisions
include a staggered Board of Directors, certain super-majority voting
requirements with respect to removal of directors and amendments of the
Articles of Incorporation and By-laws, requirements concerning the filling of
board vacancies, adoption of Florida's Control Share Acquisition Act,
elimination of shareholder action by written consent, creation of a class of
"blank check" preferred stock and an increase in the percentage of shareholder
votes required to call a special meeting of shareholders. The Company also has
adopted and implemented a Shareholder Rights Agreement that will expire by its
terms on September 20, 2004 pursuant to which each share of Common Stock has
attached to it a right to purchase a share of preferred stock under certain
circumstances. These provisions and agreements are intended to encourage a
person interested in acquiring the Company to negotiate with, and to obtain the
approval of, the Board of Directors in connection with such a transaction.
However, certain of these provisions and agreements may discourage a future
acquisition of the Company, including an acquisition in which shareholders
might otherwise receive a premium for their shares. As a result, shareholders
who might desire to participate in such a transaction may not have the
opportunity to do so.
USE OF PROCEEDS
All proceeds from the sale of the Shares offered hereby will go to the
Selling Shareholder. The Company will not receive any proceeds from the sale of
Shares registered hereunder.
SELLING SHAREHOLDER
The Selling Shareholder is Capital Ventures International. The Selling
Shareholder's address is: c/o Heights Capital Management, 425 California
Street, Suite 1100, San Francisco, CA 94104. The Selling Shareholder and the
Company are each party to the Subscription Agreement pursuant to which the
Selling Shareholder agreed to purchase, and the Company agreed to sell, up to
$7,500,000 (up to a maximum of 1,470,085) shares of Common Stock at a
negotiated price per share based on the average per-share closing bid price as
reported by Bloomberg, L.P. ("Closing Bid Price") over a period preceding a
"call for proceeds" by the Company.
As of the effective date of the Registration Statement of which this
Prospectus forms a part, the Selling Shareholder owns no shares of the capital
stock of the Company. Assuming the all 1,470,085 shares issuable pursuant to
the Subscription Agreement are issued to the Selling Shareholder, the Selling
Shareholder will own approximately 16.6% of the then issued and outstanding
Common Stock of the Company (based on the number of shares of Common Stock
outstanding as of the date hereof). Following the sale of all of the Shares
offered hereby, the Selling Shareholder will own no shares of Common Stock of
the Company.
10
<PAGE> 12
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholder or its
pledgees or donees. Such sales may be made in the over-the-counter market or
in negotiated transactions, at prices and on terms then prevailing or at prices
related to the then current market price or at negotiated prices. The Shares
may be sold by means of (a) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus
and/or (b) ordinary brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, brokers or dealers engaged by the
Selling Shareholder may arrange for other brokers or dealers to participate.
Brokers or dealers will receive commissions or discounts from the Selling
Shareholder in amounts to be negotiated immediately prior to the sale, which
amounts will not be greater than that normally paid in connection with ordinary
trading transactions.
Pursuant to the Subscription Agreement, on any given day, the Selling
Shareholder may resell only such number of Shares as does not exceed the
previous day's trading volume. Purchasers of Shares hereunder are not subject
to such volume limitations on resale.
EXPERTS
The consolidated financial statements of CyberGuard Corporation (formerly
known as Harris Computer Systems Corporation) as of June 30, 1996 and September
30, 1995 and for the nine months ended June 30, 1996, the year ended September
30, 1995 and the three months ended September 30, 1994, have been incorporated
by reference herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Harris Computer Systems Business
at June 30, 1994 and for the year then ended appearing in Harris Computer
Systems Corporation's annual report on Form 10-K have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report included therein
and incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
the Company by the law firm of Holland & Knight LLP One East Broward
Boulevard, Suite 1300, Fort Lauderdale, Florida 33301.
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<PAGE> 13
===============================================================================
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OR PROJECTIONS OF FUTURE PERFORMANCE
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND ANY SUCH OTHER INFORMATION,
PROJECTIONS OR REPRESENTATIONS IF GIVEN OR MADE MUST NOT BE RELIED UPON AS
HAVING BEEN SO AUTHORIZED. THE DELIVERY OF THIS PROSPECTUS OF ANY SALE
HEREUNDER AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information ................................................. 2
Incorporation of Certain Information by Reference ..................... 2
Forward-Looking Statements ............................................ 3
Risk Factors .......................................................... 4
Use of Proceeds ....................................................... 11
The Selling Shareholder ............................................... 11
Plan of Distribution .................................................. 12
Experts ............................................................... 12
Legal Matters ......................................................... 12
</TABLE>
---------------
===============================================================================
===============================================================================
1,470,085 SHARES
CYBERGUARD CORPORATION
COMMON STOCK
----------------------
PROSPECTUS
----------------------
JUNE 12, 1997
===============================================================================
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses and costs expected to be incurred in
connection with the issuance and distribution of the common stock being
registered and payable by the Company. All amounts are estimated except for
the SEC registration fee and the Nasdaq fees.
<TABLE>
<S> <C>
SEC Registration Fee.................................. $ 4,093
Nasdaq fees........................................... 17,500
Legal fees and expenses............................... 5,500
Accounting fees and expenses.......................... 10,000
Blue Sky fees and expenses............................ 500
Miscellaneous......................................... 10,000
Total................................................ -------
$
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act ("FBCA") and the Company's Articles
of Incorporation provide that in certain cases, each officer and director of
the Company shall be indemnified by the Company against certain costs, expenses
and liabilities which he or she may incur in his or her capacity as such.
The Company's Articles provide:
To the fullest extent permitted by the Florida Business Corporation
Act, the Corporation shall indemnify, or advance expenses to, any person
made, or threatened to be made, a party to any action, suit or proceeding
by reason of the fact that such person (i) is or was a director of the
Corporation; (ii) is or was serving at the request of the Corporation as a
director of another corporation; (iii) is or was an officer of the
Corporation, provided that such person is or was at the time a director of
the Corporation; or (iv) is or was serving at the request of the
Corporation as an officer of another corporation, provided that such
person is or was at the time a director of the Corporation or a director
of such other corporation, serving at the request of the Corporation.
Unless otherwise expressly prohibited by the Florida Business Corporation
Act, and except as otherwise provided in the previous sentence, the Board
of Directors of the Corporation shall have the sole and exclusive
discretion, on such terms and conditions as it shall determine, to
indemnify, or advance expenses to, any person made, or threatened to be
made, a party to any action, suit or proceeding by reason of the fact that
such person is or was an officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as an officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. No person falling within the purview of this
paragraph may apply for indemnification or advancement of expenses to any
court of competent jurisdiction.
The Company's officers and directors (collectively "Indemnitees") are each
party to an indemnification agreement (collectively "Indemnification
Agreements"). The Indemnification Agreements obligate the Company to
indemnify and hold harmless each Indemnitee to the fullest extent permitted
by the Articles of Incorporation and the By-laws of the Company and the FBCA
for all expenses, including attorney's fees and taxes, in connection with any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), to which an
Indemnitee was, is, or is threatened to be made a party by reason of facts
which include his being or having been a director, officer, employee or agent
of the Company. The indemnification Agreements exclude indemnification where
(i) indemnification would be prohibited by applicable law, (ii) the Indemnitee
derived an improper personal benefit, (iii) (in the case of a stockholders'
derivative suit) the Indemnitee engaged in willful misconduct or conscious
disregard for the best interests of the Company (iv) it is determined that the
Indemnitee violated a criminal law (subject to certain
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<PAGE> 15
exceptions), or (v) it is determined that the Indemnitee violated the
Securities Act of 1933, as amended or Section 16(b) of the Securities Exchange
Act of 1934, as amended. securities laws. The Indemnification Agreements
provide for the advancement of expenses of a Proceeding, including advancements
to pay for reasonable attorney's fees, upon the receipt of an undertaking to
repay such advances if its is ultimately determined that indemnification in
unavailable under the Indemnification Agreements.
FBCA 607.0850 "Indemnification of officers, directors, employees and
agents," provides:
(1) A corporation shall have power to indemnify any person who was
or is a party to any proceeding (other than an action by, or in the
right of, the corporation), by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against liability incurred in connection with
such proceeding, including any appeal thereof, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any proceeding by judgment, order,
settlement, or conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed
to be in, or not opposed to, the best interests of the corporation or,
with respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was
or is a party to any proceeding by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation or is or was
serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually
and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof. Such indemnification
shall be authorized if such person acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests
of the corporation, except that no indemnification shall be made under
this subsection in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to
the extent that, the court in which such proceeding was brought, or any
other court of competent jurisdiction, shall determine upon application
that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of
any proceeding referred to in subsection (1) or subsection (2), or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses actually and reasonably incurred by him in connection
therewith.
(4) Any indemnification under subsection (1) or subsection (2),
unless pursuant to a determination by a court, shall be made by the
corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee, or agent is
proper in the circumstances because he has met the applicable standard
of conduct set forth in subsection (1) or subsection (2). Such
determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors
(in which directors who are parties may participate) consisting solely
of two or more directors not at the time parties to the proceeding;
(c) By independent legal counsel;
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<PAGE> 16
1. Selected by the board of directors prescribed in paragraph
(a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for paragraph
(1) and the committee cannot be designated under paragraph (b), selected
by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such proceeding or, if no such
quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(5) Evaluation of the reasonableness of expenses and authorization
of indemnification shall be made in the same manner as the determination
that indemnification is permissible. However, if the determination of
permissibility is made by independent legal counsel, persons specified
by paragraph (4)(c) shall evaluate the reasonableness of expenses and
may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a
civil or criminal proceeding may be paid by the corporation in advance
of the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if he is ultimately found not to be entitled to indemnification
by the corporation pursuant to this section. Expenses incurred by other
employees and agents may be paid in advance upon such terms or
conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided
pursuant to this section are not exclusive, and a corporation may make
any other or further indemnification or advancement of expenses of any
of its directors, officers, employees, or agents, under any bylaw,
agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. However, indemnification
or advancement of expenses shall not be made to or on behalf of any
director, officer, employee, or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were
material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or
in the right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors,
and administrators of such a person, unless otherwise provided when
authorized or ratified.
(9) Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or
of the shareholders in the specific case, a director, officer, employee,
or agent of the corporation who is or was a party to a proceeding may
apply for indemnification or advancement of expenses, or both, to the
court conducting the proceeding, to the circuit court, or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice that it considers necessary, may order
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<PAGE> 17
indemnification and advancement of expenses, including expenses incurred
in seeking court-ordered indemnification or advancement of expenses, if
it determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the court
shall also order the corporation to pay the director reasonable expenses
incurred in obtaining court-ordered indemnification or advancement of
expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or
both, in view of all the relevant circumstances, regardless of whether
such person met the standard of conduct set forth in subsection (1),
subsection (2), or subsection (7).
(10) For purposes of this section, the term "corporation" includes,
in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation
or merger, so that any person who is or was a director, officer,
employee, or agent of a constituent corporation, or is or was serving at
the request of a constituent corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, is in the same position under this section
with respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence
had continued.
(11) For purposes of this section;
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for
appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect
to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil,
criminal, administrative, or investigative and whether formal or
informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties
relating to an employee benefit plan and its participants or
beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner
he reasonably believes to be in the best interests of the participants
and beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
ITEM 16. EXHIBITS
The following documents are filed as exhibits to this registration
statement:
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<S> <C>
2.01 Restated Purchase and Sale Agreement between Concurrent Computer
Corporation and the Company dated May 23, 1996.*
4.01 Form of Common Stock Certificate.**
4.02 Form of Stockholder Rights Plan.**
4.03 Form of Non-Statutory Stock Option Agreement dated as of October 8, 1994
between the Company and the following executive officers: Robert Chism,
Robert T. Menzel, Michael N. Smith, Bradley C. Lesher, Daniel S.
Dunleavy, E. Courtney Siegel (previously filed).
4.04 Form of Non-Statutory Stock Option Agreement dated as of February 4, 1996
between the Company and the following executive officers: Patrick O.
Wheeler; Katherine K. Hutchison; Robert Perks; Rick Siebenaler
(previously filed).
4.05 Form of Incentive Stock Option Agreement dated as of February 4, 1996
between the Company and the following executive officers: Patrick O.
Wheeler; Katherine K. Hutchison; Robert Perks; and Rick Siebenaler)
(previously filed).
4.06 Non-Statutory Stock Option Agreement dated as of February 4, 1996 between
the Company and Brian Foremny (previously filed).
4.07 Non-Statutory Stock Option Agreement dated as of March 5, 1996 between
the Company and Robert L. Carberry (previously filed).
4.08 Non-Statutory Stock Option Agreement dated as of August 27, 1996 between
the Company and Frank Gelbart (previously filed).
4.09 Incentive Stock Option Agreement dated as of February 4, 1996 between the
Company and Brian Foremny******
4.10 Incentive Stock Option Agreement dated as of July 23, 1996 between the
Company and Robert L. Carberry (previously filed).
4.11 Incentive Stock Option Agreement dated as of August 27, 1996 between the
Company and Frank Gelbart (previously filed).
4.12 Form of Non-Statutory Stock Option Agreement between the Company and non
executive officers (previously filed).
4.13 Form of Incentive Stock Option Agreement between the Company and non
executive officers (previously filed).
4.14 Form of Stock Option Agreement between the Company and non-employee
directors (previously filed).
4.15 Form of Restricted Stock Agreement between the Company and certain
employees of the Company's subsidiary (previously filed).
4.16 CyberGuard (f/k/a Harris Computer Systems) Corporation Stock Incentive
Plan.****
4.17 Amendment No. 1 to Stock Incentive Plan.*****
4.18 Form of Share Holding Agreement between Concurrent Computer Corporation
and the Company**
</TABLE>
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<TABLE>
<S> <C>
4.19 Private Securities Subscription Agreement dated May 15, 1997 between
the Company and Capital Ventures International.
4.20 Registration Rights Agreement dated May 15, 1997 between the Company
and Capital Ventures International.
5.01 Opinion of Holland & Knight LLP.
23.01 Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants.
23.02 Consent of Ernst & Young LLP, Independent Certified Public Accountants.
23.03 Consent of Holland & Knight LLP (included in Exhibit 5).
24.01 Power of Attorney (previously filed).
</TABLE>
- ------------------------
* Incorporated by reference to Annex A of the Registrant's
definitive proxy statement as filed with the Commission on May 24,
1996.
** Incorporated by reference to Annex F of the Registrant's
definitive proxy statement as filed with the Commission on May 24,
1996.
*** Filed with Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form 10, dated September 29, 1994, File No.
0-24544 and incorporated herein by reference.
**** Incorporated by reference to the exhibits to the Company's
Registration Statement on Form S-8 (registration number 33-88446)
***** Incorporated by Reference to Annex G of the Registrant's definitive
proxy statement as filed with the Commission on May 24, 1996.
****** Incorporated by reference to the exhibits to the Company's
Registration Statement on Form S-3 (registration number 333-28813)
II-7
<PAGE> 20
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 to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the 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.
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.
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
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant 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 Act and
will be governed by the final adjudication of such issue.
II-8
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fort Lauderdale, Florida on June 12, 1997.
CYBERGUARD CORPORATION
By: /s/ Robert L. Carberry
------------------------------
Robert L. Carberry
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
President, Chairman and Chief Executive
/s/ Robert L. Carberry Officer (Principal Executive Officer) June 12, 1997
- --------------------------- and Director
Robert L. Carberry
Vice President Finance and Chief
/s/ Patrick O. Wheeler Financial Officer (Principal Financial June 12, 1997
- --------------------------- and Principal Accounting Officer)
Patrick O. Wheeler
/s/ C. Shelton James* June 12, 1997
- --------------------------- Director
C. Shelton James
/s/ Richard P. Rifenburgh June 12, 1997
- --------------------------- Director
Richard P. Rifenburgh
/s/ Michael F. Maguire* June 12, 1997
- --------------------------- Director
Michael F. Maguire
/s/ Leland R. Reiswig* June 12, 1997
- --------------------------- Director
Leland R. Reiswig, Jr.
/s/ David R. Proctor* June 12, 1997
- --------------------------- Director
David R. Proctor
</TABLE>
* Signed by Power of Attorney
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
<S> <C>
2.01 Restated Purchase and Sale Agreement between Concurrent Computer
Corporation and the Company dated May 23, 1996.*
4.01 Form of Common Stock Certificate.**
4.02 Form of Stockholder Rights Plan.**
4.03 Form of Non-Statutory Stock Option Agreement dated as of October 8, 1994
between the Company and the following executive officers: Robert Chism,
Robert T. Menzel, Michael N. Smith, Bradley C. Lesher, Daniel S. Dunleavy,
E. Courtney Siegel (previously filed).
4.04 Form of Non-Statutory Stock Option Agreement dated as of February 4, 1996
between the Company and the following executive officers: Patrick O.
Wheeler; Katherine K. Hutchison; Robert Perks; Rick Siebenaler
(previously filed).
4.05 Form of Incentive Stock Option Agreement dated as of February 4, 1996
between the Company and the following executive officers: Patrick O.
Wheeler; Katherine K. Hutchison; Robert Perks; and Rick Siebenaler)
(previously filed).
4.06 Non-Statutory Stock Option Agreement dated as of February 4, 1996 between
the Company and Brian Foremny (previously filed).
4.07 Non-Statutory Stock Option Agreement dated as of March 5, 1996 between
the Company and Robert L. Carberry (previously filed).
4.08 Non-Statutory Stock Option Agreement dated as of August 27, 1996 between
the Company and Frank Gelbart (previously filed).
4.09 Incentive Stock Option Agreement dated as of February 4, 1996 between the
Company and Brian Foremny******
4.10 Incentive Stock Option Agreement dated as of July 23, 1996 between the
Company and Robert L. Carberry (previously filed).
4.11 Incentive Stock Option Agreement dated as of August 27, 1996 between the
Company and Frank Gelbart (previously filed).
4.12 Form of Non-Statutory Stock Option Agreement between the Company and non
executive officers (previously filed).
4.13 Form of Incentive Stock Option Agreement between the Company and non
executive officers (previously filed).
4.14 Form of Stock Option Agreement between the Company and non-employee
directors (previously filed).
4.15 Form of Restricted Stock Agreement between the Company and certain
employees of the Company's subsidiary (previously filed).
4.16 CyberGuard (f/k/a Harris Computer Systems) Corporation Stock Incentive
Plan.****
4.17 Amendment No. 1 to Stock Incentive Plan.*****
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
4.18 Form of Share Holding Agreement between Concurrent Computer Corporation
and the Company**
4.19 Private Securities Subscription Agreement dated May 15, 1997 between the
Company and Capital Ventures International.
4.20 Registration Rights Agreement dated May 15, 1997 between the Company and
Capital Ventures International.
5.01 Opinion of Holland & Knight LLP.
23.01 Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants.
23.02 Consent of Ernst & Young LLP, Independent Certified Public Accountants.
23.03 Consent of Holland & Knight LLP (included in Exhibit 5).
24.01 Power of Attorney (previously filed).
</TABLE>
- ------------------------
* Incorporated by reference to Annex A of the Registrant's
definitive proxy statement as filed with the Commission on May 24,
1996.
** Incorporated by reference to Annex F of the Registrant's
definitive proxy statement as filed with the Commission on May 24,
1996.
*** Filed with Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form 10, dated September 29, 1994, File No.
0-24544 and incorporated herein by reference.
**** Incorporated by reference to the exhibits to the Company's
Registration Statement on Form S-8 (registration number 33-88446)
***** Incorporated by Reference to Annex G of the Registrant's definitive
proxy statement as filed with the Commission on May 24, 1996.
****** Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-3 (registration number 333-28813)
<PAGE> 1
HOLLAND & KNIGHT [Letterhead]
One East Broward Boulevard
P.O. Box 14070 (ZIP 33302-4070)
Fort Lauderdale, Florida 33301
954-525-1000
FAX 954-463-2030
June 12, 1997
CyberGuard Corporation
2101 West Cypress Creek Road
Fort Lauderdale, Florida 33309
RE: CYBERGUARD CORPORATION--REGISTRATION STATEMENT ON
FORM S-3 (REG. NO. 333-28693) (THE "REGISTRATION
STATEMENT")--OPINION RE LEGALITY
Gentlemen:
We have acted as counsel to CyberGuard Corporation, a Florida
corporation (the "Company"), in connection with the preparation of the
above-referenced Registration Statement filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), under which certain selling shareholder named therein (the "Selling
Shareholder") intend to offer and sell in a public offering, from time to time,
an aggregate of up to 1,470,085 shares (the "Shares") of the Common Stock,
$.01 par value per share, of the Company ("Common Stock").
The shares will be sold to the Selling Shareholder or its designee in
connection with a Private Securities Subscription Agreement dated as of May 15,
1997 (the "Subscription Agreement") between the Company and the Selling
Shareholder. Pursuant to the Subscription Agreement, the Company will issue to
the Selling Shareholder, against calls for proceeds by the Company, up to
1,470,085 shares of its common stock.
In this connection, we have reviewed copies of the Articles of
Incorporation and Bylaws of the Company and the Subscription Agreement, and we
have examined such corporate documents and records and other certificates, and
have made such investigations of law, as we have deemed necessary in order to
render the opinion hereinafter set forth.
Based on and subject to the foregoing, we are of the opinion that the
Shares are duly authorized and, upon issuance in connection pursuant to the
Subscription Agreement, against payment of the purchase price therefor (as
applicable), will be, assuming no change in the applicable law or pertinent
facts, and assuming sufficient authorized capital at the time of issuance,
validly issued, fully paid and non-assessable.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Steven Sonberg
---------------------------
Holland & Knight LLP
By: Steven Sonberg, Partner
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
CyberGuard Corporation:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the registration
statement.
KPMG Peat Marwick LLP
Miami, Florida
June 11, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-28693) and
related Prospectus of CyberGuard Corporation for the registration of 1,470,085
shares of its common stock and to the incorporation by reference therein of our
report dated July 13, 1994, with respect to the consolidated financial
statements of Harris Computer Systems Business included in its Annual Report
(Form 10-K) for the year ended June 30, 1996, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Orlando, Florida
June 11, 1997
