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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
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)
--------------------------
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) 468-7853
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.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED PROPOSED AMOUNT OF
OF SECURITIES TO BE REGISTERED TO BE MAXIMUM MAXIMUM REGISTRATION
REGISTERED (1) OFFERING PRICE AGGREGATE FEE
PER UNIT OFFERING PRICE
(2)
================================================ ================= ================== ================== ==================
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,470,085 $9.1875 $13,506,406 $4,093
================================================ ================= ================== ================== ==================
</TABLE>
(1) This Registration Statement also relates to the Rights to purchase
fractional shares of Preferred Stock of the Registrant which are
attached to all shares of common stock outstanding as of, and issued
subsequent to, September 29, 1994, pursuant to the terms of the
Registrant's Rights Agreement, dated as of September 29, 1994. Until
the occurrence of certain prescribed events, the Rights are not
exercisable, are evidenced by the certificates of common stock and will
be transferred with and only with such stock.
(2) Estimated solely for purposes of calculating the registration fee on
the basis of the average of the high and low sale prices for the Common
Stock of the Registrant on June 4, 1997, as reported by the National
Association of Securities Dealers Automated Quotation System.
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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SUBJECT TO COMPLETION DATED JUNE 6, 1996
PROSPECTUS
1,470,085 SHARES
CYBERGUARD CORPORATION
COMMON STOCK
------------
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 4, 1997, the last reported sale price of the
Common Stock as reported by the Nasdaq National Market was $93/8 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.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------------
The 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."
--------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
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[ON COVER PAGE OF PROSPECTUS]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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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.
9
<PAGE> 11
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 4, 1997 there were 7,394,662 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.
10
<PAGE> 12
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.
11
<PAGE> 13
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, 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, and
incorporated by reference herein, 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.
12
<PAGE> 14
================================================================================
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 1,470,085 SHARES 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 CYBERGUARD CORPORATION 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 COMMON STOCK 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
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<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>
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================================================================================
================================================================================
1,470,085 Shares
CYBERGUARD CORPORATION
COMMON STOCK
----------
PROSPECTUS
----------
1997
---------------
================================================================================
<PAGE> 15
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............................................................... *
Transfer agent and registrar fees......................................... *
Legal fees and expenses................................................... *
Accounting fees and expenses.............................................. *
Blue Sky fees and expenses................................................ *
Miscellaneous............................................................. *
Total................................................................ *
</TABLE>
* To be supplied by amendment.
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
II-2
<PAGE> 16
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 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;
II-3
<PAGE> 17
(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;
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.
<PAGE> 18
(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 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
<PAGE> 19
(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:
<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.
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.
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).
4.06 Non-Statutory Stock Option Agreement dated as of February 4, 1996 between the Company and Brian Foremny.
4.07 Non-Statutory Stock Option Agreement dated as of March 5, 1996 between the Company and Robert L. Carberry.
4.08 Non-Statutory Stock Option Agreement dated as of August 27, 1996 between the Company and Frank Gelbart.
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.
</TABLE>
<PAGE> 20
<TABLE>
<S> <C>
4.11 Incentive Stock Option Agreement dated as of August 27, 1996 between the Company and Frank Gelbart.
4.12 Form of Non-Statutory Stock Option Agreement between the Company and non executive officers.
4.13 Form of Incentive Stock Option Agreement between the Company and non executive officers.
4.14 Form of Stock Option Agreement between the Company and non-employee directors.
4.15 Form of Restricted Stock Agreement between the Company and certain employees of the Company's subsidiary.
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**
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 (to be filed by amendment).
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 (included on signature page of this Registration Statement).
</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.
<PAGE> 21
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.
<PAGE> 22
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Lauderdale, Florida on June 6, 1997.
CYBERGUARD CORPORATION
By: /s/ Robert L. Carberry
---------------------------------
Robert L. Carberry
Chairman, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert L. Carberry and Pat Wheeler, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and revocation, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any Registration
Statement (and any and all amendments thereto) related to this Registration
Statement and filed pursuant to Rule 462(b) promulgated by the Securities and
Exchange Commission, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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 DATE
--------- ----- ----
<S> <C> <C>
President, Chairman and Chief Executive
/s/ Robert L. Carberry Officer (Principal Executive Officer) and
- ----------------------------------------- Director June 6, 1997
Robert L. Carberry
Vice President Finance and Chief Financial
Officer (Principal Financial and Principal
/s/ Patrick O. Wheeler Accounting Officer) June 6, 1997
- -----------------------------------------
Patrick O. Wheeler
/s/ C. Shelton James Director June 6, 1997
- -----------------------------------------
C. Shelton James
/s/ Richard P. Rifenburgh Director June 6, 1997
- -----------------------------------------
Richard P. Rifenburgh
/s/ Michael F. Maguire Director June 6, 1997
- -----------------------------------------
Michael F. Maguire
/s/ Leland R. Reiswig Director June 6, 1997
- -----------------------------------------
Leland R. Reiswig, Jr.
/s/ David R. Proctor Director June 6, 1997
- -----------------------------------------
David R. Proctor
</TABLE>
<PAGE> 23
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.
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.
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.
4.06 Non-Statutory Stock Option Agreement dated as of February 4, 1996 between the Company and Brian
Foremny.
4.07 Non-Statutory Stock Option Agreement dated as of March 5, 1996 between the Company and Robert L.
Carberry.
4.08 Non-Statutory Stock Option Agreement dated as of August 27, 1996 between the Company and Frank
Gelbart.
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.
4.11 Incentive Stock Option Agreement dated as of August 27, 1996 between the Company and Frank Gelbart.
4.12 Form of Non-Statutory Stock Option Agreement between the Company and non executive officers.
4.13 Form of Incentive Stock Option Agreement between the Company and non executive officers.
4.14 Form of Stock Option Agreement between the Company and non-employee directors.
4.15 Form of Restricted Stock Agreement between the Company and certain employees of the Company's subsidiary.
4.16 CyberGuard (f/k/a Harris Computer Systems) Corporation Stock Incentive Plan.****
4.17 Amendment No. 1 to Stock Incentive Plan.*****
</TABLE>
<PAGE> 24
<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 (to be filed by amendment).
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 (included in Exhibit 5).
24.01 Power of Attorney (included on signature page of this Registration Statement).
</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 Form10, 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.
<PAGE> 1
EXHIBIT 4.03
NON-STATUTORY STOCK OPTION AGREEMENT
HARRIS COMPUTER SYSTEMS CORPORATION
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the
______ day of _______________, 199__ between Harris Computer Systems Corporation
(the "Corporation"), a Florida corporation having its principal office in
_________________, Florida, and __________________________ (the "Employee"), of
the Corporation or one of its subsidiaries.
The Option. Under and subject to the provisions of the
Corporation's Stock Incentive Plan as in effect from time to time (the "Plan"),
the Corporation hereby grants to the Employee a Non-Statutory Stock Option (the
"Option") to purchase an aggregate of ___________ shares of Common Stock of the
Corporation at the price of $_______ per share, subject to the following
conditions:
The Option shall not be exercisable to any extent
until and unless the Employee shall have remained continuously in the
employ of the Corporation for one year from the date hereof. Nothing
herein shall limit or restrict the Corporation's rights to terminate
the Employee's employment.
During the lifetime of the Employee, the Option shall
be exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
Notwithstanding any other provision of this
Agreement, the Option shall expire no later than five years from the
date of this Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of two
years from the date hereof, not more than thirty-three
percent (33%);
(ii) After the end of two years and prior to the end of
three years from the date hereof, not more than
sixty-six percent (66%);
(iii) After the end of three years from the date hereof,
one-hundred percent (100%).
(e) Upon a Change of Control, any outstanding Option shall
immediately become exercisable.
Termination of Employment.
Death. In the event of the death of the Employee, the
Option shall be exercisable only within the twelve (12) months next
succeeding the date of death, and then only (i) by the executor or
administrator of the Employee's estate
<PAGE> 2
or by the person or persons to whom the Employee's rights under the
Option shall pass by the Employee's will or the laws of descent and
distribution, and (ii) if and to the extent that the Option was
exercisable at the date of the Employee's death.
Disability. In the event of disability of the
Employee, the Option shall be exercisable by the Employee only within
the twelve (12) months following such cessation of employment but no
later than the expiration date described in Section 1(c) and to the
extent that the Option was exercisable at the date of such cessation of
employment, and no more.
Retirement. In the event of retirement of the
Employee, the Option shall be exercisable by the Employee only
within thirty-six (36) months following such cessation of employment,
but no later than the expiration date described in Section 1(c) and to
the extent that the Option was exercisable at the date of such
cessation of employment, and no more.
Termination of Employment. In the event of
termination of employment for reasons other than death, disability or
retirement, the Option shall be exercisable only by the Employee within
three (3) months following such cessation of employment but no later
than the expiration date described in Section 1(c) and to the extent
that it was exercisable at the date of such cessation of employment,
and no more.
In the event of a conflict between the provisions of
this Agreement and any Employment Agreement defining the rights and
duties of Employee upon Employee's termination in respect of the
subject hereof, the rights and duties as set forth in any such
Employment Agreement shall control.
Exercise of Option. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
Prohibition Against Transfer. The Option and rights granted by
the Corporation under this Agreement are not transferable except by will or the
laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
<PAGE> 3
Adjustments. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
Employment by Parent, Subsidiary or Successor. For the purpose
of this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent" and
"subsidiary" as used herein shall have the meaning of "parent" and "subsidiary
corporation," respectively, as defined in Section 424 of the Internal Revenue
Code of 1986, as amended, or subsequent comparable statute.
Committee. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgement of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
Incorporation of Plan Provisions. This Agreement is made
pursuant to the Plan, the terms and conditions of which are hereby incorporated
by reference. Capitalized terms not otherwise defined herein have the meanings
set forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
HARRIS COMPUTER SYSTEMS CORPORATION
By
--------------------------------
Chairman, President and Chief
Executive Officer
-----------------------------------
Employee
<PAGE> 1
EXHIBIT 4.04
AMENDED AND RESTATED NON-STATUTORY STOCK OPTION AGREEMENT
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the
_____ day of ___________________, 199__, between __________________________ (the
"Corporation"), a Florida corporation having its principal office in Ft.
Lauderdale, Florida, and __________________________ (the "Employee"), of the
Corporation or one of its subsidiaries.
1. THE OPTION. Under and subject to the provisions of the Corporation's
Stock Incentive Plan as in effect from time to time (the "Plan"), on February 4,
1996 the Corporation granted to the Employee a Non-Statutory Stock Option (the
"Option"). On March 18, 1996, the Corporation's three-for-one stock split became
effective and this Amended and Restated Incentive Stock Option Agreement is
being entered into to reflect that the number of shares subject to the Option
has, as a result of the stock split, been multiplied by three and the per-share
exercise price of the Option has been divided by three. As a result of the stock
split, the Option granted February 4, 1996 is now an option to purchase an
aggregate of 20,460 shares of Common Stock of the Corporation at the price of
$5.50 per share. In all other respects, the Option shall remain the same, as
follows:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the date hereof. Nothing herein
shall limit or restrict the Corporation's rights to terminate the
Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the date of this
Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which the
Option may be exercised from time to time is limited to the following
percentages of the aggregate number of shares option hereby:
(i) After the end of one year and prior to the end of two
years from the date hereof, not more than
thirty-three percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the date hereof, not more than
sixty-six percent (66.666%);
(iii) After the end of three years from the date hereof,
one-hundred percent (100%).
(e) Upon a Change in Control, any outstanding Option shall
immediately become exercisable. Notwithstanding the foregoing, the sale
of the
<PAGE> 2
Corporation's real-time division to Concurrent Computer Corporation
shall not constitute a Change of Control.
2. TERMINATION OF EMPLOYMENT
(a) Death. In the event of the death of the Employee, the
Option shall be exercisable only within the twelve (12) months next
succeeding the date of death, but no later than the expiration date
described in Section 1(c), and then only (i) by the executor or
administrator of the Employee's estate or by the person or persons to
whom the Employee's rights under the Option shall pass by the
Employee's will or the laws of descent and distribution, and (ii) to
the extent that the Option was exercisable at the date of the
Employee's death or within twelve (12) months thereafter
(b) Disability. In the event of disability of the Employee,
the Option shall be exercisable by the Employee only within the twelve
(12) months following such cessation of employment but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment
or within twelve (12) months thereafter
(c) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six
(36) months following such cessation of employment, but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
(d) Termination of Employment. In the event of termination of
employment for reasons other than death, disability or retirement, the
Option shall be exercisable by the Employee in accordance with the
terms and conditions set forth in the written employment agreement
entered into between Employee and Corporation on or before the date
hereof and any amendment or replacement to such agreement ("Employment
Agreement
(e) Other Agreements. Unless otherwise explicitly provided
herein, in the event of a conflict between the provisions of this
Agreement and the Employment Agreement, this Agreement shall prevail.
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued
<PAGE> 3
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted by the
Corporation under this Agreement are not transferable except by will or the laws
of descent and distribution. Without limiting the generality of the foregoing,
the Option may not be assigned, transferred except as aforesaid, pledged or
hypothecated, shall not be assignable by operation of law, and shall not be
subject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary to
the provisions hereof, or the levy of any execution, attachment or similar
process upon the Option, shall be null and void and without effect
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the purpose of
this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent"
and"subsidiary" as used herein shall have the meaning of "parent" and
"subsidiary corporation," respectively, as defined in Section 424 of the
Internal Revenue Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made pursuant
to the Plan, the terms and conditions of which are hereby incorporated by
reference. Capitalized terms not otherwise defined herein have the meanings set
forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern
9. MISCELLANEOUS. Words such as "herein", "hereof" and "hereunder" when
used in this Agreement shall refer to this Agreement as a whole unless the
context otherwise requires. This Agreement, together with any written Employment
Agreement between Employee and Corporation, constitute the entire agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties hereto with respect to the subject matter hereof, and,
except as expressly provided herein and therein, are not intended to confer upon
any person other than the parties hereto any rights or remedies. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement may be amended or modified only in a written document
executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
-----------------------------------
By:
--------------------------------
--------------------------------
President
-----------------------------------
<PAGE> 1
EXHIBIT 4.05
AMENDED AND RESTATED INCENTIVE STOCK OPTION AGREEMENT
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the ___
day of ________, 199__, between ______________________ (the "Corporation"), a
Florida corporation having its principal office in Ft. Lauderdale, Florida, and
_______________(the "Employee"), of the Corporation or one of its subsidiaries.
1. THE OPTION. Under and subject to the provisions of the
Corporation's Stock Incentive Plan as in effect from time to time (the "Plan"),
on February 4, 1996 the Corporation granted to the Employee an Incentive Stock
Option (the "Option"), which complies with Section 422 of the Internal Revenue
Code ("Code"). On March 18, 1996, the Corporation's three-for-one stock split
became effective and this Amended and Restated Incentive Stock Option Agreement
is being entered into to reflect that the number of shares subject to the Option
has, as a result of the stock split, been multiplied by three and the per-share
exercise price of the Option has been divided by three. As a result of the stock
split, the Option granted February 4, 1996 is now an option to purchase an
aggregate of ____________ shares of Common Stock of the Corporation at the price
of __________ per share. In all other respects, the Option shall remain the
same, as follows:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the date hereof. Nothing herein
shall limit or restrict the Corporation's rights to terminate the
Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the date of this
Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of
two years from the date hereof, not more than
thirty-three percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the date hereof, not more than
sixty-six percent (66.666%);
(iii) After the end of three years from the date hereof,
one-hundred percent (100%).
<PAGE> 2
(e) Upon a Change in Control, any outstanding Option shall
immediately become exercisable. Notwithstanding the foregoing, (i)
individuals who constitute the Incumbent Board continue to constitute
in excess of three-fourths (3/4) of the Board as described in Section
2(b) of the Plan, and (ii) the Board Committee and the Board each
unanimously determine that it would be in the best interest of the
Corporation for an event that would constitute a Change in Control not
to accelerate the vesting of the exercisability of the Option, and
(iii) Employee's employment with the Corporation is not terminated by
the Corporation within one year after the Change in Control, and (iv)
within one year after the Change in Control Employee's principal work
location is not moved geographically by more than 75 miles (if Employee
is a sales representative whose principal work location is not the
Company's Fort Lauderdale headquarters, then the 75-mile limitation
contained this subsection 1(e)(iv) shall be 500 miles), then the Board
Committee, in its sole discretion, may take any one or more of the
following actions: (x) determine to retain the existing schedule of
exercisability of the Option as described in Section 1(d) hereof
("Vesting Schedule"); (y) modify the Vesting Schedule so that some, but
not all, of the Option's exercisability accelerates; and (z) change the
dates under the Vesting Schedule so that some or all of the Options
become exercisable on dates earlier than those set forth in the Vesting
Schedule. The sale of the Corporation's real-time division to
Concurrent Computer Corporation shall not constitute a Change in
Control.
2. TERMINATION OF EMPLOYMENT
(a) Death. In the event of the death of the Employee, the
Option shall be exercisable only within the twelve (12) months next
succeeding the date of death, and then only (i) by the executor or
administrator of the Employee's estate or by the person or persons to
whom the Employee's rights under the Option shall pass by the
Employee's will or the laws of descent and distribution, and (ii) if
and to the extent that the Option was exercisable at the date of the
Employee's death
(b) Disability. In the event of disability of the Employee,
the Option shall be exercisable by the Employee only within the twelve
(12) months following such cessation of employment but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
(c) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six
(36) months following such cessation of employment, but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
(d) Termination of Employment. In the event of termination of
employment for reasons other than death, disability or retirement, the
Option shall be exercisable only by the Employee within three (3)
months following such cessation of employment but no later than the
expiration date described in Section 1(c) and to the extent that it was
exercisable at the date of such cessation of employment, and no more.
<PAGE> 3
3. EXERCISE OF OPTION. The Option may be exercised by delivering to the
Corporation at the office of the Corporate Secretary (i) a written notice,
signed by the person entitled to exercise the Option, stating the number of
shares such person then elects to purchase hereunder, (ii) payment in an amount
equal to the full purchase price of the shares then to be purchased, and (iii)
in the event the Option is exercised by any person other than the Employee,
evidence satisfactory to the Corporation that such person has the right to
exercise the Option. Payment shall be made (a) in cash, (b) in previously
acquired shares of Common Stock of the Corporation, valued at their Fair Market
Value on the day preceding the exercise date of the Option, or (c) in any
combination of cash and such shares. Shares tendered in payment of the purchase
price which have been acquired through an exercise of a stock option shall have
been held at least six (6) months prior to exercise of the Option. Upon the due
exercise of the Option, the Corporation shall issue in the name of the person
exercising the Option, and deliver to the Employee, one or more certificates for
the shares in respect of which the Option shall have been so exercised. The
Employee acknowledges that the Employee does not have any rights as a
shareholder in respect of any shares as to which the Option shall not have been
duly exercised and that no rights as a shareholder shall arise in respect of any
such shares until and except to the extent that a certificate or certificates
for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted by the
Corporation under this Agreement are not transferable except by will or the laws
of descent and distribution. Without limiting the generality of the foregoing,
the Option may not be assigned, transferred except as aforesaid, pledged or
hypothecated, shall not be assignable by operation of law, and shall not be
subject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary to
the provisions hereof, or the levy of any execution, attachment or similar
process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the purpose of
this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent" and
"subsidiary" as used herein shall have the meaning of "parent" and "subsidiary
corporation," respectively, as defined in Section 424 of the Internal Revenue
Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any
<PAGE> 4
inconsistency in this Agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency.
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made pursuant to
the Plan, the terms and conditions of which are hereby incorporated by
reference. Capitalized terms not otherwise defined herein have the meanings set
forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern, except that to the
extent that Section 1(e) of this Agreement conflicts with the Plan, such Section
1(e) shall govern.
9. MISCELLANEOUS. Words such as "herein", "hereof" and "hereunder" when
used in this Agreement shall refer to this Agreement as a whole unless the
context otherwise requires. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both oral and written,
between the parties hereto with respect to the subject matter hereof, and,
except as expressly provided herein, is not intended to confer upon any person
other than the parties hereto any rights or remedies. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
This Agreement may be amended or modified only in a written document executed by
both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
EMPLOYEE CYBERGUARD CORPORATION
- -------------------------------- ----------------------------
<PAGE> 1
EXHIBIT 4.06
AMENDED AND RESTATED NON-STATUTORY STOCK OPTION AGREEMENT
CYBERGUARD CORPORATION
This Stock Option Agreement ("Agreement") is entered into as of the 4th day of
February, 1996, between CyberGuard Corporation (the "Corporation"), a Florida
corporation having its principal office in Ft. Lauderdale, Florida, and Brian
Foremny (the "Employee"), of the Corporation or one of its subsidiaries.
1. THE OPTION. On February 4, 1996 the Corporation granted to the
Employee a Non-Statutory Stock Option (the "Option"). On March 18, 1996, the
Corporation's three-for-one stock split became effective and this Amended and
Restated Non-Statutory Stock Option Agreement is being entered into to reflect
that the number of shares subject to the Option has, as a result of the stock
split, been multiplied by three and the per-share exercise price of the Option
has been divided by three. As a result of the stock split, the Option granted
February 4, 1996 is now an option to purchase an aggregate of 17,460 shares of
Common Stock of the Corporation at the price of $5.50 per share, subject to the
following terms and conditions:
(a) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(b) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the date of this
Agreement, and shall not be exercisable thereafter.
(c) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) From the date hereof and prior to the end of
one year from the date hereof, not more than
thirty-three percent (33.333%);
(ii) After the end of one year and prior to the
end of two years from the date hereof, not more
than sixty-six percent (66.666%);
(iii) After the end of two years from the date
hereof, one-hundred percent (100%).
(e) Upon a Change in Control, any outstanding Option
shall immediately become exercisable. Notwithstanding the foregoing,
the sale of the Corporation's real-time division to Concurrent Computer
Corporation shall not constitute a Change of Control.
(f) In the event of a conflict between the provisions
of this Agreement and any provisions of the written Employment
Agreement between Employee and Corporation ("Employment Agreement"),
the rights and duties as set forth in the Employment Agreement shall
control.
<PAGE> 2
2. TERMINATION OF EMPLOYMENT
(a) Death, Disability and Termination of Employment. The
rights of Employee upon Termination of employment for disability, for
cause and without cause, and the rights of Employee's estate upon his
death with respect to the Option are set forth in the Employment
Agreement.
(b) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six
(36) months following such cessation of employment, but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted
by the Corporation under this Agreement are not transferable except by will or
the laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
<PAGE> 3
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the purpose of
this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent" and
"subsidiary" as used herein shall have the meaning of "parent" and "subsidiary
corporation," respectively, as defined in Section 424 of the Internal Revenue
Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Corporation's Stock
Incentive Plan shall have authority, subject to the express provisions of this
Option Agreement, to construe this Agreement and to correct any defect or supply
any omission or reconcile any inconsistency between this Agreement and the
Employment Agreement.
8. MISCELLANEOUS. Words such as "herein", "hereof" and "hereunder" when
used in this Agreement shall refer to this Agreement as a whole unless the
context otherwise requires. This Agreement, together with any written Employment
Agreement between Employee and Corporation, constitute the entire agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties hereto with respect to the subject matter hereof, and,
except as expressly provided herein and therein, are not intended to confer upon
any person other than the parties hereto any rights or remedies. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement may be amended or modified only in a written document
executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION
By:
---------------------------------
Robert L. Carberry
President
-----------------------------------
FOREMNY
<PAGE> 1
EXHIBIT 4.07
NON-STATUTORY STOCK OPTION AGREEMENT
HARRIS COMPUTER SYSTEMS CORPORATION
This Stock Option Agreement ("Agreement") is entered into as of the 5th
day of March, 1996, between Harris Computer Systems Corporation (the
"Corporation"), a Florida corporation having its principal office in Ft.
Lauderdale, Florida, and Robert L. Carberry (the "Employee"), an executive of
the Corporation.
1. THE OPTION. The Corporation hereby grants to the Employee
a Non-Statutory Stock Option (the "Option") to purchase an aggregate of 311,000
shares of Common Stock of the Corporation at the price of $10.67 per share,
subject to the following conditions:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the date hereof.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than ten years from the date of this
Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of
two years from the date hereof, not more than
thirty-three percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the date hereof, not more than
sixty-six percent (66.666%);
(iii) After the end of three years from the date hereof,
one- hundred percent (100%).
(e) Upon a Change in Control, any outstanding Option shall
immediately become exercisable. Notwithstanding the foregoing, the
currently contemplated transaction with Concurrent Computer Corporation
(including any modifications to such transaction) shall not constitute
a Change of Control.
2. TERMINATION OF EMPLOYMENT
(a) Death, Disability and Termination of Employment. The rights of
Employee upon Termination of employment for disability, for cause and without
cause, and the rights of the executor or administrator of Employee's estate (or
the person or persons to whom Employee's rights under this Option pass by the
Employee's will or the laws of descent and distribution), with respect to the
Option are set forth in a written employment agreement entered into between
Employee and
<PAGE> 2
Corporation on or before the date hereof ("Employment Agreement")
(which term shall include any amendment or replacement to the Employment
Agreement).
(b) Retirement. In the event of retirement of the Employee, the Option
shall be exercisable by the Employee only within thirty-six (36) months
following such cessation of employment, but no later than the expiration date
described in Section 1(c) and to the extent that the Option was exercisable at
the date of such cessation of employment, and no more.
(c) Other Agreements. Unless otherwise explicitly provided herein, in
the event of a conflict between the provisions of this Agreement and
3. EXERCISE OF OPTION. The Option may be exercised by delivering to
the Corporation at the office of the Corporate Secretary (i) a written notice,
signed by the person entitled to exercise the Option, stating the number of
shares such person then elects to purchase hereunder, (ii) payment in an amount
equal to the full purchase price of the shares then to be purchased, and (iii)
in the event the Option is exercised by any person other than the Employee,
evidence satisfactory to the Corporation that such person has the right to
exercise the Option. Payment shall be made (a) in cash, (b) in previously
acquired shares of Common Stock of the Corporation, valued at their Fair Market
Value on the day preceding the exercise date of the Option, or (c) in any
combination of cash and such shares. Shares tendered in payment of the purchase
price which have been acquired through an exercise of a stock option shall have
been held at least six (6) months prior to exercise of the Option. Upon the due
exercise of the Option, the Corporation shall issue in the name of the person
exercising the Option, and deliver to the Employee, one or more certificates
for the shares in respect of which the Option shall have been so exercised. The
Employee acknowledges that the Employee does not have any rights as a
shareholder in respect of any shares as to which the Option shall not have been
duly exercised and that no rights as a shareholder shall arise in respect of
any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted by the
Corporation under this Agreement are not transferable except by will or the laws
of descent and distribution. Without limiting the generality of the foregoing,
the Option may not be assigned, transferred except as aforesaid, pledged or
hypothecated, shall not be assignable by operation of law, and shall not be
subject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary to
the provisions hereof, or the levy of any execution, attachment or similar
process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the purpose of
this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent" and
"subsidiary" as used herein shall have the
<PAGE> 3
meaning of "parent" and "subsidiary corporation," respectively, as defined in
Section 424 of the Internal Revenue Code of 1986, as amended, or subsequent
comparable statute.
7. COMMITTEE. The Committee administering the Corporation's Stock
Incentive Plan shall have authority, subject to the express provisions of this
Option Agreement, to construe this Agreement and to correct any defect or supply
any omission or reconcile any inconsistency between this Agreement and the
Employment Agreement ("Employment Agreement") between the Corporation and
Employee dated March 5, 1996.
8. MISCELLANEOUS. Words such as "herein", "hereof" and "hereunder" when
used in this Agreement shall refer to this Agreement as a whole unless the
context otherwise requires. This Agreement, together with the Employment
Agreement between Employee and Corporation, constitute the entire agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties hereto with respect to the subject matter hereof, and,
except as expressly provided herein and therein, are not intended to confer upon
any person other than the parties hereto any rights or remedies. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement may be amended or modified only in a written document
executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
HARRIS COMPUTER SYSTEMS CORPORATION
By:
---------------------------------
C. Shelton James
Chairman, Compensation Committee
-----------------------------------
ROBERT L. CARBERRY
<PAGE> 1
EXHIBIT 4.08
NON-STATUTORY STOCK OPTION AGREEMENT
CYBERGUARD CORPORATION
This Stock Option Agreement ("Agreement") is entered into as of the 27th day of
August, 1996, between CyberGuard Corporation (the "Corporation"), a Florida
corporation having its principal office in Ft. Lauderdale, Florida, and Frank
Gelbart (the "Employee"), of the Corporation or one of its subsidiaries.
1. THE OPTION. The Corporation hereby grants to the Employee a
Non-Statutory Stock Option to purchase an aggregate of 72,100 shares of common
stock of the Corporation at the price of $10.75 per share (the "Option"),
subject to the following terms and conditions:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the first date of Employee's
employment which was June 17, 1996 ("Anniversary Date"). Nothing herein
shall limit or restrict the Corporation's rights to terminate the
Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the Anniversary Date,
and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of
two years from the Anniversary Date, not more than
thirty-three and one-third percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the Anniversary Date, not more
than sixty-six and one-sixth percent (66.666%);
(iii) After the end of three years from the Anniversary
Date, one-hundred percent (100%).
(e) Upon a Change in Control, any outstanding Option
shall immediately become exercisable.
<PAGE> 2
2. TERMINATION OF EMPLOYMENT
(a) Death, Disability and Termination of Employment. The
rights of Employee upon Termination of employment for disability, for cause and
without cause, and the rights of the executor or administrator of Employee's
estate (or the person or persons to whom Employee's rights under this Option
pass by the Employee's will or the laws of descent and distribution), with
respect to the Option are set forth in a written employment agreement entered
into between Employee and Corporation on or before the date hereof ("Employment
Agreement") (which term shall include any amendment or replacement to the
Employment Agreement).
(b) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six (36)
months following such cessation of employment, but no later than the expiration
date described in Section 1(c) and to the extent that the Option was exercisable
at the date of such cessation of employment, and no more.
(c) Other Agreements. Unless otherwise explicitly provided
herein, in the event of a conflict between the provisions of this Agreement and
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted
by the Corporation under this Agreement are not transferable except by will or
the laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price
<PAGE> 3
per share of any outstanding Options shall, in the case of an increase in the
number of shares, be proportionately reduced, and in the case of a decrease in
the number of shares, shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the
purpose of this Agreement, employment by a parent or subsidiary of or a
successor to the Corporation shall be considered employment by the Corporation.
"Parent" and "subsidiary" as used herein shall have the meaning of "parent" and
"subsidiary corporation," respectively, as defined in Section 424 of the
Internal Revenue Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Corporation's
Stock Incentive Plan shall have authority, subject to the express provisions of
this Option Agreement, to construe this Agreement and to correct any defect or
supply any omission or reconcile any inconsistency between this Agreement and
the Employment Agreement.
8. MISCELLANEOUS. Words such as "herein", "hereof" and
"hereunder" when used in this Agreement shall refer to this Agreement as a whole
unless the context otherwise requires. This Agreement, together with the
Employment Agreement, constitute the entire agreement and supersede all prior
agreements and understandings, both oral and written, between the parties hereto
with respect to the subject matter hereof, and, except as expressly provided
herein and therein, are not intended to confer upon any person other than the
parties hereto any rights or remedies. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida. This Agreement
may be amended or modified only in a written document executed by both of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION EMPLOYEE
By:
---------------------------- -------------------------------
Robert L. Carberry FRANK GELBART
President
<PAGE> 1
EXHIBIT 4.09
AMENDED AND RESTATED INCENTIVE STOCK OPTION AGREEMENT
CYBERGUARD CORPORATION
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the 4th
day of February, 1996, between CYBERGUARD CORPORATION (the "Corporation"), a
Florida corporation having its principal office in Ft. Lauderdale, Florida, and
Brian Foremny (the "Employee"), of the Corporation or one of its subsidiaries.
1. THE OPTION. Under and subject to the provisions of the
Corporation's Stock Incentive Plan as in effect from time to time (the "Plan"),
on February 4, 1996 the Corporation granted to the Employee an Incentive Stock
Option (the "Option"), which complies with Section 422 of the Internal Revenue
Code ("Code"). On March 18, 1996, the Corporation's three-for-one stock split
became effective and this Amended and Restated Incentive Stock Option Agreement
is being entered into to reflect that the number of shares subject to the Option
has, as a result of the stock split, been multiplied by three and the per-share
exercise price of the Option has been divided by three. As a result of the stock
split, the Option granted February 4, 1996 is now an option to purchase an
aggregate of 54,540 shares of Common Stock of the Corporation at the price of
$5.50 per share. In all other respects, the Option shall remain the same, as
follows:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the date hereof. Nothing herein
shall limit or restrict the Corporation's rights to terminate the
Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the date of this
Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of
two years from the date hereof, not more than
thirty-three percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the date hereof, not more than
sixty-six percent (66.666%);
(iii) After the end of three years from
the date hereof, one-hundred
percent (100%).
<PAGE> 2
(e) Upon a Change in Control, any outstanding Option
shall Notwithstanding the foregoing, the sale of the Corporation's
real-time division to Concurrent Computer Corporation shall not
constitute a Change in Control.
2. TERMINATION OF EMPLOYMENT
(a) Death, Disability and Termination of Employment. The
rights of Employee upon Termination of employment for disability, for
cause and without cause, and the rights of Employee's estate upon his
death with respect to the Option are set forth in the Employment
Agreement.
(b) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six
(36) months following such cessation of employment, but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
(c) Other Agreements. In the event of a conflict between the
provisions of this Agreement and any provision of a written Employment
Agreement defining the rights and duties of Employee upon Employee's
termination in respect of the subject hereof ("Conflicting Provision"),
the rights and duties as set forth in any such Conflicting Provision
shall control; provided, however, that no Conflicting Provision shall
control this Agreement if the effect thereof would be to nullify the
compliance of the Option with Section 422 of the Code.
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted
by the Corporation under this Agreement are not transferable except by will or
the laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge,
<PAGE> 3
hypothecation or other disposition of the Option contrary to the provisions
hereof, or the levy of any execution, attachment or similar process upon the
Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the purpose of
this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent" and
"subsidiary" as used herein shall have the meaning of "parent" and "subsidiary
corporation," respectively, as defined in Section 424 of the Internal Revenue
Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made pursuant to
the Plan, the terms and conditions of which are hereby incorporated by
reference. Capitalized terms not otherwise defined herein have the meanings set
forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern, except that to the
extent that Section 1(e) of this Agreement conflicts with the Plan, such Section
1(e) shall govern.
9. MISCELLANEOUS. Words such as "herein", "hereof" and "hereunder" when
used in this Agreement shall refer to this Agreement as a whole unless the
context otherwise requires. This Agreement, together with any written Employment
Agreement between Employee and Corporation, constitute the entire agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties hereto with respect to the subject matter hereof, and,
except as expressly provided herein and therein, are not intended to confer upon
any person other than the parties hereto any rights or remedies. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement may be amended or modified only in a written document
executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION EMPLOYEE
By:
----------------------------- ---------------------------
Robert L. Carberry Brian Foremny
Chairman, President and Chief
Executive Officer
<PAGE> 1
EXHIBIT 4.10
INCENTIVE STOCK OPTION AGREEMENT
CYBERGUARD CORPORATION
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the
23rd day of July, 1996, between CYBERGUARD CORPORATION (the "Corporation"), a
Florida corporation having its principal office in Ft. Lauderdale, Florida, and
Robert L. Carberry (the "Employee"), President of the Corporation.
1. THE OPTION. Under and subject to the provisions of the
Corporation's Stock Incentive Plan as in effect from time to time (the "Plan"),
1996 the Corporation hereby grants to the Employee an Incentive Stock Option
(the "Option"), which complies with Section 422 of the Internal Revenue Code
("Code") to purchase an aggregate of 28,000 shares of Common Stock of the
Corporation at the price of $10.67 per share, subject to the following
conditions:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the first date of Employee's
employment, which was March 5, 1996 ("Anniversary Date"). Nothing
herein shall limit or restrict the Corporation's rights to terminate
the Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than ten (10) years from the Anniversary
Date, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of
two years from the Anniversary Date, not more than
thirty-three percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the Anniversary Date, not more
than sixty-six percent (66.666%);
(iii) After the end of three years from the Anniversary
Date, one-hundred percent (100%).
(e) Upon a Change in Control, any outstanding Option
shall immediately become exercisable.
2. TERMINATION OF EMPLOYMENT
<PAGE> 2
(a) Death, Disability and Termination of Employment. The
rights of Employee upon Termination of employment for disability, for
cause and without cause, and the rights of the executor or
administrator of Employee's estate (or the person or persons to whom
Employee's rights under this Option pass by the Employee's will or the
laws of descent and distribution), with respect to the Option are set
forth in a written employment agreement entered into between Employee
and Corporation on or before the date hereof ("Employment Agreement")
(which term shall include any amendment or replacement to the
Employment Agreement).
(b) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six
(36) months following such cessation of employment, but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
(c) Other Agreements. Unless otherwise explicitly provided
herein, in the event of a conflict between the provisions of this
Agreement and
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted
by the Corporation under this Agreement are not transferable except by will or
the laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion
<PAGE> 3
to the increase or decrease in the number of shares of Common Stock by reason of
such change in corporate structure. The number of shares shall always be a whole
number, and the purchase price per share of any outstanding Options shall, in
the case of an increase in the number of shares, be proportionately reduced, and
in the case of a decrease in the number of shares, shall be proportionately
increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the
purpose of this Agreement, employment by a parent or subsidiary of or a
successor to the Corporation shall be considered employment by the Corporation.
"Parent" and "subsidiary" as used herein shall have the meaning of "parent" and
"subsidiary corporation," respectively, as defined in Section 424 of the
Internal Revenue Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made
pursuant to the Plan, the terms and conditions of which are hereby incorporated
by reference. Capitalized terms not otherwise defined herein have the meanings
set forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern, except that to the
extent that Section 1(e) of this Agreement conflicts with the Plan, such Section
1(e) shall govern.
9. MISCELLANEOUS. Words such as "herein", "hereof" and
"hereunder" when used in this Agreement shall refer to this Agreement as a whole
unless the context otherwise requires. This Agreement, together with any written
Employment Agreement between Employee and Corporation, constitute the entire
agreement and supersede all prior agreements and understandings, both oral and
written, between the parties hereto with respect to the subject matter hereof,
and, except as expressly provided herein and therein, are not intended to confer
upon any person other than the parties hereto any rights or remedies. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida. This Agreement may be amended or modified only in a written
document executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION EMPLOYEE
By:
-------------------------- ---------------------------
C. Shelton James Robert L. Carberry
Chairman, Stock Option and
Compensation Committee
<PAGE> 1
EXHIBIT 4.11
INCENTIVE STOCK OPTION AGREEMENT
CYBERGUARD CORPORATION
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the
27th day of August, 1996, between CYBERGUARD CORPORATION (the "Corporation"), a
Florida corporation having its principal office in Ft. Lauderdale, Florida, and
Frank Gelbart (the "Employee"), of the Corporation or one of its subsidiaries.
1. THE OPTION. Under and subject to the provisions of the
Corporation's Stock Incentive Plan as in effect from time to time (the "Plan"),
on August 27, 1996 the Corporation granted to the Employee an Incentive Stock
Option for 100,000 shares of Common Stock of the Corporation at $10.75 per share
(the "Option"), which complies with Section 422 of the Internal Revenue Code
("Code"). The Option terms shall be as follows:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the date hereof. Nothing herein
shall limit or restrict the Corporation's rights to terminate the
Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the date of this
Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) On June 1, 1997, not more than thirty-three percent
(33.333%);
(ii) On June 1, 1998, not more than sixty-six percent
(66.666%); and
(iii) One June 1, 1999, one hundred percent (100%).
(e) Upon a Change in Control, any outstanding Option
shall immediately become exercisable.
2. TERMINATION OF EMPLOYMENT
(a) Death, Disability and Termination of Employment. The
rights of Employee upon Termination of employment for disability, for
cause and without
<PAGE> 2
cause, and the rights of Employee's estate upon his death with respect
to the Option are set forth in the Employment Agreement.
(b) Retirement. In the event of retirement of the Employee,
the Option shall be exercisable by the Employee only within thirty-six
(36) months following such cessation of employment, but no later than
the expiration date described in Section 1(c) and to the extent that
the Option was exercisable at the date of such cessation of employment,
and no more.
(c) Other Agreements. In the event of a conflict between the
provisions of this Agreement and any provision of a written Employment
Agreement defining the rights and duties of Employee upon Employee's
termination in respect of the subject hereof ("Conflicting Provision"),
the rights and duties as set forth in any such Conflicting Provision
shall control; provided, however, that no Conflicting Provision shall
control this Agreement if the effect thereof would be to nullify the
compliance of the Option with Section 422 of the Code.
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. Payment shall be made (a) in cash, (b) in
previously acquired shares of Common Stock of the Corporation, valued at their
Fair Market Value on the day preceding the exercise date of the Option, or (c)
in any combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Employee, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Employee acknowledges that the Employee does not have any rights
as a shareholder in respect of any shares as to which the Option shall not have
been duly exercised and that no rights as a shareholder shall arise in respect
of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted
by the Corporation under this Agreement are not transferable except by will or
the laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price
<PAGE> 3
per share of any outstanding Options shall, in the case of an increase in the
number of shares, be proportionately reduced, and in the case of a decrease in
the number of shares, shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the
purpose of this Agreement, employment by a parent or subsidiary of or a
successor to the Corporation shall be considered employment by the Corporation.
"Parent" and "subsidiary" as used herein shall have the meaning of "parent" and
"subsidiary corporation," respectively, as defined in Section 424 of the
Internal Revenue Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made
pursuant to the Plan, the terms and conditions of which are hereby incorporated
by reference. Capitalized terms not otherwise defined herein have the meanings
set forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern, except that to the
extent that Section 1(e) of this Agreement conflicts with the Plan, such Section
1(e) shall govern.
9. MISCELLANEOUS. Words such as "herein", "hereof" and
"hereunder" when used in this Agreement shall refer to this Agreement as a whole
unless the context otherwise requires. This Agreement, together with any written
Employment Agreement between Employee and Corporation, constitute the entire
agreement and supersede all prior agreements and understandings, both oral and
written, between the parties hereto with respect to the subject matter hereof,
and, except as expressly provided herein and therein, are not intended to confer
upon any person other than the parties hereto any rights or remedies. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Florida. This Agreement may be amended or modified only in a written
document executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION EMPLOYEE
By:
----------------------------- ---------------------------
Robert L. Carberry Frank Gelbart
Chairman, President and Chief
Executive Officer
<PAGE> 1
EXHIBIT 4.12
NON-STATUTORY STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is entered into as of the ___
day of _______, 1997, between CyberGuard Corporation (the "Corporation"), a
Florida corporation having its principal office in Ft. Lauderdale, Florida, and
________________ (the "Employee") of the Corporation or one of its subsidiaries.
I. THE OPTION. The Corporation hereby grants to Employee a
non-statutory option to purchase an aggregate of ____________ shares of Common
Stock of the Corporation at the price of _____________________ per share (the
"Option"), subject to the following conditions:
A. The Option shall not be exercisable to any extent
until and unless the Employee shall have remained continuously in the
employ of the Corporation for one year from the date of hire. Nothing
herein shall limit or restrict the Corporation's rights to terminate
the Employee's employment.
B. During the lifetime of the Employee, the Option
shall be exercisable only by the Employee, and (except when Section 2
is applicable) only while the Employee continues as an employee of the
Corporation.
C. Notwithstanding any other provision of this
Agreement, the Option shall expire no later than five years from the
Employee's date of hire, and shall not be exercisable thereafter.
D. The number of shares of Common Stock with respect
to which the Option may be exercised from time to time is limited to
the following percentages of the aggregate number of shares optioned
hereby:
1. After the end of one year and prior to
the end of two years from the date of hire, not more than
thirty-three percent (33.333%);
2. After the end of two years and prior to
the end of three years from the date of hire, not more than
sixty-six percent (66.666%);
3. After the end of three years from the
date of hire, one-hundred percent (100%).
II. TERMINATION OF EMPLOYMENT
A. Death. In the event of the death of the Employee,
the Option shall be exercisable only within the twelve (12) months next
succeeding the date of death, and then only (i) by the executor or
administrator of the Employee's estate or by the person or persons to
whom the Employee's rights under the Option shall pass by the
Employee's will or the laws of descent and distribution, and (ii) if
and to the extent that the Option was exercisable at the date of the
Employee's death
B. Disability. In the event of termination of
Employee's employment due to disability of the Employee, the Option
shall be exercisable by the Employee only within the twelve (12) months
following such cessation of employment but no later than the expiration
date described in Section 1(c) and to the extent that the Option was
exercisable at the date of such cessation of employment, and no more.
<PAGE> 2
C. Retirement. In the event of retirement of the
Employee, the Option shall be exercisable by the Employee only within
twelve (12) months following such cessation of employment, but no later
than the expiration date described in Section 1(c) and to the extent
that the Option was exercisable at the date of such cessation of
employment, and no more.
D. Termination of Employment. In the event of
termination of employment for reasons other than death, disability or
retirement, the Option shall be exercisable only by the Employee within
three (3) months following such cessation of employment but no later
than the expiration date described in Section 1(c) and to the extent
that it was exercisable at the date of such cessation of employment,
and no more.
III. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to the Corporation that such person has the
right to exercise the Option. If it is required (in the estimation of the
Corporation), the Corporation also may require the payment of any withholding or
other applicable taxes at the time of exercise of the Option. Payment shall be
made (a) in cash, (b) in previously acquired shares of Common Stock of the
Corporation, valued at their Fair Market Value on the day preceding the exercise
date of the Option, or (c) in any combination of cash and such shares. Shares
tendered in payment of the purchase price which have been acquired through an
exercise of a stock option shall have been held at least six (6) months prior to
exercise of the Option. Upon the due exercise of the Option, the Corporation
shall issue in the name of the person exercising the Option, and deliver to the
Employee, one or more certificates for the shares in respect of which the Option
shall have been so exercised. The Employee acknowledges that the Employee does
not have any rights as a shareholder in respect of any shares as to which the
Option shall not have been duly exercised and that no rights as a shareholder
shall arise in respect of any such shares until and except to the extent that a
certificate or certificates for such shares shall have been issued.
IV. PROHIBITION AGAINST TRANSFER. The Option and rights granted
by the Corporation under this Agreement are not transferable except by will or
the laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect
V. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
<PAGE> 3
VI. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the
purpose of this Agreement, employment by a parent or subsidiary of or a
successor to the Corporation shall be considered employment by the Corporation.
"Parent" and "subsidiary" as used herein shall have the meaning of "parent" and
"subsidiary corporation," respectively, as defined in Section 424 of the
Internal Revenue Code of 1986, as amended, or subsequent comparable statute.
VII. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties with respect to the Option. Without
limiting the generality of the foregoing, this Option is not issued pursuant to
any stock option plan or other plan of the Corporation.
VIII. MISCELLANEOUS. Words such as "herein", "hereof" and
"hereunder" when used in this Agreement shall refer to this Agreement as a whole
unless the context otherwise requires. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties hereto with respect to the subject matter hereof,
and, except as expressly provided herein, is not intended to confer upon any
person other than the parties hereto any rights or remedies. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement may be amended or modified only in a written document
executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION EMPLOYEE
By:
------------------------- ---------------------------
<PAGE> 1
EXHIBIT 4.13
INCENTIVE STOCK OPTION AGREEMENT
CYBERGUARD CORPORATION
STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the
____ day of ______, 1997, between CYBERGUARD CORPORATION (the "Corporation"), a
Florida corporation having its principal office in Ft. Lauderdale, Florida,
and______________ (the "Employee"), of the Corporation or one of its
subsidiaries.
1. THE OPTION. Under and subject to the provisions of the
Corporation's Stock Incentive Plan as in effect from time to time (the "Plan"),
the Corporation hereby grants to the Employee an Incentive Stock Option (the
"Option"), that is intended to comply with Section 422 of the Internal Revenue
Code ("Code") to purchase an aggregate of ______ shares of Common Stock of the
Corporation at the price of $________ per share, subject to the following
conditions:
(a) The Option shall not be exercisable to any extent until
and unless the Employee shall have remained continuously in the employ
of the Corporation for one year from the date hereof. Nothing herein
shall limit or restrict the Corporation's rights to terminate the
Employee's employment.
(b) During the lifetime of the Employee, the Option shall be
exercisable only by the Employee, and (except when Section 2 is
applicable) only while the Employee continues as an employee of the
Corporation.
(c) Notwithstanding any other provision of this Agreement, the
Option shall expire no later than five years from the date of this
Agreement, and shall not be exercisable thereafter.
(d) The number of shares of Common Stock with respect to which
the Option may be exercised from time to time is limited to the
following percentages of the aggregate number of shares optioned
hereby:
(i) After the end of one year and prior to the end of
two years from the date hereof, not more
than thirty-three percent (33.333%);
(ii) After the end of two years and prior to the end of
three years from the date hereof, not more
than sixty-six percent (66.666%);
(iii) After the end of three years from the date hereof,
one-hundred percent (100%).
(e) For the purposes of this Agreement, the definition of the
term "Change in Control" contained in Section 2 (c) of the Plan
shall be amended by deleting the percentage "80%" contained in such
Section 2 (c) and substituting in its place the percentage "30%". Upon
a Change in Control, any outstanding Option shall immediately become
exercisable. Notwithstanding the foregoing, if (i) individuals who
constitute the Incumbent Board continue to constitute in excess of
<PAGE> 2
forty percent (40%) of the Board, and (ii) the Board Committee and the
Board each unanimously determine that it would be in the best interest
of the Corporation for an event that would constitute a Change in
Control not to accelerate the vesting of the exercisability of the
Option, and (iii) Employee's employment with the Corporation is not
terminated by the Corporation within one year after the Change in
Control, and (iv) within one year after the Change in Control
Employee's principal work location is not moved geographically by more
than 75 miles (if Employee is a sales representative whose principal
work location is not the Company's Fort Lauderdale headquarters, then
the 75-mile limitation contained this subsection 1(e)(iv) shall be 500
miles), then the Board Committee, in its sole discretion, may take any
one or more of the following actions: (x) determine to retain the
existing schedule of exercisability of the Option as described in
Section 1(d) hereof ("Vesting Schedule"); (y) modify the Vesting
Schedule so that some, but not all, of the Option's exercisability
accelerates; and (z) change the dates under the Vesting Schedule so
that some or all of the Options become exercisable on dates earlier
than those set forth in the Vesting Schedule.
2. TERMINATION OF EMPLOYMENT
(a) Death. In the event of the death of the Employee, the
Option shall be exercisable only within the twelve (12) months next
succeeding the date of death, and then only (i) by the executor or
administrator of the Employee's estate or by the person or persons to
whom the Employee's rights under the Option shall pass by the
Employee's will or the laws of descent and distribution, and (ii) if
and to the extent that the Option was exercisable at the date of the
Employee's death.
(b) Disability. In the event of disability of the
Employee, the Option shall be exercisable by the Employee only within
the twelve (12) months following such cessation of employment but no
later than the expiration date described in Section 1(c) and to the
extent that the Option was exercisable at the date of such cessation of
employment, and no more.
(c) Retirement. In the event of retirement of the
Employee, the Option shall be exercisable by the Employee only within
thirty-six (36) months following such cessation of employment, but no
later than the expiration date described in Section 1(c) and to the
extent that the Option was exercisable at the date of such cessation of
employment, and no more.
(d) Termination of Employment. In the event of
termination of employment for reasons other than death, disability or
retirement, the Option shall be exercisable only by the Employee within
three (3) months following such cessation of employment but no later
than the expiration date described in Section 1(c) and to the extent
that it was exercisable at the date of such cessation of employment,
and no more.
3. EXERCISE OF OPTION. The Option may be exercised by delivering
to the Corporation at the office of the Corporate Secretary (i) a written
notice, signed by the person entitled to exercise the Option, stating the number
of shares such person then elects to purchase hereunder, (ii) payment in an
amount equal to the full purchase price of the shares then to be purchased, and
(iii) in the event the Option is exercised by any person other than the
Employee, evidence satisfactory to
<PAGE> 3
the Corporation that such person has the right to exercise the Option. Payment
shall be made (a) in cash, (b) in previously acquired shares of Common Stock of
the Corporation, valued at their Fair Market Value on the day preceding the
exercise date of the Option, or (c) in any combination of cash and such shares.
Shares tendered in payment of the purchase price which have been acquired
through an exercise of a stock option shall have been held at least six (6)
months prior to exercise of the Option. Upon the due exercise of the Option, the
Corporation shall issue in the name of the person exercising the Option, and
deliver to the Employee, one or more certificates for the shares in respect of
which the Option shall have been so exercised. The Employee acknowledges that
the Employee does not have any rights as a shareholder in respect of any shares
as to which the Option shall not have been duly exercised and that no rights as
a shareholder shall arise in respect of any such shares until and except to the
extent that a certificate or certificates for such shares shall have been
issued.
4. PROHIBITION AGAINST TRANSFER. The Option and rights granted by
the Corporation under this Agreement are not transferable except by will or the
laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
6. EMPLOYMENT BY PARENT, SUBSIDIARY OR SUCCESSOR. For the purpose
of this Agreement, employment by a parent or subsidiary of or a successor to the
Corporation shall be considered employment by the Corporation. "Parent" and
"subsidiary" as used herein shall have the meaning of "parent" and "subsidiary
corporation," respectively, as defined in Section 424 of the Internal Revenue
Code of 1986, as amended, or subsequent comparable statute.
7. COMMITTEE. The Committee administering the Plan shall have
authority, subject to the express provisions of the Plan as in effect from time
to time, to construe this Agreement and the Plan, to establish, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations in the judgment of the Committee necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in this Agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and it shall
be the sole and final judge of such expediency.
8. INCORPORATION OF PLAN PROVISIONS. This Agreement is made
pursuant to the Plan, the terms and conditions of which are hereby incorporated
by reference. Capitalized terms not otherwise defined herein have the meanings
set forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of this Agreement shall govern.
<PAGE> 4
9. MISCELLANEOUS. Words such as "herein", "hereof" and
"hereunder" when used in this Agreement shall refer to this Agreement as a whole
unless the context otherwise requires. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties hereto with respect to the subject matter hereof,
and, except as expressly provided herein, is not intended to confer upon any
person other than the parties hereto any rights or remedies. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida. This Agreement may be amended or modified only in a written document
executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION EMPLOYEE
By:
------------------------ ----------------------------
<PAGE> 1
EXHIBIT 4.14
DIRECTORS NON-STATUTORY STOCK OPTION AGREEMENT
UNDER THE
CYBERGUARD CORPORATION STOCK INCENTIVE PLAN
This Stock Option Agreement ("Agreement") is entered into as of the ___
day of _______, between CyberGuard Corporation (the "Corporation"), a Florida
corporation having its principal office in Ft. Lauderdale, Florida, and
____________, (the "Director"), a director of the Corporation.
1. THE OPTION. Under and subject to the provisions of the Corporation's
Stock Incentive Plan as in effect on the date hereof (the "Plan"), the
Corporation hereby grants to the Director a Non-Statutory Stock Option
("Option"), to acquire _______ shares of the Corporation's Common Stock at the
price of $_______per share, that was the fair market value of the Common Stock
on the date of grant, as follows:
(a) The Option shall be exercisable immediately and shall
remain exercisable for ten years from the date hereof, except in
the event of the Director's death, in which case it shall remain
exercisable as described in the Plan.
(b) During the lifetime of the Director, the Option shall be
exercisable only by the Director; after the Director's death, the
Option shall be exercisable as described in the Plan.
(c) Notwithstanding any other provision of this Agreement,
the Option shall expire no later than ten years from the date of
this Agreement, and shall not be exercisable thereafter.
(d) Upon a Change in Control, any outstanding Option shall
immediately become exercisable.
2. EXERCISE OF OPTION. The Option may be exercised by delivering to the
Corporation at the office of the Corporate Secretary (i) a written notice,
signed by the person entitled to exercise the Option, stating the number of
shares such person then elects to purchase hereunder, (ii) payment in an amount
equal to the full purchase price of the shares then to be purchased, and (iii)
in the event the Option is exercised by any person other than the Director,
evidence satisfactory to the Corporation that such person has the right to
exercise the Option. Payment shall be made (a) in cash, (b) in previously
acquired shares of Common Stock of the Corporation, valued at their Fair Market
Value on the day preceding the exercise date of the Option, or (c) in any
combination of cash and such shares. Shares tendered in payment of the
purchase price which have been acquired through an exercise of a stock option
shall have been held at least six (6) months prior to exercise of the Option.
Upon the due exercise of the Option, the Corporation shall issue in the name of
the person exercising the Option, and deliver to the Director, one or more
certificates for the shares in respect of which the Option shall have been so
exercised. The Director acknowledges that the Director does not have any
rights as a shareholder in respect of any shares as to which the Option shall
not have been duly exercised and that no rights as a shareholder shall arise in
respect of any such shares until and except to the extent that a certificate or
certificates for such shares shall have been issued.
3. PROHIBITION AGAINST TRANSFER. The Option and rights granted by the
Corporation under this Agreement are not transferable except by will or the
laws of descent and distribution. Without limiting the generality of the
foregoing, the Option may not be assigned, transferred except as aforesaid,
pledged or hypothecated, shall not be assignable by operation of law, and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge,
<PAGE> 2
hypothecation or other disposition of the Option contrary to the provisions
hereof, or the levy of any execution, attachment or similar process upon the
Option, shall be null and void and without effect.
4. ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, the number of shares
subject to outstanding Options shall be increased or decreased in direct
proportion to the increase or decrease in the number of shares of Common Stock
by reason of such change in corporate structure. The number of shares shall
always be a whole number, and the purchase price per share of any outstanding
Options shall, in the case of an increase in the number of shares, be
proportionately reduced, and in the case of a decrease in the number of shares,
shall be proportionately increased.
5. COMMITTEE. The Committee administering the Plan shall have authority,
subject to the express provisions of the Plan as in effect from time to time,
to construe this Agreement and the Plan, to establish, amend and rescind rules
and regulations relating to the Plan, and to make all other determinations in
the judgment of the Committee necessary or desirable for the administration of
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Agreement in the manner and to the extent
it shall deem expedient to carry the Plan into effect, and it shall be the sole
and final judge of such expediency.
6. INCORPORATION OF PLAN PROVISIONS. This Agreement is made pursuant to
the Plan, the terms and conditions of which are hereby incorporated by
reference. Capitalized terms not otherwise defined herein have the meanings
set forth in the Plan. In the event of a conflict between the terms of this
Agreement and the Plan, the terms of the Plan shall govern.
7. MISCELLANEOUS. Words such as "herein", "hereof" and "hereunder" when
used in this Agreement shall refer to this Agreement as a whole unless the
context otherwise requires. This Agreement, together with any written
Employment Agreement between Employee and Corporation, constitute the entire
agreement and supersede all prior agreements and understandings, both oral and
written, between the parties hereto with respect to the subject matter hereof,
and, except as expressly provided herein and therein, are not intended to
confer upon any person other than the parties hereto any rights or remedies.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Florida. This Agreement may be amended or modified only in a
written document executed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Agreement in duplicate as of the day and year first above written.
CYBERGUARD CORPORATION
By:
------------------------------------
EMPLOYEE
<PAGE> 1
EXHIBIT 4.15
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT, dated as of ___________, 1997 ("Agreement"), between
CyberGuard Corporation, a Florida corporation (the "Company"), and __________
(the "Employee").
WITNESSETH:
WHEREAS, the Company has granted to the Employee pursuant to the
CyberGuard Corporation Stock Incentive Plan, as amended (the "Plan"), shares of
the common stock (par value $.01) of the Company ("Common Stock"), subject to
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, the parties hereto agree as follows:
1. RESTRICTED SHARES
1.1 GRANT OF RESTRICTED SHARES AND CASH BONUS.
(a) The Company hereby grants to the Employee ______shares of Common
Stock (the "Restricted Shares"), subject to the restrictions set forth in
Paragraph 1.2 of this Agreement. As the restrictions set forth in Paragraph
1.2 hereof lapse in accordance with the terms of this Agreement as to all or a
portion of the Restricted Shares, such shares shall no longer be considered
Restricted Shares for purposes of this Agreement.
(b) The Company hereby directs that a stock certificate or certificates
representing the Restricted Shares shall be registered in the name of and
issued to the Employee. Such stock certificate or certificates shall be
subject to such stop-transfer orders and other restrictions as the
Compensation/Stock Option Committee of the Board of Directors of the Company
(the "Committee") may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission and any applicable
federal or state securities law, and the Committee may cause a legend or
legends to be placed on such certificate or certificates to make appropriate
reference to such restrictions. In addition, each such certificate shall bear
the following legend:
The transferability of this certificate and the
shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of
the CyberGuard Corporation Stock Incentive Plan and
an Agreement entered into between the registered
owner and CyberGuard Corporation. Copies of such
Plan and Agreement are on file in the offices of
CyberGuard Corporation, 2101 West Cypress Creek
Road, Fort Lauderdale, Florida 33309.
Upon expiration of the applicable Restricted Period (as hereinafter
defined), the Company shall deliver or cause to be delivered to the Employee a
certificate or certificates for the Restricted Shares which shall not bear the
foregoing legend.
<PAGE> 2
1.2 RESTRICTIONS.
(a) The Employee shall have all rights and privileges of a stockholder
as to the Restricted Shares, including the right to vote and receive dividends
or other distributions with respect to the Restricted Shares, except that,
subject to the provisions of Paragraph 1.3(b) hereof, the following
restrictions shall apply:
(i) none of the Restricted Shares may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of during the
Restricted Period (as hereinafter defined), except as otherwise provided
in Paragraph 1.3(c) hereof or pursuant to rules adopted by the Committee
in accordance with the Plan; and
(ii) all of the Restricted Shares may be forfeited in accordance
with Paragraph 1.4.
(b) Any attempt to dispose of Restricted Shares in a manner contrary to
the restrictions set forth in this Agreement shall be ineffective.
1.3 RESTRICTED PERIOD.
(a) The restrictions set forth in Paragraph 1.2 shall apply
with respect to one-third (1/3) of the Restricted Shares, until the _____ day
after the date of this Agreement, (B) with respect to an additional one-third
(1/3) of the Restricted Shares, for a cumulative total of two-thirds (2/3) of
the Restricted Shares, until the _______ day after the date of this Agreement,
(C) with respect to the balance of the Restricted Shares, until the ______ day
after the date of this Agreement.
(b) Notwithstanding Paragraph 1.2, in the event of the
Employee's retirement, permanent total disability or death, or in cases of
special circumstances, the Committee may, in its sole discretion, when it finds
that a waiver would be in the best interests of the Company, waive in whole or
in part any or all remaining restrictions with respect to the Restricted
Shares.
(c) Nothing in this Agreement shall preclude the Employee
from exchanging any Restricted Shares for any other shares of Common Stock
that are similarly restricted.
1.4 FORFEITURE. If the Employee's employment with the Company shall
terminate for any reason during the Restricted Period, all rights of the
Employee to the then remaining Restricted Shares shall terminate and be
forfeited (except as otherwise determined by the Committee pursuant to
Paragraph 1.3(b)).
1.5 WITHHOLDING. The Company may withhold from any cash payments due
from the Company to the Employee all taxes, including social security taxes,
which the Company is required or otherwise authorized to withhold with respect
to the Restricted Shares granted hereunder.
1.6 INVESTMENT REPRESENTATION. The Employee hereby represents,
warrants and covenants that (i) the Employee is acquiring the Restricted Shares
for his own account and not with a view to the distribution thereof, and (ii)
the Restricted Shares acquired by the Employee under this Agreement will not be
sold except pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or pursuant to an exemption from
registration under said Act.
<PAGE> 3
2. ADJUSTMENTS TO NUMBER OF SHARES
In the event there is any change in the Common Stock through the
declaration of stock dividends or rights dividends, or through recapitalization
resulting in stock split-ups, or combinations or exchanges of shares, or
otherwise (including any change which would result n a substantial dilution or
enlargement of the rights or economic benefit inuring to the Employee from the
Restricted Shares), the Restricted Shares then subject to the restrictions
imposed hereunder shall be appropriately adjusted as determined by the
Committee, in its sole discretion.
3. NOTICES
All notices or communications hereunder shall be in writing, addressed as
follows:
To the Company:
CyberGuard Corporation
2101 West Cypress Creek Road,
Fort Lauderdale, Florida 33309
Attention: Secretary
To the Employee:
to the last known address of the Employee as appearing in the
Employee's personnel records as maintained by the Company.
Any such notice or communication shall be sent certified or registered
mail, return receipt requested, postage prepaid, addressed as above (or to such
other address as such party may designate in writing from time to time), and
the actual date of receipt, as shown by the receipt therefor, shall determine
the time at which notice was given.
4. ASSIGNMENT; AGREEMENT
This Agreement shall be binding upon and inure to the benefit of the heirs
and representatives of the Employee and the assigns and successors of the
Company, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Employee.
5. ENTIRE AGREEMENT; AMENDMENT; TERMINATION
This Agreement represents the entire agreement of the parties with
respect to the subject matter hereof. The Agreement may be amended at any time
by written agreement of the parties hereto. This Agreement may also be
amended, or may be terminated in its entirety, under the circumstances
described in the Plan.
6. GOVERNING LAW
This Agreement and its validity, interpretation, performance and
enforcement shall be governed by the laws of the State of Florida.
<PAGE> 4
7. SEVERABILITY
If, for any reason, any provision of this Agreement is held invalid, such
invalidity shall not affect any other provision of this Agreement not held so
invalid, and each such other provision shall to the full extent consistent with
law continue in full force and effect. If any provision of this Agreement
shall be held invalid in part, such invalidity shall in no way affect the rest
of such provision not held so invalid, and the rest of such provision, together
with all other provisions of this Agreement, shall to the full extent
consistent with law continue in full force and effect.
8. NO RIGHT TO CONTINUED EMPLOYMENT; EFFECT ON OTHER PLANS
This Agreement shall not, of itself, confer upon the Employee any right
with respect to continuance of employment by the Company, nor shall it
interfere in any way with the right of the Company to terminate Employee's
employment at any time. Income realized by the Employee pursuant to this
Agreement shall not be included in the Employee's earnings for the purpose of
any benefit plan of the Company in which the Employee may be enrolled or for
which the Employee may become eligible unless otherwise specifically provided
for in such plan.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Employee has hereunto set his hand, as of the day and year
first above written.
CYBERGUARD CORPORATION
By:
--------------------------------
EMPLOYEE
--------------------------------
<PAGE> 1
EXHIBIT 4.19
PRIVATE SECURITIES SUBSCRIPTION AGREEMENT
CyberGuard Corporation/Capital Ventures International
May 15, 1997
THIS PRIVATE SECURITIES SUBSCRIPTION AGREEMENT (this "AGREEMENT") has
been executed by the undersigned in connection with the sale pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
of certain shares of common stock, par value $0.01 per share (the "COMMON
STOCK") of CyberGuard Corporation, 2101 West Cypress Creek Road, Fort
Lauderdale, FL 33309, a corporation organized under the laws of Florida
("SELLER") to Capital Ventures International, c/o Heights Capital Management,
located at 425 California Street, Suite 1100, San Francisco, CA 94104, a
corporation organized under the laws of the Cayman Islands ("BUYER"). Seller
and Buyer (collectively, the "PARTIES") each hereby represents, warrants and
agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE
(i) Seller and Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
to Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and Rule 506 under Regulation D ("REGULATION D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act;
(ii) Buyer hereby subscribes for Seven Million Five Hundred
Thousand United States Dollars ($7,500,000) of Seller's Common Stock (said
shares of Common Stock being subscribed for by Buyer pursuant to this Agreement
are referred to herein as the "COMMON SHARES") payable in United States Dollars
as hereinafter provided, which purchase constitutes 100% of an offering (the
"OFFERING") of Seven Million Five Hundred Thousand United States Dollars
($7,500,000) of Common Stock, more fully described herein and in the Offering
Memorandum (as defined herein); and
(iii) Seller will file, not later than 30 days after the
Commitment Date (as hereinafter defined), a Registration Statement (the
"REGISTRATION STATEMENT") with the SEC to register the resale of the Common
Shares by Buyer and shall cause the Registration Statement to become effective
within ninety (90) days after the Commitment Date. The date on which this
Agreement has been signed by both Seller and Buyer is referred to herein
as the "COMMITMENT DATE."
2. BUYER'S REPRESENTATIONS AND AGREEMENTS
Buyer represents, warrants and agrees as follows:
(i) Buyer understands that the Common Shares have not been
registered under the Securities Act, or any other applicable securities law,
and, accordingly, none of the Common Shares may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless registered pursuant to,
or in a transaction exempt from registration under, the Securities Act and any
other applicable securities law. Buyer agrees not to sell any Common Shares
except either (a) in accordance with the Registration Statement, in which case
Buyer
<PAGE> 2
agrees to deliver a current prospectus to the extent required, or (b) in
accordance with Rule 144 under the Securities Act, in which case Buyer agrees
to comply with such rule.
(ii) Buyer has been duly organized and is validly existing
and in good standing in the jurisdiction of its organization. Buyer is an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3), or (7) of
Regulation D (an "ACCREDITED INVESTOR") that is acquiring the Common Shares.
Buyer has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the Common
Shares. Buyer has had a reasonable opportunity to ask questions of and
received answers from Seller concerning Seller and the offering of the Common
Shares. Buyer is not subscribing for the Common Shares as a result of any
"general solicitation" or "general advertising" as such terms are defined by
the interpretive materials of the SEC when used in connection with an offering
exempt from registration under Section 4(2) of the Securities Act and
Regulation D. Buyer is aware that it may be required to bear the economic risk
of an investment in the Common Shares for an indefinite period, and Buyer is
able to bear such risk for an indefinite period.
(iii) Buyer is acquiring the Common Shares for its own account
for investment purposes and not with a view to, or for offer or sale in
connection with, the distribution thereof (subject to any requirement of law
that the disposition of its property remains within its control) other than
pursuant to this Agreement, the Registration Statement or in compliance with
Rule 144 promulgated under the Securities Act. Notwithstanding anything to the
contrary in this Agreement, by making the representations herein, Buyer does
not agree to hold the Common Shares for any minimum other specified period and
reserves the right to dispose of the Common Shares at any time pursuant to
effective registration or exemption from registration.
(iv) Buyer acknowledges that Seller or the transfer agent for
Seller's Common Stock (the "TRANSFER AGENT") shall register the transfer or
exchange of any of the Common Shares only upon receipt of the certificate(s)
evidencing such Common Shares with the customary documentation necessary for
such transfer or exchange, it being understood by the parties that no opinion
of counsel shall be required for any transfer contemplated by the
Registration Statement;
(v) Following each Call For Proceeds, Buyer may sell on any
day only a number of Common Shares which does not exceed the trading volume on
the previous Trading Day (as defined herein), as reported by Bloomberg, L.P.
("BLOOMBERG"). The number of Common Shares which may be sold each day
thereafter shall be determined based upon the volume of the previous Trading
Day. "TRADING DAY" shall mean a business day on which the Common Stock trades
at least 1,000 shares in the Principal Market (as defined herein).
(vi) Buyer acknowledges that Seller and others will rely upon
the truth and accuracy of the foregoing acknowledgments, representations and
agreements and further agrees that if any of such acknowledgments,
representations and agreements made by Buyer are no longer accurate during such
time as the Registration Statement is in effect, Buyer will promptly notify
Seller.
(vii) Buyer has received all information relating to the
business, finances and operations of the Seller and materials relating to the
offer and sale of the Common Shares which have been requested by the Buyer.
Without limiting the generality of the foregoing, the Buyer had the opportunity
to review the Seller's Annual Report on Form 10-K for the fiscal
<PAGE> 3
year ended June 30, 1996, as amended by Amendment No. 1 thereto, the Quarterly
Reports on Form 10-Q for the quarterly periods ended September 30, 1996 and
December 31, 1996, and the Offering Memorandum, dated May 15, 1997, prepared by
Seller (the "OFFERING MEMORANDUM");
(viii) This Agreement has been duly authorized, validly executed,
and delivered on behalf of Buyer and is a valid and binding agreement upon
Buyer enforceable in accordance with its terms, subject to general principles
of equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally; and
(ix) Buyer and Buyer's affiliates over which Buyer exercises
investment discretion have no existing short position with respect to the
common stock of Seller. Except at any time when the Closing Price (as
hereinafter defined) of the Common Shares is greater than $15.50 per share,
Buyer shall not, and shall cause Buyer's affiliates over which Buyer exercises
investment discretion not to, enter into any short sales or other hedging
transactions with respect to shares of Common Stock at any time after the
execution of this Agreement by Buyer except with respect to shares of Common
Stock with respect to which Buyer has received a Call for Proceeds (as
hereinafter defined) by Seller; provided, however, that in no event shall the
number of shares sold short exceed such number of shares as is issuable on the
date of any such short sale to Buyer upon subsequent Calls for Proceeds, based
on a Closing Price of $15.50 per share. If so requested by Seller, Buyer shall
deliver a certificate of an executive officer or any other authorized
representative of Buyer as to Buyer's compliance with the provisions of this
Section 2(ix).
3. SELLER'S REPRESENTATIONS
Seller represents and warrants as follows:
(i) Seller has not conducted any general solicitation or
general advertising (as defined in Regulation D) with respect to any of the
securities offered hereby.
(ii) Each tranche of the Common Shares when issued, delivered
and paid for at the price provided herein will be duly and validly authorized
and issued, fully-paid and nonassessable and will not subject the holders
thereof to personal liability by reason of being such holders. There are no
preemptive rights of any shareholder of Seller with respect to the Common
Shares. The Common Stock is included in the Nasdaq National Market ("NASDAQ")
and no suspension of trading in the Common Stock is in effect. Seller has
submitted a notice to the National Association of Securities Dealers, Inc. (the
"NASD") relating to the proposed issuance of the Common Shares and is not aware
of any reason why inclusion of the Common Shares, subject to official notice of
issuance, will not be approved by the NASD.
(iii) Each of Seller and its subsidiaries, if any, (a) have been
duly incorporated and are validly existing and in good standing under the laws
of their respective jurisdictions of incorporation and have the requisite
corporate power to own their respective properties and to carry on their
businesses as now being conducted; and (b) are duly qualified as foreign
corporations to do business and are in good standing in every jurisdiction in
which the nature of their respective businesses makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on or
development in the business, operations, properties, financial condition,
results of operation or prospects of Seller or any of its subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby. Seller has
registered its common stock pursuant to
<PAGE> 4
Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and is in full compliance with all reporting requirements of
either Section 13(a) or 15(d) of the Exchange Act.
(iv) Seller has the requisite corporate power and authority to
enter into and perform this Agreement and the Registration Rights Agreement
being executed and delivered contemporaneously herewith, in the form attached
to this Agreement as Exhibit A (the "REGISTRATION RIGHTS AGREEMENT"), and to
issue and sell the Common Shares in accordance with the terms hereof. The
execution and delivery of this Agreement and the Registration Rights Agreement
by Seller and the consummation by it of the transactions contemplated hereby
(including without limitation the issuance of the Common Shares), have been
duly authorized by Seller's Board of Directors and no further consent or
authorization of Seller, its Board or Directors, or its stockholders is
required (under Rule 4460(i) promulgated by the NASD or otherwise). This
Agreement and the Registration Rights Agreement have been duly executed and
delivered by Seller. This Agreement and the Registration Rights Agreement
constitute valid and binding obligations of Seller enforceable against Seller
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other laws
affecting creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity) are in full force and effect as of the date hereof, and the Investor
is entitled to the rights set forth therein. Seller shall provide Buyer with a
written update of this representation signed by Seller's Chief Executive
Officer or Chief Financial Officer on behalf of Seller as of the date of each
closing (as defined herein) hereunder.
(v) The execution and delivery of this Agreement and the
Registration Rights Agreement, the issuance of the Common Shares and the
transactions contemplated by this Agreement do not and will not (a) conflict
with or result in a breach by Seller, or any of its subsidiaries, if any, of
any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or bylaws of Seller, or any of its subsidiaries,
if any, or (b) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which Seller is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations) applicable
to Seller or by which any property or asset of Seller is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Seller is not in violation of its certificate
of incorporation, bylaws or other organizational documents and is not in
default (and no event has occurred which, with notice or lapse of time or both,
would put Seller in default) under, nor has there occurred any event giving
others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which Seller is a party, except for possible defaults or rights
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of Seller is not being conducted, and shall not be conducted so
long as Buyer owns any of the Shares, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Seller is not in violation of the listing requirements of
Nasdaq and does not reasonably anticipate that the Common Stock will be
delisted by Nasdaq for the foreseeable future.
<PAGE> 5
(vi) Other than (a) approval of the inclusion of the Common
Shares by the NASD, which approval shall be obtained on or prior to the first
closing date, (b) the requirements of any applicable blue sky laws, and (c) a
Form D to be filed in connection with the Offering under Regulation D under the
Securities Act, no authorization, approval or consent of or filing or
registration with any court or federal, state or local governmental agency or
body, any regulatory or self-regulatory agency, any stock exchange or market or
any shareholder of the Seller is required for the execution, delivery or
performance by Seller of any of its obligations under this Agreement in
accordance with the terms hereof, including, without limitation the issuance
and sale of the Common Shares as contemplated hereby;
(vii) Since June 30, 1996, Seller has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Exchange Act (all of
the foregoing, together with any Current Reports on Form 8-K, if any, filed
prior to the date hereof and after June 30, 1996, and all exhibits included
therein and financial statements and schedules thereto and documents (other
than exhibits) incorporated by reference therein, being referred to herein as
the "SEC DOCUMENTS"). Seller has delivered to Buyer true and complete copies
of each SEC Document which it has requested (except for such exhibits,
schedules and incorporated documents), including without limitation copies of
Seller's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, as
amended by Amendment No. 1 thereto and the Quarterly Reports on Form 10-Q for
the quarterly periods ended September 30, 1996 and December 31, 1996. As of
their respective dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the respective times they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Seller has delivered to Buyer a true and correct copy of the
Offering Memorandum. The Offering Memorandum, including the information
incorporated by reference therein, as of the date thereof and the date of this
representation, does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of Seller included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may include footnotes or may be condensed or summary statements)
and fairly present in all material respects the consolidated financial position
of Seller and its subsidiaries, if any, as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of Seller
included in the SEC Documents, Seller has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results of
Seller. Since June 30, 1996, there has been no Material Adverse Effect, except
as disclosed in the SEC Documents or the Offering
<PAGE> 6
Memorandum. Seller has not provided to Buyer any information which, according
to applicable law, rule or regulation, should have been disclosed publicly by
Seller but which has not been so disclosed.
(viii) There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Seller or any of its subsidiaries, threatened against or
affecting the Seller or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Seller to perform its obligations under, this Agreement or any of
such other documents.
(ix) The capitalization of Seller as of the date hereof,
including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to Seller's
stock option plans, the number of shares reserved for issuance pursuant to
securities exercisable for, or convertible into or exchangeable for any shares
of Common Stock is set forth on Schedule 3(ix). All of such outstanding shares
of capital stock have been, or upon issuance will be, validly issued, fully
paid and nonassessable. No shares of capital stock of Seller (including the
Common Shares), are subject to preemptive rights or any other similar rights
of the stockholders of Seller or any liens or encumbrances. Except as
disclosed in Schedule 3(ix) or as contemplated herein, as of the date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of Seller, or arrangements by which Seller is or may
become bound to issue additional shares of capital stock of the Company, and
(ii) there are no agreements or arrangements under which Seller is obligated to
register the sale of any of its or their securities under the Securities Act.
Seller has furnished to Buyer true and correct copies of Seller's articles of
incorporation and bylaws, and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for Common Stock of
Seller.
(x) All information relating to or concerning Seller set forth
in this Agreement or provided to Buyer in connection with the transactions
contemplated hereby is true and correct in all material respects and Seller has
not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or
exists with respect to Seller or its businesses, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by Seller but which has
not been so publicly announced or disclosed.
(xi) Seller acknowledges and agrees that Buyer is not acting as
financial advisor or fiduciary of Seller (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and any
advice given by Buyer or any of its representatives or agents, in connection
with this Agreement and the transactions contemplated hereby is merely
incidental to each Investor's purchase of Common Shares. Seller further
represents to Buyer that Seller's decision to enter into this Agreement has
been based solely on an independent evaluation by Seller and its
representatives.
(xii) Seller is currently eligible to register the resale of its
Common Stock on a registration statement on Form S-3 under the Securities Act.
<PAGE> 7
(xiii) Neither Seller, nor any of its affiliates, nor to
Seller's Actual Knowledge (as defined herein) any person acting on its or their
behalf, has directly or indirectly made any offers or sales of any security or
solicited any offerers to buy any security under circumstances that would
require registration of the Shares being offered hereby under the Securities
Act. For purposes of the preceding sentence, the term "ACTUAL KNOWLEDGE" means
the actual knowledge of Seller's Chief Executive Officer, Chief Financial
Officer or General Counsel.
(xiv) Seller owns or possesses adequate and enforceable rights
to use all patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications, licenses,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures) and other
similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in Seller's Annual Report on Form 10-K for the fiscal year ended June
30, 1996. Seller does not infringe nor is it in conflict with any right of any
other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.
(xv) Neither Seller, nor any director, officer, agent, employee
or other person acting on behalf of, Seller, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
4. SELLER'S COVENANTS
Seller covenants and agrees as follows:
(i) Seller will file a Form D with respect to the Common
Shares as required under Regulation D and provide a copy thereof to Buyer
promptly after such filing. Seller will, prior to the initial closing date,
take such action as Seller shall reasonably determine as necessary to qualify
the Common Shares for, or obtain the exemption for the Common Shares for, sale
to Buyer at the closing dates pursuant to this Agreement under applicable
securities or "blue sky" laws of the State of California and the Commonwealth
of Pennsylvania, and shall provide evidence of any such action so taken to the
Buyer on or prior to the initial closing date.
(ii) On or before the initial closing date Seller will file a
request for inclusion of the Common Shares with the NASD and provide evidence
of such filing to Buyer. For a period of three years after the final closing
date so long as Buyer beneficially owns any of the Common Shares, Seller will
file all reports to be filed with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act, and Seller will not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
(iii) On or prior to each closing date Seller will instruct the
Transfer Agent to issue the Common Shares purchased hereunder to be registered
in the name of Buyer
<PAGE> 8
or its nominee in such denominations as are specified by Buyer at least one
business day prior to the applicable closing date. Seller agrees that no
instruction other than such instructions referred to in this subsection will be
given by Seller to the Transfer Agent with respect to the Common Shares, that
no legend restricting transfer of the Common Shares will appear on any
certificate representing Common Shares and that the Common Shares shall be
freely transferable on the books and records of Seller as and to the extent
provided in this Agreement and the Registration Rights Agreement.
(iv) Seller shall notify the SEC and Nasdaq, the American Stock
Exchange or the New York Stock Exchange (whichever is the principal trading
market for the Common Stock, hereinafter called the "PRINCIPAL MARKET") and any
other applicable market in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of all of the Common Shares to
Buyer.
(v) Seller will cause its Common Stock to continue to be
registered under Section 12(b) or 12(g) of the Exchange Act, will comply in all
respects with its reporting and filing obligations under said act, will comply
with all requirements related to the Registration Statement, and will not take
any action or file any document (whether or not permitted by said Act or the
rules thereunder) to terminate or suspend such Registration Statement or to
terminate or suspend its reporting and filing obligations under the Exchange
Act, except as permitted herein. The Company will take all action necessary to
continue the listing or trading of its Common Stock (including the Common
Shares) on the Principal Market, including taking all action necessary to cause
the Common Shares that are issuable under this Agreement to be authorized for
listing or trading on the Principal Market, subject to official notice of
issuance and will comply in all respects with the Seller's reporting, filing
and other obligations under the bylaws or rules of the Principal Market.
(vi) Prior to the first call for proceeds, Seller may
terminate the transaction within 120 days after the Commitment Date. In such
event, Seller agrees to issue to Buyer three (3) year warrants to purchase an
aggregate of 170,000 Common Shares at the Closing Price on such termination
date. The form of such warrants is attached to this Agreement as Exhibit B.
(vii) In the event the Registration Statement is not declared
effective by the SEC within ninety (90) days after the Commitment Date, Buyer's
obligations to purchase the Common Shares may be terminated upon the election
of the Buyer by notice to Seller; provided, however, that Buyer in its sole
discretion may (but shall not be required to) extend this 90-day period for an
additional 90 days. In the event that the Registration Statement is not
declared effective by the SEC within 180 days after the Commitment Date, Buyer
may terminate the transaction within 15 days of the end of such period, and, if
so terminated, Seller agrees to issue to Buyer warrants to purchase 170,000
Common Shares at the Closing Price on such termination date.
(viii) If Seller has made Calls for Proceeds with respect to at
least $3,750,000 of the Common Shares within the one-year period following the
Effective Date (as defined herein), Seller may, in its sole discretion, elect
to extend the period during which Seller may make Calls for Proceeds by an
additional six (6) months.
<PAGE> 9
(ix) After one year from the Effective Date, or one year and
six months after the Effective Date in the event Seller has extended the call
period pursuant to Section 4(viii):
(a) Seller agrees to issue to Buyer warrants to purchase
Common Shares based on the following: (x) if Seller has made Calls for Proceeds
with respect to the full $7,500,000 of Common Shares, Buyer shall be issued no
warrants; (y) if Seller has not made a Call for Proceeds with respect to any
Common Shares, Buyer shall be issued warrants to purchase 170,000 Common
Shares; and (z) if Seller has made Calls for Proceeds with respect to some, but
less than the full $7,500,000 of Common Shares, Buyer shall be issued warrants
to purchase Common Shares on a pro rata basis. (For example, if Seller has
made Calls for Proceeds with respect to $3,000,000 of Common Shares, Buyer
shall be issued warrants to purchase 102,000 Common Shares.) In each such
case, the warrant exercise price shall be the Closing Price on the Trading Date
that is one year (or one year and six months, as the case may be), after
the Effective Date.
(b) In the alternative to the receipt of warrants
pursuant to Section 4(ix)(a), Buyer may, in its sole discretion, elect to
purchase from Seller such number of Common Shares at $15.50 per share as is
equal to the quotient obtained by dividing (x) the difference of $7,500,000
less the aggregate dollar amount of all prior Calls for Proceeds by (y)
15.50.
(x) In the event of a merger, consolidation or sale of all or
substantially all of Seller's assets prior to the termination of this
Agreement, Buyer may, in its sole discretion, elect either to: (i) purchase
such dollar amount of Common Shares as is equal to the difference of $7,500,000
less the aggregate dollar amount of all prior Calls for Proceeds at the lesser
of (a) $15.50 per share or (b) the Closing Price as of the Trading Day
immediately preceding the public announcement of such merger, consolidation or
acquisition or (ii) deem such merger, consolidation or acquisition to be an
immediate termination of this Agreement in which case Seller shall issue to
Buyer warrants to purchase Common Shares on a pro rata basis (determined in
accordance with the terms and provisions of Section 4(ix)(a)), the exercise
price of which warrants shall be equal to the Closing Price as of the Trading
Day immediately preceding the public announcement of such merger, consolidation
or acquisition.
(xi) Seller agrees that it will not issue a press release or
other communication to the public containing Buyer's name or other information
that could identify Buyer without Buyer's written consent.
5. CALLS FOR PROCEEDS
(i) During the 12-month period, and during any period of
extension pursuant to Section 4(viii), following the date on which the
Registration Statement is declared effective by the SEC (the "EFFECTIVE DATE"),
Seller may deliver written notices pursuant to the terms of Section 12 hereof
to Buyer (each such notice hereinafter referred to as a "CALL FOR PROCEEDS,"
and the date such a notice is given hereinafter called a "CALL DATE") stating a
dollar amount (the "DOLLAR AMOUNT") of Common Shares which Seller intends to
sell to Buyer three business days following the Call Date. Notice constituting
each Call for Proceeds shall be given by Seller by telecopy after the Principal
Market has closed but by no later than 5:30 p.m., New
<PAGE> 10
York time, and such notice shall not be effective unless given to Buyer care of
its offices in San Francisco and Bala Cynwyd. "BUSINESS DAY" shall mean any
day on which Nasdaq (or, if on such day the Principal Market is not Nasdaq,
such Principal Market) is open for trading.
(ii) (a) If the Closing Price (as defined herein) is greater
than $8.00 on the Call Date for the first Call for Proceeds (the "DESIGNATED
FIRST CALL FOR PROCEEDS"), the aggregate amount of the Designated First Call
for Proceeds may not be more than three (3) times the Trading Volume (as
defined herein). "TRADING VOLUME" shall mean the dollar amount of the average
daily trading volume of the Common Stock, calculated based upon the average
closing bid price and average daily trading volume over the twenty (20) Trading
Days preceding the applicable Call Date, in each case as reported by
Bloomberg.
(b) With respect to each Call for Proceeds (other than
the Designated First Call for Proceeds, if any), the aggregate amount of such
Call for Proceeds may not be more than one and one-half (1.5) times the
Trading Volume.
(iii) There must be at least fifteen (15) Business Days between
each Call for Proceeds; provided, however, that there must be at least forty
(40) Business Days between the Designated First Call for Proceeds, if any, and
the Call for Proceeds immediately subsequent thereto if the aggregate amount of
the Designated First Call for Proceeds exceeds one and one-half (1.5) times the
Trading Volume.
(iv) The closing (each, a "CLOSING") for the number of Common
Shares to be sold pursuant to each Call for Proceeds shall occur on the third
Business Day following the Call Date with respect to such Call for Proceeds
(each, a "CLOSING DATE"). The number of Common Shares to be sold at the
Closing that occurs on the applicable Closing Date shall be the greater of (a)
the quotient obtained in dividing the Dollar Amount in the applicable Call for
Proceeds by $15.50 and (b) the sum of (x) the quotient obtained in dividing the
Dollar Amount up to one and one-half (1.5) times the Trading Volume by 88% of
the Call Price (as defined herein), plus, with respect to the Designated First
Call for Proceeds, (y) the quotient obtained in dividing the Dollar Amount, if
any, in excess of one and one-half (1.5) times the Trading Volume by 80% of the
Call Price, rounding any fractional share up to a full share. The "CALL PRICE"
with respect to any Call for Proceeds shall mean the average Closing Price (as
defined herein) during the five Trading Days immediately preceding the Call
Date relating to such Call for Proceeds, appropriately adjusted to reflect any
pending stock dividend, stock split or similar transaction. With respect to
any Trading Day, the "CLOSING PRICE" shall mean the closing bid price as
reported by Bloomberg for the Common Stock on such Trading Day. The first
Closing Date is sometimes referred to herein as the "INITIAL CLOSING DATE" and
the last closing date is sometimes referred to herein as the "FINAL CLOSING
DATE." The Closing that occurs on the initial closing date is sometimes
referred to herein as the "INITIAL CLOSING" and the Closing that occurs on the
final closing date is sometimes referred to herein as the "FINAL CLOSING."
(v) Seller may Call for Proceeds only when the Closing Price
for the Common Stock on the Call Date with respect to such Call for Proceeds is
equal to or greater than the average Closing Price during the five Trading Days
preceding such Call Date.
(vi) On or before the Closing Date for the Closing with
respect to each Call for Proceeds, Seller shall deliver to Buyer a certificate
or certificates (in denominations as instructed by Buyer) for the Common
Shares, registered in the name of Buyer or Buyer's
<PAGE> 11
nominee. Promptly, but no later than one business day following receipt of the
certificate(s) representing the Common Shares to be issued in connection with
such Call for Proceeds, Buyer shall pay the purchase price for such Common
Shares by wire transfer pursuant to the instructions of Seller. Such
instructions shall be provided by notice to Buyer no later than the Call Date
for such Call for Proceeds.
(vii) Notwithstanding the foregoing, in no event may Seller
issue to Buyer a number of Common Shares which exceeds nineteen and nine-tenths
percent (19.9%) of the number of shares of Common Stock outstanding on the
Commitment Date. In the event such number of Common Shares is reached, no
additional Calls for Proceeds may be made nor may additional Common Shares be
issued pursuant to this Agreement
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER TO
PURCHASE COMMON SHARES ON ANY CLOSING DATE
The obligation of Buyer hereunder to acquire and pay for Common
Shares on any Closing Date is subject to the satisfaction, at or before such
Closing Date of each of the following conditions set forth below, which
conditions are for Buyer's sole benefit and may be waived by Buyer at any time
in its sole discretion:
(i) The representations and warranties of Seller shall be
true and correct in all material respects as of the date when made and as of
such Closing Date, as though made at that time (except for representations and
warranties that speak as of a particular date or refer to a particular point in
time which shall be true and correct as of such date or time).
(ii) Seller shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Seller at or
prior to such Closing Date.
(iii) As of such Closing Date, no statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(iv) On or prior to such Closing Date, Buyer shall have
received an opinion of counsel to Seller (in substantially the form of Exhibit
C), dated such Closing Date, and such other certificates, opinions of other
counsel, and documents as Buyer or its counsel shall reasonably require
incident to the Closing scheduled to occur on such Closing Date.
(v) As of such Closing Date, the Registration Statement shall
be effective and no stop order or other suspension suspending the effectiveness
of the Registration Statement shall have been instituted or shall be pending.
(vi) On or prior to such Closing Date, Seller and Buyer shall
have entered into the Registration Rights Agreement, and, as of such Closing
Date, such agreement shall be in full force and effect.
(vii) As of such Closing Date, the Registration Statement
(including information or documents incorporated by reference therein) and any
amendments or supplements thereto shall not contain any untrue statement of a
material fact or omit to state any
<PAGE> 12
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(viii) As of such Closing Date, trading of the Common Stock on
the Principal Market shall not been have been suspended or limited, and trading
in securities generally as reported by the Principal Market shall not have been
suspended or limited.
(ix) On or prior to such Closing Date, Buyer shall have
received a certificate from the Chief Executive Officer and/or the Chief
Financial Officer of Seller, dated such Closing Date, in substantially the form
of Exhibit D hereto.
(x) Since the Commitment Date, and on or prior to such Closing
Date, there shall not have occurred any event which would constitute a Material
Adverse Effect.
(xi) On or prior to such Closing Date, there shall have been
no filing of a petition in bankruptcy, either voluntarily or involuntarily,
with respect to Seller and there shall not have commenced any proceedings under
any bankruptcy or insolvency laws, or any laws relating to the relief of
debtors, readjustment of indebtedness or reorganization of debtors and there
shall have been no calling of a meeting of creditors of Seller or appointment
of a committee of creditors or liquidating agents or offering of a composition
or extension to creditors by, for, with or without the consent or acquiescence
of Seller.
(xii) As of such Closing Date, the Common Shares to be delivered
on such Closing Date shall have been approved for trading on the Principal
Market, subject to official notice of issuance.
All representations, warranties and covenants shall survive each Closing
and termination of this Agreement.
7. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that
Shoreline Pacific, the Institutional Division of Financial West Group
("Shoreline Pacific"), shall be deemed a third party beneficiary of Seller's
agreements and representations set forth in this Agreement, entitled to enforce
the terms thereof, and to indemnification for any damages resulting to
Shoreline Pacific from any actual or threatened breach thereof by Seller, both
in Shoreline Pacific's personal capacity and, should Shoreline Pacific so elect
and Buyer permits, on behalf of Buyer.
8. SHORELINE PACIFIC
(i) Seller's obligations hereunder shall also be conditioned
upon Seller receiving a representation letter from Shoreline Pacific
("SHORELINE") regarding the manner of conducting this offering, in the form
agreed upon by Seller and Shoreline a copy of which is attached hereto as
Exhibit E.
(ii) Seller acknowledges that it shall be solely responsible
for payment of any and all brokerage, finders or similar fees due and owing to
Shoreline in connection with the transactions contemplated under this
Agreement, and that Buyer shall have no liability with respect to such
fees.
<PAGE> 13
9. GOVERNING LAW; INTERPRETATION. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York
without giving effect to rules governing the conflict of laws.
10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Registration Rights Agreement contain the entire understanding of the parties
with respect to the transactions contemplated hereby, and supersede all prior
and contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written. No provision of this Agreement may be
amended or waived other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is sought.
11. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective upon
hand delivery or delivery by facsimile at the address or facsimile number
designated below (if delivered on a business day during regular business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during regular business
hours where such notice is to be received). The addresses and facsimile
numbers for such communications shall be:
to the Seller:
CyberGuard Corporation
2101 West Cypress Creek Road
Fort Lauderdale, FL 33309
Phone No.: (954) 973-5356
Fax No.: (954) 973-5160
Attention: Patrick O. Wheeler, Chief Financial Officer
with copies to:
Holland & Knight
One East Broward Boulevard, Suite 1300
Fort Lauderdale, FL 33301-4811
Phone No.: (954) 468-7953
Fax No.: (954) 463-2030
Attention: D. Ronald Surbey, Esquire
to the Buyer:
Capital Ventures International
c/o Heights Capital Management
423 California Street, Suite 1100
San Francisco, CA 94104
Phone No.: (415) 403-6500
Fax No.: (415) 403-6525
Attention: Johann Koehne
and, if required pursuant to Section 5(i), to:
<PAGE> 14
Capital Ventures International
c/o Susquehanna Financial Group
401 City Line Avenue
Bala Cynwyd, PA 19004
Phone No.: (610) 617-2760
Fax No.: (610) 617-2707
Attention: Michael Howe
with copies to:
Wolf, Block, Schorr and Solis-Cohen
111 South 15th Street, 12th Floor
Philadelphia, PA 19102-2678
Fax No.: (215) 977-2740
Phone No.: (215) 977-2324
Attention: Richard A. Silfen, Esquire
Either party hereto may from time to time change its address or
facsimile number for notices under this Section by giving written notice of
such change to the other party hereto.
13. WAIVERS. No waiver by either party of any default with respect
to any provisions, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any other provisions,
condition or requirement hereof, nor shall any delay or omission of either
party to exercise any right hereunder in any manner impair the exercise of any
such right accruing to it thereafter.
14. HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
parties hereto may amend this Agreement without notice to or the consent of any
third party. Neither Buyer nor the Seller shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
(which consent may be withheld for any reason in the sole discretion of the
party from whom consent is sought); provided, however, that Buyer may assign
its rights and obligations hereunder to any acquirer of substantially all of
the assets of Buyer provided that such assignment shall be subject to the
Seller's prior written consent which consent may not be unreasonably withheld.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 15
IN WITNESS WHEREOF, this Agreement was duly executed as of the
date first written above.
CAPITAL VENTURES INTERNATIONAL
By: HEIGHTS CAPITAL MANAGEMENT, as agent
By:
Andrew Frost
President
Date: May , 1997
CYBERGUARD CORPORATION
By:
Patrick O. Wheeler
Chief Financial Officer
Date: May , 1997
<PAGE> 16
SCHEDULE 3(IX)
CAPITALIZATION OF SELLER
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
Authorized capital stock:
Common stock, par value $.01 per share ("Common Stock") 20,000,000
Preferred stock, par value $.01 per share ("Preferred Stock") 5,000,000
Outstanding capital stock (as of May 9, 1997):
Common stock 7,386,315
Preferred stock --
Capital stock reserved for issuance:
Shares of Common Stock reserved for issuance pursuant to the
CyberGuard Corporation Stock Incentive Plan, as amended (the
"Plan") 1,369,211
Shares of Preferred Stock reserved for issuance pursuant to
the CyberGuard Corporation Stockholder Protection Rights
Agreement dated September 15, 1994 20,000
Shares of Common Stock issuable upon exercise of options
currently outstanding pursuant to the Plan 1,025,595
Shares of Common Stock issuable upon exercise of options
currently outstanding (other than pursuant to the Plan) 663,310
Shares of Common Stock issuable upon exercise of warrants
currently outstanding 200,000
Shares of Common Stock issued subject to restrictions (i.e.,
shares of "restricted stock") 15,000
Shares of Common Stock subject to registration rights (other
than shares issuable pursuant to this Agreement) 200,000
</TABLE>
<PAGE> 17
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 15, 1997 (this
"AGREEMENT"), is made by and among CyberGuard Corporation, a Florida
corporation (the "COMPANY"), and the person named on the signature page hereto
(the "INVESTOR").
W I T N E S S E T H:
WHEREAS, in connection with the Private Securities Subscription Agreement,
of even date herewith between the Investor and the Company (the "SUBSCRIPTION
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the Investor
shares and warrants to purchase shares (collectively, the "COMMON SHARES" or
the "SHARES") of Common Stock, $0.01 par value (the "COMMON STOCK");
WHEREAS, the Subscription Agreement relates to an offering (the
"OFFERING") of Seven Million Five Hundred Thousand Dollars U.S. ($7,500,000),
which Subscription Agreement was received and countersigned by the Company on
May 15, 1997 (the "COMMITMENT DATE"), pursuant to which the Investor committed
to purchase the full $7,500,000 of Common Shares; and
WHEREAS, to induce the Investor to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "SECURITIES
ACT"), and applicable state securities laws with respect to the Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTOR" or "INVESTORS" means the Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements on Form S-3 or another form acceptable to Investor in compliance
with the Securities Act and pursuant to Rule 415 under the Securities Act or
any successor rule providing for offering securities on a continuous basis
("RULE 415") and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange
Commission ("SEC").
(iii) "REGISTRABLE SECURITIES" means the Shares.
<PAGE> 18
(iv) "REGISTRATION STATEMENT" means a registration statement
under the Securities Act.
(v) "RULE 144" means Rule 144 promulgated under the Securities
Act.
(vi) "WARRANTS" means warrants to purchase Common Shares issued
to the Investor in connection with the Subscription Agreement.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(a) INITIAL REGISTRATION. The Company shall prepare and file with the
SEC within 30 days of the Commitment Date, a registration statement on Form S-3
covering at least 1,470,085 shares of Common Stock as Registerable Securities
hereunder, and which Registration Statement shall state that, in accordance
with Rule 416 under the Securities Act, such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(b) PIGGY-BACK REGISTRATIONS. If at any time prior to the date which is
four years, in the case of Shares issuable upon the exercise of Warrants, or 30
months, in the case of other Shares, after the final closing date under the
Subscription Agreement the Company shall file with the SEC a Registration
Statement relating to an underwritten offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
of business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(b) written notice of such
determination and, if within twenty (20) days after receipt of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registerable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registerable Securities with respect to which such Investor has
requested inclusion hereunder. Any exclusion of Registerable Securities shall
be made pro rata among the Investors seeking to include Registerable
Securities, in proportion to the number of registerable Securities sought to be
included by such Investors; provided, however, that the Company shall not
exclude any Registerable Securities unless the Company has first excluded all
outstanding securities the holders of which are entitled to inclusion of such
securities in such Registration Statement by reason of piggyback registration
rights, are not entitled to pro rata exclusion with the Registerable
<PAGE> 19
Securities and are not entitled by right to inclusion of securities in
such Registration Statement; and provided further, however, that after giving
effect to the immediately preceding proviso, any exclusion of Registerable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registerable Securities under this Section 2(b) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(b) may be waived by Investors
holding a majority in interest of the Registerable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(b) for two registrations; provided,
however, that any Investor who shall have had any Registerable Securities
excluded from any Registration Statement in accordance with this Section 2(b)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registerable Securities so excluded. If an offering in
connection with which an Investor is entitled to registration under this
Section 2(b) is an underwritten offering, then each Investor whose Registerable
Securities are included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registerable Securities in an
underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
(c) ELIGIBILITY FOR FORM S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the sale
by the Investor of the Registerable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3.
(d) SALES UNDER RULE 144. Notwithstanding the registration of
Registerable Securities in accordance with Section 2(a), if at any time of
offer and sale of such Registerable Securities by an Investor such Registerable
Securities can be sold pursuant to Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at anytime
permit the Investor to sell securities of the Company to the public without
registration ("RULE 144") in the manner, amount and on such terms as such
Investor wishes to offer and sell such Registerable Securities, such Investor
may endeavor to offer and sell such Registerable Securities pursuant to Rule
144; provided, however, that such Investor shall not be required to limit the
amount or manner of sale or otherwise modify such offer or sale to use Rule
144; and provided further, however, that such Investor shall have no liability
to the Company under this Section 2(d) if such Investor does not offer and sell
such Registerable Securities pursuant to Rule 144 notwithstanding the
availability thereof.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event
later than the applicable time periods set forth in Section 2(a)) a
Registration Statement or Statements with respect to all Registrable Securities
to be included therein, and thereafter use its best efforts to cause the
Registration Statement to become effective as soon as possible after such
filing, and keep the Registration Statement, if the Registration Statement
utilizes to Rule 415, effective at all times until such date as is four years,
in the case of Shares issuable upon the exercise of Warrants, or 30 months, in
the case of other Shares, after the date such Registration Statement is first
ordered effective by the SEC. In any case, the Registration Statement
(including any
<PAGE> 20
amendments or supplements thereto and prospectuses contained therein)
filed by the Company shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that, subject to the conditions set
forth in Section 4(a) below, each Investor may notify the Company in writing
that it wishes to exclude all or a portion of its Registrable Securities from
such Registration Statement; provided further, however, that if at any time one
year or more after the final closing date under the Subscription Agreement the
Investor shall be entitled to sell all Registrable Securities held by the
Investor pursuant to Rule 144, in a period of three consecutive months then the
Company shall, so long as it meets the current public information requirements
of Rule 144, thereafter no longer be required to maintain the registration of
Registrable Securities pursuant to this Agreement.
(b) prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until such
date as is two years or, two years and six months in the case where Seller has
exercised its option to extend the call period pursuant to the last paragraph
of Section 5 of the Subscription Agreement, after the date such Registration
Statement is first ordered effective by the SEC, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in
the Registration Statement, (i) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one copy
of the Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto and, in the
case of the Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, each
item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request, (ii)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times until such date as is the earlier of four years, in the case of
Shares issuable upon the exercise of Warrants, or 30 months, in the case of
other Shares, after the date such Registration Statement is first ordered
effective by the SEC and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (I) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (II) subject itself to general taxation in any such jurisdiction,
(III) file a general consent to service of process in any such jurisdiction,
(IV) provide any undertakings that cause more than nominal expense or
<PAGE> 21
burden to the Company or (V) make any change in its charter or bylaws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders;
(e) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold pursuant to such
registration of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold pursuant to such
registration of the issuance by the SEC of any stop order or other suspension
of effectiveness of the Registration Statement at the earliest possible time;
(g) permit a single firm of counsel designated as selling stockholders'
counsel by the Investors who hold a majority in interest of the Registrable
Securities being sold pursuant to such registration to review the Registration
Statement and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and shall not file any document in a
form to which such counsel reasonably objects;
(h) make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of Rule 158 under the Securities Act) covering a twelve-month period beginning
not later than the first day of the Company's fiscal quarter next following the
date of the Registration Statement;
(i) make available for inspection by any Investor whose Registrable
Securities are being sold pursuant to such registration, any underwriter
participating in any disposition pursuant to the Registration Statement and any
attorney, accountant or other agent retained by any such Investor or
underwriter (collectively, the "INSPECTORS"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably necessary to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence (making such confidential
information known only to officers, agents or employees thereof who have a need
to know), shall not use any information so obtained for any purpose other than
preparation or review of the registration statement, and shall not make any
disclosure (except to an Investor or underwriter) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (ii) the release of such Records is
requested pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or (iii) the information in such Records
<PAGE> 22
has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector or
Investor until and unless such Investor or Inspector shall have entered into
confidentiality agreements (in a form as is customary in similar circumstances)
with the Company with respect thereto, substantially in the form of this
Section 3(i). Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor, to undertake, at Investor's expense,
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information;
(j) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on
which similar securities issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange or (ii) secure designation of all the Registrable Securities
covered by the Registration Statement as a National Association of Securities
Dealers Automated Quotations System ("NASDAQ") "national market system
security" within the meaning of Rule 11Aa2-1 of the SEC under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the quotation of the
Registrable Securities on the Nasdaq National Market System; or, if, despite
the Company's best efforts to satisfy the preceding clause (i) or (ii), the
Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities;
(k) provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(l) cooperate with the Investors who hold Registrable Securities being
sold and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be sold pursuant to the
denominations or amounts as the case may be, and registered in such names as
the Investors may reasonably request; and, within three business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investor whose Registrable Securities are
included in such Registration Statement) instructions to the transfer agent to
issue new stock certificates without a legend and an opinion of such counsel
that the shares have been registered; and
<PAGE> 23
(m) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant
to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of the Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least fifteen (15) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor (the
"REQUESTED INFORMATION") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If within five
(5) business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "NON-RESPONSIVE INVESTOR"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(d) In the event Investors holding a majority in interest of
Registerable Securities being registered determined to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registerable Securities, unless such Investor has notified
the Company in writing of such Investor's election to exclude all of such
Investor's Registerable Securities from the Registration Statement; and
(e) No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registerable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably requested under the
<PAGE> 24
terms of such underwriting arrangements and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions and other fees and
expenses of investment bankers and any manager or managers of such underwriting
and legal expenses of the underwriters applicable with respect to its
Registerable Securities, in each case to the extent not payable by the Company
pursuant to the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All expenses (other than brokerage commissions
or discounts and, in connection with securities registered pursuant to
Section 2(b) hereof, the pro rata portion of state and federal filing
fees) incurred in connection with registrations, filings or qualifications
pursuant to Section 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees
and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and
out-of-pocket expenses of the one legal counsel selected by the Investors
pursuant to Section 3(g) hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act, any underwriter (as defined in the Securities Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Exchange Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively "CLAIMS") to which any of them
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein: (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any state securities law or any rule or regulation under
the Securities Act, the Exchange Act or any state securities law (the matters
in the foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS").
Subject to the restrictions set forth in Section 6(d) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
such underwriters or controlling person, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in
conformity with information
<PAGE> 25
furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) with respect to any preliminary
prospectus shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person)
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (III) shall not be available to the extent
such Claim is based on a failure of the Investor to deliver or cause to be
delivered the prospectus made available by the Company; and (IV) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Persons
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which any of
them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
(I) in reliance upon and in conformity with written information furnished to
the Company by such Investor expressly for use in connection with such
Registration Statement or (II) the Investor's violation of Regulation M; and
such Investor will promptly reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a
Claim as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended
or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
<PAGE> 26
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable written opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party or other party represented by such
counsel in such proceeding. The Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the claim relates. The failure to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification provided for herein is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of
the Company to the public without Registration, until such time as the
Investors have sold all the Registrable Securities pursuant to a
Registration Statement or Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
<PAGE> 27
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investor to sell such securities pursuant to Rule 144 without Registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to transferees or assignees of all
or any portion of such securities only if:
(a) (i) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (x) the name and address of such
transferee or assignee and (y) the securities with respect to which such
registration rights are being transferred or assigned, (ii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iii) at or before the time the Company
received the written notice contemplated by clause (i) of this subsection the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, and (iv) the transferee or assignee acquires
(or has the right to acquire) at least 100,000 shares of Common Stock as a
result of such transfer or assignment;
(b) in the case of a transfer or assignment which constitutes a transfer
or assignment of rights pursuant to the Subscription Agreement, such transfer
or assignment is not in violation of Section 15 of the Subscription Agreement;
or
(c) such transfer or assignment is made to an affiliate of any Investor or
a clearing or other agent of any Investor in connection with the customary
trading activities of such Investor.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
the written consent of the Company and Investor who hold a majority in
interest of the Registrable Securities. Any amendment of waiver effected
in accordance with this Section 10 shall be binding upon each Investor and
the Company.
11. MISCELLANEOUS.
(a) If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or when sent by registered mail, return receipt requested, addressed (i) if to
the Company, at CyberGuard Corporation, 2101 West Cypress Creek Road, Ft.
Lauderdale, FL 33309, Attention: Mr. Patrick Wheeler, Chief Financial Officer,
and (ii) if to the Investor, at the address set forth under its name in the
Subscription Agreement, or at such other address as each such party furnishes
by notice given in accordance
<PAGE> 28
with this Section 11(b), and shall be effective, when personally
delivered, upon receipt, and when so sent by certified mail, four business days
after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to the agreements
made and to be performed entirely within such state, without giving effect to
rules governing the conflict of laws. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in the Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
<PAGE> 29
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CYBERGUARD CORPORATION
By
-------------------------------------
Patrick O. Wheeler,
Chief Financial Officer
Date: May 15, 1997
CAPITAL VENTURES INTERNATIONAL
BY: HEIGHTS CAPITAL MANAGEMENT, as agent
By
---------------------------------------
Andrew Frost,
President, Heights Capital Management
Date: May 15, 1997
<PAGE> 30
EXHIBIT B
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON [ ], 2000
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES REPRESENTED HEREBY AND THEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,
SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.
Right to Purchase Common Shares,
par value $0.01 per share
Date:____________, 1997
CYBERGUARD CORPORATION
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CAPITAL VENTURES
INTERNATIONAL, a corporation organized under the laws of the Cayman Islands
("CVI"), or its registered assigns, is entitled to purchase from CYBERGUARD
CORPORATION, a corporation organized under the laws of the State of Florida
(the "COMPANY"), at any time or from time to time during the period specified
in Section 2 hereof, _______________ (_________) fully paid and nonassessable
shares of the Company's Common Stock, par value $0.01 per share (the "COMMON
STOCK"), at an exercise price per share (the "EXERCISE PRICE") of $_____ per
share (and in no event less than $0.01). The number of shares of Common Stock
purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this
Warrant and the other warrants, if any, of the Company issued in connection
with the Private Securities Subscription Agreement by and between the Company
and CVI, dated April ___, 1997 (the "SUBSCRIPTION AGREEMENT").
This Warrant is subject to the following terms, provisions, and
conditions:
12. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the
limitations contained in Section 7 hereof, this Warrant may be exercised
by the holder hereof, in whole or in part by the surrender of this
Warrant, together with a completed exercise agreement in the form attached
hereto (the "EXERCISE AGREEMENT"), to the Company during normal business
<PAGE> 31
hours on any business day at the Company's principal executive offices (or
such other office or agency of the Company as it may designate by notice
to the holder hereof), and upon (i) payment to the Company in cash, by
certified or official bank check or by wire transfer for the account of
the Company, of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), delivery to the Company of a written notice of an
election to effect a Cashless Exercise (as defined in Section 11(c) below) for
the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or such holder's
designee, as the record owner of such shares, as of the close of business on
the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment shall have been made
for such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof within a reasonable
time, not exceeding three (3) business days, after this Warrant shall have been
so exercised. The certificates so delivered shall be in such denominations as
may be requested by the holder hereof and shall be registered in the name of
such holder or such other name as shall be designated by such holder. If this
Warrant shall have been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.
13. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time
to time on or after the date on which this Warrant is issued and before
5:00 p.m., New York City time on the third (3rd) anniversary of the date
of issuance (the "EXERCISE PERIOD").
14. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, claims and
encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or become listed (subject to official
notice of issuance upon exercise of this Warrant) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system.
<PAGE> 32
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the holder
of this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all of the Company's assets.
15. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price
and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Sections 4(c) and
4(e) hereof, if and whenever on or after the date of the first closing under
the Subscription Agreement, the Company issues or sells, or in accordance with
Section 4(b) hereof is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration per share less than the
Market Price (as hereinafter defined) on the date of issuance ("DILUTIVE
ISSUANCE"), then effective immediately upon the Dilutive Issuance, the Exercise
Price will be adjusted in accordance with the following formula:
E = E~x~{O+P OVER M} OVER CSDO
where:
<TABLE>
<S> <C> <C>
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in Section 4(b)
hereof, received by the Company upon such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed Outstanding
(as defined in Section 4(1)) immediately after the Dilutive Issuance
</TABLE>
<PAGE> 33
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "OPTIONS") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price on the date of issuance ("BELOW MARKET
OPTIONS"), then the maximum total number of shares of Common Stock issuable upon
the exercise of all such Below Market Options (assuming full exercise,
conversion or exchange of Convertible Securities, if applicable) will, as of the
date of the issuance or grant of such Below Market Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Below Market Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum aggregate amount of additional
consideration payable upon the exercise, conversion or exchange thereof at the
time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Below Market Options or upon the exercise, conversion
or exchange of Convertible Securities issuable upon exercise of such Below
Market Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
<PAGE> 34
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price on the date
of issuance of such Convertible Security was 75% of the Market Price on such
date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Market Price at any
time or times thereafter is less than or equal to the Assumed Variable Market
Price last used for making any adjustment under this Section 4 with respect to
any Variable Rate Convertible Security, the Exercise Price in effect at such
time shall be readjusted to equal the Exercise Price which would have resulted
if the Assumed Variable Market Price at the time of issuance of the Variable
Rate Convertible Security had been 75% of the Market Price existing at the time
of the adjustment required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted,issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise such Option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in effect
will be readjusted to the Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Company will be the
fair market value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the Market Price thereof as of the date of receipt. In case
any Common Stock, Options or Convertible Securities are issued in connection
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
market value of such portion of the net assets and business of the non-
<PAGE> 35
surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair market value of any
consideration other than cash or securities will be determined in good faith by
an investment banker or other appropriate expert of national reputation
selected by the Company and reasonably acceptable to the holder hereof, with
the costs of such appraisal to be borne by the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding on the date
of the first closing under the Subscription Agreement in accordance with the
terms of such securities as of such date; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time after the first closing under the Subscription Agreement subdivides
(by any stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) its shares of Common Stock into a greater number
of shares, then, after the date of record for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time after the first closing
under the Subscription Agreement combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior
to such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation
of the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time after the first closing under the Subscription Agreement,
then as a condition of such consolidation, merger or sale or conveyance,
adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Section 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the
<PAGE> 36
successor corporation (if other than the Company) assumes by written
instrument the obligations under this Section 4 and the obligations to deliver
to the holder of this Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be entitled to
acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION") at any time after the first closing under the
Subscription Agreement, then the holder of this Warrant shall be entitled upon
exercise of this Warrant for the purchase of any or all of the shares of Common
Stock subject hereto, to receive the amount of such assets (or rights) which
would have been payable to the holder had such holder been the holder of such
shares of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
<PAGE> 37
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall
be entitled to receive such dividend, distribution, or subscription rights or
to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If, at any time after the first closing
under the Subscription Agreement, any event occurs of the type contemplated by
the adjustment provisions of this Section 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Section 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number
of shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise
of the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment
is required, as of the date of issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the Nasdaq
National Market for the five (5) trading days immediately preceding such date,
or (ii) if the Nasdaq National Market is not the principal trading market for
the shares of Common Stock, the average of the last reported bid prices on the
principal trading market for the Common Stock during the same period, or, if
there is no bid price for such period, the last reported sales price for such
period, or (iii) if market value cannot be calculated as of such date on any of
the foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by
<PAGE> 38
the Company and reasonably acceptable to the holder, with the costs of the
appraisal to be borne by the Company. The manner of determining the Market
Price of the Common Stock set forth in the foregoing definition shall apply
with respect to any other security in respect of which a determination as to
market value must be made hereunder.
(iii) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Shares,
par value $0.01 per share, in respect of which this Warrant is exercisable, or
shares resulting from any subdivision or combination of such Common Stock, or
in the case of any reorganization, reclassification, consolidation, merger, or
sale of the character referred to in Section 4(e) hereof, the stock or other
securities or property provided for in such Section.
16. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than the holder of this
Warrant.
17. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant, in the absence
of affirmative action by the holder hereof to purchase Warrant Shares, and
no mere enumeration herein of the rights or privileges of the holder
hereof, shall give rise to any liability of such holder for the Exercise
Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
18. TRANSFER. EXCHANGE. REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder hereof are transferable with the prior written consent of
the Company, in whole or in part, upon surrender of this Warrant, together with
a properly executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Section 7(e) below, provided, however,
that any transfer or assignment shall be subject to the conditions set forth in
Section 7(f) and (g) hereof and to the provisions of Section 2(i) of the
Subscription Agreement and provided, further, that no consent of the Company
shall be required for transfers to affiliates of the holder and to clearing
firms that execute trades on behalf of the holder. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the registration
rights described in Section 8 hereof are assignable only in accordance with the
provisions of that certain Registration Rights Agreement, dated as of
____________, 1997, by and among the Company and the other signatory thereto
(the "REGISTRATION RIGHTS AGREEMENT").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different
<PAGE> 39
denominations representing in the aggregate the right to purchase the number
of shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof), a register for this Warrant,
in which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the
Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant. as the case may
be, furnish to the Company a written opinion of counsel (which opinion shall be
in form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to
the Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as
defined in Rule 501(a) promulgated under the Securities Act; provided that no
such opinion, letter or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER.
Notwithstanding anything contained herein to the contrary, in no event shall
the holder hereof exercise Warrants to the extent that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities (including, without
limitation, the Preferred Stock) of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein) and (b)
the number of shares of Common Stock issuable upon exercise of the Warrants (or
portion thereof) with respect to which the determination described herein is
being
<PAGE> 40
made, would result in beneficial Ownership by such holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (a) hereof. In addition, no Subject Holder (as defined below) may
sell or otherwise transfer in a private sale which is not a Permitted Sale (as
defined below) during any ninety (90) day period a portion(s) of the Warrants
or any other securities of the Company subject to limitations on sale or
transfer analogous to the limitations contained herein, which, if exercised for
or converted into Common Stock at the time of the transfer, would represent, in
the aggregate (together with any other shares of Common Stock transferred),
beneficial ownership by the transferee(s) of more than 4.9% of the Common Stock
then outstanding. For purposes of this paragraph, (i) "SUBJECT HOLDER" means
any holder of Warrants who, but for the provisions of the immediately preceding
Section and this Section, may be deemed to beneficially own 5% or more of the
outstanding Common Stock of the Company and (ii) "PERMITTED SALE" means any
sale or transfer (x) to the Company or to a shareholder or a group of
shareholders who immediately prior to the sale control a majority of the
Company's voting shares; (y) to an affiliate of such holder; or (z) in
connection with any merger, consolidation, reorganization or sale of more than
50% of the outstanding Common Stock of the Company. The first holder of this
Warrant, by taking and holding the same, represents to the Company that such
holder is acquiring this Warrant for investment only and not with a view to the
distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act.
(h) REDEMPTION. If, at any time after the first anniversary of
the date of issuance hereof, the closing bid price for the shares of Common
Stock as reported on the Nasdaq National Market (or the then principal
trading market for the Common Stock if not the Nasdaq National Market) (the
"REPORTED PRICE"), shall, for a period of twenty (20) consecutive trading days
(the "DETERMINATION PERIOD"), be greater than or equal to $_____ (subject to
equitable adjustments from time to time for the events described in Section
4(c)), then the Company shall have the right, exercisable on the first trading
day after the Determination Period, by written notice to the holders of this
Warrant (a "REDEMPTION NOTICE") of such exercise at least thirty (30) days
prior to the date of redemption (the "REDEMPTION DATE") to redeem this Warrant
and all, but not less than all, of the other Warrants then outstanding in full
at a redemption price per Warrant equal to the product of (i) the number of
shares of Common Stock issuable upon the exercise of such Warrant, multiplied
by (ii) $.01. Notwithstanding the foregoing, the Company shall not have the
right to redeem this Warrant pursuant to this Section 7(h) unless, on the
seventeenth (17th) day of the Determination Period, the Company notifies the
holder of this Warrant of the Company's potential ability to deliver a
Redemption Notice in three (3) days and the potential redemption price hereof.
Nothing herein shall prevent the exercise of, and the holder shall have the
right to exercise this Warrant at any time during the period after the
Redemption Notice and on or prior to the Redemption Date.
19. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights
in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement.
20. NOTICES. Any notices required or permitted to be given under the terms
of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after
<PAGE> 41
being placed in the mail, or upon receipt or refusal of receipt, if
delivered personally or by courier or confirmed telecopy, in each case
addressed to a party. The addresses for such communications shall be:
If to the Company:
CyberGuard Corporation
2101 West Cypress Creek Road
Fort Lauderdale, FL 33309
Telephone No.: (954) 973-5356
Fax No.: (954) 973-5160
Attention: General Counsel
with copy to:
Holland & Knight
One East Broward Boulevard
Suite 1300
Fort Lauderdale, FL 33301-4811
Telephone No.: (954) 468-7953
Fax No.: (954) 463-2030
Attention: D. Ronald Surbey, Esquire
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes
by notice given in accordance with this Section 9.
21. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed in the State of New York. The
Company irrevocably consents to the jurisdiction of the United States
federal courts located in Pennsylvania in any suit or proceeding based on
or arising under this Warrant and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in such courts. The
Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees that
service of process upon the Company mailed by first class mail shall be
deemed in every respect effective service of process upon the Company in
any such suit or proceeding. Nothing herein shall affect the holder's
right to serve process in any other manner permitted by law. The Company
agrees that a final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on
such judgment or in any other lawful manner.
22. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
<PAGE> 42
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time during the Exercise
Period, by presentation and surrender of this Warrant to the Company at its
principal executive offices with a written notice of the holder's intention to
effect a cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms
hereof (a "CASHLESS EXERCISE"). In the event of a Cashless Exercise, in lieu of
paying the Exercise Price in cash, the holder shall surrender this Warrant for
that number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market
Price per share of the Common Stock and the Exercise Price, and the denominator
of which shall be the then current Market Price per share of Common Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 43
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
CYBERGUARD CORPORATION
By:
Name:
Title:
<PAGE> 44
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
The undersigned hereby irrevocably exercises the right to purchase _______
of the shares of Common Stock of CyberGuard Corporation, a corporation
organized under the laws of the State of Florida (the "COMPANY"), evidenced by
the attached Warrant, and herewith makes payment of the Exercise Price with
respect to such shares in full, all in accordance with the conditions and
provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws, and agrees that the following
legend may be affixed to the stock certificate for the Common Stock hereby
subscribed for if resale of such Common Stock is not registered or if Rule
144(k) is unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER
SAID ACT.
ii. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
---------------------- Signature of Holder
Name of Holder (Print)
Address:
<PAGE> 45
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
- ---------------- -------------------------------------
and hereby irrevocably constitutes and appoints________________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:
---------------, ------
In the presence of
- -------------------- Name:
Signature:
Title of Signing Officer or Agent (if any):
Address:
Note: The above signature should correspond exactly
with the name on the face of the within
Warrant.
<PAGE> 46
EXHIBIT C
[Form of Opinion of Holland & Knight]
We have acted as counsel to CyberGuard Corporation, a Florida
corporation (the "Company"), in connection with the Private Securities
Subscription Agreement dated May __, 1997 (the "Agreement"), between the
Company and you. This opinion is provided to you at the request of the Company
pursuant to 6(iv) of the Agreement.
In connection with this opinion, we have examined executed copies of the
following documents:
1. The Agreement;
2. The Registration Rights Agreement among the Company and you dated
May __, 1997;
3. The form of Warrants attached to the Agreement as Exhibit B;
4. The Company's Articles of Incorporation, as amended, as
certified by the Secretary of State of the State of Florida on
___________;
5. The Company's Bylaws;
6. A certificate of good standing for the Company issued on _________
by the Secretary of State of Florida; and
7. Certificates, dated as of the date hereof, containing certain
representations and executed by certain officers of the Company in
connection with the Closing.
8. The Offering Memorandum, including the material incorporated there
in by reference.
9. Certificates, dated as of the date hereof, containing certain
representations and executed by certain officers of the Company in
connection with the Closing.
The documents numbered 1 through 3 listed above are hereinafter
collectively referred to as the "Transaction Documents" and the documents
numbered 4 through 7 listed above are hereinafter collectively referred to as
the "Constituent Documents".
This opinion is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage, and other limitations, all as
more particularly described in the Accord, and this opinion should be read in
conjunction therewith. The law covered by the opinions expressed herein is
limited to the federal laws of the United States and the laws of the State of
Florida. Except as otherwise indicated herein, capitalized terms used in this
opinion are defined as set forth in the Agreement or the Accord.
With respect to factual matters, we have relied upon the representations
made by the Company in Section 2 of the Agreement and the certificate referred
to in Item 9, above. With respect to our opinions expressed below relating to
valid existence and good standing, we have relied, without independent
investigation, upon the certificate of good standing referred to above.
To the extent that the laws of New York govern the Transaction Documents,
we assume that the interpretation and application of those laws to the
Transaction Documents will be the same as if they were governed by the laws of
Florida.The General Qualifications, the Bankruptcy
<PAGE> 47
and Insolvency Exception, the Equitable Principles Limitation, and the
Other Common Qualifications apply to the opinions expressed below.
The phrase "Primary Lawyer Group," as used in the Accord, is hereby
modified for purposes of applying the Accord to this Opinion to mean the
lawyers in this firm who have given substantive legal attention to
representation of the Company in connection with the Transactions.
Based upon and subject to the foregoing, we are of the opinion that:
(1) The Company and its subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, have all requisite corporate power and
authority to conduct their respective businesses as described in the Offering
Memorandum, or the materials incorporated by reference therein, own or lease
all of the assets owned or leased by them, and are duly licensed or qualified
as foreign corporations to do business in each jurisdiction in which the nature
of the business conducted by them makes such license or qualification necessary
and in which the failure to become so licensed or so qualify would have a
material adverse effect on the Company taken as a whole.
(2) The Company is not an "investment company" as defined in Section 3(a)
of the Investment Company Act of 1940, as amended, and, if the Company conducts
its business as described in the Offering Memorandum, or the materials
incorporated reference therein, will not become an "investment company" and
will not be required to register under the Investment Act.
(3) (i) The Company has the requisite corporate power and authority to
enter into and perform the Transaction Documents and to issue the Common Shares
and the Warrants, (ii) the execution and delivery of the Transaction Documents
and the Warrants by the Company and the consummation by the Company of the
transactions contemplated thereby have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board or Directors, or its stockholders is required, (iii) the Transaction
Documents have been duly authorized, executed and delivered by the Company and
(iv) the Transaction Documents constitute, and the Warrants, when duly executed
and delivered, will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
(4) The Common Shares have been validly issued and are fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. The delivery of the Common Shares pursuant to the terms of the
Transaction Agreements will pass title to the Common Shares to you, free and
clear of all liens, encumbrances and claims. The number of shares of Common
Stock issuable upon exercise of the Warrants has been duly reserved for such
issuance.
(5) As of the date hereof, the authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock, par value $0.01 per share,
of which ________ shares are issued and outstanding, and ________ shares are
reserved for issuance as follows:__________________, and (ii) 5,000,000 shares
of Preferred Stock, par value $0.01 per share, of which no shares are issued
and outstanding. All of such outstanding shares have been duly authorized and
validly issued and are fully paid and non-assessable. No shares of Common
Stock or Preferred Stock of the Company are subject to preemptive rights or any
other similar rights of the stockholders of the Company pursuant to the
Articles of Incorporation or Bylaws or by statute or pursuant to any agreement
by which the Company is bound of which we are aware, or have been issued in
<PAGE> 48
violation of any statutory preemptive rights or, to our Actual Knowledge,
similar contractual rights, and, to our Actual Knowledge, are not subject to
any liens or encumbrances. The Common Stock has been duly authorized for
quotation in the Nasdaq National Market. To our Actual Knowledge, except for
the rights contemplated under the Transaction Agreements, there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries, and there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the Securities Act of 1933, as
amended (the "Securities Act"), except the Registration Rights Agreement.
(6) Other than you and to those persons listed on Schedule 1 hereto, to
our Actual Knowledge no holder of any securities of the Company has the right
to require registration of shares of the Common Stock or other securities of
the Company. The description of the Common Shares contained, or incorporated
by reference, in the Offering Memorandum conforms to the rights set forth in
the instruments defining the same and is in conformity with the requirements of
the Securities Act.
(7) Based upon your representations, warranties and covenants set forth in
the Agreement, the Common Shares and the Warrants may be issued to you without
registration under the Securities Act.
(8) Other than necessary approvals that have been obtained and are in full
force and effect, no authorization, approval, license or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market, the stockholders of the Company, or, to our Actual
Knowledge, any third party is required to be obtained by the Company under the
Securities Act in connection with the (A) authorization, issuance, transfer,
sale or delivery of the Common Shares and the Warrants, or (B) execution,
delivery and performance of the Transaction Documents by the Company, or (C)
taking of any action contemplated in the Transaction Documents or any other
transactions contemplated thereby.
(9) To our Actual Knowledge, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body or any
governmental agency or self-regulatory organization pending or threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the Company taken as a whole or which would adversely affect the validity or
enforceability of or the authority or ability of the Company to perform its
obligations under the Transaction Documents.
(10) The Company is not in violation of any term of its Articles of
Incorporation or Bylaws. Neither the Articles of Incorporation nor the Bylaws
of the Company are in violation of the laws of the State of Florida. The
execution, delivery and performance of, and compliance with, the terms of the
Transaction Documents, the sale and issuance of the Common Shares and Warrants
(and the Common Stock issuable upon conversion or exercise thereof) and the
consummation by the Company of the transactions contemplated in the Transaction
Documents, do not (i) violate, conflict with, result in a breach of any of the
terms of provisions of (a) the Articles of Incorporation or Bylaws of the
Company or, (b) any provision of any applicable United States federal or state
law, rule or regulation; (ii) to our Actual Knowledge, violate or constitute a
default (or give rise to
<PAGE> 49
any right of termination, cancellation or acceltion) under (or an event which
with the passage of time or the giving of notice or both would constitute a
default under), or result in the creation of any lien, charge, security
interest or encumbrance on the assets or properties of the Company pursuant to
any indenture, mortgage, deed of trust, voting trust agreement, contract or
other agreement or instrument, binding upon the Company, or any existing
statute, rule or regulation, or any judgment, order or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties which, individually or
in the aggregate, would have a material adverse effect on the Company taken as
a whole.
(11) To our Actual Knowledge, all of the representations and warranties of
the Company contained in the Agreement or in any certificate or document
contemplated under the Transaction Documents are true and correct as of the
date hereof.
(12) Other than taxes that to our Actual Knowledge have been paid, there
are no transfer or similar taxes payable in connection with the sale and
delivery of the Common Shares or the Warrants (or the issuance of shares of
Common Stock upon the exercise of the Warrants) by the Company to you.
(13) A Registration Statement, Registration Number 333-******, relating to
your resale of the Common Shares (the "Registration Statement"), has been
declared effective under the Securities Act and, to our Actual Knowledge, no
stop order suspending the effectiveness of the Registration Statement has been
issued under the Securities Act or any part thereof and no proceedings for that
purpose have been instituted or threatened under the Securities Act or the
Securities Exchange Act of 1934, as amended.
In the process of our review of the Offering Memorandum, and the materials
incorporated by reference therein, although we have not engaged in any
independent investigation, and do not assume any responsibility for the
accuracy or completeness of the information contained therein, nothing has come
ntion that would lead us to believe that any of the Offering Memorandum or such
materials contains any untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of circumstances under which they were made, not misleading, as of
the date thereof, in the case of the Offering Memorandum, or the date of its
filing with the Securities and Exchange Commission, in the case of such
materials.
No opinion is expressed as to consents, authorizations or orders required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Common Shares or the Warrants.
<PAGE> 50
EXHIBIT A
OFFICER'S CERTIFICATE
I, _______________________, Executive Officer of CyberGuard Corporation, a
Florida corporation (the "Company"), do hereby certify that:
1. This Certificate is being delivered to and may be relied upon by
Holland & Knight LLP ("Counsel") in delivering its opinion of counsel
pursuant to the requirements of that certain Private Securities Subscription
Agreement dated May __, 1997 between the Company and Capital Ventures
International, Inc. and the documents related thereto (the "Transaction
Documents"). All initial capital words used herein and not otherwise
defined shall have the same meaning ascribed thereto in the Transaction
Documents.
2. Neither the Company nor any of its properties or assets, are bound
by, subject to or affected by any note, indebtedness, bond, mortgage, lien,
indenture, deed of trust, or other similar instrument or obligation other
than: (i) those set forth on Schedule 1 attached hereto; and (ii) debt
incurred in the ordinary course of business.
3. The Company's subsidiaries are:
4. The Company and its subsidiaries are authorized to do business in
the following jurisdictions:
5. None of the Company nor its subsidiaries is required to do business
in any jurisdiction other than those listed above.
6. There are ____________________ shares of Common Stock of the Company
outstanding and _____________________ shares of Preferred Stock outstanding.
The following shares of common stock are reserved for issuance for the
purposes set forth below:
7. No authorizations, approvals, consents of, and no filings or
registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by the Company of any
of the Transaction Documents to which its is a party or for the validity or
enforceability thereof, except as otherwise referred to in the Transaction
Documents.
8. There are no actions, suits, proceedings or investigations pending
or, threatened, including without limitation, actions, suits or proceedings
relating to product or service liability claims, against or affecting the
Company or any of its properties or business, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
whether as plaintiff or defendant, which individually or in the aggregate
could have a Material Adverse Effect. There is no state of facts or
contemplated event which may reasonably be expected to give rise to such
claim, action, suit, proceeding or investigation which could have a Material
<PAGE> 51
Adverse Effect. The Company is not operating under, or subject to, or in
default with respect to, any judgment, order, writ, injunction, rule,
regulation or decree of any court or federal, state, municipal or other
governmental agency or body, domestic or foreign.
9. The Company is not in violation of, or default under, and the
execution and delivery of the Transaction Documents, and the performance by
the Company of its obligations thereunder, will not be in conflict with, or
constitute (with or without the passage of time or giving of notice) a breach
of default under, or require any consent or waiver (other than any consents
or waivers that have been obtained) pursuant to, or result in the creation
of any mortgage, pledge, lien, encumbrance or charge upon the assets of the
Company under (i) any provision of the Articles of Incorporation or Bylaws
of the Company or (ii) any instrument, mortgage, deed of trust, contract or
agreement to which the Company is a party or by which it is bound, or (iii)
any judgment, decree or order of a court, tribunal or governmental authority
by which the Company is bound.
10. The schedules attached to the Transaction Documents have been
prepared by officers and employees of the Company and, to the best of my
knowledge, are accurate and complete and do not fail to include therein any
material fact necessary to make the statements therein not misleading.
<PAGE> 52
EXHIBIT D
FORM OF OFFICER'S CERTIFICATE
The undersigned, Chief ______________________ Officer of CYBERGUARD
CORPORATION, a Florida corporation (the "Company"), hereby certifies, on behalf
of the Company that:
All of the representations and warranties of the Company contained
in the Private Securities Subscription Agreement (the
"Agreement"), dated May 15, 1997, by and between the Company and
CAPITAL VENTURES INTERNATIONAL, a corporation organized under the
laws of the Cayman Islands, were true and correct on and as of the
date of execution of the Agreement, are true and correct on and as
of the date hereof and have been true and correct as of all times
between the date of such execution and the date hereof.
IN WITNESS WHEREOF, the undersigned has hereunto signed his name this
date of , 1997.
Chief Officer
----------------------
CyberGuard Corporation
<PAGE> 53
EXHIBIT E
FORM OF SHORELINE LETTER
[SHORELINE PACIFIC LETTERHEAD]
[date]
CyberGuard Corporation
2101 West Cypress Creek Road
Fort Lauderdale, Florida 33309
Attn.: Mr. Pat Wheeler, Chief Financial Officer
RE: CYBERGUARD CORPORATION (THE "COMPANY") PRIVATE SECURITIES SUBSCRIPTION
AGREEMENTS (THE "SUBSCRIPTION AGREEMENTS") DATED MARCH ____, 1997 BY AND
AMONG THE COMPANY AND CERTAIN BUYERS OF SHARES OF THE COMPANY'S COMMON
STOCK
Ladies and Gentlemen:
Reference is made to (i) the letter agreement between us dated February
18, 1997 (the "Engagement Letter") and (ii) the Subscription Agreements
executed in connection with the Company's private placement (the "Private
Placement") of shares of its Common Stock (the "Common Shares") for which we
have acted as the placement agent.
We hereby represent and warrant to the Company that we have conducted all
sales and solicitation efforts in a manner consistent with the requirements of
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and Rule
506 under Regulation D as promulgated by the Securities and Exchange Commission
under the Securities Act, both in respect those persons who are buyers of the
Common Shares and those who determined not to purchase Common Shares in the
Private Placement.
Further, we hereby consent and agree that the Company may, at its option,
make reference to Cowan & Co. in any press release or tombstone announcement as
having participated in the arranging of this financing for the Company.
Sincerely,
SHORELINE PACIFIC,
THE INSTITUTIONAL DIVISION OF FINANCIAL WEST GROUP
By:
<PAGE> 1
EXHIBIT 4.20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 15, 1997 (this
"AGREEMENT"), is made by and among CyberGuard Corporation, a Florida
corporation (the "COMPANY"), and the person named on the signature page hereto
(the "INVESTOR").
W I T N E S S E T H:
WHEREAS, in connection with the Private Securities Subscription Agreement,
of even date herewith between the Investor and the Company (the "SUBSCRIPTION
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the Investor
shares and warrants to purchase shares (collectively, the "COMMON SHARES" or
the "SHARES") of Common Stock, $0.01 par value (the "COMMON STOCK");
WHEREAS, the Subscription Agreement relates to an offering (the
"OFFERING") of Seven Million Five Hundred Thousand Dollars U.S. ($7,500,000),
which Subscription Agreement was received and countersigned by the Company on
May 15, 1997 (the "COMMITMENT DATE"), pursuant to which the Investor committed
to purchase the full $7,500,000 of Common Shares; and
WHEREAS, to induce the Investor to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "SECURITIES
ACT"), and applicable state securities laws with respect to the Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTOR" or "INVESTORS" means the Investor and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements on Form S-3 or another form acceptable to Investor in compliance
with the Securities Act and pursuant to Rule 415 under the Securities Act or
any successor rule providing for offering securities on a continuous basis
("RULE 415") and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
("SEC").
(iii) "REGISTRABLE SECURITIES" means the Shares.
(iv) "REGISTRATION STATEMENT" means a registration statement under the
Securities Act.
<PAGE> 2
(v) "RULE 144" means Rule 144 promulgated under the Securities Act.
(vi)"WARRANTS" means warrants to purchase Common Shares issued to the
Investor in connection with the Subscription Agreement.
(b) As used in this Agreement, the term Investor includes (i) each
Investor (as defined above) and (ii) each person who is a permitted transferee
or assignee of the Registrable Securities pursuant to Section 9 of this
Agreement.
(c) Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Subscription Agreement.
2. REGISTRATION.
(a) INITIAL REGISTRATION. The Company shall prepare and file with the SEC
within 30 days of the Commitment Date, a registration statement on Form S-3
covering at least 1,470,085 shares of Common Stock as Registerable Securities
hereunder, and which Registration Statement shall state that, in accordance
with Rule 416 under the Securities Act, such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
(b) PIGGY-BACK REGISTRATIONS. If at any time prior to the date which is
four years, in the case of Shares issuable upon the exercise of Warrants, or 30
months, in the case of other Shares, after the final closing date under the
Subscription Agreement the Company shall file with the SEC a Registration
Statement relating to an underwritten offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
of business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to each Investor who is
entitled to registration rights under this Section 2(b) written notice of such
determination and, if within twenty (20) days after receipt of such notice,
such Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registerable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registerable Securities with respect to which such Investor has
requested inclusion hereunder. Any exclusion of Registerable Securities shall
be made pro rata among the Investors seeking to include Registerable
Securities, in proportion to the number of registerable Securities sought to be
included by such Investors; provided, however, that the Company shall not
exclude any Registerable Securities unless the Company has first excluded all
outstanding securities the holders of which are entitled to inclusion of such
securities in such Registration Statement by reason of piggyback registration
rights, are not entitled to pro rata exclusion with the Registerable Securities
and are not entitled by right to inclusion of securities in such Registration
Statement; and provided further, however, that after giving effect to the
immediately preceding proviso, any exclusion of Registerable Securities shall
be made pro rata with holders of other securities having
<PAGE> 3
the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registerable Securities under this Section 2(b) shall be
construed to limit any registration required under Section 2(a) hereof. The
obligations of the Company under this Section 2(b) may be waived by Investors
holding a majority in interest of the Registerable Securities and shall expire
after the Company has afforded the opportunity for the Investors to exercise
registration rights under this Section 2(b) for two registrations; provided,
however, that any Investor who shall have had any Registerable Securities
excluded from any Registration Statement in accordance with this Section 2(b)
shall be entitled to include in an additional Registration Statement filed by
the Company the Registerable Securities so excluded. If an offering in
connection with which an Investor is entitled to registration under this
Section 2(b) is an underwritten offering, then each Investor whose Registerable
Securities are included in such Registration Statement shall, unless otherwise
agreed by the Company, offer and sell such Registerable Securities in an
underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
(c) ELIGIBILITY FOR FORM S-3. The Company represents and warrants that it
meets the requirements for the use of Form S-3 for registration of the sale by
the Investor of the Registerable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3.
(d) SALES UNDER RULE 144. Notwithstanding the registration of Registerable
Securities in accordance with Section 2(a), if at any time of offer and sale of
such Registerable Securities by an Investor such Registerable Securities can be
sold pursuant to Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at anytime permit the Investor
to sell securities of the Company to the public without registration ("RULE
144") in the manner, amount and on such terms as such Investor wishes to offer
and sell such Registerable Securities, such Investor may endeavor to offer and
sell such Registerable Securities pursuant to Rule 144; provided, however, that
such Investor shall not be required to limit the amount or manner of sale or
otherwise modify such offer or sale to use Rule 144; and provided further,
however, that such Investor shall have no liability to the Company under this
Section 2(d) if such Investor does not offer and sell such Registerable
Securities pursuant to Rule 144 notwithstanding the availability thereof.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of the
Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in no event later
than the applicable time periods set forth in Section 2(a)) a Registration
Statement or Statements with respect to all Registrable Securities to be
included therein, and thereafter use its best efforts to cause the Registration
Statement to become effective as soon as possible after such filing, and keep
the Registration Statement, if the Registration Statement utilizes to Rule 415,
effective at all times until such date as is four years, in the case of Shares
issuable upon the exercise of Warrants, or 30 months, in the case of other
Shares, after the date such Registration Statement is first ordered effective
by the SEC. In any case, the Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) filed by the Company
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in
<PAGE> 4
which they were made, not misleading; provided, however, that, subject to
the conditions set forth in Section 4(a) below, each Investor may notify the
Company in writing that it wishes to exclude all or a portion of its
Registrable Securities from such Registration Statement; provided further,
however, that if at any time one year or more after the final closing date
under the Subscription Agreement the Investor shall be entitled to sell all
Registrable Securities held by the Investor pursuant to Rule 144, in a period
of three consecutive months then the Company shall, so long as it meets the
current public information requirements of Rule 144, thereafter no longer be
required to maintain the registration of Registrable Securities pursuant to
this Agreement.
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until such
date as is two years or, two years and six months in the case where Seller has
exercised its option to extend the call period pursuant to the last paragraph
of Section 5 of the Subscription Agreement, after the date such Registration
Statement is first ordered effective by the SEC, and, during such period,
comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement;
(c) furnish to each Investor whose Registrable Securities are included in
the Registration Statement, (i) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Company, one
copy of the Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto and, in the
case of the Registration Statement referred to in Section 2(a), each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, each
item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(d) use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request, (ii)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect at
all times until such date as is the earlier of four years, in the case of
Shares issuable upon the exercise of Warrants, or 30 months, in the case of
other Shares, after the date such Registration Statement is first ordered
effective by the SEC and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (I) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (II) subject itself to general taxation in any such jurisdiction,
(III) file a general consent to service of process in any such jurisdiction,
(IV) provide any undertakings that cause more than nominal expense or burden to
the Company or (V) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
<PAGE> 5
(e) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold pursuant to such
registration of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request;
(f) as promptly as practicable after becoming aware of such event, notify
each Investor who holds Registrable Securities being sold pursuant to such
registration of the issuance by the SEC of any stop order or other suspension
of effectiveness of the Registration Statement at the earliest possible time;
(g) permit a single firm of counsel designated as selling stockholders'
counsel by the Investors who hold a majority in interest of the Registrable
Securities being sold pursuant to such registration to review the Registration
Statement and all amendments and supplements thereto a reasonable period of
time prior to their filing with the SEC, and shall not file any document in a
form to which such counsel reasonably objects;
(h) make generally available to its security holders as soon as practical,
but not later than ninety (90) days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following the
date of the Registration Statement;
(i) make available for inspection by any Investor whose Registrable
Securities are being sold pursuant to such registration, any underwriter
participating in any disposition pursuant to the Registration Statement and any
attorney, accountant or other agent retained by any such Investor or
underwriter (collectively, the "INSPECTORS"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "RECORDS"), as shall be reasonably necessary to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence (making such confidential
information known only to officers, agents or employees thereof who have a need
to know), shall not use any information so obtained for any purpose other than
preparation or review of the registration statement, and shall not make any
disclosure (except to an Investor or underwriter) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (ii) the release of such Records is
requested pursuant to a subpoena or other order from a court or government body
of competent jurisdiction, or (iii) the information in such Records has been
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector or Investor until and
unless such Investor or Inspector shall have
<PAGE> 6
entered into confidentiality agreements (in a form as is customary in
similar circumstances) with the Company with respect thereto, substantially in
the form of this Section 3(i). Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, to
undertake, at Investor's expense, appropriate action to prevent disclosure of,
or to obtain a protective order for, such information;
(j) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on
which similar securities issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange or (ii) secure designation of all the Registrable Securities
covered by the Registration Statement as a National Association of Securities
Dealers Automated Quotations System ("NASDAQ") "national market system
security" within the meaning of Rule 11Aa2-1 of the SEC under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the quotation of the
Registrable Securities on the Nasdaq National Market System; or, if, despite
the Company's best efforts to satisfy the preceding clause (i) or (ii), the
Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
arrange for at least two market makers to register with the National
Association of Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities;
(k) provide a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(l) cooperate with the Investors who hold Registrable Securities being
sold and the managing underwriter or underwriters, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be sold pursuant to the
denominations or amounts as the case may be, and registered in such names as
the Investors may reasonably request; and, within three business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC the Company shall deliver, and shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investor whose Registrable
Securities are included in such Registration Statement) instructions to the
transfer agent to issue new stock certificates without a legend and an opinion
of such counsel that the shares have been registered; and
(m) take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
<PAGE> 7
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of the
Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to each
Investor that such Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of the Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least fifteen (15) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor (the
"REQUESTED INFORMATION") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If within five
(5) business days prior to the filing date the Company has not received the
Requested Information from an Investor (a "NON-RESPONSIVE INVESTOR"), then the
Company may file the Registration Statement without including Registrable
Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement;
(c) Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e) or 3(f),
such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice;
(d) In the event Investors holding a majority in interest of Registerable
Securities being registered determined to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registerable Securities, unless such Investor has notified
the Company in writing of such Investor's election to exclude all of such
Investor's Registerable Securities from the Registration Statement; and
(e) No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registerable Securities
on the basis provided in any underwriting arrangements approved by the
Investors entitled hereunder to approve such arrangements, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably requested under the terms of such
underwriting arrangements and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and other fees and expenses of
investment bankers and any manager or managers of such underwriting and legal
expenses of the underwriters applicable
<PAGE> 8
with respect to its Registerable Securities, in each case to the extent not
payable by the Company pursuant to the terms of this Agreement.
5. EXPENSES OF REGISTRATION. All expenses (other than brokerage commissions
or discounts and, in connection with securities registered pursuant to
Section 2(b) hereof, the pro rata portion of state and federal filing
fees) incurred in connection with registrations, filings or qualifications
pursuant to Section 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees
and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Investors shall bear the fees and
out-of-pocket expenses of the one legal counsel selected by the Investors
pursuant to Section 3(g) hereof.
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, each person, if
any, who controls any Investor within the meaning of the Securities Act or the
Exchange Act, any underwriter (as defined in the Securities Act) for the
Investors, the directors, if any, of such underwriter and the officers, if any,
of such underwriter, and each person, if any, who controls any such underwriter
within the meaning of the Securities Act or the Exchange Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, expenses or
liabilities (joint or several) (collectively "CLAIMS") to which any of them
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations in the Registration Statement, or any
post-effective amendment thereof, or any prospectus included therein: (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any state securities law or any rule or regulation under
the Securities Act, the Exchange Act or any state securities law (the matters
in the foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS").
Subject to the restrictions set forth in Section 6(d) with respect to the
number of legal counsel, the Company shall reimburse the Investors and each
such underwriters or controlling person, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) (I) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by any
Indemnified Person or underwriter for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely
<PAGE> 9
made available by the Company pursuant to Section 3(c) hereof; (II) with
respect to any preliminary prospectus shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus,
as then amended or supplemented, if such prospectus was timely made available
by the Company pursuant to Section 3(c) hereof; (III) shall not be available to
the extent such Claim is based on a failure of the Investor to deliver or cause
to be delivered the prospectus made available by the Company; and (IV) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Persons and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify and hold harmless, to the
same extent and in the same manner set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement,
each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which any of
them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
(I) in reliance upon and in conformity with written information furnished to
the Company by such Investor expressly for use in connection with such
Registration Statement or (II) the Investor's violation of Regulation M; and
such Investor will promptly reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a
Claim as does not exceed the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the
untrue statement or omission of material fact contained in the preliminary
prospectus was corrected on a timely basis in the prospectus, as then amended
or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice of
<PAGE> 10
the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying parties
and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable written opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party or other party represented by such
counsel in such proceeding. The Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the claim relates. The failure to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in
its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification provided for herein is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Registrable Securities who was
not guilty of such fraudulent misrepresentation and (c) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of
the Company to the public without Registration, until such time as the
Investors have sold all the Registrable Securities pursuant to a
Registration Statement or Rule 144, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so
<PAGE> 11
filed by the Company and (iii) such other information as may be reasonably
requested to permit the Investor to sell such securities pursuant to Rule 144
without Registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to transferees or assignees of all
or any portion of such securities only if:
(a) (i) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (x) the name and address of such
transferee or assignee and (y) the securities with respect to which such
registration rights are being transferred or assigned, (ii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iii) at or before the time the Company
received the written notice contemplated by clause (i) of this subsection the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, and (iv) the transferee or assignee acquires
(or has the right to acquire) at least 100,000 shares of Common Stock as a
result of such transfer or assignment;
(b) in the case of a transfer or assignment which constitutes a transfer
or assignment of rights pursuant to the Subscription Agreement, such transfer
or assignment is not in violation of Section 15 of the Subscription Agreement;
or
(c) such transfer or assignment is made to an affiliate of any Investor or
a clearing or other agent of any Investor in connection with the customary
trading activities of such Investor.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
the written consent of the Company and Investor who hold a majority in
interest of the Registrable Securities. Any amendment of waiver effected
in accordance with this Section 10 shall be binding upon each Investor and
the Company.
11. MISCELLANEOUS.
(a) If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or when sent by registered mail, return receipt requested, addressed (i) if to
the Company, at CyberGuard Corporation, 2101 West Cypress Creek Road, Ft.
Lauderdale, FL 33309, Attention: Mr. Patrick Wheeler, Chief Financial Officer,
and (ii) if to the Investor, at the address set forth under its name in the
Subscription Agreement, or at such other address as each such party furnishes
by notice given in accordance with this Section 11(b), and shall be effective,
when personally delivered, upon receipt, and when so sent by certified mail,
four business days after deposit with the United States Postal Service.
<PAGE> 12
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of New York applicable to the agreements
made and to be performed entirely within such state, without giving effect to
rules governing the conflict of laws. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in the Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CYBERGUARD CORPORATION
By
----------------------------------------------
Patrick O. Wheeler,
Chief Financial Officer
Date: May 15, 1997
CAPITAL VENTURES INTERNATIONAL
BY: HEIGHTS CAPITAL MANAGEMENT, as agent
By
------------------------------------------
Andrew Frost,
President, Heights Capital Management
Date: May 15, 1997
<PAGE> 1
EXHIBIT 23.01
The Board of Directors
CyberGuard Corporation:
We consent to the sue of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the registration
statement.
KPMG Peat Marwick
Miami, Florida
June 4, 1997
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 33-00000) 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 4, 1997
