<PAGE> 1
As filed with the Securities and Exchange Commission on July 7, 1998
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 65-0510339
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 WEST COMMERCIAL BOULEVARD, SUITE 200
FORT LAUDERDALE, FLORIDA 33309
(954) 958-3900
(Address of principal executive offices, including zip code)
-----------------------
BRIAN FOREMNY, ESQ.
2000 WEST COMMERCIAL BOULEVARD, SUITE 200
FORT LAUDERDALE, FLORIDA 33309
(954) 958-3900
(Name, address and telephone number, including
area code, of agent for service)
WITH A COPY TO:
TEDDY D. KLINGHOFFER, ESQ.
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
150 WEST FLAGLER STREET, SUITE 2200
MIAMI, FLORIDA 33130
(305) 789-3200
Approximate date of commencement of proposed sale to the public:
from time to time after the effective date of the Registration Statement.
-----------------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, 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
================================================================================================================================
Proposed Proposed
maximum maximum Amount of
TITLE OF SECURITIES Amount to be offering price aggregate registration
TO BE REGISTERED(1) registered per share(2) offering price(2) fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 299,482 $9.28 $2,779,193 $820
================================================================================================================================
</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
pursuant to Rules 457(c) and (g) on the basis of the average of the
high and low prices of the Common Stock as quoted on the NASDAQ
National Market on July 1, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MIGHT DETERMINE.
================================================================================
<PAGE> 2
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.
SUBJECT TO COMPLETION, DATED JULY __, 1998
299,482 SHARES
OF CYBERGUARD CORPORATION
COMMON STOCK, PAR VALUE
$.01 PER SHARE
------------------------------------
This Prospectus relates to the offering by certain selling
securityholders (the "Selling Securityholders") of 299,482 shares (the "Shares")
of common stock, par value $.01 per share ("Common Stock"), of CyberGuard
Corporation, a Florida corporation ("CyberGuard" or the "Company"). The Shares
were received by the Selling Securityholders in connection with the Company's
acquisition of ARCA Systems, Inc. ("ARCA"), through the merger of ARCA
Acquisition Corporation ("Sub"), a Florida corporation and wholly-owned
subsidiary of CyberGuard, with and into ARCA with ARCA becoming a wholly-owned
subsidiary of CyberGuard (the "Merger").
The Selling Securityholders or their transferees may sell all or a part
of the Shares in transactions on the NASDAQ National Market ("NASDAQ") or in
negotiated transactions, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Securityholders may effect such transactions directly, or indirectly, by
selling the Shares to or through agents, broker-dealers or underwriters
designated from time to time and in connection with such sales, such agents,
broker-dealers or underwriters may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of the Shares for whom they may act as agent or to whom they may
sell Shares as principals, or both. See "Selling Securityholders" and "Plan of
Distribution." The Company will not receive any of the proceeds from the sale of
the Shares.
The Shares held by the Selling Securityholders were issued by the
Company on June 17, 1998, pursuant to the Merger. The Common Stock is quoted on
NASDAQ under the symbol "CYBG." On July 2, 1998, the closing sale price of the
Common Stock on NASDAQ was $9.75 per share.
INVESTMENT IN THE COMPANY'S COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" ON PAGES 4-10.
------------------------------------
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.
------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED BY THIS
PROSPECTUS IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO OR FROM
WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER, OR SOLICITATION OF AN OFFER. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED
PURSUANT TO THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
The date of this Prospectus is July 7, 1998.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................................................................................2
INFORMATION INCORPORATED BY REFERENCE....................................................................................3
THE COMPANY..............................................................................................................4
RISK FACTORS.............................................................................................................4
USE OF PROCEEDS.........................................................................................................10
ISSUANCE OF COMMON STOCK TO SELLING SECURITYHOLDERS.....................................................................10
PLAN OF DISTRIBUTION....................................................................................................11
SELLING SECURITYHOLDERS.................................................................................................12
LEGAL MATTERS...........................................................................................................13
EXPERTS ...............................................................................................................14
</TABLE>
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 periodic reports, proxy and information statements
and other information, with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act, relating to its business, financial statements and
other matters. Such reports, proxy and information statements and other
information can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices at 7 World Trade Center, Suite 1300, New York, N.Y.
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can also be obtained from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such information is also available on the
internet at http://www.sec.gov.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (the "Registration Statement") filed by the
Company with the SEC with respect to the securities to which the Prospectus
relates, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. In addition, certain documents filed by the Company with
the SEC have been incorporated in this Prospectus by reference. See "Information
Incorporated by Reference." For further information with respect to the Company
and the Common Stock, reference is made to the Registration Statement including
the exhibits thereto and the documents incorporated herein by reference.
Statements contained herein concerning the provisions of any document are not
necessarily complete and in each instance reference is made to the copy of the
document filed as an exhibit or schedule to the Registration Statement. Each
such statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the SEC.
The Common Stock is listed on NASDAQ and reports and proxy statements
and other information concerning the Company also can be inspected at the
offices of the NASDAQ, at 1735 K Street N.W., Washington, D.C. 20006-1500.
-2-
<PAGE> 4
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed with the SEC by the Company
are incorporated herein by this reference:
(1) The Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997, filed with the SEC
on September 29, 1997, as amended on Form 10-K/A for
the fiscal year ended June 30, 1997, filed with the
SEC on October 22, 1997, and as amended on Form
10-K/A for the fiscal year ended June 30, 1997, filed
with the SEC on October 28, 1997.
(2) The Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997, filed with
the SEC on November 13, 1997.
(3) The Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 1997, filed with
the SEC on February 13, 1998.
(4) The Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998, filed with the
SEC on May 15, 1998.
(5) The Company's Current Report on Form 8-K, dated
November 20, 1997 filed with the SEC on November 20,
1997.
(6) The Company's Current Report on Form 8-K, dated June
17, 1998, filed with the SEC on June 23, 1998.
(7) The description of the Company's Common Stock
contained in its Registration Statement on Form 10,
filed with the SEC on July 20, 1994.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference herein and made a part hereof from the date of filing of such
documents. Any statements contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof to the
extent that a statement contained herein (or in any other subsequently filed
document which also is incorporated by reference herein) modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO CYBERGUARD CORPORATION, 2000 WEST COMMERCIAL
BOULEVARD, SUITE 200, FORT LAUDERDALE, FLORIDA 33309, ATTENTION: BRIAN FOREMNY,
ESQUIRE; TELEPHONE (954) 958-3900.
-3-
<PAGE> 5
THE COMPANY
CyberGuard is a company engaged in the business of providing Internet
and Intranet security solutions to Fortune 1000 and other companies and
government agencies worldwide. The Company's firewall and related security
products comprise a software suite of products that are designed to protect the
integrity of electronic data and customer applications from unauthorized
individuals and digital thieves. The Company extended its product offering with
the April 1997 formation of its TradeWave subsidiary. TradeWave provides digital
certificate authority products and services to safeguard electronic commerce
applications.
On June 17, 1998, the Company completed the acquisition of ARCA
pursuant to an Agreement and Plan of Merger, dated May 29, 1998 (the "Merger
Agreement"), among CyberGuard, ARCA, ARCA Acquisition Corporation ("Sub") and
certain shareholders of ARCA. ARCA is a high-end security integration services
firm specializing in practical applications of advanced security technology for
information services. ARCA provides assistance, guidance, planning, methods and
training to a wide variety of customers in the private industry and governmental
organizations.
CyberGuard's principal executive offices are located at 2000 West
Commercial Boulevard, Fort Lauderdale, Florida 33309, and its telephone number
is (954) 958-3900. The Common Stock is traded on NASDAQ under the symbol "CYBG."
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS
SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
BEFORE DECIDING TO INVEST IN THE COMMON STOCK OFFERED HEREBY.
THIS PROSPECTUS CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTANTIES. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE,"
"INTEND," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF
OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS ARE BASED UPON ASSUMPTIONS AND ANALYSES MADE BY THE COMPANY IN
LIGHT OF CURRENT CONDITIONS, FUTURE DEVELOPMENTS AND OTHER FACTORS THE COMPANY
BELIEVES ARE APPROPRIATE IN THE CIRCUMSTANCES, OR INFORMATION OBTAINED FROM
THIRD PARTIES AND ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS AND
UNCERTAINTIES. READERS ARE CAUTIONED THAT FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND THAT ACTUAL RESULTS MIGHT DIFFER MATERIALLY
FROM THOSE SUGGESTED OR PROJECTED IN THE FORWARD-LOOKING STATEMENTS. SOME OF THE
FACTORS THAT MAY CAUSE ACTUAL FUTURE EVENTS TO DIFFER FROM THOSE PREDICTED OR
ASSUMED INCLUDE: GENERAL ECONOMIC AND BUSINESS CONDITIONS, INCLUDING CHANGES IN
TECHNOLOGY AND INDUSTRY STANDARDS; EXPENDITURES FOR RESEARCH AND DEVELOPMENT;
PERFORMANCE OF FINANCIAL MARKETS; CHANGES IN DOMESTIC AND FOREIGN LAWS,
REGULATIONS AND TAXES; LACK OF PROFITABILITY; CASH PROVIDED BY OPERATIONS;
INTEGRATION OF THE OPERATIONS OF CYBERGUARD AND ARCA, INCLUDING THE FAILURE TO
REALIZE SYNERGIES OR THE BENEFITS FROM THE MERGER; THE COMPANY'S ABILITY TO
EXECUTE ON ITS BUSINESS PLANS; CHANGES IN BUSINESS STRATEGIES OR DEVELOPMENT
PLANS; THE COMPANY'S DEPENDENCE ON OUTSIDE PARTIES SUCH AS ITS KEY CUSTOMERS AND
ALLIANCE PARTNERS; COMPETITION; RISKS ASSOCIATED WITH GROWTH AND EXPANSION;
UNCERTAINTIES IN AVAILABILITY OF EXPANSION CAPITAL IN THE FUTURE AND OTHER RISKS
ASSOCIATED WITH CAPITAL MARKETS.
-4-
<PAGE> 6
LIMITED OPERATING HISTORY IN THE COMMERCIAL NETWORK SECURITY MARKET;
UNPREDICTABILITY OF OPERATING RESULTS
Although CyberGuard has been developing network security products since
1989, it has operated in the commercial network security market only since 1994.
Risks inherent in CyberGuard's business include, among other things, its short
operating experience in, and the rapidly changing and intensely competitive
nature of, the commercial network security market, the uncertainty of acceptance
of CyberGuard's products, the reliance of such products on the Internet, the
timing of orders and shipments of products, the introduction of new products by
CyberGuard, the introduction or the announcement of competitive products and the
early development stage of the distribution channels through which CyberGuard's
products are sold. A substantial portion of CyberGuard'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. CyberGuard has
not recorded a net operating profit since its inception. There can be no
assurance that CyberGuard will be able to continue growth in sales of its
products in the future or that the level of sales in the future will not
decrease from past levels. There is no assurance when CyberGuard will become
profitable, if ever. There can be no assurance that in future quarters
CyberGuard'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. Since the
sale of CyberGuard's real-time business in 1996, CyberGuard's cash requirements
have been funded from its working capital, operating cash flow and external
capital from the sale of its Common Stock and investment securities. On May 15,
1997, the Company entered into a Private Securities Subscription Agreement (the
"Subscription Agreement") pursuant to which an investor agreed to purchase, and
the Company agreed to sell, $7,500,000 in shares of Common Stock at a negotiated
price based on the average per-share closing bid price as reported by Bloomberg,
L.P. over a period preceding a "call for proceeds" by the Company. Pursuant to
the Subscription Agreement, the Company has sold to the investor an aggregate of
1,143,117 shares of Common Stock, in exchange for $7,500,000. The Company may in
the future seek additional financing under an arrangement such as the
Subscription Agreement. The issuance of Common Stock, and possibly warrants to
purchase Common Stock, under such additional financings could result in dilution
of the interests of existing and future security holders.
The Company has in place a line of credit with a financial institution
that is secured by all the assets of the Company and under which the Company is
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 would subject the Company's
assets to seizure upon default.
In the event that the Company requires additional 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.
RISKS ASSOCIATED WITH NETWORK SECURITY MARKET
The market for CyberGuard's products is continuing to emerge. The rapid
development of the Internet 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. 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
conditions or other factors, could have a material adverse effect on the
business, financial condition and results of operations (a "Material Adverse
Effect") on CyberGuard.
-5-
<PAGE> 7
COMPETITION
The market for network security products and services is intensely
competitive, rapidly evolving and characterized by frequent technological
change. CyberGuard expects competition to persist and intensify in the future.
CyberGuard's principal current competitors include Network Associates, Check
Point Software Technologies Ltd., Axent Technologies, Inc., and Secure Computing
Corporation. In addition, companies such as Security Dynamics Technologies,
Inc., Digital Equipment Corporation, International Business Machines Corporation
and Sun Microsystems, Inc. sell products with similar features and functions
that could be considered competitors of CyberGuard. Several other companies
offering other network and other computer-related products, including Microsoft
Corporation, CISCO Systems, Inc. and Lucent Technologies, Inc., from time to
time have indicated that they may enter the commercial network security market.
Many of CyberGuard's current and potential competitors have greater name
recognition, larger installed customer bases and significantly greater
financial, technical or marketing resources than CyberGuard. 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 CyberGuard. In addition, certain of CyberGuard'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 CyberGuard. Such competition and any resulting
reduction in pricing and gross margins could have a Material Adverse Effect on
CyberGuard. There can be no assurance that CyberGuard's competitors will not
develop network security products using approaches substantially similar to or
different from CyberGuard's that may be more effective than CyberGuard's current
or future products or that CyberGuard's technologies and products would not be
rendered obsolete by such developments.
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 CyberGuard's
existing products obsolete or unmarketable. Advances in techniques employed by
individuals and entities seeking to gain unauthorized access to networks could
expose CyberGuard's existing products to new and unexpected attacks and require
accelerated development of new products. There can be no assurance that
CyberGuard will be able to counter challenges to its current products, that
CyberGuard's future product offerings will keep pace with technological changes
implemented by competitors or persons seeking to breach network security, that
CyberGuard will be able to establish and maintain any strategic technical
alliances necessary to achieve a competitive advantage or that CyberGuard will
be successful in developing and marketing products for any future technology.
The development cycle for CyberGuard's new products may be significantly longer
than CyberGuard'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 CyberGuard. Moreover, the
costs of developing new products, and related sales and marketing expenses, can
be significant before such products are in a position to deliver significant
sales or cash flow to CyberGuard. There can be no assurance that new product
introduction will be executed without materially and adversely affecting
CyberGuard's business, financial condition and results of operations.
DEPENDENCE ON PRINCIPAL PRODUCT; UNCERTAINTY OF PRODUCT ACCEPTANCE
Sales of CyberGuard's CyberGuard Firewall in the commercial network
security market account for a substantial portion of CyberGuard's sales, and
CyberGuard 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 CyberGuard. CyberGuard's future
success depends on the continued adoption of CyberGuard's CyberGuard Firewall
and other network security products by users. The market acceptance of
CyberGuard'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
-6-
<PAGE> 8
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 CyberGuard's products, particularly its CyberGuard Firewall, will
continue to achieve acceptance in the network security market, and the failure
of CyberGuard's products to achieve such continued market acceptance could have
a Material Adverse Effect on CyberGuard. Moreover, CyberGuard 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 CyberGuard's products. As the
network security industry continues to evolve, CyberGuard'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 CyberGuard 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 CyberGuard will be able to
maintain such acceptance for a significant period of time. Any significant delay
in the introduction of CyberGuard's future products could result in loss of
market share and could have a Material Adverse Effect on CyberGuard.
DEPENDENCE ON THE INTERNET
The success of CyberGuard's products and services will depend in large
part upon the development of an infrastructure for providing Internet access and
services. Because global commerce and on-line 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 Internet will prove to be a
viable commercial marketplace. The Internet has experienced, and is expected to
continue to experience, significant, geometric growth in the number of users and
amount of traffic. There can be no assurance that the Internet infrastructure
will continue to be able to support the demands placed on it by this continued
growth. In addition, the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols (for example, the
next-generation Internet Protocol) to handle increased levels of Internet
activity, or due to increased governmental regulation. If the necessary
infrastructure or complementary services or facilities are not developed, or if
the Internet does not become a viable commercial marketplace, CyberGuard's
business, results of operations and financial conditions could be materially
adversely affected.
DEPENDENCE ON RESELLERS; NEED TO ESTABLISH COLLABORATIVE MARKETING ARRANGEMENTS
In marketing its products, CyberGuard depends substantially, and
expects to increase its dependence, upon the performance of indirect sales
channels, including systems integrators and VARs and consultants, over which
CyberGuard does not have complete authority. CyberGuard is unable to predict
with accuracy the extent to which its resellers and other marketing partners
will be successful in marketing and selling CyberGuard's products. Moreover,
CyberGuard's future success will depend in part on its ability to establish
further collaborative marketing relationships in other indirect sales channels.
There can be no assurance that CyberGuard's existing or contemplated
collaborative relationships will be commercially successful, that CyberGuard
will be able to negotiate additional collaborative relationships, that such
additional collaborations will be available to CyberGuard 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 CyberGuard has
established collaborative relationships will not pursue alternative technologies
or develop alternative products in addition to or in lieu of CyberGuard's
products either on their own or with others, including CyberGuard's competitors.
The loss of several of CyberGuard'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 CyberGuard. CyberGuard
expects to continue to add substantially to its pre-sales, field support, and
marketing staffs in order to support the sales activities of an expanding
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 CyberGuard's sales and marketing
organization will successfully compete against the more extensive and
well-funded sales and marketing operations of many of CyberGuard's current and
future competitors.
RISK OF ERRORS OR FAILURES
Products as complex as those offered by CyberGuard may contain
undetected errors when first introduced or when new versions are released. There
can be no assurance that errors will not be found in new products or releases
after
-7-
<PAGE> 9
commencement of commercial shipments by CyberGuard. A computer break-in or other
disruption experienced by one of CyberGuard's customers, if caused by errors or
failures in CyberGuard's products, could result in product recalls and liability
under CyberGuard'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 CyberGuard or its products, even if CyberGuard's
products are not the cause of the security breach. Alleviating such problems
could require significant expenditures of capital and resources by CyberGuard,
could cause interruptions, delays or cessation of service to CyberGuard's
customers and could have a Material Adverse Effect on CyberGuard. CyberGuard
attempts to limit its liability to customers, including liability arising from a
failure of the security features contained in CyberGuard'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 CyberGuard's products or as
against parties who have an interest in data stored on networks that might be
compromised by a failure of CyberGuard's product. While CyberGuard 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
CyberGuard's products or will continue to be available to CyberGuard on
commercially reasonable terms or at all.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; RISK OF
LITIGATION
CyberGuard 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. CyberGuard currently does not hold any patents and has no
pending patent applications to cover any aspects of its technology. There can be
no assurance that CyberGuard's conflict of interest or non-disclosure agreements
will provide meaningful protection of CyberGuard's proprietary information.
Further, CyberGuard 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. If CyberGuard were unable to maintain a
competitive advantage based on proprietary rights, it could have a Material
Adverse Effect on CyberGuard. 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 CyberGuard or that CyberGuard's technology will not infringe upon patents or
other rights owned by others. Likewise, there can be no assurance that third
parties will not assert infringement claims against CyberGuard in the future
with respect to current or future products. Although CyberGuard 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
CyberGuard. Adverse determinations in such claims or litigation could also have
a Material Adverse Effect on CyberGuard.
DEPENDENCE ON KEY PERSONNEL
CyberGuard's success depends to a significant degree upon the
continuing contributions of its key management, sales, marketing and product
development personnel. The loss of the services of any key employee could
adversely affect CyberGuard's financial condition and results of operations.
CyberGuard believes that its future success will depend in large part upon its
ability to attract and retain highly skilled managerial, sales, marketing and
product development personnel. CyberGuard requires consulting services and
product development personnel who are highly technically trained in the field of
information security. CyberGuard has at times experienced, and continues to
experience, difficulty in recruiting qualified personnel. Competition for
qualified personnel in the software industry is intense, and there can be no
assurance that CyberGuard will be successful in retaining its key employees or
that it can attract or retain additional skilled personnel as required.
INABILITY TO SUCCESSFULLY INTEGRATE OPERATIONS
The Merger involves the integration of two companies that have
previously operated independently. Among the factors considered by the Company
in connection with the Merger was the expectation that the Merger would result
in certain
-8-
<PAGE> 10
benefits, including, without limitation, operating efficiencies, revenue
enhancement, a strategic alliance and other synergies. Achieving the benefits of
the Merger will depend in part on the integration of the businesses of
CyberGuard and ARCA in an efficient manner and no assurance can be given that
CyberGuard will not encounter difficulties in integrating such operations or
that the benefits and operating synergies anticipated from such integration will
be realized. CyberGuard's growth and profitability will be affected by its
ability to consolidate and rationalize the business, operations and employees of
ARCA. Such consolidation of operations will require substantial attention from
management. Any delays or unexpected costs incurred in connection with such
integration, the diversion of management attention and any other difficulties
encountered in the transition and integration process could have a Material
Adverse Effect on CyberGuard. No assurance can be given that the strategic
synergies considered by the Board of CyberGuard in connection with the Merger or
other potential benefits will be realized. There can be no assurance that
CyberGuard or ARCA will not experience the loss of significant personnel or
customers in connection with the Merger.
RECENT AND POTENTIAL ACQUISITIONS
In the normal course of its business, CyberGuard evaluates potential
acquisitions of businesses, products and technologies that could complement or
expand CyberGuard's network security business. In the event CyberGuard were to
identify an appropriate acquisition candidate, there is no assurance that
CyberGuard would be able to successfully negotiate the terms of any such
acquisition, finance such acquisition and integrate such acquired business,
products or technologies into CyberGuard's existing business and operations.
Furthermore, the integration of an acquired business could cause a diversion of
management time and resources. There can be no assurance that a given
acquisition, when consummated, would not materially adversely affect
CyberGuard's business, financial condition and results of operations. If
CyberGuard proceeds with one or more significant acquisitions in which the
consideration consists of cash, a substantial portion of CyberGuard's available
cash could be used to consummate the acquisitions. If CyberGuard 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
CyberGuard could suffer a significant dilution of their interests in CyberGuard.
INTERNATIONAL SALES RISKS
CyberGuard has historically received a significant portion of its
revenue from sales outside of North America, and expects to continue to expand
its marketing efforts abroad (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in CyberGuard's Form 10-K and
10-Q's incorporated herein by reference for more information on the levels of
CyberGuard's international sales). International sales are subject to certain
risks, such as currency fluctuations, that could make CyberGuard's products less
competitive in foreign markets and contribute to fluctuations in CyberGuard's
operating results. In addition, CyberGuard is subject to the usual risks of
doing business abroad, including increases in duty rates, the introduction of
non-tariff barriers and difficulties in enforcement of intellectual property
rights. 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 CyberGuard's products and intellectual property rights
to the same extent as the laws of the United States. CyberGuard has historically
generated a significant percentage of its revenues from certain Asian and
Pacific-rim countries that currently are undergoing severe economic
difficulties. In the past, these countries contributed to CyberGuard's revenue
growth, but the potential for growth from this region has become uncertain. It
is not possible to predict when this region will recover from its economic
crisis, or to predict this crisis' direct and indirect impact on CyberGuard's
future financial results. There can be no assurance that these factors would not
have a Material Adverse Effect on CyberGuard.
EFFECT OF GOVERNMENT REGULATION OF TECHNOLOGY EXPORTS
CyberGuard's international sales and operations may be subject to risks
such as the imposition of governmental controls, export license requirements,
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, CyberGuard could become unable to export
its most robust network security products. As a result, foreign competitors that
face less stringent controls
-9-
<PAGE> 11
on their products may be able to compete more effectively than CyberGuard in the
global network security market. There can be no assurance that these factors
would not have a Material Adverse Effect on CyberGuard.
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 CyberGuard's ability to raise capital through an offering of its
equity securities. There are approximately 9,393,000 shares of Common Stock
outstanding, all of which (upon the effectiveness of Registration Statements
that will be filed for the resale of shares being issued in the Merger), will be
tradable without restriction under the Securities Act. See "Issuance of Common
Stock to Selling Securityholders." An additional 2,215,525 shares of Common
Stock are issuable upon exercise of options that are currently outstanding (a
majority of which are in-the-money and approximately 33.5% of which are
currently exercisable), and 165,000 shares are issuable upon the exercise of
outstanding warrants to purchase Common Stock. A total of 302,585 shares of
Common Stock or options thereon are available for future issuance under
CyberGuard's Stock Incentive Plan and an additional 14,850 shares are
"restricted stock", subject to certain employment restrictions.
ABSENCE OF DIVIDENDS
CyberGuard does not intend to pay any cash dividends for the
foreseeable future. CyberGuard intends to follow a policy of retaining earnings,
if any, to finance the development and expansion of its business.
ANTI-TAKEOVER PROVISIONS
CyberGuard's Articles of Incorporation and Bylaws 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 CyberGuard. 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 Bylaws, 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. CyberGuard 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 CyberGuard 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 CyberGuard,
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 of the Shares offered hereby are being sold by the Selling
Securityholders. The Company will not receive any of the proceeds from the sale
of the Shares offered hereby.
ISSUANCE OF COMMON STOCK TO SELLING SECURITYHOLDERS
On June 17, 1998, the Company completed the acquisition of ARCA
pursuant to the Merger Agreement through the merger of Sub with and into ARCA,
with ARCA becoming a wholly-owned subsidiary of the Company.
-10-
<PAGE> 12
In connection with the Merger, (i) each of the 3,726,667 shares of ARCA
common stock issued and outstanding immediately prior to the Merger was
converted into the right to receive .11819 shares of Common Stock; (ii) each of
the 76,130 shares of ARCA Series A preferred stock issued and outstanding
immediately prior to the Merger was converted into the right to receive .54817
shares of Common Stock; (iii) each of the 515,000 shares of ARCA Series B
preferred stock issued and outstanding immediately prior to the Merger was
converted into the right to receive .19361 shares of Common Stock; and (iv)
certain loans, which aggregated approximately $113,000 with principal and
interest, to ARCA from certain shareholders of ARCA (the "Shareholder Loans")
were converted into and exchanged for 8,577 shares of Common Stock. In the
aggregate, approximately 590,429 shares of Common Stock, constituting
approximately 6.7% of the Company's then-outstanding shares, were issued in the
Merger with an additional 124,463 shares reserved for issuance pursuant to
options outstanding under the 1988 Stock Plan of ARCA Systems, Inc. which was
assumed by the Company in the Merger. The Merger will be accounted for by the
Company under the "pooling-of interests" method of accounting in accordance with
generally accepted accounting principles.
In connection with the Merger, the Company agreed to register the
shares of Common Stock to be received by the ARCA shareholders in the Merger in
three tranches over a 270-day period (the "Registration Agreement") on three
Registration Statements on Form S-3. The Company agreed to use its best efforts
to file (i) no later than three business days after the closing of the Merger
Agreement (the "Closing"), a Registration Statement on Form S-3 covering 50% of
the Shares issued to the ARCA shareholders as a result of the Merger together
with all of the Common Stock issued to certain shareholders of ARCA in exchange
for the Shareholder Loans; (ii) no later than 150 days after the Closing, a
Registration Statement on Form S-3 covering 30% of the Shares issued in
connection with the Merger; and (iii) no later than 270 days after the Closing a
Registration Statement on Form S-3 covering the remaining 20% of the shares of
Common Stock issued in connection with the Merger. In connection with the
Merger, an aggregate of 58,185 Shares of Common Stock representing 10% of the
total Shares of Common Stock issued by CyberGuard in the Merger, were delivered
into escrow by Messrs. Wilson, Weidner and Bauer as security for certain
indemnity obligations. Therefore, certain shares registered pursuant to the
above referenced Registration Statements will remain in escrow until released
pursuant to that certain escrow agreement among CyberGuard, counsel to
CyberGuard and Messrs. Wilson, Weidner and Bauer.
PLAN OF DISTRIBUTION
The Selling Securityholders may sell the Shares in transactions on the
NASDAQ or in privately negotiated transactions, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders may effect such transactions
directly, or indirectly, by selling the Shares to or through agents,
broker-dealers or underwriters designated from time to time, and such agents,
broker-dealers or underwriters may act as principal or agent and may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Securityholders and/or the purchasers of Shares for whom they
may act as agent or to whom they sell as principals, or both. The Selling
Securityholders and any agents, broker-dealers or underwriters that act in
connection with the sale of Shares might be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any discount or
commission received by them and any profit on the resale of Shares as principal
might be deemed to be underwriting discounts or commissions under the Securities
Act. Any securities covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
To the extent required, the number of Shares to be sold, the purchase
price and public offering price, the name or names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offering will be set forth in a supplement to this Prospectus to be
filed with the SEC pursuant to Rule 424 under the Securities Act.
Pursuant to the Registration Agreement, the Company has agreed to use
its best efforts to cause the Registration Statement of which this Prospectus is
a part to become effective and to remain effective until two years from such
date it is declared effective by the SEC.
-11-
<PAGE> 13
The Company will receive no portion of the proceeds from the sale of
the Shares. The Selling Securityholders and each person who controls the Selling
Securityholders, within the meaning of the Securities Act and the Exchange Act,
will be indemnified by the Company against certain civil liabilities, including
certain liabilities which may arise under the Securities Act.
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to the
Selling Securityholders as of June 17, 1998, as follows: (i) the name and
position or other relationship (if any) with the Company within the past three
years of the Selling Securityholders; (ii) the number of outstanding shares of
Common Stock beneficially owned by the Selling Securityholders prior to the
Offering hereby (excluding shares of Common Stock issuable upon the exercise of
certain options by the Selling Securityholders); (iii) the number of shares of
Common Stock offered hereby; (iv) the number of outstanding shares of Common
Stock beneficially owned by the Selling Securityholders after the completion of
the Offering; and (v) the percent (if one percent or more) of outstanding shares
of Common Stock beneficially owned by the Selling Securityholders after the
completion of the Offering.
<TABLE>
<CAPTION>
Number of Number of Percent of
Shares Owned Number of Shares Owned Shares Owned
Shareholders Prior to Offering(1) Shares Offered(2) After Offering After Offering
- ------------ -------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
R. Kenneth Bauer (3) 141,829 70,914 70,915 *
Robert E. Bauer 24,985 13,788 11,197 *
Gordon L. Buhle 738 369 369 *
Diann and Scott Carpenter, 29 14 15 *
joint tenants
Sandy Creyssels 456 228 228 *
Jeffrey T. DeMello 738 369 369 *
Charles and Alice Doxie 1,096 548 548 *
E. Lance Doxie 2,740 1,370 1,370 *
Lawrence R. Halme 9,114 6,210 2,904 *
Arnold M. Harrison 10,473 5,236 5,237 *
Frederick and Donna 1,418 709 709 *
Henninge, joint tenants
Vincent O. and Barbara 2,740 1,370 1,370 *
Lacariere, joint tenants
John Philip and Eve Wood 10,209 5,104 5,105 *
Melton, trustee of Melton
Family Trust
Sally A. Moulton 88 44 44 *
Richard Perez 58,081 29,040 29,041 *
Judi L. Piatanesi 952 476 476 *
Rochelle Randel 472 236 236 *
Stanley and Winnie 1,644 822 822 *
Rybczynski, joint tenants
Marvin Schaefer (4) 20,837 10,418 10,419 *
</TABLE>
-12-
<PAGE> 14
<TABLE>
<CAPTION>
Number of Number of Percent of
Shares Owned Number of Shares Owned Shares Owned
Shareholders Prior to Offering(1) Shares Offered(2) After Offering After Offering
- ------------ -------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Elizabeth J. and Douglas H. 1,300 650 650 *
Slater, joint tenants
Victoria P. Thompson (4) 590 295 295 *
Michael L. Weidner (3) 141,829 70,914 70,915 *
David R. Wichers 945 472 473 *
Frances L. Wichers, 1,936 968 968 *
Revocable Trust
Steven K. Wilson 9,680 4,840 4,840 *
William F. Wilson (3) 144,477 73,562 70,915 *
William S. Wisseman 147 73 74 *
Jack and Laura Wool, joint 886 443 443 *
tenants (4)
TOTAL 590,429 299,482 290,947
</TABLE>
- ------------------------------------
*Less than 1%
(1) The number of Shares of Common Stock listed under this column represents
all the Shares of Common Stock issued to each Selling Securityholder in the
Merger for each share of ARCA common stock, ARCA Series A preferred stock
and ARCA Series B preferred stock and the Shareholder Loans converted in
the Merger.
(2) The number of Shares of Common Stock listed under this column represents
50% of the Shares of Common Stock issued to each Selling Securityholder in
the Merger (including escrowed shares) and all of the Shares of Common
Stock issued in the Merger in exchange for the Loans. Stock certificates
representing an aggregate of 58,185 Shares of Common Stock were delivered
by each of Messrs. Wilson, Weidner and Bauer into escrow as security for
certain indemnity obligations.
(3) In connection with the Merger, Messrs. Wilson, Weidner and Bauer were
appointed to the Board of Directors of ARCA and each entered into an
employment agreement with ARCA. Mr. Wilson also serves as a vice president
of the Company.
(4) In connection with the Merger, each of Messrs. Wool and Schaefer and
Ms. Thompson also entered into employment agreements with ARCA.
The preceding table has been prepared based, upon information furnished to the
Company by the Selling Securityholders.
The Selling Securityholders identified above may have sold, transferred
or otherwise disposed of in transactions exempt from the requirements of the
Securities Act, all or a portion of their Common Stock since the date as of
which the information in the preceding table is presented. Information
concerning the Selling Securityholders may change from time to time, which
changed information will be set forth in supplements to this Prospectus if and
when necessary. Because the Selling Securityholders may offer all or some of the
Common Stock that they hold, no estimate can be given as to the amount of Common
Stock that will be held by the Selling Securityholders upon the termination of
this offering. See "Plan of Distribution."
The Company will pay the expenses of registering the Common Stock being
sold hereunder.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., 150 West
Flagler Street, Suite 2200, Miami, Florida 33130-1557.
-13-
<PAGE> 15
EXPERTS
The consolidated financial statements of CyberGuard Corporation as of
June 30, 1997 and 1996, and for each of the years in the three-year period ended
June 30, 1997 have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The audited historical financial statements of ARCA included in the
Company's Current Report on Form 8-K dated June 17, 1998, which is incorporated
herein by reference, have been so incorporated in reliance on the report of
Tobkin, Chiang & Hammon, certified public accountants, given on the authority of
said firm as experts in auditing and accounting.
-14-
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated amount of expenses to
be borne by CyberGuard Corporation (the "Registrant") in connection with the
Offering:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee.............................................................................................. $820
Legal Fees........................................................................................................ $8,000
Accounting Fees .................................................................................................. $10,000
Miscellaneous Expenses ........................................................................................... $7,000
TOTAL FEES AND EXPENSES...................................................................................$25,820
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act (the "FBCA") to indemnify its directors and officers to
the extent permitted in such statute. With respect to the indemnification of the
Registrant's directors and officers, the Registrant's Restated Bylaws provide
that the Registrant shall indemnify its directors and officers to the fullest
extent permitted by law. In addition, the Registrant carries insurance permitted
by the laws of the State of Florida on behalf of its directors and officers
which may cover liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
The provisions of the FBCA that authorize indemnification do not
eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of nonmonetary relief will
remain available under Florida law. In addition, each director will continue to
be subject to liability for (a) violations of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful; (b) deriving an improper
personal benefit from a transaction; (c) voting for or assenting to an unlawful
distribution; and (d) willful misconduct or a conscious disregard for the best
interests of the Registrant in a proceeding by or in the right of the Registrant
to procure a judgment in its favor or in a proceeding by or in the right of a
shareholder. These provisions do not affect a director's responsibilities under
any other law, such as the federal securities laws or state or federal
environmental laws.
ITEM 16. EXHIBITS
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger, dated as of May 29, 1998, among
CyberGuard Corporation, ARCA Acquisition Corporation, ARCA Systems,
Inc. and William F. Wilson, Michael L. Weidner and R. Kenneth Bauer
(incorporated by reference to Exhibit 2.1 to the Current Report on Form
8-K dated June 17, 1998).
4.1 Form of Stockholder Rights Plan (incorporated by reference to
Post-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form 10, filed with the SEC on September 29, 1994 (File
No. 0-24544)).
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
regarding the legality of the securities being registered.
10.1 Form of Registration Agreement, among CyberGuard Corporation and the
shareholders of ARCA (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K dated June 17, 1998).
23.1 Consent of KPMG Peat Marwick LLP.
II-1
<PAGE> 17
23.2 Consent of Tobkin, Chiang & Hammon, certified public accountants.
23.3 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
(included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page of this Registration
Statement).
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) 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;
PROVIDED, HOWEVER, that paragraphs (1)(a)(i) and (ii) do not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") that are incorporated by reference in the Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, 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.
(c) 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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act 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
Securities Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act, 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, State of Florida on July 7, 1998.
CYBERGUARD CORPORATION
By: /s/ Robert L. Carberry
------------------------------------
Robert L. Carberry
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert L. Carberry and William Murray,
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, this Registration
Statement was signed by the persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert L. Carberry Chief Executive Officer and July 7, 1998
- ---------------------------------- Chairman of the Board of Directors
Robert L. Carberry
/s/ William D. Murray Vice President of Finance and Chief Financial July 7, 1998
- ---------------------------------- Officer
William D. Murray
/s/ Tommy D. Steele President, Chief Operating Officer and Director July 7, 1998
- ----------------------------------
Tommy D. Steele
/s/ C. Shelton James Director July 7, 1998
- ----------------------------------
C. Shelton James
Director
- ----------------------------------
David R. Proctor
/s/ Richard P. Rifenburgh Director July 7, 1998
- ----------------------------------
Richard P. Rifenburgh
Director
- ----------------------------------
Leland R. Reiswig, Jr.
</TABLE>
II-3
<PAGE> 19
EXHIBIT INDEX
EXHIBIT
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
regarding the legality of the securities being registered.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Tobkin, Chiang & Hammon, certified public accountants.
23.3 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
(included in Exhibit 5.1).
II-4
<PAGE> 1
Exhibit 5.1
LAW OFFICES
STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A.
MUSEUM TOWER
150 WEST FLAGLER STREET
MIAMI, FLORIDA 33130
---------
MIAMI (305) 789-3200 $ BROWARD (954) 463-5440
FAX (305) 789-3395
<TABLE>
<CAPTION>
<S> <C> <C> <C>
E. RICHARD ALHADEFF RICHARD B. JACKSON CARL D. ROSTON OWEN S. FREED
LOUISE JACOWITZ ALLEN THEODORE A. JEWELL DAVID A. ROTHSTEIN SENIOR COUNSEL
STUART D. AMES MICHAEL I. KEYES BETTY CHANG ROWE
LAWRENCE J. BAILIN TEDDY D. KLINGHOFFER STEVEN D. RUBIN DAVID M. SMITH
PATRICK A. BARRY ROBERT T. KOFMAN MIMI L. SALL LAND USE CONSULTANT
AMANDA C. BARRY PAUL TAGER LEHR NICOLE S. SAYFIE
SHAWN BAYNE VERNON L. LEWIS RICHARD E. SCHATZ
LISA K. BENNETT WENDELL T. LOCKE LESTER E. SEGAL TAMPA OFFICE
SUSAN FLEMING BENNETT KEVIN B. LOVE JAY B. SHAPIRO SUITE 2200
LISA K. BERG JOY SPILLIS LUNDEEN MARTIN S. SIMKOVIC SUNTRUST FINANCIAL CENTRE
MARK J. BERNET GEOFFREY MacDONALD CURTIS H. SITTERSON 401 EAST JACKSON STREET
HANS C. BEYER MICHAEL C. MARSH RONNI D. SOLOMON TAMPA, FLORIDA 33602
MARTIN G. BURKETT BRIAN J. McDONOUGH MARK D. SOLOV ----------
CLAIRE BAILEY CARRAWAY ANTONIO R. MENENDEZ EUGENE E. STEARNS (813) 223-4800
ELLEN I. CHO FRANCISCO J. MENENDEZ JENNIFER D. STEARNS
SETH THOMAS CRAINE ALISON W. MILLER BRADFORD SWING
PETER L. DESIDERIO VICKI LYNN MONROE SUSAN J. TOEPFER FORT LAUDERDALE OFFICE
MARK P. DIKEMAN HAROLD D. MOOREFIELD, JR. ANNETTE TORRES SUITE 1900
SHARON QUINN DIXON JOHN N. MURATIDES DENNIS R. TURNER 200 EAST BROWARD BOULEVARD
ALAN H. FEIN JOHN K. OLSON RONALD L. WEAVER FORT LAUDERDALE, FLORIDA 33301
ANGELO M. FILIPPI ROBERT C. OWENS ROBERT I. WEISSLER ----------
ANDREA F. FISHER JAY P. W. PHILP PATRICIA G. WELLES (954) 462-9500
ROBERT E. GALLAGHER, JR. DARRIN J. QUAM THOMAS H. WILLIAMS, JR.
CHAVA E. GENET NICOLE R. RAMIREZ MARTIN B. WOODS
LATASHA A. GETHERS JOHN M. RAWICZ
PATRICIA K. GREEN PATRICIA A. REDMOND
JOSEPH K. HALL ELIZABETH G. RICE
ALICE R. HUNEYCUTT GLENN M. RISSMAN
</TABLE>
July 7, 1998
Mr. Robert L. Carberry
Chief Executive Officer
CyberGuard Corporation
2000 W. Commercial Boulevard
Suite 200
Fort Lauderdale, FL 33309
Re: CyberGuard Corporation
REGISTRATION STATEMENT ON FORM S-3
Dear Mr. Carberry:
As counsel to CyberGuard Corporation, a Florida corporation (the
"Corporation"), we have examined the Articles of Incorporation and Bylaws of the
Corporation, as amended, as well as such other documents and proceedings as we
have considered necessary for the purposes of this opinion. We have also
examined and are familiar with the Corporation's Registration Statement on Form
S-3 (the "Registration Statement") as filed with the Securities and Exchange
Commission under the Securities Act of 1933, in connection with the registration
of 299,482 shares of the Corporation's Common Stock (the "Shares") issued by the
Corporation in connection with the Corporation's acquisition of ARCA Systems,
Inc., a California corporation (the "Acquisition").
In rendering this opinion, we have undertaken no independent review of
the operations of the Corporation. Instead, we have relied solely upon the
documents described above. In examining such documents, we have assumed, without
independent investigation: (i) the authenticity of all documents submitted to us
as originals; (ii) the conformity to original documents of all documents
submitted to us as certified or photostatic copies; (iii) the authenticity of
the originals of such latter documents; (iv) that all factual information
supplied to us is accurate, true and complete; and (v) the genuineness of all
signatures. In addition, as to questions of fact material to the opinions
expressed herein, we have relied upon the accuracy of: (i) all representations
and warranties as to factual matters contained in any of the documents submitted
to us for purposes of rendering the opinion; and (ii) factual recitals made in
the resolutions adopted by the Board of Directors of the Corporation. We have
also assumed that the exercise price of each Share will be in excess of the par
value of the common stock. We express no opinion as to federal securities laws
or the "blue sky" laws of any state or jurisdiction.
<PAGE> 2
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that the Shares registered under
the Registration Statement which were issued in connection with the Acquisition
are, and when issued and delivered by the Corporation, will be legally issued,
fully paid and non-assessable.
This opinion is intended solely for the Corporation's use in connection
with the registration of the shares and may not be relied upon for any other
purpose or by any other person. This opinion may not be quoted in whole or in
part or otherwise referred to or furnished to any other person except in
response to a valid subpoena. This opinion is limited to the matters expressly
stated herein, and no opinion is implied or may be inferred beyond the matters
expressly stated herein. This opinion is rendered as of the date hereof, and we
assume no obligation to update or supplement such opinion to reflect any facts
or circumstances that may hereafter come to our attention or any changes in
facts or law that may hereafter occur. We hereby consent to the inclusion of
this opinion letter as an exhibit to the Registration Statement.
Very truly yours,
/s/ STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
-----------------------------------
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
CyberGuard Corporation:
We consent to incorporation by reference in the registration statement
on Form S-3 of CyberGuard Corporation of our report dated September 23, 1997,
relating to the consolidated balance sheets of CyberGuard Corporation and its
subsidiaries as of June 30, 1997, and 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1997, which report appears in the
June 30, 1998 annual report on Form 10-K of CyberGuard Corporation, and to the
reference to us under the heading "Experts" in the prospectus, which is part of
this registration statement.
(signed) KPMG Peat Marwick LLP
Miami, Florida
July 7, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement of CyberGuard Corporation on Form S-3 of our report dated February 13,
1998, for the Audited Financial Statements of ARCA Systems, Inc. for the year
ended December 31, 1997, appearing in the Current Report on Form 8-K of
CyberGuard Corporation, dated June 17, 1998, and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
TOBKIN, CHIANG & HAMMON, certified public accountants
San Jose, California
July 7, 1998
