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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER: 0-26298
HARBINGER CORPORATION
(exact name of registrant specified in its charter)
GEORGIA 58-1817306
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1055 LENOX PARK BOULEVARD 30319
ATLANTA, GEORGIA (zip code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 841-4334
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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Common Stock, par value $.0001 per share The Nasdaq National Market
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the average of the closing bid and ask quotations
for the Common Stock on March 21, 1996 as reported by The Nasdaq Stock Market,
was approximately $85,018,938. The shares of Common Stock held by each officer
and director and by each person known to the company who owns 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of March 21, 1996, Registrant
had outstanding 10,475,335 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1995 are incorporated by reference in Parts II and IV
of this Form 10-K to the extent stated herein. The Registrant's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1996
is incorporated by reference in Part III of this Form 10-K to the extent stated
herein.
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PART I
ITEM 1. BUSINESS.
Harbinger Corporation ("Harbinger" or the "Company") develops, markets and
supports software products and provides computer communications network and
consulting services which enable businesses to engage in electronic commerce.
The Company's objective is to be a leading worldwide provider of electronic
commerce products and services to businesses by offering comprehensive,
customizable, standards-based electronic commerce solutions. Harbinger offers
software products that operate on multiple computer platforms, a secure and
reliable computer network to facilitate the transmission of business
information and transactions, and value-added products and services to enable
businesses of all sizes to maximize the number and value of their electronic
trading relationships. The Company's products and services facilitate EDI by
businesses and financial institutions by providing the ability to
electronically transmit and receive routine business information and documents
in a standard format. The Harbinger VAN serves as an electronic communications
link for computer systems by receiving, storing and forwarding electronically
transmitted business documents and data for re-transmission in a form that can
be received and interpreted by the computer of another commercial business.
Harbinger facilitates the electronic link to its computer communications
network through the sale of electronic commerce software packages for use in a
broad range of computing environments, including DOS, Windows, UNIX, IBM AS/400
mid range and IBM MVS mainframe platforms.
ELECTRONIC COMMERCE AND EDI
Electronic commerce involves the automation of business transactions
through the use of telecommunications and computers to exchange and process
electronically commercial information and transactional documents. Electronic
commerce typically involves the use of a third-party or private value-added
computer network to perform EDI, email, EFT, electronic forms, and bulletin
board and electronic catalogue services. Users of private or third-party VANs
may also have access through the VAN to directories or on-line information
services. EDI is a cornerstone of electronic commerce. The advantages of EDI
include one-time data entry, reduced clerical workload and the elimination of
paper records, rapid, accurate and secure exchange of business data, and
reduced operating and inventory carrying costs. EDI facilitates uniform
communications with different trading partners, including customers, suppliers,
common carriers, and banks or other financial institutions.
Trading Communities. Groups of companies that regularly trade with each
other generate significant repetitive business transactions. These existing
trading communities are natural prospects for implementation of EDI. Certain
trading communities are defined by trading standards, protocols, rules or
procedures adopted through trade organizations, such as the EDI standards
adopted by members of the Petroleum Industry Data Exchange. The adoption of EDI
as an accepted means of transmitting business documents and data has occurred,
in part, because many trade organizations or groups and many large companies
within a trading community increasingly recommend or require their member
organizations or trading partners to adopt and use EDI as the primary method of
communicating business documents. Large companies within a trading community
often are described as ''hubs'' and their trading partners as ''spokes.'' A hub
company and its trading partners communicate through electronic networks,
generally either third party networks or a private network owned and operated
by the hub company. Hub companies decide to implement EDI generally for one or
more of the following reasons: (i) to enable a reduction in inventories by
reducing the time required to notify vendors and replenish stocks; (ii) to
reduce the administrative handling costs of documents that they send or receive
from their suppliers or customers; or (iii) to improve customer support and
service levels by eliminating data entry errors. For these reasons, a hub
company often adopts as a stated business objective that all of its trading
partners use EDI as the principal means of communicating business documents.
Spoke companies, in turn, often expand the electronic commerce community by
also requesting or requiring their other trading partners to communicate
through EDI. This expanding number of trading partners adopting EDI results in
the establishment of distinct trading communities comprising potential software
customers and network subscribers for EDI services.
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EDI Transaction Flow. In a typical EDI transaction, a trading partner
(the ''sending partner'') first creates with its computer, either manually or
electronically, the business data used for the completion of a particular set
of documents, described by EDI standards as a transaction set. Transaction sets
include requests for quotes, quotes, purchase orders, invoices, shipping
notices, and other related documents and messages. Second, a translation
software program on the sending partner's computer converts the document or
transaction set into a standard EDI format. Third, this information is
electronically transmitted through telecommunications links from the sending
partner's computer to a central computer system that serves as a value-added
network shared by many trading partners. Value-added networks receive documents
for subsequent delivery to the intended trading partner (the ''receiving
partner''), and connect many types of computer hardware and communications
devices, convert multiple transaction sets from one industry standard to
another, and maintain security by reducing the possibility of one trading
partner accessing another's computer.
EDI Industry Standards. EDI has been further promoted through the
adoption of EDI standards within various industries. These standards describe
the content and format of business documents, such as the data required to be
included in purchase orders, invoices, shipping notices, and other business
documents. Before these standards were adopted, electronic document
transmission was based on proprietary formats agreed to by two trading
partners. However, incompatible computer systems and differing proprietary
formats limited widespread adoption of EDI. In 1979, the American National
Standards Institute (''ANSI''), an organization responsible for coordinating
national standards in the United States, formed the Accredited Standards
Committee (''ASC'') X12, Electronic Data Interchange, to develop uniform
standards for electronic interchange of business transactions. In 1983, ANSI
published the first five EDI standards proposed by the ASC. The number of
business transactions covered by EDI standards has continued to increase, and
by 1995 the ASC X12 Committee had approved the development of over 280 domestic
and international standards.
Uniform EDI standards for the exchange of business information have now
been adopted for many important industries, including:
<TABLE>
<CAPTION>
<S> <C> <C>
Aerospace Financial Services Paper and Pulp
Air Freight Food Petroleum
Automotive Government Rail Freight
Banking Grocery Retail
Beverage Hardware Goods Textiles
Chemical Healthcare Trucking
Education Insurance Utilities
Electronics Metals Warehousing
Financial Ocean Freight
</TABLE>
Within these industries, trade and industry organizations often suggest
additions and changes to EDI standards. The United Nations Joint EDI Committee
has developed international industry standards known as Electronic Data
Interchange for Administration, Commerce, Transport (EDIFACT). Harbinger
believes the continuing adoption of EDI standards in the U.S. and
internationally will promote a significant expansion of electronic commerce and
a potential increase in the demand for EDI software products and the number of
transactions processed by network operators.
STRATEGY
The Company's objective is to be a leading worldwide provider of
electronic commerce products and services to businesses of all sizes with a
focus on solidifying its recurring revenue base by increasing the number of
subscribers to its network. The Company's strategy to achieve this objective
includes the following key elements.
Comprehensive Range of Products and Services. Harbinger's strategy is to
offer a broad range of electronic commerce products and services, thereby
enabling trading partners to obtain the products and services necessary to
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conduct electronic commerce transactions within their trading communities. The
products and services offered by the Company include EDI and electronic
commerce software for use on numerous computing platforms, value-added network
transaction processing, software programming and customization services,
customer support and training, and implementation and consulting services.
Trading Communities Marketing Strategy. Harbinger's central strategic
objective is to grow by promoting its products and services to identified
trading communities. Through this strategy, Harbinger identifies significant
trade organizations or ''hub'' companies within various industries, including
the utilities, electronics, healthcare, aerospace and petroleum industries, to
establish and promote the growth of trading communities. Harbinger seeks to
establish new and larger trading communities by (i) developing marketing and
technical competence within the industry by learning the needs of major trade
organizations or hub companies in the industry, and the trading customs and
practices of their trading partners, (ii) working closely with trading partners
in these target markets to define software and computer systems requirements,
(iii) developing standard and customized software products to meet the needs of
trading partners in these markets, and (iv) providing an array of high-quality
services to facilitate the adoption and implementation of EDI and other
electronic commerce services throughout that industry.
Integrated Product Offerings. Harbinger offers, and is further
developing and enhancing, numerous software products operating on a broad range
of computing platforms, including DOS and Windows-based PCs, UNIX-based
workstations, IBM AS/400 midrange computers and IBM MVS mainframe computers.
The Company designs its products with significant ease-of-use features and has
recently completed development efforts to integrate technologies acquired from
Texas Instruments Incorporated ("TI") and System Software Associates, Inc.
("SSA") with its existing software products to enable customers to easily
migrate from one computer platform to another. Harbinger seeks to offer a full
array of EDI products and services to meet its customer's evolving EDI needs.
Customer Satisfaction and Superior Support Services. Harbinger strives
to provide dependable, prompt and competent customer service through the
Harbinger network and the Company's customer support personnel. Harbinger
offers extensive customer service, consulting and support to trading partners
to assist in the operation and use of the Company's network services and its
software products. These services are designed to attract new customers and to
encourage greater utilization of the Company's products and services by
existing customers, thereby increasing recurring revenues through greater
transaction flow.
Electronic Commerce on the Internet. Through its investment in Harbinger
Net Services, LLC ("HNS"), the Company seeks to offer products and services to
facilitate electronic commerce using the Internet. HNS will seek to develop and
market a comprehensive suite of products and services directed at delivering
electronic commerce solutions to business customers over the Internet. Through
its agreements with HNS, the Company will seek to offer those products and
services to its customer base.
Strategic Alliances and Acquisitions. The Company actively seeks
strategic alliances with leading telecommunications companies, software
application developers and computer system suppliers. For example, Sprint
resells, distributes and co-markets the Company's electronic commerce software
products and network services. The Company also has recently introduced its
Marketing Partners Program to establish alliances between the Company and
application software developers, systems integrators and value-added resellers
of computer products. In furtherance of its strategy to expand its product and
service offerings, the Company will seek to acquire assets, technologies and
businesses providing services complementary to the Company's existing products
and services. Through the 1994 acquisition of the EDI Business Unit from TI
(the "TI Acquisition"), the Company expanded its products to include offerings
on UNIX and IBM MVS computer platforms. Through the Company's 1995 asset
purchase and licensing arrangements with SSA (the "SSA Alliance"), the Company
expanded its products to include an offering on IBM's AS/400 midrange computer
platform.
International Markets. Harbinger believes that a significant component
of its strategy is to provide electronic commerce and EDI products and services
to markets outside the United States. In addition to its international
relationship with Sprint, the Company has an investment in and a distribution
relationship with Harbinger NV, a Netherlands-based affiliate of the Company
which is actively seeking electronic commerce business in selected
international markets. The Company intends to aggressively pursue international
electronic commerce opportunities.
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PRODUCTS AND SERVICES
The following charts summarize the functions and platforms of the
Company's principal electronic commerce software products and includes a
description of the services available to software customers and network
subscribers:
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PRODUCT NAME FUNCTION COMPUTER PLATFORM
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<S> <C> <C>
TrustedLink Commerce EDI communications, document DOS, Windows
management and forms creation,
plus import/export of data from
software applications
TrustedLink Enterprise EDI communications, document UNIX
management plus import/export of IBM AS/400
data from software applications IBM MVS
EDI map Mapping tool, integrate EDI DOS
software with specific
applications
TrustedLink Banker Small business cash management DOS, Windows
activities, EFT, wire transfers,
direct deposits and debits
EDI communications, document
management and forms creation
TrustedLink Distributor for specific for the Petroleum
Petroleum Industry Windows
TrustedLink Shipper Integrated EDI and Barcode solution Windows
SERVICES DESCRIPTION
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Fault tolerant, store and forward, retrieval
Value-Added Network services, protocol conversion, electronic mail
Services box
EDI to Fax Services Translation of EDI documents to fax format
Trading Partner Information seminars, support materials,
Implementation testing and confirmation of EDI communications
/Certification with trading partners
Customer Support Telephone hotline, support documentation,
network transmission support, electronic
software updates
Consulting and Development of computer programs needed to
Programming integrate EDI with a customers other software
Services applications
Third Party Ticket Translation of EDI documents to facilitate
System ownership tracking for Petroleum Companies
</TABLE>
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Software Products
The Company's products include a family of software programs and tools
operating on DOS, Windows, UNIX, IBM AS/400 and IBM MVS mainframe computing
environments and are designed to facilitate and enhance the use of electronic
commerce by trading partners.
TrustedLink Commerce. Harbinger's principal PC-based products,
TrustedLink Commerce for DOS-based personal computers and TrustedLink Commerce
for Windows-based computers, perform the critical tasks necessary to create,
format and electronically transmit and receive business documents and data
among trading partners. The software programs convert a customer's documents
and data into EDI format, translate the document to a standard form for use
with the designated trading partner, transmit the information to the Harbinger
network, and convert EDI documents and data received from their trading
partners into a format that may be interpreted by the user's personal computer
to display, print, fax the document or automatically update its accounting
records to register information received from a trading partner. These products
have the following additional features and functions:
o Ease-of-Use. Each of these products include features such as pull-down
menus, common command structure, context-sensitive ''Help,'' mouse
support and color-coding. These features permit use of the products by a
broader audience of computer users possessing a less advanced level of
technical knowledge in the operation of computers.
o Ease-of-Installation. Harbinger's DOS and Windows products facilitate
installation on a personal computer by automatically analyzing certain
aspects of the user's computer to establish modem specifications,
including type and speed, telecommunications parameters, and the user's
network link telephone number. Following installation on the user's hard
drive, the software includes functions that automatically dial the
Harbinger network, establish password security and register the user on
the network.
o Network Software Integration. TrustedLink Commerce receives and
registers trading partner information. When a user first receives
documents or data from a trading partner, the software recognizes that it
has received information from a new source and automatically re-dials and
downloads that Harbinger customer's mailing address and adds it to the
recipient's directory of addresses.
o Broad Functionality and Flexibility . The products allow a trading
partner to transmit and receive documents either through a manual
computer request or automatically if a trading partner's computer is
unattended. The software sorts documents by date, type and trading
partner, prints summaries or the full text of documents, stores incoming
documents, and copies outgoing documents for later review.
o Support for EDI Standards. The software sends and receives
transmissions in compliance with a wide range of electronic data industry
standards that dictate the form, content and structure of documents and
communications, including ANSI X12 and EDIFACT, as well as TDCC, UCS and
WINS, which are electronic data formats specific to certain industries.
Harbinger's PC-based customers primarily use the DOS product, and
Harbinger has not achieved significant market penetration with the Windows
product. As a result of the TI Acquisition, the Company has developed an
enhanced version of its TrustedLink Commerce product which incorporates the
favorable features of Harbinger's and TI's Windows-based products and utilizes
translation software which is common to the UNIX and IBM MVS products and
technologies acquired from TI. The enhanced TrustedLink Commerce product is
expected to be available in the second quarter of 1996. The Company believes
that customer conversions from DOS to Windows-based products will accelerate
after the introduction of the Company's enhanced TrustedLink Commerce product.
Furthermore, availability of the new Windows-based product, together with other
integration and development activities associated with the Company's products,
should allow customers to more easily migrate from one computer platform to
another.
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TrustedLink Enterprise for Unix. TrustedLink Enterprise for UNIX was
acquired in the TI Acquisition. Harbinger is currently in the process of
developing significant enhancements to the communications and user interface
capabilities of this product. Upon successful completion of these enhancements,
TrustedLink Enterprise for UNIX will facilitate the creation and control of
business documents, such as order forms and invoices in complex client/server
computing environments and provide data linking and messaging functions which
act as a gateway to update a trading partner's accounting system. This product
also will support several of the most popular UNIX versions, including HP/UX,
AIX, and SCO Open Servers, that offer high-throughput features that provide for
fast receipt and transmission of EDI documents, and support a comprehensive
range of EDI standards.
TrustedLink Enterprise for AS/400. TrustedLink Enterprise for AS/400 was
acquired in connection with the SSA Alliance and offers a mapping, translation,
communication and trading partner management toolset and utilizes up to 21 EDI
standard formats. The product's integrated IDK mapper enables customers to
integrate documents directly into existing AS/400 database applications. The
product's ANK network module enables communications among trading partners and
VANs utilizing a broad range of data communication protocols.
TrustedLink Enterprise for IBM MVS Mainframe. TrustedLink Enterprise for
MVS mainframe systems performs identical features and functions to TrustedLink
Enterprise for UNIX, and translates a trading partner's documents and data into
electronic data formats that may be interpreted by the IBM MVS operating
system. By offering high-throughput features and rapid document analysis, this
version of the Company's TrustedLink Enterprise product is intended to minimize
telecommunications costs as well as the costs of administrative personnel.
TrustedLink Enterprise for IBM MVS mainframe also offers a single-pass test
system that analyzes, summarizes and reports transmission faults, thereby
facilitating the quick resolution of system delays resulting from transmission
errors. The Company's MVS Gateway software product offers a high performance
post office system and communications gateway to facilitate the rapid retrieval
and storage of massive volumes of EDI documents on an IBM MVS mainframe.
EDI map. Harbinger offers EDI map, a software tool designed to assist a
trading partner in integrating EDI with other software applications operated by
the user on a personal computer. EDI map includes software functions that may
be used to create an application program to translate standard EDI documents
into designated data records and files. These data records and files can be
read by the trading partner's existing application software, including, for
example, the general ledger, accounts payable, and accounts receivable programs
included within the trading partners back-office accounting system. The
program also allows a user to translate data records retrieved from an internal
computer system into standard EDI documents. EDI map is distributed by the
Company under a license from a third party software developer which permits the
Company to obtain access to the source code for this product if the owner
discontinues support and related services or ceases its business. Under this
license, the Company has nonexclusive worldwide rights to use, reproduce,
distribute and exercise other rights with respect to the EDI map software.
TrustedLink Banker. TrustedLink Banker is designed to facilitate the use
of personal computers to access a customer's bank or other financial
institution through the Harbinger network. Businesses use TrustedLink Banker
to access balance and transaction histories for various financial accounts,
perform electronic funds transfers between financial accounts (within a single
bank or among banks), register stop payments, write checks, reconcile accounts,
send and receive messages to and from financial institutions, perform budgeting
and cash flow analysis, and schedule activities by means of an electronic
calendar. TrustedLink Banker includes functions that enable businesses to
access information services such as Dow Jones News/Retrieval, and transfer data
to other software programs such as Microsoft Excel, Lotus 1-2-3 and dBASE III.
TrustedLink Banker is also used to perform direct deposits into payroll
accounts, fund tax payments and direct debit transactions, and perform funds
transfers. Banks and financial institutions access the Harbinger network to
exchange information, electronic mail and messages with their trading partners.
TrustedLink Banker translates documents and data through industry standard
formats, including the BAI standard for balance and transaction reporting and
the National Automated Clearing House Association (''NACHA'') standard for ACH
transfers.
TrustedLink Distributor for Petroleum. TrustedLink Distributor for
Petroleum automates purchase order and buyback processing and makes it easier
for lubricant distributors to do business with petroleum suppliers.
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TrustedLink Shipper. TrustedLink Shipper is a Windows-based add-on
module to the Company's TrustedLink Commerce Product designed to facilitate the
use of EDI at the shipping dock. Users of the product can process purchase
orders, send advanced ship notices, and label shipments with barcodes. The
product is fully integrated with the Company's VAN.
Productivity Tools. The Company also offers a number of additional
complementary PC, UNIX and MVS mainframe software products and modules,
including productivity tools that facilitate the enabling, management and
auditing of EDI trading relationships. Examples include a Windows-based
mapping application that enables EDI support personnel to map internal
application formats to EDI transactions and a trading partner profile
management system that allows trading partner, transaction, and communications
definitions and also contains contract, billing, transaction processing, audit
and trading information.
Other than the EDImap product, the Company's software products do not
include any material third party source code, and the Company does not rely in
any material respect on technical or source code data owned by third parties
that are critical to the Company's intellectual property or its operations.
Services
The Company provides a range of services to businesses engaged in
electronic commerce, including network services, trading partner and electronic
commerce implementation services, programming services and customer training
and support.
Value-Added Network Services. Harbinger operates a value-added network
that provides the central point for document and data receipt, translation and
transmission and serves as a communication link between the members of a
trading community. With more than 17,000 subscribers, Harbinger believes that
its VAN is one of the largest EDI networks in the United States as measured by
the number of network subscribers. Harbinger offers trading partners a wide
range of network services, including batch communication of purchase orders,
invoices, and shipping confirmations, and email between trading partners.
Additional network services enable a trading partner to transmit into the
network a large number of electronic documents intended for various
destinations through a single toll-free telephone line, and to acknowledge and
reconcile document transmission and receipt. Harbinger provides its network
customers with monthly statistical information regarding network usage.
Harbinger believes that its value-added network offers several advantages
to trading partners:
o Protocol Conversion. Through a protocol conversion routine,
Harbinger's VAN enables trading partners to exchange documents,
notwithstanding that their respective computers generate and transmit
data and documents according to different document standards and
communications protocols.
o Transmission Speed Conversion. Harbinger's VAN provides access ports
that allow data transmission speeds at mainframe-to-network rates up to
56,000 bps (bits per second) as well as ports for typical PC-to-network
speeds of 2,400 bps to 28,800 bps.
o Flexibility in Mail Pick-up and Drop-off Times. Harbinger's VAN
enables trading partners to send and receive documents at their
convenience through the network. The network stores documents received
from a trading partner in its electronic mailbox for transmission and
delivery at a subsequent time designated by the recipient.
o Security. The network includes precautions to minimize security
breaches by outsiders and restrict the ability of one trading partner to
gain access to confidential data of another. Harbinger's TrustedLink
Commerce and TrustedLink Banker family of software products each utilize
data encryption algorithms to ensure that network access is limited to
authorized users.
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The Harbinger network operates on a Tandem Himalaya computer system which
is maintained by the Company at its headquarters in Atlanta, Georgia. The
Company utilizes wide band telephone circuits that enable the computer network
to receive and process numerous telephone links simultaneously. Moreover, the
Company utilizes a packet switch network which receives and sends data across
telephone circuits thereby enhancing the Tandem computer's ability to handle a
large number of concurrent users at the most economical transmission cost. The
network supports multiple communications protocols, including SNA, X.25,
ASYNCH, FTP, and BISYNCH, enabling it to communicate data with most computer
systems at transmission speeds ranging from 1,200 bps to 56,000 bps. The
network also supports many standards for documents and data content and format,
including ANSI X12, EDIFACT, BAI and NACHA. The network is designed for
operation 24 hours a day, seven days a week. The Company is party to a
disaster recovery agreement that provides an alternative off-site computer
system for use in disastrous events.
The Company provides network services pursuant to subscriber agreements.
Under the subscriber agreement, the customer provides, at its expense, all
necessary computing and hardware systems, which must meet technical
specifications established by the Company. The subscriber agreement can be
terminated by either party without cause at any time with 30 days' written
notice. Customers are required to pay for services in accordance with the then
applicable service fees, which include set-up fees, monthly mailbox fees, and
transaction fees. No minimum revenue commitment or annual fee is required.
Trading Partner Implementation and Certification. Harbinger offers
several programs to assist its hub customers in maximizing the number of their
trading partners utilizing EDI. These programs are designed to communicate the
advantages of EDI and electronic commerce to all potential trading partners of
a major hub, regardless of size, and provide the following:
o Information Seminars. The Company schedules and conducts half-day
seminars with potential trading partners of a major hub company
highlighting the benefits of EDI and electronic commerce, explaining the
hub organization's EDI initiative, and demonstrating the Company's
products and services. Representatives of the hub company attend these
seminars to present their EDI recommendations and requirements.
o Support Materials. Utilizing the hub company's list of trading
partners, the Company sends each trading partner an invitation packet
including a program description, telephone set-up information, a computer
hardware checklist, product literature, a demonstration software
diskette, and response forms for registration to seminars conducted by
the Company.
o Trading Partner Certification. The Company assists trading partners
in installing, testing, and confirming the ability to transmit
information and documents with hub companies using the Harbinger network.
Through this testing process, trading partners can implement and
initiate EDI communications with hub companies with a minimum of
conflicts and problems.
Electronic Commerce Implementation. Harbinger also offers a range of
services to assist in the implementation of electronic commerce by developing
custom software templates, known as Trading Partner Packs, to conform with
guidelines and parameters identified by the major purchasers and suppliers
within various trading communities. For example, Harbinger customizes its
software to enable businesses in a defined trading community to utilize only a
specified subset of the ANSI X12 or EDIFACT standard that the major trading
partners have defined for the trading relationship. In this way, each trading
partner is assured that only the data elements that the trading partners expect
are sent and received. This customization prevents one trading partner from
sending unintended or incomplete data that otherwise might be permissible under
the standard, but which could cause the receiver's application system to fail.
The Company distributes a customized Trading Partner Pack to initiate trading
among the partners of an existing Company subscriber and to enable hub
companies to expand their base of trading partners. Harbinger's customer
service personnel meet with major trading partners to identify and design the
formats necessary to develop a Trading Partner Pack for use by trading partners
of the customer. Harbinger maintains a library of more than 700 Trading
Partner Packs.
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Consulting and Programming Services. Harbinger employees consult with
trading partners to create functional specifications to develop computer
programs necessary to integrate EDI with the customer's other software
applications. This process, known as ''mapping,'' requires the identification
of internal data file and record formats, data field descriptions, and
equivalent paper document formats. Harbinger's technical consultants then
develop functional specifications that are used to develop the interface
programs necessary to integrate EDI with the trading partner's applications.
Harbinger also provides software programming services to trading partners to
create the application interface programs necessary to translate data into and
out of EDI standards.
Customer Training. Harbinger offers training classes designed for
various stages of EDI implementation by trading partners. These classes
provide instruction on the use of the Company software products operating
either alone or together with the other application software operated by a
trading partner. Training classes are conducted in Atlanta and other cities in
the U.S. Primary classes are directed at users who utilize the software to
input and send EDI documents, or to receive and print such documents. Advanced
classes explain the basics of integrating EDI with other application software
and provide basic information for creating application interface programs to
connect a trading partner with application software of another party.
Customer Support Services. Harbinger provides extensive customer service
and support to trading partners on the use and operation of its software
products and the conduct of business with trading partners utilizing electronic
commerce. Harbinger supplies detailed printed documentation instructing on the
use and operation of the Company's software products and the scope and
availability of the Company's services. Toll-free customer telephone support
is available five days a week from 8 a.m. to 8 p.m. E.S.T., responses being
provided by employees in the Company's customer support department. Network
transmission support is available seven days per week, 24 hours per day. The
Company's support of EDI communication standards enables its customer support
personnel to perform file transfers to analyze problems on a customer's
computer system and to transmit software or EDI standard updates to a customer,
where necessary.
Third Party Ticket System ("TPTS"). TPTS is a service offered by the
Company which permits tank owners, pipeline companies, and other affiliated
parties in the petroleum industry to track ownership of petroleum through a
pipeline. The product, which was developed in conjunction with the American
Petroleum Institute, automates the transfer of documents associated with
product requests and shipments between third parties. The service utilizes the
ANSI X12 PIPENET standards.
Pricing
Harbinger markets its software products under license agreements that
provide one-time license fee charges which range from $460 to $2,740 for DOS
and Windows products, $70,000 to $90,000 for UNIX products, $35,000 to $50,000
for AS/400 products and up to $180,000 for IBM MVS products. License fees are
determined according to the number of specified users.
Charges for transactions placed through the Harbinger network are based
upon the number of messages transmitted and the number of characters in each
transmission. Transaction fees vary during peak or off-peak hours. The
Company's transaction fees during peak hours are currently $.10 per message and
$.02 per 100 characters. Additionally, customers pay a mailbox service fee of
$25 per month to maintain access to the network. Harbinger provides a discount
to those subscribers who allow their monthly fees to be direct-debited. For
customers accessing the Harbinger network through other communications
networks, there is a monthly interconnect charge of $25 for access through one
or more public networks and $25 for each private network interconnect.
A separate fee for Trading Partner Certification is generally paid by hub
companies desiring to facilitate communications with new trading partners.
Fees for integration services performed for hub companies and trading partners
are generally provided based on the number of hours or days required to perform
the necessary project.
- 10 -
<PAGE> 11
SALES AND MARKETING
The Company's principal marketing strategy focuses on establishing and
expanding the number of trading partners using the Harbinger network and
software products. The Company seeks to target trading communities composed of
electronic trading partners in common industries or markets conducting
recurring business transactions. To achieve this strategy, the Company
emphasizes sales to hub companies and their trading partners in a wide range of
trading communities. Typically, a hub company will establish an EDI program by
selecting the software, documents, formats, standards and value-added network
that it intends to employ to exchange documents with its trading partners.
After announcing the establishment of an EDI program, a hub company generally
allows trading partners a period of time, generally from three months to
several years, to comply with the EDI specifications and become EDI-capable.
In many instances, hub companies ultimately will require trading partners to
execute all transactions through EDI. The Company's marketing and sales
activities are centered around the implementation of EDI within these trading
communities through hub and spoke programs, particularly within selected
vertical markets.
The Company has developed a three-tiered sales and marketing program.
First, the Company identifies potential hub companies that either seek to
formulate an EDI program, or that have made the decision to implement EDI. The
Company representatives meet with the hub company and discuss the procedure for
establishing EDI relationships with trading partners. Second, the Company
contacts the hub company's trading partners through seminars and by
telemarketing, informing these parties of the EDI requirements of the hub
company and implementation procedures. The Company schedules and conducts
half-day information seminars with potential trading partners of a major hub
company highlighting the benefits of EDI and electronic commerce, explaining
the hub organization's EDI initiative, and demonstrating the Company's products
and services. Representatives of the hub company generally attend these
seminars to present their EDI recommendations and requirements. Third,
Harbinger uses telemarketing, direct mail and advertising activities that are
targeted at potential customers who are not trading partners of a specific hub.
Harbinger's account executives identify, qualify and market the Company's
services to potential hub companies that seek to implement EDI programs.
Account executives work closely with these hub companies to design and
implement the EDI program and maximize the number of subscribing trading
partners. Hub companies are encouraged to produce a list of trading partners
for the Company's use in marketing its products and services and endorse the
family of TrustedLink software products encouraging those trading partners to
become EDI-capable. Through successful EDI implementation programs with hub
companies, Harbinger has established a database of existing and prospective
trading partners. Harbinger's account executives regularly contact prospective
trading partners through advertising, seminars and telemarketing to promote the
Company's products and services.
The Company's inside sales team establishes contacts and leads from a
variety of sources, including industry lists, trade associations, advertising,
direct mail campaigns, trade shows and marketing partners. Spoke companies are
grouped into various trading communities. By analyzing the common business
needs of these trading communities, Harbinger seeks to provide custom solutions
to selected trading communities, thereby potentially increasing the usage of
the Harbinger network and its software products.
Harbinger has introduced its Marketing Partners Program to establish
alliances between the Company and application software developers, systems
integrators and value-added resellers of computer products (''Marketing
Partners''). The Company's objective is to integrate Harbinger's products with
those of its Marketing Partners and to promote distribution of Harbinger
software along with products and services sold by its Marketing Partners. The
current Marketing Partners of the Company include SSA, Westinghouse Canada,
Solomon Software, Real World Corporation, and Open Systems.
The Company markets and distributes its TrustedLink Banker products and
related services through commercial banks and holding companies and bank
processors. The Company also markets its family of TrustedLink Banker software
products and computer network services directly to the customers of certain
banks and financial service organizations. Harbinger's sales personnel
identify prospective customers by reviewing the list of
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<PAGE> 12
commercial accounts maintained by the banks and once prospects are identified,
the Company conducts sales activities predominantly over the telephone and by
direct mailings.
As of December 31, 1995, the Company employed approximately 65 sales and
marketing personnel who concentrate their efforts in direct sales of the
Company software products and services. Sales personnel are compensated
through a combination of base salary and commissions. The Company's
compensation strategies are designed to reward sales personnel based upon sales
to new customers and the sale of additional products and services to existing
customers. In addition to the Company's internal sales and marketing
personnel, the Company markets its products through several licensees,
distributors and co-marketers.
CUSTOMERS AND MARKETS
The Company's customers include a wide range of hub companies and their
trading partners in several markets targeted by the Company. The Company's hub
customers (grouped by industry) include the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Aerospace: Northrop Metals: Alcoa
Reynolds
Banking: Bank of America Paper and Pulp: Champion Paper
Barnett Banks
First of America
Electronics: Compaq Computer Petroleum: AMOCO
Digital Equipment Chevron
Corporation Mobil
Hewlett-Packard
Siemens
General: ASEA Brown Boveri Textiles: James River
Square D Milliken & Company
3M
Westinghouse Electric
Healthcare: Abbott Laboratories Utilities: Consumers Power
Baxter Healthcare Pacific Gas &
Johnson & Johnson Electric Southern
California Edison
The Southern Company
</TABLE>
The Company has contracts with two customers which account for a
significant amount of historical revenue. An agreement with Sprint
International Communications Corporation ("Sprint") provides the terms by which
Sprint may distribute and co-market the Company's software products. During
the years ended December 31, 1994 and 1995, revenues from Sprint represented
approximately 5% and 2%, respectively of the Company's total revenues for such
periods. Under the SSA Alliance, SSA will pay the Company royalties
representing a percentage of annual net fees generated by SSA from the sale of
software licensed from the Company. For the year ended December 31, 1995,
revenues from SSA represented approximately 7% of the Company's total revenue
for the period.
STRATEGIC RELATIONSHIPS
Harbinger is party to an Alliance Agreement with SSA pursuant to which the
Company has licensed to SSA the Company's IBM AS/400, UNIX and PC-based EDI
software and related tools and utilities (the ''Licensed
- 12 -
<PAGE> 13
Software"), under agreements whereby SSA may remarket the Licensed Software to
licensees of SSA's BPCS software products. SSA pays Harbinger a royalty based
on net fees realized by SSA from the sale of the Licensed Software, related
maintenance and support, and migration fees payable when a customer upgrades
from one computer platform to another. Harbinger is responsible to train SSA
personnel in the use and support of Harbinger products, and SSA provides direct
telephone support to SSA's customers who use the Harbinger software products.
During the term of the Alliance Agreement, Harbinger, at its option, will
provide SSA with future product modifications and upgrades, architect the
Licensed Software to facilitate foreign language translations, provide
training, telephone and technical support to SSA personnel, modify or enhance
the Licensed Software in the manner requested by SSA to correct software errors
and maintain product competitiveness (or allow SSA to make such revisions), and
modify the products to interface with specified database programs, perform
designated client/server functions, offer enhanced graphical user interfaces,
and conform to specified industry data communication standards. See ''Certain
Transactions--SSA Alliance."
Harbinger is a party to licensing and co-marketing agreements with Sprint
and another licensee pursuant to which the Company has licensed its TrustedLink
EDI software and its network system software to permit the licensees to
remarket the PC-based software under private label and to implement their own
value-added network. Under the Sprint relationship, the network system
software has been licensed for use by various government agencies in the
People's Republic of China and Poland. Additionally, Sprint uses Harbinger's
existing network for Sprint's own EDI service. Sprint and Harbinger also
maintain a co-marketing agreement with respect to several United States
government agencies, pursuant to which Harbinger markets its software and
services to numerous spoke companies which are suppliers to these agencies.
The Sprint agreements grant certain non-exclusive rights to distribute the
Company's PC-based software and network services and to license the Company's
private network software outside the United States. These licenses and
marketing agreements generally provide for payment by the licensee of an
initial license fee, recurring transaction and network service and maintenance
fees, and license fees based on the distribution of TrustedLink Commerce
software programs.
PRODUCT DEVELOPMENT
The Company continues to assess the needs of trading partners in various
trading communities and to develop software programs and network services which
facilitate electronic commerce transactions. The Company's product development
efforts currently are focused on providing a full range of electronic commerce
solutions to Harbinger customers. The Company integrates software products and
technologies acquired from TI with the Company's other software products by
combining the most favorable features of the products and maintaining common
translation software to facilitate the transfer of information and data between
operating environments. The Company has completed product integration
modifications to UNIX versions for use on HP9000, RS/6000 and SCO/UNIX
platforms. Modifications of the Company's enhanced TrustedLink Commerce for
Windows version are anticipated to be completed, and the product to be
generally available, in the second quarter of 1996. Additional modifications
intended to add enhanced graphical user interface features to the UNIX products
also will be completed during the second quarter of 1996.
Through its investment in HNS, the Company also is seeking to explore the
feasibility of conducting electronic commerce over the Internet. HNS is
expected to develop software products and provide related services designed to
permit increased security for transmitting commercial data over the Internet by
using the Company's VAN and supplementing it with additional software
encryption measures. HNS may also develop technologies and provide services to
allow Internet users to access the Company's VAN in order to provide a greater
level of reliability of accurate data transmission than otherwise available by
using the Internet alone. See ''Business--Internet Strategy'.' There can be
no assurance that the Company or HNS can overcome the substantial technological
and product development issues that will be faced in developing acceptable
technologies for conducting electronic commerce over the Internet.
The Company is in various stages of development for other software
applications, including electronic messaging and email, bar code integration to
facilitate the shipping and receiving of goods, an enhanced mapping
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<PAGE> 14
product to allow users to customize their EDI data to existing software
applications, and foreign translations of the Company's software products for
distribution in international markets.
INTERNET STRATEGY
The Company believes that the Internet may become a vehicle for electronic
commerce and communication among businesses. The Internet is an interconnected
global network of computer networks linked together through a common protocol.
Unlike other public telecommunications networks, the Internet is not managed by
a single corporation, government agency or other entity. The market for
software to access the Internet and related services is rapidly emerging and
there are constantly evolving standards and technologies for communicating
information over the Internet. Through the Internet, businesses can exchange
documents and electronic mail, access a wide range of commercial information,
and establish a presence on the World Wide Web (WWW). The WWW is the part of
the Internet where information and documents reside in a standard format
enabling them to be easily displayed and linked for access by other Internet
users on the WWW. By using a special programming language called hypertext
markup language (HTML), a user can establish a presence on the WWW known as a
web page or home page and can link with other users of the WWW. To date, the
Internet has not been an accepted medium for processing routine business
transactions between organizations, in part due to security and reliability
issues.
The Company organized HNS in December 1994 as an early stage company to
address opportunities to use the Internet to perform electronic commerce
transactions. During its initial phase of operation, HNS explored the
viability of developing products and providing services to facilitate
electronic commerce on the Internet. At the conclusion of that effort, HNS
concluded that it had developed a strategy for promoting electronic commerce
over the Internet and for addressing the primary obstacles to the use of the
Internet to exchange routine business documents. As part of its business plan,
HNS investigated a strategic relationship with a telecommunications provider.
In June 1995, BellSouth invested $3.0 million in HNS in exchange for the
BellSouth Debenture. To date, the Company has invested approximately $8.4
million in HNS. The Company organized HNS as a separate company to permit HNS
to focus solely on the market for products and services on the Internet, to
reduce, to some degree, the risk of the Company's investment in the Internet,
and to enable HNS to seek a strategic third-party investor. The Company and
HNS have entered into several agreements whereby the Company provides HNS with
management and development services, access to the Company's VAN, and a license
to use and create derivative works of certain Company software programs. HNS
provides the Company a non-exclusive right to license and distribute HNS
products, if any, which may be derived from the Company's products.
HNS is currently developing and plans to market a comprehensive suite of
products and services directed at delivering electronic commerce solutions to
business customers over the Internet. In November 1995, HNS announced its
plans for TrustedLink, which provides organizations of all sizes with an open,
standards-based solution for sending and receiving secure EDI documents over
the Internet. The product will complement the Company's existing Windows and
UNIX-based products and utilize simple mail transfer protocol ("SMTP") as the
underlying Email mechanism to transfer EDI files over the Internet. In
addition, the product will support S/MIME, an emerging security standard
supported by major software industry leaders, and will also support the
authentication mechanisms currently available in the Company's EDI Products.
The Company has scheduled a general release of this Product in the third
quarter of 1996. As of December 31, 1995, HNS had approximately 25 employees,
of whom 15 are technical personnel engaged in maintaining or developing HNS's
products or performing related services, approximately five are marketing and
sales personnel and approximately five are involved in administration and
finance.
The Company plans to work with HNS in developing coordinated sales and
marketing approaches to maximize electronic commerce both on the Company's VAN
and to explore alternatives over the Internet. The Company expects to derive
revenues from HNS under several agreements between the parties.
- 14 -
<PAGE> 15
COMPETITION
The electronic commerce and EDI network services and computer software
markets are highly competitive. Numerous companies supply electronic commerce
network services, and several competitors target specific vertical markets such
as the pharmaceutical, agri-business, retail and transportation industries.
Additional competitors provide software designed to facilitate electronic
commerce and EDI communications. Several of the Company's most significant
competitors provide network services and related software products and
services. Other competitors provide PC-based computer programs and network
services specifically targeted to facilitate electronic banking transactions.
These competitors include banks and financial institutions that operate
privately-owned computer networks that link directly to their commercial
customers. The Company believes that many of its competitors have
significantly greater financial and personnel resources than the Company.
The Company believes that in the future it may face competition from
companies providing electronic commerce solutions over the Internet. Through
an investment in and agreements with HNS, the Company is implementing its
strategy with regard to the Internet. The market for Internet software and
services is emerging and highly competitive, ranging from small companies with
limited resources such as HNS to large companies with substantially greater
financial, technical and marketing resources than the Company or HNS. The
Company believes that existing competitors are likely to expand the range of
their electronic commerce services to include Internet access, and that new
competitors, which may include telephone companies and media companies, are
likely to increasingly offer services which utilize the Internet to provide
business-to-business data transmission services. A group of computer companies
including some competitors of the Company have formed Commerce Net, a business
entity which has announced an intention to explore the use of the Internet for
commercial applications. Additionally, several competitive network service
providers allow their subscribers access to the Internet, and several major
software and telecommunications companies, including Sprint, MCI, AT&T and
Microsoft, either have or are expected to have Internet access services.
Similarly, the major on-line service companies, such as America Online,
Compuserve and Prodigy, also offer Internet services and are expected to
enhance the services in the future to include certain aspects of electronic
commerce. If the Internet becomes an accepted method of electronic commerce,
the Company could lose network customers which would reduce recurring revenue
from network services and have a material adverse effect on the Company.
The Company's competitive strategy in electronic commerce is to offer a
total solution comprised of software products operating on multiple computer
platforms, a computer communications network to facilitate reliable and secure
transmissions of business information and transactions, and value-added
products and services. The Company differentiates itself through its
established customers in target industries, computer programs and software
tools operating in multiple computing environments, and extensive experience in
providing consulting, implementation and training services to facilitate EDI
and electronic commerce transactions. There can be no assurance that the
Company will be successful in its effort or that it will not be materially
adversely affected by competitive factors.
INTELLECTUAL PROPERTY RIGHTS
In accordance with industry practice, the Company relies primarily on a
combination of copyright, patent and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its
proprietary rights. The Company seeks to protect its software, documentation
and other written materials principally under trade secret and copyright laws,
which afford only limited protection. The Company presently has one patent for
an electronic document interchange test facility and patent applications
pending for an EDI communication system. The Company routinely enters into
non-disclosure and confidentiality agreements with principal employees,
vendors, contractors, consultants and customers. Despite the Company's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. There can be no assurance that the Company's
means of protecting its proprietary rights will be adequate or that competitors
will not independently develop similar technology. The Company believes that,
due to the rapid pace of innovation within the electronic commerce, EDI and
related software industries, factors such as the technological and creative
skills of its personnel are more important in establishing and maintaining a
leadership
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<PAGE> 16
position within the industry than are the various legal protections of its
technology. The Company does not believe that any of its products infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to
current or future products. From time to time, the Company has received
notices which allege, directly or indirectly, that the Company's products or
other intellectual property rights infringe the rights of others. The Company
generally has been able to address these allegations without material cost to
the Company. The Company expects that software product developers will
increasingly be subject to infringement claims as the number of products and
competitors in electronic commerce grows and the functionality of products in
different industry segments overlaps. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment
delays or require the Company to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be able on terms
acceptable to the Company or at all, which could have a material adverse effect
on the Company.
The Company recently entered into an agreement to cease use of its InTouch
mark after May 31, 1996. The Company has adopted a new mark, TrustedLink, to
use in lieu of the InTouch mark.
EMPLOYEES
As of December 31, 1995, the Company had approximately 210 full-time
employees, of whom approximately 45 are technical personnel engaged in
maintaining or developing the Company's products or performing related
services, approximately 70 are marketing and sales personnel, approximately 60
are customer support and operations personnel, and approximately 30 are
involved in administration and finance.
EXECUTIVE OFFICERS
The current executive officers of the Company and their ages as of March
31, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---------------- --- -----------------------------------------------
<S> <C> <C>
C. Tycho Howle 46 Chairman of the Board, Chief Executive Officer
and Director
David T. Leach 45 President, Chief Operating Officer and Director
James C. Davis 43 President, Harbinger Group Operations
James M. Travers 44 President, Harbinger Enterprise Solutions
George S. Hart 54 Senior Vice President, Licensee Relationships
David A. Meeker 53 Vice President, Sales
Joel G. Katz 32 Vice President, Finance and Secretary
</TABLE>
Mr. C. Tycho Howle has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company and its predecessors since 1983. From
1981 to 1983 Mr. Howle was a consultant with McKinsey & Company, Inc., a
management consulting firm. From 1979 to 1981, Mr. Howle was a Product Line
Manager with the Hewlett-Packard Company. From 1973 to 1977, he was a project
manager with Booz, Allen & Hamilton's Applied Research Unit.
Mr. David T. Leach has served as President and a director of the Company
since February 1994. From June 1992 until February 1994, he was Group Executive
Vice President, Sales and Operations of the Company. He served as Senior Vice
President of Harbinger Computer Services, Inc. (''HCS'') from 1988 until 1990
and was
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<PAGE> 17
President of HCS from 1990 until its reorganization into Harbinger Corporation
in 1992. Prior to joining HCS, Mr. Leach was a consultant with McKinsey &
Company, Inc., a management consulting firm.
Mr. James C. Davis has served as President of Harbinger Group Operations
since January 1995. In this capacity Mr. Davis has responsibility for
international operations and corporate mergers and acquisitions. He served as
President of the Company from January 1989 until December 1993, when he
resigned as an officer and director of the Company. He was Vice President and
Senior Vice President of HCS from May 1984 until December 1988.
Mr. James M. Travers has served as President of Harbinger Enterprise
Solutions since January 1995. In this capacity, Mr. Travers manages the
business operations acquired in the TI Acquisition. From 1978 through 1994, Mr.
Travers served in various managerial positions with TI, including the position
as Director of Business Development for TI's Worldwide Applications Software
Business and General Manager of TI's EDI business unit from June 1992 through
December of 1994.
Mr. George S. Hart, age 54, has served as Senior Vice President, Licensee
Relationships of Harbinger since April 1984. He served as Senior Vice
President, Business Development and Sales of the Company from the
Reorganization in May 1992 until April 1994. From April 1984 to May 1992, Mr.
Hart served as Senior Vice President, Business Development and Sales of HCS.
Mr. David A. Meeker has served as Vice President, Sales since January,
1995. From September 1992 through December 1994, Mr. Meeker served as Vice
President, Sales for National Data Corp., a credit card processing company.
From January 1992 through August 1992 Mr. Meeker served as Vice President,
Sales and Marketing for Software Alternatives, a computer software and systems
vendor. From January 1990 to January 1992, Mr. Meeker served as Manager, U.S.
Channel Operations for IBM.
Mr. Joel G. Katz has served as Vice President, Finance and Secretary of
Harbinger since January 1995. He served as Senior Director of Finance of the
Company from February 1994 to January 1995, and he was elected Secretary in
February 1994. He joined Harbinger in 1990 as Controller and became Director of
Finance in December 1991. From 1985 to 1990, he was a certified public
accountant in the audit division of Arthur Andersen LLP.
GOVERNMENTAL REGULATIONS AND INDUSTRY STANDARDS
The Company's network services are transmitted to its customers over
dedicated and public telephone lines. These transmissions are governed by
regulatory policies establishing charges and terms for communications. Changes
in the legislative and regulatory environment relating to online services, EDI
or the Internet access industry, including regulatory or legislative changes
which directly or indirectly affect telecommunication costs or increase the
likelihood of competition from regional telephone companies or others, could
have an adverse effect on the Company's business. Congress has enacted, and
President Clinton signed, the Telecommunications Act of 1996 to amend the
federal telecommunications laws to lift restrictions on regional telephone
companies and others competing with the Company and to impose certain
restrictions regarding obscene and indecent content communicated to minors over
the Internet or through interactive computer services. The Telecommunications
Act of 1996 imposes fines and other criminal liability on any entity that
knowingly uses a telecommunications device or interactive computer service to
send obscene or indecent material to minors or permits any telecommunications
facility under such entity's control to be used for such a purpose. Litigation
has been filed in federal court challenging the constitutionality of those
provisions of the Act. A temporary restraining order has been issued by a
federal court enjoining the U.S. Attorney General from enforcing the Act's
"indecency" prohibition. The Company cannot predict the impact, if any, that
this Act and future court opinions, legislation, regulations or regulatory
changes may have on its business. Management believes that the Company is in
compliance with all material applicable regulations.
The Company has not adopted a specific intention with respect to
compliance with ISO 9000 standards for software development and maintenance
services. The Company does not believe that failure to adopt ISO 9000
compliance has had, or in the future will have, a material adverse effect on
its business. However, the Company
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<PAGE> 18
will continue to assess whether or not ISO 9000 compliance will be in the best
interest of the Company. In the event the Company chooses to comply with ISO
9000 standards, such compliance could have a material cost to the Company.
ITEM 2. PROPERTIES.
The Company occupies approximately 48,000 square feet in an office
building in Atlanta, Georgia under a lease expiring in 1998. The facility
serves as the Company's headquarters and data center. The Company also has
offices in Texas and California occupying approximately 12,000 square feet and
1,200 square feet, respectively. The Company also reimburses Harbinger NV for
the cost of facilities located in Hoorne, The Netherlands representing
approximately 4,300 square feet, which Harbinger NV assumed in connection with
the SSA Alliance.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings. From time
to time, the Company is involved in various routine legal proceedings
incidental to the conduct of its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Harbinger's Common Stock is traded on the Nasdaq National Market under the
symbol "HRBC". The price per share reflected in the table below represents the
range of low and high closing sale prices for the Company's Common Stock as
reported by the Nasdaq Stock Market for the quarters indicated:
<TABLE>
<CAPTION>
FISCAL PERIOD HIGH PRICE LOW PRICE
- - -------------------- ---------- ---------
<S> <C> <C>
Commencing August
22, 1995 and ending
September 30, 1995 $17 1/2 $13
December 31, 1995 $29 1/2 $12 1/4
</TABLE>
The closing sale price of the Company's Common Stock as reported by the
Nasdaq Stock Market on March 21, 1996 was $17-1/8.
The number of shareholders of record of the Company's Common Stock as of
March 21, 1996, was approximately 180.
The Company has never paid cash dividends on its capital stock. The
Company currently intends to retain any earnings for use in the business and
does not anticipate paying any cash dividends in the foreseeable future. In
addition, the Company's bank line of credit prohibits payments of cash
dividends without prior bank approval.
- 18 -
<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the section entitled "Selected Financial
Data" on page 1 of the Company's 1995 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information set forth under the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 10 through 13 of the Company's 1995 Annual Report to Shareholders is
incorporated herein by reference and filed herewith as a part of Exhibit 13.1.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The quarterly results of operations set forth on page 9 of the Company's
1995 Annual Report to Shareholders and the following financial statements,
related notes thereto and report of independent auditors set forth on pages 14
through 27 of the Company's 1995 Annual Report to Shareholders, are
incorporated herein by reference and filed herewith as a part of Exhibit 13.1.
Balance Sheets as of December 31, 1995 and 1994.
Statements of Operations for the years ended December 31, 1995, 1994 and
1993.
Statements of Shareholders' Equity for the years ended December 31, 1995,
1994 and 1993.
Statements of Cash Flows for the years ended December 31, 1995, 1994 and
1993.
Notes to Financial Statement.
Independent Auditors' Report.
In addition to the foregoing, the following Financial Statements of
Harbinger Net Services, LLC are provided in response to the requirements of
Item 309 of Regulation S-K and this Item 8:
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<PAGE> 20
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Harbinger NET Services, LLC:
We have audited the accompanying balance sheet of Harbinger NET Services, LLC
as of December 31, 1995 and the related statements of operations, shareholders'
equity, and cash flows for the period from inception (March 1995) through
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Harbinger NET Services, LLC as
of December 31, 1995 and the results of its operations and its cash flows for
the period from inception (March 1995) through December 31, 1995 in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
/S/ KPMG Peat Marwick LLP
Atlanta, Georgia
February 9, 1996
- 20 -
<PAGE> 21
HARBINGER NET SERVICES, LLC
Balance Sheet
December 31, 1995
Assets
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $10,645,000
Other current assets 42,000
-----------
Total current assets 10,687,000
Property and equipment, less accumulated
depreciation and amortization 219,000
-----------
$10,906,000
===========
Liabilities and Shareholders' Equity
Accounts payable $ 13,000
Due to affiliates, net 180,000
Accrued expenses 160,000
-----------
Total current liabilities 353,000
Long-term debt 3,000,000
-----------
Total liabilities 3,353,000
-----------
Shareholders' equity:
Common stock, no par value; 10,000,000 shares
authorized, 6,718,286 shares issued and outstanding 8,703,000
Accumulated deficit (1,150,000)
-----------
Total shareholders' equity 7,553,000
-----------
Commitments and contingencies $10,906,000
===========
</TABLE>
See accompanying notes to financial statements.
- 21 -
<PAGE> 22
HARBINGER NET SERVICES, LLC
Statement of Operations
Period from inception (March 1995) through December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Operating costs:
Selling and marketing $84,000
General and administrative 133,000
Depreciation and amortization 21,000
Product development 1,077,000
------------
Total operating costs 1,315,000
------------
Operating loss (1,315,000)
Interest expense (income), net (165,000)
------------
Net loss $(1,150,000)
===========
</TABLE>
See accompanying notes to financial statements.
- 22 -
<PAGE> 23
HARBINGER NET SERVICES, LLC
Statement of Shareholders' Equity
Period from inception (March 1995) through December 31, 1995
<TABLE>
<CAPTION>
Common stock Total
--------------------- Accumulated Shareholder shareholders'
Shares Amount deficit note receivable equity
--------- ---------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
Initial capitalization (March 1995) 1,004,000 $ 703,000 - - $ 703,000
Sale of common stock 5,714,286 8,000,000 - $(6,000,000) 2,000,000
Proceeds from payment of shareholder
note receivable - - - 6,000,000 6,000,000
Net loss - - (1,150,000) - (1,150,000)
--------- ---------- ------------ ------------ -------------
Balance at December 31, 1995 6,718,286 $8,703,000 $(1,150,000) - $7,553,000
========= ========== ============ ============ =============
</TABLE>
See accompanying notes to financial statements.
- 23 -
<PAGE> 24
HARBINGER NET SERVICES, LLC
Statement of Cash Flows
Period from inception (March 1995) through December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $(1,150,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 21,000
Increase in other current assets (49,000)
Increase in:
Accounts payable 13,000
Due to affiliates, net 180,000
Accrued expenses 160,000
-----------
Net cash used in operating activities (825,000)
-----------
Cash flows from investing activities - purchases of property
and equipment (233,000)
-----------
Cash flows from financing activities:
Proceeds from sale of common stock 2,703,000
Proceeds from issuance of long-term debt 3,000,000
Proceeds from payment of shareholder note receivable 6,000,000
-----------
Net cash provided by financing activities 11,703,000
-----------
Net increase in cash and cash equivalents 10,645,000
Cash and cash equivalents at inception -
-----------
Cash and cash equivalents at end of the period $10,645,000
===========
Supplemental disclosure of noncash financing activity -
sale of common stock for shareholder note receivable $ 6,000,000
===========
</TABLE>
See accompanying notes to financial statements.
- 24 -
<PAGE> 25
HARBINGER NET SERVICES, LLC
Notes to Financial Statements
December 31, 1995
(1) Description of Business and Summary of Significant Accounting Policies
(a) Business and Presentation
Harbinger NET Services, LLC (the "Company") was organized by Harbinger
Corporation and certain other shareholders in December 1994 and began
operations as a development stage enterprise in March 1995. The Company
develops, markets, and supports software products to enable businesses
to engage in electronic commerce using the Internet.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
(c) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures 10 years
Computer software 5 years
Computer and office equipment 5-10 years
</TABLE>
(d) Product and Software Development Costs
Product development costs consist principally of compensation and
benefits paid to the Company's employees or Harbinger Corporation. All
product development costs not qualifying for capitalization as software
development costs are expensed as incurred.
The Company's policy is to expense all software development costs
associated with establishing technological feasibility. Because none of
the Company's products have reached this stage of development, the
Company has not capitalized any product development costs in the
accompanying financial statements.
(e) Income Taxes
The Company has elected to incorporate as a Limited Liability Company in
accordance with the laws in the State of Georgia. As a result, the
Company is taxed as a partnership and has not provided for Federal
- 25 -
<PAGE> 26
or state income taxes as the operations are passed through to, and the
related income taxes become the individual responsibility of, the
Company's shareholders.
(f) Fair Value of Financial Instruments
The Company uses financial instruments in the normal course of its
business. The carrying values of cash equivalents, other current
assets, accounts payable, due to affiliates, net, and accrued expenses
approximate fair value due to the short-term maturities of these assets
and liabilities. The Company believes the fair value of its long-term
debt is not significantly different than its carrying value.
(g) Recent Accounting Pronouncement
On October 23, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation ("SFAS No. 123")." SFAS No. 123 allows
companies to retain the current approach set forth in APB Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), for
recognizing stock-based expense in their financial statements; however,
companies are encouraged to adopt the new accounting method proposed
under SFAS No. 123 based on the estimated fair value of employee stock
options. Companies that do not follow the new fair value based method
will be required to provide expanded footnote disclosures. The
provisions of SFAS No. 123 are effective for fiscal years beginning
after December 15, 1995. However, disclosure of the pro forma net
income and earnings per share, as if the fair value method for
accounting for stock-based compensation had been elected, is required
for all awards granted in fiscal years beginning after December 15,
1994.
The Company intends to continue accounting for stock-related
compensation using APB Opinion No. 25 and will provide the expanded
footnote disclosures required under SFAS No. 123 beginning with its 1996
financial statements.
(2) Property and Equipment
Property and equipment as of December 31, 1995 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures $ 4,000
Computer software 36,000
Computer and office equipment 193,000
--------
233,000
Less accumulated depreciation and amortization 14,000
--------
$219,000
========
</TABLE>
(3) Long-Term Debt
In connection with a June 1995 financing, the Company issued a $3 million
subordinated convertible debenture bearing interest at 6% with principal
and accrued interest due in full in June 2000. This financing was
completed simultaneously with a capital investment made by Harbinger
Corporation of $8 million. The Company is party to an Operating Agreement
(see note 4(b)) between Harbinger Corporation, the holder of the $3 million
subordinated convertible debenture, and the Company's shareholders which
provides, among other terms, a right of first refusal to Harbinger
Corporation and the holder with respect to future securities sales by the
Company and restricts the Company from certain activities including issuing
additional debt in excess of $7.5 million. The terms of this agreement
also provide for the automatic conversion of the subordinated convertible
debenture into the number of shares of the Company's common stock
equivalent to the outstanding principal and accrued interest on the
subordinated convertible debenture divided by the
- 26 -
<PAGE> 27
conversion price, as defined, at the time that the debenture holder
receives any and all regulatory approvals required to hold equity in the
Company.
(4) Shareholders' Equity
(a) Common Stock
The Company's initial capitalization of $703,000 was provided by
Harbinger Corporation and certain other shareholders in March 1995
through the issuance of 1,004,000 shares of the Company's common stock
at $0.70 per share.
In connection with a June 1995 financing, the Company issued 5,714,286
shares of its common stock to Harbinger Corporation at a price
equivalent to $1.40 per share in exchange for $2 million in cash and a
$6 million note receivable bearing interest at 7% due at the earlier of
September 1996 or the completion of an initial public offering, as
defined, by Harbinger Corporation. The note receivable was paid in full
in August 1995.
(b) Operating Agreement
The shareholders of the Company, including the holder of the
subordinated convertible debenture, are parties to an Operating
Agreement (the "Agreement") which grants certain designated
shareholders, presently Harbinger Corporation and the holder of the
subordinated convertible debenture, the right after December 1, 1996 to
initiate a buy-sell procedure with respect to shares owned by such
shareholders. The Agreement also provides for the Company to be
controlled by a Board of Managers of seven individuals, two of which are
designated by Harbinger Corporation, two are designated by the holder of
the subordinated convertible debenture, two are jointly designated by
these two parties, and the final member is selected by majority vote of
shareholders other than these two parties. After December 31, 1996, the
members of the Board of Managers are elected by a simple majority vote
of all of the Company's shareholders.
(c) Stock Options
In connection with the initial capitalization of the Company and in
order to attract and retain certain key employees, the Company has
granted noncompensatory options to acquire the Company's common stock.
The following table summarizes option activity for the period from
inception (March 1995) through December 31, 1995:
<TABLE>
<CAPTION>
Number Price range
------- -------------
<S> <C> <C>
Outstanding at inception -
Granted 103,102 $0.70 - $1.40
Exercised -
-------
Outstanding at December 31, 1995 103,102 $0.70 - $1.40
=======
Options exercisable at December 31, 1995 -
=======
</TABLE>
(5) Due to Affiliates, Net
The Company has entered into several agreements with Harbinger Corporation
governing certain transactions between them, including the use of
personnel, the use of technology owned by Harbinger Corporation, the rights
of Harbinger Corporation to license and distribute the Company's products,
and the payment of royalties by the Company and Harbinger Corporation.
- 27 -
<PAGE> 28
Amounts paid to Harbinger Corporation by the Company for services provided
and for reimbursement of expenses incurred by Harbinger Corporation on
behalf of the Company for the period from inception (March 1995) through
December 31, 1995 included in the Company's accompanying financial
statements are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Operating costs:
Selling and marketing $ 36,000
========
General and administrative $ 94,000
========
Product development $449,000
========
Balance sheet:
Reimbursement for property and equipment purchases $158,000
========
At December 31, 1995, the Company had an amount due to affiliates, net,
resulting from these and other affiliated transactions as follows:
Due to Harbinger Corporation $ 97,000
Due to holder of the subordinated convertible
debenture (accrued interest) 97,000
Due from Harbinger Corporation affiliate (14,000)
--------
$180,000
========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On December 26, 1995, the Company dismissed its independent public
accountants, Arthur Andersen LLP. Prior to December 26, 1995, Arthur Andersen
LLP was engaged as the principal accountant to audit the Company's financial
statements. The reports by Arthur Andersen LLP on the Company's financial
statements for the fiscal years ended December 31, 1994 and December 31, 1993
and subsequent interim periods, did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. The dismissal of the former accountants
was recommended by the Company's Audit Committee and approved by the Company's
Board of Directors.
During the Company's fiscal years ended December 31, 1994 and December 31,
1993, and during the subsequent interim fiscal periods following the Company's
fiscal year ended December 31, 1994 through the date of dismissal, there were
no disagreements with Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Arthur
Andersen LLP, would have caused it to make reference to the subject matter of
the disagreement in their reports. Also, there were no reportable events of
the nature described in Rule 304(a)(1)(v) during the Company's fiscal years
ended December 31, 1994 and December 31, 1993, or during the subsequent interim
fiscal periods following the Company's fiscal year ended December 31, 1994
through the date of dismissal.
On January 2, 1996, the Company announced the appointment of KPMG Peat
Marwick LLP as independent accountants to audit the Company's financial
statements for 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain information required by this item is incorporated by reference
from the information contained in the Company's Proxy Statement for the Annual
Meeting of Shareholders expected to be filed with the Commission on
- 28 -
<PAGE> 29
April 8, 1996 under the captions "Election of Directors" and "Executive
Officers." Certain information regarding executive officers of the Company is
included in Part I of this report on Form 10-K under the caption "Executive
Officers."
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be included in the Company's
Proxy Statement for the Annual Meeting of Shareholders expected to be filed
with the Commission on April 8, 1996 under the caption "Executive Compensation"
and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be included in the Company's
Proxy Statement for the Annual Meeting of Shareholders expected to be filed
with the Commission on April 8, 1996 under the caption "Security Ownership of
Certain Beneficial Owners and Management" and is incorporated by reference
herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be included in the Company's
Proxy Statement for the Annual Meeting of Shareholders expected to be filed
with the Commission on April 8, 1996 under the caption "Certain Transactions"
and is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements
The financial statements of Harbinger Corporation and reports of
independent auditors as set forth under Item 8 of this report on Form 10-K are
incorporated herein by reference.
2. Financial Statement Schedules
(i) The following Financial Statement Schedule of Harbinger Corporation
for the Years Ended December 31, 1993, 1994 and 1995 is filed as a part of this
Report on Form 10-K and should be read in conjunction with the Financial
Statements, and related notes thereto, of Harbinger Corporation.
- 29 -
<PAGE> 30
HARBINGER CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING OF COSTS AND ACCOUNTS-- DEDUCTIONS-- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE(B) DESCRIBE(A) PERIOD
- - ---------------------------------- ------------ --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
December 31, 1993
Allowance for returns and doubtful
accounts.......................... $110,000 69,000 1,010,000 (907,000) $282,000
December 31, 1994
Allowance for returns and doubtful
accounts.......................... $282,000 86,000 964,000 (1,062,000) $270,000
December 31, 1995
Allowance for returns and doubtful
accounts.......................... $270,000 99,000 1,309,000 (1,141,000) $537,000
</TABLE>
- - ---------------
(A) Deductions represent write offs and sales returns.
(B) Charges to revenue for sales returns and allowances.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Harbinger Corporation:
Under date of February 9, 1996, we reported on the balance
sheet of Harbinger Corporation as of December 31, 1995 and
the related statements of operations, shareholders' equity,
and cash flows for the year ended December 31, 1995, as
contained in the Harbinger Corporation 1995 Annual Report to
Shareholders. These financial statements and our report
thereon are included in the Harbinger Corporation Annual
Report on Form 10-K for the year 1995. In connection with
our audit of the aforementioned financial statements, we
also audited the related financial statement schedule listed
in Item 14(a)2. The financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement schedule based on our audit.
In our opinion, such financial schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information
set forth therein.
KPMG PEAT MARWICK LLP
/s/ KPMG Peat Marwick LLP
Atlanta, Georgia
February 9, 1996
- 30 -
<PAGE> 31
Schedules not listed above have been omitted because they are not
applicable or the information required to be set forth herein is included in
the Financial Statements or notes thereto.
(ii) The following Report of Independent Public Accountants with respect
to the Company's Balance Sheet as of December 31, 1994 and its related
Statements of Operations, changes in Shareholders' equity and cash flows for
the two years in the period ended December 31, 1994 is filed as a part of this
Report on Form 10-K and should be read in conjunction with the Financial
Statements, and related notes thereto, of Harbinger Corporation.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Harbinger Corporation:
We have audited the balance sheet of HARBINGER CORPORATION,
a Georgia corporation (formerly known as Harbinger EDI Services,
Inc.), as of December 31, 1994 and the related statements of
operations, changes in shareholders' equity, and cash flows for
the two years in the period ended December 31, 1994. These
financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Harbinger Corporation as of December 31, 1994 and the results
of its operations and its cash flows for the two years in the
period ended December 31, 1994 in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule
listed in Item 14(a)2 herein is the responsibility of the
Company's management and is presented for purpose of complying
with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set
forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 14, 1995
- 31 -
<PAGE> 32
(b) REPORTS ON FORM 8-K. The Company filed the following report on Form 8-K
during the quarter ended December 31, 1995.
(i) Report on Form 8-K with respect to the dismissal of Arthur Andersen
LLP filed December 28, 1995,
(c) EXHIBITS. The following exhibits are filed as part of, or are
incorporated by reference into, this report on Form 10-K:
<TABLE>
<CAPTION>
EXHIBIT
- - -------
NUMBER DESCRIPTION
- - ------- -----------------------------------------------------------------------------------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of the Registrant.
3.2* Amended and Restated Bylaws of the Registrant.
10.1* Amended and Restated Operating Agreement of Harbinger NET Services, LLC dated
June 20, 1995 (''HNS'')
10.2* Note and Security Agreement made by Registrant to HNS for $6,000,000, dated June
20, 1995
10.3* HNS Subordinated Convertible Debenture for $3,000,000 due June 20, 2000
10.4* Amended and Restated Software License Agreement between Registrant and HNS
made as of June 20, 1995 and effective as of May 31, 1995
10.5* Amended and Restated System Operation Agreement between Registrant and HNS
made as of June 20, 1995 and effective as of May 31, 1995
10.6* Amended and Restated Development Agreement between Registrant and HNS made
as of June 20, 1995 and effective as of May 31, 1995
10.7* Subscription Documents of Registrant for the acquisition of 1,428,571 shares of HNS
dated June 20, 1995
10.8* Subscription Documents of Registrant for 4,285,714 shares of HNS dated June 20,
1995
10.9* Agreement by and among Registrant, HNS, and BellSouth Corporation dated June 20,
1995
10.10* Management Agreement between Registrant and HNS dated as of May 31, 1995
10.11* Westinghouse Communications Order Form between Registrant and Westinghouse
Communications dated May 12, 1995
10.12* Promissory Note for $3,000,000 payable by Registrant to NationsBank of Georgia,
N.A. (''NationsBank'') dated May 2, 1995
</TABLE>
- 32 -
<PAGE> 33
<TABLE>
<CAPTION>
<S> <C>
10.13* Loan Agreement between Registrant and NationsBank dated as of August 15, 1994
with First Amendment dated as of May 2, 1995
10.14* Employment Agreement between Registrant and Mr. James M. Travers effective as of
February 1, 1995 with letter from Registrant to Mr. Travers dated December 27,
1994
10.15* Employment Agreement between Registrant and Mr. James C. Davis effective as of
January 18, 1995
10.16* Assignment of Invention and Patents Thereon (Patent No. 5,367,664) by Texas
Instruments, Incorporated (''TI'') to Registrant dated January 12, 1995 as recorded
with United States Patent and Trademark Office on March 13, 1995
10.17* U.S. Patent No. 5,367,664 issued November 22, 1994
10.18* Assignment of Invention and Patents Thereon (Application No. 07/502,955) by TI to
Registrant dated January 12, 1995 as recorded with United States Patent and
Trademark Office on March 13, 1995
10.19* Asset Purchase Agreement between Registrant and TI dated as of December 31,
1994**
10.20*+ Business Financial Management System License Agreement between Registrant and
Private Business, Inc. dated December 28, 1994
10.21* Employment Agreement between Registrant and Mr. David A. Meeker effective as of
December 21, 1994
10.22* Exclusive Licensing Agreement between Registrant and Tools & Techniques, Inc.
(''T&T'') dated as of October 31, 1994
10.23* Right-To-Purchase Agreement between Registrant and the Principal Shareholders of
T&T dated as of October 31, 1994
10.24* 401(k) Profit Sharing Plan amended and restated effective as of September 1, 1994;
original effective date October 1, 1991
10.25* Employment Agreement between Registrant and Mr. C. Tycho Howle effective as of
March 7, 1994
10.26* Employment Agreement between Registrant and Mr. Joel G. Katz effective as of
March 7, 1994
10.27* Employment Agreement between Registrant and Mr. David T. Leach effective as of
March 7, 1994
10.28* Employment Agreement between Registrant and Mr. George S. Hart effective as of
March 7, 1994
10.29*+ License and Service Agreement between Registrant and Bank of America National
Trust and Savings Association dated as of February 18, 1994
</TABLE>
- 33 -
<PAGE> 34
<TABLE>
<CAPTION>
<S> <C>
10.30* Harbinger NV. (''HNV'') Shareholders Agreement between the Registrant, AXA
Equity & Law Life Assurance Society, Ltd. (''Equity & Law'') and Vulcan Ventures,
Inc. (''Vulcan'') dated November 5, 1993 with Addendum made as of May 11,
1994
10.31* Management Agreement between Registrant and Harbinger NV dated as of November 5,
1993
10.32* Agreement between Registrant and EDI Solutions, Inc. effective as of September 1,
1993
10.33* Amended and Restated 1993 Stock Option Plan for Nonemployee Directors effective
as of August 11, 1993
10.34* Co-Marketing Agreement between Registrant and Sprint Communications Company
Limited Partnership of Delaware made as of August 9, 1993
10.35* Series C Preferred Stock Agreement between Registrant and Equity & Law dated
March 4, 1993
10.36* Series C Preferred Stock Agreement between Registrant and Vulcan dated March 4,
1993
10.37* Form of Series B Preferred Stock Agreement by and among Registrant and holders of
the Series B Preferred Stock of Registrant made as of November 30, 1992
10.38* Lease between Registrant and Lenox Park Development No. 1 L.P. for office located
at 1055 Lenox Park Boulevard, Atlanta, Georgia dated July 16, 1992 with First
Amendment dated July 22, 1993 and Second Amendment dated December 27,
1993
10.39* Amended and Restated 1989 Stock Option Plan effective as of April 15, 1992
10.40*+ Harbinger Business Financial Management System License Agreement between
Registrant as assignee of Harbinger Computer Services, Inc. and Barnett Banks, Inc.
dated November 18, 1991 with amendment dated May 21, 1992
10.41* Software License and Distribution Agreement between Registrant and Sprint
International Communications Corporation (''Sprint'') effective July 27, 1990 with
First Amendment effective as of May 24, 1993
10.42* Reseller Agreement (now known as Service Management Agreement) between
Registrant and Sprint effective July 27, 1990 with First Amendment effective as of
May 1, 1991, Second Amendment effective as of May 1, 1992, and Third
Amendment dated July 1, 1994
10.43* Form of Indemnification Agreement between Registrant and Directors
10.44 Letter Agreement between Registrant and Harbinger NET Services, L.L.C.
10.45 Subscription Agreement between Registrant and Harbinger NV effective December 29,
1995
</TABLE>
- 34 -
<PAGE> 35
<TABLE>
<CAPTION>
<S> <C>
10.46 Subscription Agreement and Investor Suitability Representations (Regulation S)
between Registrant and Henk P.M. Kivits effective as of August 22, 1995
10.47 Harbinger NV Amended and Restated Shareholders Agreement between Registrant, AXA
Equity & Law Life Assurance Society, Ltd. and Vulcan Ventures dated December 29,
1995
10.48 Harbinger Corporation 1996 Stock Option Plan
10.49 Amended and Restated Harbinger Corporation Employee Stock Purchase Plan
10.50 Amendment to Harbinger Corporation Amended and Restated 1989 Stock Option Plan
10.51 First Amendment to Alliance Agreement between System Software Associates, Inc. and
Harbinger Corporation
10.52 Supplemental Agreement by and among Harbinger Corporation, Vulcan
Ventures, Inc. and AXA Equity & Law Life Assurance Society, Ltd. effective
December 29, 1995.
11.1 Computation of Earnings Per Share
13.1 The following financial information included within the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1995:
(i) Selected Financial Data;
(ii) Quarterly Results of Operations;
(iii) Management's Discussion and Analysis of Financial Condition and Results of
Operations; and
(iv) Financial Statements, Notes to Financial Statements, and Independent
Auditor's Report.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule (for SEC use only)
</TABLE>
* Incorporated by reference to Exhibits filed in response to Item 16(a),
"Exhibits" of the Company's Registration Statement on Form S-1 (File No.
33-93804) declared effective on August 22, 1995.
+ The Company has received confidential treatment with respect to portions
of these Exhibits.
- 35 -
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HARBINGER CORPORATION
/s/ C. Tycho Howle
--------------------------------
C. Tycho Howle
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ C. Tycho Howle
- - ------------------------------------- Chief Executive Officer, March 29, 1996
C. Tycho Howle Director (Principal Executive
Officer)
/s/ David T. Leach
- - ------------------------------------- President, Chief Operating Officer March 29, 1996
David T. Leach and Director
/s/ Joel G. Katz
- - ------------------------------------- Vice-President-Finance and Secretary March 29, 1996
Joel G. Katz (Principal Financial Officer and Principal
Accounting Officer)
/s/ Donald L. House
- - ------------------------------------- Director March 29, 1996
Donald L. House
/s/ William D. Savoy
- - ------------------------------------- Director March 29, 1996
William D. Savoy
/s/ William B. King
- - ------------------------------------- Director March 29, 1996
William B. King
/s/ Stuart L. Bell
- - ------------------------------------- Director March 29, 1996
Stuart L. Bell
/s/ Roger E. Covey
- - ------------------------------------- Director March 29, 1996
Roger E. Covey
</TABLE>
<PAGE> 37
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
HARBINGER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THE CHARTER)
<PAGE> 1
EXHIBIT 10.44
<PAGE> 2
Tycho Howle
Harbinger Corporation
Re: Harbinger Corporation Employee Stock Purchase Plan
Dear Tycho:
The purpose of this letter is to formally acknowledge the responsibilities
which Harbinger NET Services, L.L.C. ("HNS") will have regarding the
participation of HNS employees in the Harbinger Corporation Employee Stock
Purchase Plan (the "Plan").
First, HNS will remit to Harbinger Corporation ("Harbinger"), as soon as
administratively possible following the end of each quarterly purchase period,
the fair market value (as defined in the Plan) for the shares purchased for the
purchase period under the Plan for HNS employees. The fair market value will
be funded with amounts withheld from HNS employees' salary via payroll
deductions, and HNS's fifteen (15%) percent share of the purchase price.
Second, HNS agrees to cooperate with whatever practices and procedures are
established for the administration of the Plan by the Compensation Committee of
Harbinger.
Third, HNS will cooperate with Harbinger and take whatever actions may be
necessary to ensure that the issuance of Harbinger shares to HNS employees
under the Plan complies with applicable securities requirements, as determined
by Harbinger.
Sincerely,
Harbinger NET Services, L.L.C.
By: /s/ James C. Davis
James Davis, President
<PAGE> 1
EXHIBIT 10.45
<PAGE> 2
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made and entered into between HARBINGER NV,
a corporation organized under the laws of the Netherlands (herein referred to
as the "Company") and HARBINGER CORPORATION, a corporation organized under the
laws of the State of Georgia U.S.A. ("Investor"). By executing this
Subscription Agreement, Investor acknowledges that Investor understands that
the Company is relying upon the accuracy of the representations and warranties
of Investor contained herein in complying with its obligations under applicable
securities laws.
TERMS OF INVESTMENT
1. GENERAL. Investor hereby agrees to acquire and obtain upon the terms
and conditions set forth herein 150,000 shares of the Company's Common Shares
(the "Securities"). The Purchase Price shall be $U.S. 150,000.00.
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES.
a. Investor represents, warrants and covenants to the Company that
Investor is domiciled in the country and state or province shown in Investor's
address below, and will be the sole party in interest as to the Securities
subscribed for and is acquiring the Securities for Investor's own account, for
investment only and not with a view toward the resale or distribution thereof
for at least a period of one year.
b. Investor represents and warrants that Investor is able to bear the
economic risk; of losing Investor's entire investment in the Company, that such
investment is not disproportionate to Investor's net worth, and that Investor
has adequate means of providing for Investor's current needs and contingencies
without regard to the investment in the Company.
c. Investor represents and warrants that in connection with Investor's
purchase of any of the Securities no oral or written representations or
warranties have been made to Investor.
d. Investor represents and warrants that, to the extent Investor has
deemed necessary, Investor has consulted with Investor's attorney, financial
advisors and others regarding all financial, securities, and tax aspects of the
proposed investment.
e. Investor represents, warrants, and agrees that it shall not transfer
the Securities to any person or entity except in accordance with the provisions
of that certain Amended and Restated Shareholders Agreement dated December 29,
1995 by and between Investor, Vulcan Ventures, Inc., a corporation organized
under the laws of the State of Washington, U.S.A. and AXA Equity & Law Life
Assurance Society, Ltd., a corporation organized under the laws of England
(the "Shareholders Agreement").
f. Investor represents, warrants, and agrees that Investor has read
carefully the Shareholders Agreement and that Investor ratifies and confirms
the terms and conditions of the Shareholders Agreement.
3. PROCEDURE FOR CLOSING. The closing of the offer and sale of the
Securities pursuant to this Agreement shall occur as follows:
(i) Investor shall execute a copy of this Agreement (also indicating
Investor's address on the signature page of this Agreement) and a copy of the
Shareholders Agreement and shall forward such executed documents, together with
a wire transfer of funds, in the amount equal to the
<PAGE> 3
Purchase Price of the Securities subscribed for, to the Company. The wire
transfer should be transmitted to:
ABN*AMRO Bank
For Credit to the Account of:
Harbinger NV
USD Account 43.15.42.414
SWIFTCODE: ABNANL2A
ABN*AMRO Bank at
Nieuweweg 49
Postbus 49
2130 AA Hoofddorp
The Netherlands
Phone: +31-23-5614041
Contact Person: Ms. A. Kuijper-Woldhuis
(ii) Simultaneously with the Company's transmittal of this executed
Agreement, Shareholders Agreement, and certificate representing the Securities
to Investor, the Company will be authorized to disburse the funds wired by
Investor into the Company's account and immediately to make use of such funds
in its sole discretion
4. MISCELLANEOUS.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Georgia, U.S.A., without regard to the respect to any laws
governing conflict of laws.
IN WITNESS WHEREOF, Investor has executed this Subscription Agreement
effective the 29th day of December, 1995.
HARBINGER CORPORATION
<TABLE>
<CAPTION>
<S> <C>
By: /s/ C. Tycho Howle
-------------------
Name (Print or Type): C. Tycho Howle
-------------------
Title: CEO
-------------------
Address of Investor: 1055 Lenox Park Boulevard
Atlanta, GA 30319
Country of Residence: U.S.A.
Investment Agreement For: 150,000 shares of Common Shares at $U.S. 1.00 per
share
Total Purchase Price: $U.S.150,000.00
</TABLE>
[SIGNATURES CONTINUED ON NEXT PAGE]
- 2 -
<PAGE> 4
Accepted by Harbinger NV effective the 29th day of December, 1995.
HARBINGER NV
By: /s/ James C. Davis
------------------------
James C. Davis
Name (Print or Type)
Title: Managing Director
-----------------
- 3 -
<PAGE> 1
EXHIBIT 10.46
<PAGE> 2
CONFIDENTIAL
SUBSCRIPTION AGREEMENT AND
INVESTOR SUITABILITY REPRESENTATIONS
(REGULATION S)
____________________
HARBINGER CORPORATION
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS.
THE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON
TRANSFERABILITY SET FORTH HEREIN.
THIS SUBSCRIPTION AGREEMENT is made and entered into between HARBINGER
CORPORATION, a corporation organized under the laws of the State of Georgia,
U.S.A. (herein referred to as the "Company") and Hendrikus Pieter Marie Kivits,
a resident of the Netherlands ("Investor"). By executing this Subscription
Agreement, Investor acknowledges that Investor understands that the Company is
relying upon the accuracy of the representations and warranties of Investor
contained herein in complying with its obligations under applicable securities
laws.
I. TERMS OF SUBSCRIPTION
1. GENERAL. Investor owns 32,000 shares of the NLG. 1 par value per share
Common Shares of Harbinger NV, a corporation organized under the laws of the
Netherlands, (the "HNV Shares"). Investor hereby subscribes to acquire, upon
the terms and conditions set forth in this Subscription Agreement, such number
of shares of the $U.S. .0001 par value per share Common Stock of the Company as
shall be determined in accordance with the provisions of Section 2 hereof (the
"HC Shares"). The HC Shares subscribed hereby are herein referred to as the
"Securities." Execution of this Subscription Agreement by Investor shall
constitute an offer by Investor to subscribe for HC Shares. The subscription
shall be on the terms and conditions specified herein.
<PAGE> 3
2. CONVERSION OF HNV SHARES TO HC SHARES. Investor hereby agrees
immediately to tender to the Company, as consideration for the HC Shares, all
of the HNV Shares owned by Investor. Upon acceptance of Investor's
subscription offer by the Company and in return for and following receipt by
the Company of the stock certificate representing the HNV Shares, the Company
shall issue to Investor certain HC Shares in the amount specified below (the
"Converted HC Share Amount") which is equal to the quotient derived by DIVIDING
Thirty-Two Thousand and No/100ths United Stated Dollars ($U.S. 32,000.00),
which equals the amount Investor originally paid for the HNV Shares (the
"Conversion Price") BY twelve U.S. dollars ($U.S. 12.00) per share which is the
price per share to the public of the Company's Common Stock proposed pursuant
to the Company's initial public offering completed pursuant to that certain
Underwriting Agreement by and among the Company and the Company's Investment
Bankers and other named parties therein dated August 21, 1995 (the
"Underwriting Agreement"). In the event the calculations of this Section 2
result in any fractional shares of the Company to be issued to Investor, the
Company shall remit to Investor payment in cash in an amount equal to the
number of fractional shares MULTIPLIED BY the price per share to the public for
the Company's Common Stock in its initial public offering (the "Fractional
Share Payment").
3. INVESTOR'S REPRESENTATION AND WARRANTIES.
A. Investor represents, warrants and covenants to the Company that
Investor (i) will be the sole party in interest as to the Securities subscribed
for and is acquiring the Securities for Investor's own account, for investment
only and not with a view toward the resale or distribution thereof, (ii)
received this Subscription Agreement outside of the United States, and executed
and delivered this Subscription Agreement outside of the United States, and
(iii) is a resident of a jurisdiction other than the United States.
B. Investor understands that Investor must bear the economic risk of this
investment for an indefinite period of time because the Securities are not
registered under the Securities Act of 1933, as amended (the "1933 Act"), or
the securities laws of the Netherlands or any other jurisdiction. Investor has
been advised that the Securities are not being registered under the 1933 Act
upon the basis that the transactions involving their sale are exempt from such
registration requirements as transactions made outside the United States in
reliance on Regulation S, as promulgated by the United States Securities and
Exchange Commission ("SEC") pursuant to the 1933 Act, and that reliance by the
Company on such exemption is predicated in part on Investor's representations
set forth in this Subscription Agreement. Investor acknowledges that the
Company makes no representations of any kind concerning its intent or ability
to offer or sell the Securities in a public offering or otherwise. Investor
further understands that the Company makes no representation or warranty
regarding its fulfillment in the future of any reporting requirements under the
Securities Exchange Act of 1934, as amended, or its dissemination to the public
of any current financial or other information concerning the Company, as may be
required as a condition for the unregistered resale of restricted securities.
C. Investor represents and warrants that Investor is able to bear the
economic risk of losing Investor's entire investment in the Company, which is
not disproportionate to
- 2 -
<PAGE> 4
Investor's net worth, and that Investor has adequate means of providing for
Investor's current needs and personal contingencies without regard to the
investment in the Company.
D. Investor represents and warrants that in connection with Investor's
purchase of any of the Securities no oral or written representations or
warranties have been made to Investor. Investor acknowledges receipt of the
Company's Prospectus dated August 21, 1995 and further acknowledges that the HC
Shares being acquired by Investor hereunder are not covered by such Prospectus
and are not registered shares. Investor acknowledges that the Company has not
made or delivered any financial projections, and Investor is not relying on any
expectations of financial condition or results of operations for any future
period.
E. Investor represents and warrants that Investor is an accredited
investor as defined in the 1933 Act, either by virtue of having a net worth in
excess of One Million United States Dollars ($U.S. 1,000,000) or by having, for
each of the two most recent years, an individual income in excess of Two
Hundred Thousand United States Dollars ($U.S. 200,000) or a joint income in
excess of Three Hundred Thousand United States Dollars ($U.S. 300,000) and a
reasonable expectation of achieving the same income level in the current year.
Investor further represents and warrants that Investor is familiar with the
business in which the Company is engaged and, based upon Investor's knowledge
and experience in financial and business matters, Investor is familiar with
investments of the sort that Investor is undertaking herein, that Investor is
fully aware of the problems and risks involved in making an investment of this
type, and that Investor is capable of evaluating the merits and risks of this
investment.
F. Investor represents and warrants that, to the extent Investor has
deemed necessary, Investor has consulted with Investor's attorney, financial
advisors and others regarding all financial, securities and tax aspects of the
proposed investment, and that said advisors have reviewed this Subscription
Agreement and all documents relating hereto on Investor's behalf. Investor and
Investor's advisors have sufficient knowledge and experience in business and
financial matters to evaluate the Company, to evaluate the risks and merits of
an investment in the Company, to make an informed investment decision with
respect thereto, and to protect Investor's interest in connection with
Investor's subscription without need for the additional information which would
be required to be included in more complete registration statements effective
under the 1933 Act or under the laws of other jurisdictions.
G. Investor acknowledges that Investor and Investor's advisors have had an
opportunity to ask questions of and to receive answers from the officers of the
Company and to obtain additional information in writing to the extent that the
Company possesses such information or could acquire it without unreasonable
effort or expense: (i) relative to the Company and the subscription for the
Securities hereunder; and (ii) necessary to verify the accuracy of any
information, documents, books and records furnished. All such materials and
information requested by Investor and Investor's advisors (including
information requested to verify information previously furnished) have been
made available and examined by Investor or Investor's advisors.
- 3 -
<PAGE> 5
H. Investor agrees that Investor will not attempt to pledge, transfer,
convey or otherwise dispose of the Securities in the United States except in a
transaction made pursuant to the following offering restrictions: all offers
and sales of the Securities to a U.S. person or inside the United States prior
to the expiration of a one-year period immediately following the date of this
Subscription Agreement shall be made only upon receipt by the Company of an
opinion of counsel satisfactory to the Company that such transaction complies
with all applicable securities laws and only (i) in accordance with the
provisions of Rules 903 or 904 of Regulation S, or (ii) pursuant to the
registration requirements under the 1933 Act, or (ii) pursuant to an available
exemption from registration under the 1933 Act. Investor consents to the
placement of legends on any certificates or documents representing any of the
Securities stating that they have not been registered under the 1933 Act or any
applicable securities laws of other jurisdictions and setting forth or
referring to such offering restrictions. Investor is aware that the Company
will make a notation in its appropriate records, and notify its transfer agent,
with respect to the restrictions on the transferability of the Securities.
I. Investor represents and warrants that Investor is not a citizen or
resident of the United Sates and as such Investor is a non-U.S. person within
the meaning of Regulation S promulgated by the SEC under the 1933 Act.
J. Investor represents and warrants to the Company that the he owns the
HNV Shares in his own name, free and clear of all encumbrances, liens, security
interests or other assessments of any kind, and that Investor is legally
permitted to enter into this Agreement. Investor also agrees to execute the
stock power (the "Stock Power"), in the form attached hereto at EXHIBIT 1,
assigning the HNV Shares to the Company, and such other documents, instruments,
and agreements as may be requested by the Company to effectuate the transfer of
the HNV Shares to the Company. Notwithstanding anything herein to the
contrary, Investor agrees and acknowledges that the obligations of the Company
herein shall be conditioned in all respects upon the receipt by the Company of
the Consent Form fully executed by all parties thereto (the "Consent Form"), in
the form as attached hereto at EXHIBIT 2.
4. INDEMNIFICATION. Investor shall indemnify and hold harmless the
Company, any affiliated corporation or entity, the partners, officers,
directors and employees of any of the foregoing and any professional advisors
thereto, from and against any and all loss, damage, liability or expense,
including costs and reasonable attorney's fees, to which they may become
subject or which they may incur by reason of or in connection with any
misrepresentation made by Investor, any breach of any of Investor's
representations or warranties, or any failure by Investor to fulfill any of its
covenants or agreements under this Subscription Agreement.
5. RELEASE BY INVESTOR. Investor hereby forever releases, dismisses, and
discharges, the Company, Harbinger NV and their affiliates, and their
respective officers, directors, employees, shareholders, successors, assigns,
and transferees (collectively the "Released Persons"), from any and all now or
hereafter existing actions, causes of action, suits, damages, debts, claims,
counterclaims, obligations and liabilities of any nature whatsoever, known or
unknown, suspected or unsuspected (collectively the "Released Claims"), that
Investor may have against any of the Released Persons, including, without
limitation, any Released Claim which in
- 4 -
<PAGE> 6
whole or in part is based upon or arises out of the purchase and sale of the HC
Shares and HNV Shares pursuant to this Subscription Agreement.
6. EFFECTIVE DATE. This Subscription Agreement shall be effective at 8:00
a.m. Netherlands time on the day immediately following the execution of the
Underwriting Agreement by all parties thereto.
7. MISCELLANEOUS.
A. This Subscription Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
B. This Subscription Agreement contains the entire agreement between the
parties with respect to the subject matter thereof. The provisions of this
Subscription Agreement may not be modified or waived except in writing.
C. This Subscription Agreement and the rights, powers and duties set forth
herein shall, except as set forth herein, bind and inure to the benefit of the
heirs, executors, administrators, legal representatives, successors and assigns
of the parties hereto. Investor may not assign any of Investor's rights or
interests in and under this Subscription Agreement without the prior written
consent of the Company, and any attempted assignment without such consent shall
be void and without effect.
8. COUNTERPARTS. This Subscription Agreement may be executed in two or
more counterparts, each of which shall constitute an original. The Company
shall retain one counterpart, and one counterpart shall be returned to Investor
upon acceptance thereof by the Company.
9. TITLE TO HC SHARES. Investor shall hold title to the HC Shares
purchased hereunder in his individual name and for his individual account.
[SIGNATURES ON NEXT PAGE]
- 5 -
<PAGE> 7
IN WITNESS WHEREOF, Investor has executed this Subscription Agreement in
Hoolddoup, Netherlands effective the 22nd day of August, 1995.
BY SIGNING BELOW, INVESTOR REPRESENTS THAT HE HAS READ, UNDERSTANDS AND
AGREES TO THE WARRANTIES AND REPRESENTATIONS AND OTHER PROVISIONS OF THIS
SUBSCRIPTION AGREEMENT.
INVESTOR
Hendrikus Pieter Marie Kivits
/s/ Hendrikus Pieter Marie Kivits
- - ---------------------------------
Signature of Investor
INVESTOR'S PRINCIPAL PLACE OF BUSINESS (THIS IS THE ADDRESS AT WHICH PAYMENTS,
IF ANY, WILL BE DELIVERED):
Jogersboschlaen 18
5262 L5 Vaght
the Netherlands
INVESTOR'S TELEPHONE NUMBER: 073-579004
[SIGNATURES CONTINUED ON NEXT PAGE]
- 6 -
<PAGE> 8
SUBSCRIPTION AGREEMENT AND
INVESTOR SUITABILITY REPRESENTATIONS
(REGULATION S)
HARBINGER CORPORATION
SIGNATURE PAGE FOR HARBINGER CORPORATION
SUBSCRIPTION OFFER ACCEPTED THIS 22 DAY OF AUGUST, 1995.
------ ---------
HARBINGER CORPORATION
By: /s/ Joel G. Katz
------------------------------
Name: Joel G. Katz
----------------------------
Title: Vice President, Finance
---------------------------
Converted HC Share Amount: 2,666 shares of Common Stock of the Company.
Fractional Share Payment: $8.00 U.S.
- 7 -
<PAGE> 9
EXHIBIT 1
Stock Power
[ATTACHED]
<PAGE> 10
IRREVOCABLE STOCK POWER
For value received, the undersigned hereby transfers unto Harbinger
Corporation, Thirty-Two Thousand (32,000) shares of the NLG. 1 par value per
share common shares of Harbinger NV (the "Company"), represented by Certificate
No. 2,508,001 - 2,540,000, and does hereby irrevocably constitute and appoint
any officer of the Company, attorney, to transfer the said shares on the books
of the Company with full power of substitution in the premises.
Dated effective as of August 22nd, 1995
By: /s/ Hendrikus Pieter Marie Kivits
---------------------------------
Hendrikus Pieter Marie Kivits
In the presence of:
/s/ Witness Signature
- - ---------------------
Witness
<PAGE> 11
EXHIBIT 2
Consent Form
[ATTACHED]
<PAGE> 12
CONSENT FORM
THIS CONSENT FORM (this "Consent") effective as of this 22nd day of
August, 1995, by and among HARBINGER CORPORATION, a corporation organized under
the laws of the State of Georgia, U.S.A., with its principal office at 1055
Lenox Park Blvd., Atlanta, Georgia 30319 ("HC"); VULCAN VENTURES INC., a
corporation organized under the laws of the State of Washington, U.S.A., with
its principal office at 13810 SE Eastgateway, Ste 480, Velleview, Washington
98005-4442 ("Vulcan"); AXA EQUITY & LAW LIFE ASSURANCE SOCIETY LTD., a
corporation organized under the laws of the England, with its principal office
at 20 Lincoln's Inn Fields, London WC2A 3ES ("EQL"); HENDRIKUS PIETER MARIE
KIVITS, resident at Geleenbeeklaan 33, 6166 GP GELEEN ("Kivits"); and ADRIANUS
JOZEF VAN DIEPEN, resident at Jagersweg 8, 1251 ZR LAREN ("van Diepen"). The
above parties may be individually referred to as a "Shareholder" or
collectively as the " Shareholders".
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of Harbinger NV, a corporation organized under the laws of the
Netherlands (the "Company");
WHEREAS, the shareholders agreement of the Company dated as of November 5,
1993 (as amended and in effect as of the date hereof, the "Shareholders
Agreement") contains various restrictions on the ability of the Shareholders to
transfer, convey, pledge and encumber the stock of the Company;
WHEREAS, Kivits and van Diepen desire to be authorized to transfer and
convey their shares in the Company (the "Transferred Shares") to HC in exchange
for shares of the capital stock of HC; and
WHEREAS, the Shareholders desire to authorize Kivits and van Diepen to
transfer and convey the Transferred Shares to HC;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
premises and agreements contained herein, and other good and valuable
consideration, the shareholders hereby agree as follows:
Section 1. The Shareholders hereby jointly and severally consent to Kivits
and van Diepen's transfer and conveyance of the Transferred Shares and in all
rights attendant thereto to HC and its successors and assigns.
Section 2. The Shareholders hereby jointly and severally and irrevocably
waive and modify any provisions of the Shareholders Agreement that prohibit,
restrict, condition or otherwise affect the transfer and conveyance of the
Transferred Shares to HC or any enforcement action which may be taken in
respect of such transfer and conveyance including, without limitation, any
rights of first refusal or preemptive rights.
Section 3. Without the prior written consent of all shareholders, the
Shareholders hereby jointly and severally agree not to amend, modify or alter
in any way the Shareholders Agreement, except to the extent that is necessary
to permit the provisions of this Consent.
<PAGE> 13
Section 4. The Company has recorded, or caused to be recorded, on the books
and records of the Company, all entries necessary to reflect completely and
accurately the transfer and conveyance of the Transferred Shares to HC. A copy
of this Consent will be included in the books and records of the Company.
Section 5. This Consent may executed in one or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Consent is entered into as an instrument under
seal as of the date first above written.
HARBINGER CORPORATION
BY: /s/ Joel G. Katz
------------------------
TITLE: Vice President, Finance
---------------------
VULCAN VENTURES INC.
BY:
------------------------
TITLE:
---------------------
AXA EQUITY & LAW
LIFE ASSURANCE
SOCIETY LTD.
BY:
------------------------
TITLE:
---------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE> 14
IN WITNESS WHEREOF, this Consent is entered into as an instrument under
seal as of the date first above written.
HENDRIKUS PIETER MARIE KIVITS
/s/ Hendrikus Pieter Marie Kivits
---------------------------------
ADRIANUS JOZEF VAN DIEPEN
/s/ Adrianus Jozef van Diepen
---------------------------------
COMPANY:
HARBINGER NV
BY: /s/ James Davis
------------------------------
TITLE: President
---------------------------
<PAGE> 1
EXHIBIT 10.47
<PAGE> 2
HARBINGER NV
AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
BETWEEN
HARBINGER CORPORATION F/K/A
HARBINGER*EDI SERVICES, INC.;
AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD.; AND
VULCAN VENTURES, INC.
EFFECTIVE DATE: DECEMBER 29, 1995
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Article l. - Formation
Article 2. - Technology
Article 3. - Share Capital Structure
Article 4. - Management Board
Article 5. - Supervisory Board
Article 6. - Meeting of Shareholders
Article 7. - Business Plans
Article 8. - Financial Reporting
Article 9. - Auditors and Accounting Principles
Article 10. - Transferability of Shares
Article 11. - Shareholders' Put-Call Option
Article 12. - HARBINGER's Call Option
Article 13. - Termination
Article 14. - Confidentiality
Article 15. - General
</TABLE>
<PAGE> 4
THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (this "Agreement") is
made as of December 29, 1995 by and between HARBINGER CORPORATION f/k/a
HARBINGER EDI SERVICES INC., a corporation organized under the laws of the
State of Georgia, U.S.A., with its principal office at 1055 Lenox Park Blvd.,
Atlanta, Georgia 30319 ("HARBINGER"); VULCAN VENTURES, INC., a corporation
organized under the laws of the State of Washington, U.S.A., with its principal
office at 13810 S.E. Eastgateway, Ste 480 Belleview, Washington 98005-4442
("VULCAN"); and AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD., a corporation
organized under the laws of England, with its principal office at 20 Lincoln's
Inn Fields, London WC2A 3ES, England ("EQL"). The above parties may be
individually referred to as a "Shareholder" or collectively as the
"Shareholders".
WHEREAS, the Shareholders own all of the outstanding capital stock of Harbinger
NV, a corporation organized under the laws of The Netherlands (the "Company");
WHEREAS, the Shareholders are parties to that certain Shareholders Agreement
dated November 5, 1993 pursuant to which the Shareholders in the Company
stipulated the terms and conditions of the Shareholders' participation in the
equity and business policies of the Company and their rights and obligations
with respect to the disposition or transfer of shares; and
WHEREAS, the Shareholders and the Company desire to amend and restate such
Shareholders Agreement in its entirety on and pursuant to the terms and
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties hereto, intending to be legally
bound, agree as follows:
ARTICLE 1. - FORMATION
1.1 The Company shall be incorporated under the laws of The
Netherlands in the form of a Naamloze Vennootschap ("N.V.").
1.2 The name of the Company shall be Harbinger NV and its
registered office shall be in the Netherlands at an address to be
determined by the Managing Director.
ARTICLE 2. - TECHNOLOGY RIGHTS
2.1 Initially, HARBINGER shall grant to the Company a personal,
non-exclusive, non-transferable right to use and exercise certain
rights with respect to the technology necessary to enable the
company to render services in the area of electronic data
interchange. The specific terms and conditions for this technology
transfer and the performance by HARBINGER of related development
services shall be described in a separate Software License Agreement
and Development Services Agreement.
<PAGE> 5
2.2 In consideration for the grant of the above license, the
Company shall grant to HARBINGER a personal, fully paid, perpetual
and non-exclusive right to use any enhancements developed for the
technology licensed from HARBINGER. The terms and conditions for
these grant-back rights shall likewise be specified in the Software
License Agreement.
2.3 Upon termination of this Agreement, or liquidation of the
Company, the Shareholders and the Company shall ensure that the
license referred to in Article 2.2 shall continue without
interruption or diminishment of rights.
ARTICLE 3. - SHARE CAPITAL STRUCTURE
3.1 The initial authorized share capital of the Company is ten
million Dutch Guilders (NLG. 10.000.000) represented by nine million
(9.000.000) common shares with a par value of one Dutch Guilder
(NLG. 1) each and one million (1.000.000) preferred shares with a
par value of one Dutch Guilder (NLG. 1) each.
3.2 The initial issued capital of the Company was two million
five hundred thousand (2.500.000) common shares and was issued to
the Shareholders as follows:
<TABLE>
<CAPTION>
Percentage Number of Shares Consideration
---------- ---------------- ---------------
<S> <C> <C> <C>
HARBINGER 20% 500.000 shares US$ 500,000
VULCAN 60% 1.500.000 shares US$ 1,500,000
EQL 20% 500.000 shares US$ 500,000
TOTAL 100% 2.500.000 shares US$ 2,500,000
</TABLE>
3.3 HARBINGER received thirty-two thousand common shares (32.000)
from Henrikus Pieter Marie Kivits, eight thousand shares (8.000)
from Adrianus Jozef van Diepen and five thousand five hundred shares
(5.500) from John D. Lowenberg pursuant to such individuals'
conversion of common shares in the Company to common stock of
HARBINGER.
3.4 Pursuant to subscription agreements dated as of the date
hereof, the Company shall issue seven hundred fifty thousand
(750.000) common shares to the Shareholders as follows:
<TABLE>
<CAPTION>
Percentage Number of Shares Consideration
---------- ---------------- ---------------
<S> <C> <C> <C>
HARBINGER 20% 150.000 shares US$ 150,000
VULCAN 60% 450.000 shares US$ 450,000
</TABLE>
-2-
<PAGE> 6
<TABLE>
<CAPTION>
Percentage Number of Shares Consideration
---------- ---------------- ---------------
<S> <C> <C> <C>
EQL 20% 150.000 shares US$ 150,000
TOTAL 100% 750.000 shares US$ 750,000
</TABLE>
The total consideration paid by the Shareholders pursuant to this Section 3.4,
seven hundred fifty thousand United States Dollars (U.S. $750,000), shall
hereinafter be referred to as the "Additional Capital Contribution."
ARTICLE 4. - MANAGEMENT BOARD
4.1 The Managing Director(s) of the Company shall be appointed by
the General Meeting of Shareholders and shall be entrusted with the
day to day business of the Company.
The Shareholders shall decide the compensation, including the grant
of any stock options in the Company's shares, to be paid to each
Managing Director.
4.2 The Management Board shall be composed of one or more
Managing Directors. The initial Managing Director shall be C. TYCHO
HOWLE.
4.3 The Management Board shall obtain the prior approval of
two-thirds of the Shareholders for the following matters:
(i) the liquidation, dissolution or other winding up of the affairs
of the Company. Any voluntary bankruptcy of the Company or the
filing of any proceeding under any bankruptcy, insolvency or
similar law now or hereafter in effect or the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator,
or similar official of the Company for any substantial part of the
Company's property;
(ii) the sale of all or substantially all of the Company's assets;
(iii) the merger or consolidation of the Company with any other
entity determined by the Management Board to result in
consideration being transferred by the Company with a value in
excess of the equivalent of US$ 2,500,000; or
(iv) the acquisition of the whole or substantially all of the
business or property of any other corporation, association,
partnership or person if the value of such business or property is
determined by the Management Board to exceed the equivalent of US$
2,500,000.
4.4 The Management Board shall need the prior approval of
two-thirds of the Board (consisting of the Supervisory and Managing
Directors) for the following matters:
-3-
<PAGE> 7
(i) the entry into any contract, agreement or other instrument
binding and obligating the Company for a liability in excess of the
equivalent of US$ 500,000 per annum or for a term in excess of
three years;
(ii) the purchase of capital stock or an equity interest in another
corporation, partnership or any other entity, or the formation of
any domestic or foreign subsidiary;
(iii) the selection of any bank or other financial institution from
which the Company obtains a loan or line of credit, or with which
the Company deposits funds, in excess of the equivalent of US$
1,000,000 or the borrowing of any funds in excess of the equivalent
of US$ 1,000,000 in the aggregate;
(iv) the election of any officer of the Company including without
limitation, the Chief Executive Officer and the chief employees of
the Company in the areas of finance, operations and technology;
(v) the amendment of the Company's Articles of Association;
(vi) the issuance of any equity securities of the Company;
(vii) the declaration or payment of any dividends of the Company's
shares;
(viii) the establishment or material amendment of employee
retirement plans, fringe benefit plans, bonus plans, stock option
plans and other plans establishing employee benefits or
perquisites; or
(ix) the amendment or change of any approved Business Plan of the
Company.
ARTICLE 5. - SUPERVISORY BOARD
5.1 The Supervisory Directors of the Company shall be appointed
by the General Meeting of Shareholders and shall exercise
supervision over the Management Board's conduct of the day to day
business of the Company and the general course of business.
Meetings of Supervisory Board shall be held at least four (4) times
each financial year. Supervisory Directors may attend meetings by
telephone or teleconference with the unanimous agreement of all
Supervisory Directors.
5.2 The Supervisory Board shall be composed of five (5)
Supervisory Directors. Each Shareholder who is an original
signatory to this Agreement and who holds at least fifteen percent
(15%) of the issued common shares of the Company at the time of the
Annual Meeting of the Shareholders shall be entitled to make a
binding nomination for the appointment of one (1) Supervisory
Director. The four Supervisory Directors so nominated shall be
entitled to make a binding nomination for the appointment of the
fifth Supervisory Director.
-4-
<PAGE> 8
5.3 The Supervisory Directors shall be entitled to the following
compensation for attendance at Board meetings: (i) U.S. Dollars
seven hundred (US$ 700) per meeting attended; plus (ii) annually,
5.000 non-vested options, each to purchase one share in the
Company's stock at the fair market value on the day of the annual
general shareholders meeting.
One thousand two hundred fifty (l,250) options shall vest after
each meeting attended by the Supervisory Director during the year
granted. At the end of the year granted, any remaining non-vested
options shall expire.
ARTICLE 6. - MEETING OF SHAREHOLDERS
6.1 The meetings of Shareholders shall have such powers as are
conferred under the laws of The Netherlands and the Company's
Articles of Association. All resolutions shall be passed by a
simple majority of the votes represented in a meeting where a quorum
is present, unless this Agreement or the Articles require a
two-thirds or greater majority. A quorum shall consist of the
holders of fifty percent or more of the shares entitled to vote at
the meeting.
6.2 The Shareholders shall exercise their voting rights with
respect to the appointment of the Supervisory and Managing Directors
in accordance with the binding nominations specified in Articles 5
and 4 respectively.
Each Shareholder shall be authorized to give instructions to the
other Shareholders regarding the exercise of their voting rights in
the event of the suspension or dismissal of any Director nominated
by that Shareholder and such instructions shall be observed by the
other Shareholders.
ARTICLE 7. - BUSINESS PLANS
The Management Board shall submit to the Supervisory Board, not later than
forty-five (45) days prior to the end of each financial year, an annual
business plan for the succeeding financial year containing projected statements
of profit and loss, cash flow and ending balance sheets (the "Business Plan").
The Business Plan will include a statement on the technical progress made by
the Company in the preceding year, together with a forecast of the technical
progress to be made in the succeeding financial Year.
ARTICLE 8. - FINANCIAL REPORTING
8.1 The Management Board shall submit to the Supervisory Board,
not later than forty-five (45) days after the end of each financial
quarter of the Company a quarterly report for the Company consisting
of the unaudited balance sheet as of the end of the quarter and an
unaudited statement of operations and statement of cash flows for the
quarter. These quarterly reports shall be certified by the Managing
Directors to be correct and complete to the best of their knowledge
and belief, to fairly present the financial condition of the
Company on the date shown,
-5-
<PAGE> 9
and to have been prepared in accordance with generally accepted
accounting principles as practiced in the United States.
8.2 The Management Board shall submit to the Supervisory Board,
not later than seventy-five (75) days after the end of each
financial year of the Company, an annual report for the Company,
including an unaudited balance sheet as of the end of the financial
year and an unaudited statement of operations and statement of cash
flows for the financial year.
8.3 At the request of any Shareholder or when required by Dutch
law, the annual reports specified in this Article 8 shall be audited
by an independent public accountant and shall be accompanied by the
report of the independent public accountants. In case audited
accounts are requested by a Shareholder but are not required under
Dutch law, that Shareholder shall reimburse the Company for fifty
percent of the cost of the audit.
ARTICLE 9. - AUDITORS AND ACCOUNTING PRINCIPLES
9.1 The independent public accountants (auditors) for the Company
shall be appointed by the Shareholders. The initial auditors shall
be Moret Ernst & Young in Amsterdam.
9.2 The Management Board shall ensure that the Company keeps
complete and accurate books of account. All financial reports shall
be prepared applying generally accepted accounting principles as
practiced in the United States and shall be maintained in the
principal office of the Company. The financial year for the Company
shall be the calendar year.
ARTICLE 10. - TRANSFERABILITY OF SHARES
10.1 No Shareholder shall, directly or indirectly, make or permit
to be made, any sale, assignment, gift, pledge, mortgage,
hypothecation, transfer or other disposition or encumbrance
(hereinafter collectively referred to as a "transfer") of any shares
in the Company now or in the future owned by it, except as provided
in this Agreement.
10.2 A Shareholder may transfer its shares in the Company to any
of the following:
(i) the Company;
(ii) any person or entity that controls or is controlled by, or is
under common control with, such Shareholder;
(iii) any entity to which such Shareholder shall have sold all or
substantially all of its assets or with which it shall have been
merged.
-6-
<PAGE> 10
As a condition to the effectiveness of any transfer under this
Article 10.2, the transferee shall become a party to this Agreement
and shall be bound by the terms and conditions of this Agreement.
10.3 Commencing one year after the effective date of this
Agreement, a Shareholder may transfer shares in the Company to a
third party provided:
(i) the Shareholder (hereinafter the "Offeror-Shareholder") shall
deliver to all other Shareholders holding at least 100,000 shares
(hereinafter the "Offeree-Shareholders") a written notice setting
forth the name and address of the proposed third party transferee,
the number of shares proposed to be transferred and the price,
terms and conditions of the proposed transfer (hereinafter the
"Offer to Sell");
(ii) the Offeree-Shareholders shall have sixty (60) days after
their receipt of any offer to sell within which to notify the
Offeror-Shareholder in writing of their election to purchase that
portion of the shares offered which is the ratio of the number of
shares held by the Offeree-Shareholder on the date of receipt of
the Offer to Sell divided by the total number of issued shares
outstanding;
(iii) in case the Offeror-Shareholder does not receive acceptances
from the Offeree-Shareholders to purchase a total of all the shares
offered within the sixty (60) day acceptance period, then the
Offeror-Shareholder shall promptly notify all accepting
Offeree-Shareholders that they may further elect to purchase that
portion of the remaining shares offered in the ratio of the number
of shares held by the Offeree-Shareholder on the date of receipt of
the second notice divided by the total number of issued shares
outstanding;
(iv) the Offeree-Shareholder shall have ten (10) days after receipt
of the second notice within which to elect to purchase additional
shares;
(v) the procedures under (iii) and (iv) shall be repeated among the
Offeree-Shareholders who elect to purchase the full amounts offered
to them until either all of the shares offered have been purchased
or none of the Offeree-Shareholders who have elected to purchase
their full amounts on a particular offering elect to purchase their
full amounts on the following offering;
(vi) upon completion of the above procedures, the
Offeror-Shareholder shall promptly notify all Shareholders of the
results thereof, including the names of the accepting
Offeree-Shareholders and the total number of shares they have
elected to purchase and shall promptly notify the accepting
Offeree-Shareholders of the date, time and place for the closing of
the share transfer;
(vii) any Offeree-Shareholder's election to purchase shares shall
not be binding if the Offeree-Shareholders do not in the aggregate
elect to purchase all of the shares offered. In such a case, the
Offeror-Shareholder may transfer the shares to
-7-
<PAGE> 11
the third party named in the original notice, under the terms and
conditions stated in that notice, provided that the third party
transferee executes and delivers to the Company and the
Shareholders a written agreement that it will be bound by the terms
and conditions of this Agreement, and that the shares held by it
will be subject to all restrictions and other terms of this
Agreement, as if the third party transferee were an original party
to this Agreement.
Notwithstanding the above, the third party transferee shall not be
entitled to the rights of first refusal provided under this Article
10.3 unless the original parties to this Agreement unanimously
agree to extend such rights to the third party transferee.
ARTICLE 11. - SHAREHOLDERS' PUT-CALL OPTION
11.1 At any time one year after the effective date of this
Agreement any Shareholder holding at least nine percent (9%) of the
issued shares in the Company (a "Put-Call Offeror") may make an
offer to sell all of the shares in the Company held by it to the
other Shareholders (the "Put-Call Offerees") and an offer to
purchase all of the shares in the Company held by the Put-Call
Offerees (a "Put-Call Offer"), provided:
(i) no other Put-Call Offer is outstanding;
(ii) the offer is made in writing, specifies the number of shares
to be transferred, the price, terms and conditions of their
transfer, and complies with the notice requirements of Article
15.6;
(iii) each Put-Call Offeree's election to accept EITHER the offer
to sell their shares OR the offer to purchase the shares held by
the Put-Call Offeror is made within sixty (60) days after receipt
of the Put-Call Offer;
(iv) if one or more of the Put-Call Offerees accept the offer to
sell in the manner and within the time period specified in Article
11.1 (ii) and (iii) of this Agreement (a "Purchasing Offeree"),
then the Put-Call Offeror shall sell to each Purchasing Offeree,
and each Purchasing Offeree shall purchase from the Put-Call
Offeror, a portion of the shares offered in the ratio of the number
of shares held by the Purchasing Offeree divided by the aggregate
number of shares held by all Purchasing Offerees, at the purchase
price per share and upon the terms set forth in the Put-Call Offer.
In this event, the offer to buy by the Put-Call Offeror and any
acceptance of such offer by a Put-Call Offeree shall be null and
void;
(v) if one or more Put-Call Offerees accepts the offer to buy in
the manner and within the time period specified in Article 11.1
(ii) and (iii) of this Agreement (a "Selling Offeree"), and if no
Put-Call Offeree accepts the offer to sell in the manner and within
the time period specified, then the Put-Call Offeror shall buy all
of the shares held by the Selling Offerees and the Selling Offerees
shall sell to
-8-
<PAGE> 12
the Put-Call Offeror all of the shares held by them, at the
purchase price per share and upon the terms set forth in the
Put-Call Offer;
(vi) if all of the Put-Call Offerees reject both offers, or fail to
accept either offer in the manner and within the time period
specified, then the Put-Call Offeror shall have an option,
exercisable within fifteen (15) days after the expiration of the
Put-Call Offer period, to purchase all of the shares held by each
Put-Call Offeree at the purchase price and upon the terms set forth
in the Put-Call Offer. If the Put-Call Offeror fails to exercise
such option, then any Shareholder may thereafter make a new offer
pursuant to this Article;
(vii) the closing of any purchase and sale of shares pursuant to
this Article shall take place not more than forty-five (45) days
after the date on which the Put-Call Offeror exercises the option
granted to it under Article 11.1 (vi) of this Agreement, or not
more than forty-five (45) days after the date of the last
acceptance of an offer made pursuant to Article 11.1 (iv) or (v) of
this Agreement.
11.2 In the event HARBINGER makes a Put-Call Offer pursuant to
this Article 11, the aggregate purchase price for the shares in the
Put-Call Offer shall not be less than the Additional Capital
Contribution of VULCAN and EQL (without including the amount of
such Additional Capital Contribution paid by HARBINGER).
ARTICLE 12. - HARBINGER'S CALL OPTION
12.1 Commencing one year after, and ending four years after the
effective date of this Agreement, HARBINGER shall have an option to
purchase and the Shareholders shall be required to sell all of the
shares held by them for a purchase price to be chosen by each
Shareholder from the following alternatives:
(i) one share of HARBINGER Common Stock for each seven shares of
the Company's Common Stock held by the Shareholder at the time
HARBINGER exercises this call option. To the extent that, after
the effective date of the Agreement, the number of shares of
HARBINGER Common Stock are increased or decreased, or changed into
or exchanged for a different number or kind of shares or other
securities of HARBINGER or of any other corporation by reason of
any merger, sale of stock, consolidation, liquidation,
recapitalization, reclassification, stock split up, combination of
shares, or stock dividend, the price per share of HARBINGER Common
Stock shall be proportionately and appropriately adjusted to
reflect these changes; or
(ii) the total amount contributed to the Company's capital by the
Shareholder plus 30% (thirty percent) compounded annual interest
calculated as of the date of the contribution.
12.2 HARBINGER shall exercise this call option by giving notice in
writing to all Shareholders who shall have ten (10) days after
receipt of the notice to notify
-9-
<PAGE> 13
HARBINGER of their choice with respect to the method of payment.
Closing shall take place within thirty (30) days after the date the
original notice was sent by HARBINGER.
12.3 At the time of transfer, the Shareholders will represent and
warrant that they have good and marketable title to any Company
shares delivered to HARBINGER and that the shares are free and clear
from all liens, claims and encumbrances. The Shareholders shall
take all action and perform all deeds necessary to transfer the
Company's shares under Dutch law.
ARTICLE 13. - TERMINATION
13.1 Unless all Shareholders otherwise agree, this Agreement shall
continue in full force and effect From the date hereof until
terminated upon the occurrence of the earlier of the following: (i)
December 31, 1999 or (ii) termination by written agreement of the
Company and by the Shareholders holding at least eighty percent
(80%) of the aggregate issued shares.
13.2 In case no understanding can be reached by the Shareholders
as to the method to terminate this Agreement and assuming HARBINGER
has not exercised its option to call the shares held by the other
Shareholders, the Company shall be liquidated in accordance with the
Articles of Association and the laws of The Netherlands.
ARTICLE 14. - CONFIDENTIALITY
The Shareholders acknowledge and agree that the information to be disclosed to
them by HARBINGER and by the Company, its directors or its officer
("Confidential Information") will be highly confidential and of a sensitive
nature and will constitute respectively, HARBINGER's or the Company's valuable
confidential property. The Confidential Information will be disclosed to the
Shareholders for the sole purpose of monitoring and evaluating their investment
in the Company. The Shareholders agree not to use, duplicate or disclose in
any form or matter to a third party, any Confidential Information except to the
extent that (i) the Company has expressly agreed in writing to such disclosure;
(ii) the Confidential Information is or becomes generally available to the
public through no fault of any Shareholder; (iii) the Confidential Information
is available from a source other than the Company in good faith and without
limitation as to its use.
ARTICLE 15. - GENERAL
15.1 Further Assurances. From time to time after the date hereof,
the parties will, at their expense, and without further
consideration, execute and deliver such other documents and
instruments and take all such other actions as are reasonably
requested to effect the purposes and intent of this Agreement.
15.2 Parties in Interest. All covenants, agreements,
representations, warranties and undertakings in this Agreement made
by and on behalf of any of the parties hereto
-10-
<PAGE> 14
shall bind and inure to the benefit of their respective successors
and assigns; provided, however, that this Agreement may not be
assigned by any party hereto without the prior written consent of
each other party.
15.3 Amendments and Waivers. This Agreement cannot be amended or
modified except by a written instrument modified by all of the
parties hereto. No waiver of compliance with any provision or
condition hereof and no consent provided for herein shall be
effective unless evidenced by an instrument in writing duly executed
by the party hereto sought to be charged with such waiver or
consent.
No waiver of any term or provision hereof shall be construed as a
further or continuing waiver of such term or provision or any other
term or provision.
15.4 Governing Law. This Agreement, together with the rights and
obligations of the parties hereunder, shall be governed by,
construed and enforced in accordance with the laws of The
Netherlands without reference to its conflict of laws principles.
15.5 Severability. In the event any provision of this Agreement
or the application of any such provision to any party shall be held
by a court of competent jurisdiction to be contrary to law, the
remaining provisions of this Agreement shall remain in full force
and effect.
15.6 Notices. All notices, requests, consents, and demands
required or permitted to be given hereunder shall be in writing and
shall be deemed to have been sufficiently given if delivered
personally to an officer of the party to whom addressed or mailed,
first class postage prepaid, by registered or certified mail, return
receipt requested, at the address set forth hereinabove (or to such
other address as any party shall have last designated by notice to
the others). Notices mailed in accordance with the foregoing shall
be deemed to have been given and made three days following the date
so mailed.
15.7 Counterparts. This Agreement may be executed in
counterparts, including by facsimile, each of which shall be deemed
an original, but all of which together shall constitute one and the
same instrument.
15.8 Captions. The captions and headings of this Agreement are
for convenience only and are not to be construed as defining or
limiting the scope or intent of any of the provisions hereof.
15.9 Company Action Regarding Shares. The Company shall not
transfer on its books or take any action with respect to any shares
contrary to, or in violation of, this Agreement, and any transferee
with respect to the Company's shares shall neither be deemed to be
the record or beneficial owner of any of such shares nor to be
entitled to any of the rights or privileges attached thereto.
-11-
<PAGE> 15
15.10 Arbitration. Unless the parties shall mutually agree to an
alternative method of dispute resolution, any dispute, claim or
controversy arising out of or in relation to this Agreement, or the
interpretation or breach hereof, shall be referred to arbitration
under the rules of The Netherlands Arbitration Institute subject,
however, to the following: (i) the arbitration proceedings shall be
conducted in the English language; (ii) the arbitrators shall decide
in accordance with the rules of the law ("naar de regelen des
rechts"); (iii) should any dispute arise with respect to the price
for a share transfer or the liquidation of the Company, two of the
arbitrators shall be registered accountants and one of the
arbitrators shall be an attorney. Judgment upon any arbitration
award may be entered in any court with competent jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed on the date set forth
above.
SHAREHOLDERS:
HARBINGER CORPORATION
By: /s/ C. Tycho Howle
------------------
Title: CEO
---
VULCAN VENTURES, INC.
By: /s/ William D. Savoy
--------------------
Title: Vice President
--------------
AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD.
By: /s/ A. Arnold for AXA Equity & Law Investment Managers Ltd
----------------------------------------------------------
Title: Associate Director
COMPANY:
HARBINGER NV
By: /s/ James C. Davis
-------------------
Title: Managing Director
-----------------
-12-
<PAGE> 1
EXHIBIT 10.48
<PAGE> 2
HARBINGER CORPORATION
1996 STOCK OPTION PLAN
Section 1.
PURPOSE
The purpose of this stock option plan is to (i) promote the interests of
the Company and its stockholders by attracting and retaining the services of
experienced and knowledgeable Directors, Key Employees and Consultants who have
rendered valuable services to the Company, (ii) provide additional incentives
to Key Employees to increase the value of the Company's Shares, and (iii)
provide the Key Employees, Consultants and Directors with a stake in the future
of the Company which corresponds to the stake of each of the Company's
shareholders.
Section 2.
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the committee of the Board appointed pursuant to Section 5.
2.4 COMMON STOCK means the common stock, $.0001 par value per share, of
the Company, and shall also mean any other stock or securities (including any
other share or securities of an entity other than the Company) for or into
which the outstanding shares of such stock are hereafter exchanged or changed.
2.5 COMPANY means Harbinger Corporation, a Georgia corporation, and any
successor to such organization.
2.6 CONSULTANT means a consultant of the Company who has rendered valuable
service to the Company and who is not a Key Employee.
2.7 DIRECTOR means a Member of the Board, or a Member of the Board of
Directors of a Parent or Subsidiary, who is not a Key Employee.
<PAGE> 3
2.8 EXERCISE PRICE means the price which, under the terms of an Option
Agreement, is required to be paid to purchase one (1) Share upon the exercise
of an Option granted under this Plan.
2.9 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.10 FAIR MARKET VALUE of each Share on any date shall mean the price
determined below on the last business day immediately preceding the date of
valuation:
(a) The closing sales price per Share, regular way, or in the absence
thereof, the mean of the last reported bid and asked quotations, on such date
on the exchange having the greatest volume of trading in the Shares during the
thirty-day period preceding such date (or, if such exchange was not open for
trading on such date, the next preceding date on which it was open); or
(b) If there is no price as specified in (a), the final reported sales
price per Share, or if not reported, the mean of the closing high bid and low
asked prices, in the over-the-counter market for the Shares as reported by the
National Association of Securities Dealers Automatic Quotation System, or if
not so reported, then as reported by the National Quotation Bureau
Incorporated, or if such organization is not in existence, by an organization
providing similar services, on such date (or, if such date is not a date for
which such system or organization generally provides reports, then on the next
preceding date for which it does so); or
(c) If there also is no price as specified in (b), the price per Share
determined by the Committee by reference to bid-and-asked quotations for the
Shares provided by members of an association of brokers and dealers registered
pursuant to Subsection 15(b) of the Exchange Act, which members make a market
in the Shares, for such recent dates as the Committee shall determine to be
appropriate for fairly determining current market value; or
(d) If there also is no price as specified in (c), an amount per Share
determined in good faith by the Committee based on such relevant facts, which
may include opinions of independent experts, as may be available to the
Committee.
2.11 ISO means an option granted under this Plan to purchase Shares which
is intended by the Company to satisfy the requirements of Code Section 422 as
an incentive stock option.
2.12 KEY EMPLOYEE means any person, including officers and directors, in
the regular employment of the Company, or a Subsidiary or a Parent, who is
designated a Key Employee by the Committee and is, or is expected to be,
primarily responsible for the management, growth, or supervision of some part
or all of the business of the Company, a Subsidiary or a Parent. The power to
determine who is a Key Employee is reserved solely for the Committee.
2.13 NQSO means an option granted under this Plan to purchase Shares which
is not intended by the Company to be an incentive stock option satisfying the
requirements of Code Section 422.
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2.14 OPTION means an ISO or a NQSO.
2.15 OPTION AGREEMENT means the written agreement or instrument which sets
forth the terms of an Option granted to a Consultant, Director or Key Employee
under this Plan.
2.16 OPTIONEE means the grantee of an Option.
2.17 PARENT means any corporation (other than the Company), partnership or
other entity in an unbroken chain of corporations, partnerships or other
entities ending with the Company if, at the relevant time, each of the
corporations (other than the Company), partnerships or other entities owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations, partnership or other
entities in such chain.
2.18 PLAN means the Harbinger Corporation 1996 Stock Option Plan, as
amended from time to time.
2.19 PRIOR PLAN means the Harbinger Corporation Amended and Restated 1989
Stock Option Plan.
2.20 PRIOR PLAN SHARES means the number of Shares reserved under the Prior
Plan for issuance upon the exercise of options granted under the Prior Plan,
minus (a) the number of Shares actually issued upon exercise of such options,
and (b) the number of Shares subject to outstanding options granted under the
Prior Plan. The number of Prior Plan Shares shall be increased by the number
of Shares subject to options granted under the Prior Plan which terminate,
expire or are canceled. Notwithstanding the above, the number of Prior Plan
Shares shall not exceed 995,206.
2.21 SHARE means one (1) share of Common Stock.
2.22 STOCK APPRECIATION RIGHT means a stock appreciation right as
described in Section 9.
2.23 SUBSIDIARY means any corporation (other than the Company), partnership
or other entity in an unbroken chain of corporations, partnerships or other
entities beginning with the Company if, at the relevant time, each of the
corporations, partnerships or other entities, other than the last corporation
in the unbroken chain, owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations, partnerships or other entities in such chain. The term
"Subsidiary" shall include Harbinger NET Services, LLC for all purposes under
this Plan.
2.24 SURRENDERED SHARES means the Shares described in Section 8 which (in
lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 8.
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2.25 TEN PERCENT SHAREHOLDER means a person who owns (after taking into
account the attribution rules of Code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
Section 3.
SHARES SUBJECT TO OPTIONS
3.1 SHARES RESERVED FOR ISSUANCE. Subject to any antidilution adjustment
pursuant to Section 3.2, the maximum number of Shares that may be subject to
Options granted hereunder shall not exceed 1,750,000, plus the number of Prior
Plan Shares. Shares issued pursuant to the exercise of an Option may be either
authorized and unissued Shares or Shares issued and subsequently acquired by
the Company. The Shares covered by any unexercised portion of an Option that
has terminated for any reason (except as may be adjusted under Section 3.2
below) may again be optioned or awarded under the Plan, and such Shares shall
not be considered as having been optioned or issued in computing the number of
Shares remaining available to be subject to Options granted hereunder.
3.2 ANTIDILUTION.
(a) In the event that the outstanding Shares are changed into or exchanged
for a different number or kind or shares or other securities of the Company by
reason of merger, consolidation, reorganization, recapitalization,
reclassification, combination or exchange of shares, stock split or stock
dividend, or in the event that any spin-off, spin-out or other distribution of
assets materially affects the price of the Company's stock:
(i) The aggregate number and kind of Shares for which Options may be
granted hereunder shall be adjusted proportionately by the Committee;
(ii) The number of Shares subject to each outstanding Option, and the
Exercise Price of each such outstanding Option, shall be adjusted
proportionately by the Committee; and
(iii) The number and kind of Stock Appreciation Rights shall be
adjusted as the Committee deems appropriate in the circumstances.
(b) If the Company shall be a party to any reorganization in which it does
not survive, involving a merger, consolidation, or acquisition of the stock or
substantially all of the assets of the Company, the Committee, in its
discretion, may:
(i) Notwithstanding other provisions hereof, declare that all Options
and Stock Appreciation Rights granted under the Plan shall become exercisable
immediately notwithstanding the provisions of the respective Option Agreements
or Stock Appreciation Rights agreements regarding exercisability, and that all
such Options shall terminate a specified period of time after the Committee
gives written notice of the immediate right to exercise all such Options and of
the decision to terminate all Options not exercised within such period; and/or
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(ii) Notify all Grantees that all Options and Stock Appreciation Rights
granted under the Plan shall be assumed by the successor corporation or
substituted on an equitable basis with options or restricted stock issued by
the successor corporation.
(c) If the Company is to be liquidated or dissolved in connection with a
reorganization described in Section 3.2(b), the provisions of such Section
shall apply. In all other instances, the adoption of a plan of dissolution or
liquidation of the Company shall, notwithstanding any other provisions hereof,
cause all then remaining unvested Shares subject to Options and all remaining
Stock Appreciation Rights under the Plan to vest, and shall cause every
outstanding Option and Stock Appreciation Right under the Plan to terminate to
the extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the stockholders, provided that, notwithstanding other
provisions hereof, the Committee may declare all Options granted under the Plan
to be exercisable at any time on or before the fifth business day following
such adoption, notwithstanding the provisions of the respective Option
Agreements or Stock Appreciation Rights agreements regarding exercisability.
(d) The adjustments described in Subsections (a) through (c) of this
Section 3.2, and the manner of their application, shall be determined solely by
the Committee, and any such adjustment may provide for the elimination or
redemption of fractional share interests. The adjustments required under this
Section 3 shall apply to any successors of the Company and shall be made
regardless of the number or type of successive events requiring such
adjustments.
Section 4.
EFFECTIVE DATE AND DURATION OF PLAN
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before
such shareholder approval, any Options granted under this Plan before the date
of such approval shall automatically be granted subject to such approval. The
Plan shall continue in effect until it is terminated by action of the Board or
the Company's shareholders, but such termination shall not affect the terms of
any outstanding Options.
Section 5.
COMMITTEE
This Plan shall be administered by the Committee, which shall consist of
three (3) or more directors appointed by the Board, each of whom is not while a
member of the Committee, or was not during the one (1) year prior to serving as
a member of the Committee, eligible to receive equity securities of the
Company, or any affiliate of the Company, pursuant to this Plan, the Prior
Plan, or any other plan of the Company or any affiliate of the Company, except
as may be permitted under Section 16(b)(3) of the Exchange Act. The Committee
acting in its absolute discretion shall exercise such powers and take such
action as expressly called for under this Plan and, further, the Committee
shall have the power to interpret this Plan and (subject to Section 11) to take
such other action in the administration and operation of this Plan as the
Committee deems equitable under the circumstances, which action shall be
binding on the Company, on each
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affected Consultant, Director or Key Employee and on each other person directly
or indirectly affected by such action. Notwithstanding anything else to the
contrary herein, the Board shall have the authority to assume the powers and
responsibilities outlined above with respect to the Committee, in whole or in
part.
Section 6.
ELIGIBILITY
Except as provided below, only Consultants, Directors and Key Employees
shall be eligible for the grant of Options under this Plan, but no Consultant,
Director or Key Employee shall have the right to be granted an Option under
this Plan merely as a result of his or her status as a Consultant, Director or
Key Employee. Key Employees shall be eligible for the grant of ISO's under
this Plan. Consultants and Directors shall not be eligible for the grant of
ISO's under this Plan.
Section 7.
TERMS AND CONDITIONS OF OPTIONS
7.1 GRANTS OF OPTIONS.
(a) AWARDS. In accord with the procedure established by the Board, the
Committee in its absolute discretion shall grant Options under this Plan from
time to time to purchase Shares and, further, shall have the right to grant new
Options in exchange for outstanding Options. Such Options shall be granted to
Consultants, Directors or Key Employees selected by the Committee acting in its
discretion as set forth above, and the Committee shall not be under any
obligation whatsoever to grant Options to all Consultants, Directors or Key
Employees or to grant all Options subject to the same terms and conditions.
Each grant of an Option shall be evidenced by an Option Agreement, and each
Option Agreement shall:
(i) specify whether the Option is an ISO or NQSO; and
(ii) incorporate such other terms and conditions as the Committee
acting in its absolute discretion deems consistent with the terms of this Plan,
including (without limitation) a restriction on the number of Shares subject to
the Option which first become exercisable or subject to surrender during any
calendar year.
(b) SELECTION OF GRANTEES. In determining the Consultants, Directors
or Key Employees to whom Options shall be granted and the number of Shares to be
covered by such Options, the Committee may take into account the
recommendations of the President of the Company and its other officers, the
duties of the Consultants, Directors or Key Employees, the present and
potential contributions of the Consultants, Directors or Key Employees to the
success of the Company, the anticipated number of years of service remaining
before the attainment by the Key Employees of retirement age, and other factors
deemed relevant by the Committee, in its sole discretion, in connection with
accomplishing the purpose of this Plan. A Consultant, Director or Key Employee
who has been granted an Option to purchase Shares of the
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Company, whether under this Plan or otherwise, may be granted one (1) or more
additional Options.
(c) DUAL GRANTS. If the Committee grants an ISO and a NQSO to a Key
Employee on the same date, the right of the Key Employee to exercise or
surrender one such Option shall not be conditioned on his or her failure to
exercise or surrender the other such Option.
7.2 EXERCISE PRICE.
(a) ISO. If an Option is an ISO, the Exercise Price for each Share
subject to such Option shall be no less than the Fair Market Value of a Share
on the date such Option is granted or, if such Option is granted to a Ten
Percent Shareholder, the Exercise Price for each Share subject to such Option
shall be no less than one hundred ten percent (110%) of the Fair Market Value
of a Share on the date such Option is granted.
(b) NQSO. If an Option is a NQSO, the Exercise Price for each Share shall
be no less than the minimum price required by applicable state law or by the
Company's governing instrument, or $0.01, whichever price is greater.
7.3 VESTING OF OPTIONS. Each Option granted under the Plan shall be
exercisable at such time or times, or upon the occurrence of such event or
events, and in such amounts, as the Committee shall specify in the Option
Agreement; provided, however, that subsequent to the grant of an Option, the
Committee may, at any time before complete termination of such Option,
accelerate the time or times at which such Option may be exercised in whole or
in part.
7.4 TERM OF OPTION. Each Option granted under this Plan shall be
exercisable in whole or in part at such time or times as set forth in the
related Option Agreement, but no Option Agreement shall:
(a) make an Option exercisable before the date such Option is granted or;
(b) make an Option exercisable after the earlier of the:
(i) the date such Option is exercised in full, or
(ii) the date which is the tenth (10th) anniversary of the date such
Option is granted, if such Option is a NQSO or an ISO granted to a non-Ten
Percent Shareholder, or the date which is the fifth (5th) anniversary of the
date such Option is granted, if such Option is an ISO granted to a Ten Percent
Shareholder.
An Option Agreement may provide for the exercise of an Option after the
employment of a Key Employee has terminated for any reason whatsoever,
including death or disability.
7.5 TIME AND MANNER OF OPTION EXERCISE. Any vested and exercisable Option
is exercisable in whole or in part (in whole Shares and in lots of not less
than one hundred (100)
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Shares) at any time or from time to time prior to the expiration of an Option
by giving written notice, signed by the person exercising the Option, to the
Company stating the number of Shares with respect to which the Option is being
exercised, accompanied by payment in full of the Exercise Price for the number
of Shares to be purchased. The date upon which the Company's Secretary or
Treasurer shall have received both such notice and payment shall be the date of
exercise of the Option as to the number of Shares described by the Optionee.
No Option may be exercised at any time with respect to a fractional share.
Any Option of a deceased Optionee may be exercised, to the extent vested on such
Optionee's death, by the estate of such Optionee or by a person or persons whom
the Optionee has designated in writing filed with the Company, or, if no such
designation has been made, by the person or persons to whom the Optionee's
rights have passed by will or the laws of descent and distribution.
7.6 PAYMENT OF OPTION PRICE. Payment for all Shares purchased pursuant to
the exercise of an Option shall be made in cash or, if the Option Agreement
provides, by delivery to the Company of a number of Shares which have been
owned by the Optionee for at least six (6) months prior to the date of exercise
having an aggregate Fair Market Value on the date of delivery of not less than
the product of the Option Price multiplied by the number of Shares the Optionee
intends to purchase upon exercise of the Option. In addition, the Option
Agreement may provide for cashless exercise through a brokerage transaction
following registration of the Company's equity securities under Section 12 of
the Securities Exchange Act of 1934. Further, in the sole discretion of the
Board, an Option may be exercised as to a portion or all (as determined by the
Board) of the number of Shares specified in the Option Agreement by delivery to
the Company of a promissory note. Such promissory note shall be executed by
the Optionee and shall include, with such other terms and conditions as the
Board shall approve, provisions in a form approved by the Board under which:
(a) the balance of the aggregate purchase price shall be payable in equal
installments over such period as the Board shall approve, and shall bear
interest at a per annum rate equal to the prime rate as announced from time to
time by the Company's principal bank or, if the Company has no principal bank,
that rate announced by the Wall Street Journal as the prevailing "prime rate"
of interest per annum, and (b) the Optionee shall be personally liable for
payment of the unpaid principal balance and all accrued but unpaid interest.
Except as otherwise provided herein, payment shall be made at the time that the
Option or any part thereof is exercised, and no Shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Optionee. No Optionee, as such, shall have any of the rights of a shareholder.
7.7 TRANSFERABILITY. The right of any Optionee to exercise an Option
granted under the Plan shall, during the lifetime of such Optionee, be
exercisable only by such Optionee or by a person who obtained such Option
pursuant to a qualified domestic relations order as defined by the Code, or
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or the rules thereunder (a "QDRO") and shall not be assignable or
transferable by such Optionee other than by will or by the laws of descent and
distribution or by a QDRO.
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7.8 LIMITATION OF RIGHTS.
(a) LIMITATION AS TO SHARES. Neither the recipient of an Option under the
Plan nor an Optionee's successor or successors in interest shall have any
rights as a stockholder of the Company with respect to any Shares subject to an
Option granted to such person until the date of issuance of a stock certificate
for such Shares.
(b) LIMITATION AS TO EMPLOYMENT. Neither the Plan, nor the granting of an
Option, nor any other action taken pursuant to the Plan shall constitute or be
evidence of any agreement or understanding, express or implied, that a
Consultant, Director or Key Employee has a right to continue as an employee of
the Company or in the relationship of a consultant or director with the
Company, respectively, for any period of time or at any particular rate of
compensation.
(c) REGULATORY APPROVAL AND COMPLIANCE. The Company shall not be required
to issue any certificate or certificates for Shares upon the exercise of an
Option granted under the Plan or to record as a holder of record of Shares the
name of the individual exercising an Option under the Plan, without obtaining
to the complete satisfaction of the Board the approval of all regulatory bodies
deemed necessary by the Board and without complying, to the Board's complete
satisfaction, with all rules and regulations under federal, state, or local law
deemed applicable by the Board. In addition, with respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the
Committee fail to comply, it shall deemed null and void, to the extent
permitted by law and deemed advisable by the Committee.
Section 8.
SURRENDER OF OPTIONS
8.1 GENERAL RULE. The Committee acting in its absolute discretion may
incorporate a provision in an Option Agreement to allow an Optionee to
surrender his or her Option in whole or in part in lieu of the exercise in
whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such Option exceeds the
Exercise Price for such Shares, and
(b) the Option to purchase such Shares is otherwise exercisable.
8.2 PROCEDURE. The surrender of an Option in whole or in part shall be
effected by the delivery of the Option Agreement to the Committee (or to its
delegate) together with a statement signed by the Optionee which specifies the
number of Shares ("Surrendered Shares") as to which the Optionee surrenders his
or her Option and how he or she desires payment be made for such Surrendered
Shares.
8.3 PAYMENT. An Optionee in exchange for his or her Surrendered Shares
shall receive a payment in cash or in Shares, or in a combination of cash and
Shares, equal in amount
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on the date such surrender is effected to the excess of the Fair Market Value
of the Surrendered Shares on such date over the Exercise Price for the
Surrendered Shares. The Committee acting in its absolute discretion can
approve or disapprove an Optionee's request for payment in whole or in part in
cash and can make that payment in cash or in such combination of cash and
Shares as the Committee deems appropriate. A request for payment only in
Shares shall be approved and made in Shares to the extent payment can be made
in whole shares of Shares and (at the Committee's discretion) in cash in lieu
of any fractional Shares.
8.4 RESTRICTIONS. Any Option Agreement which incorporates a provision to
allow an Optionee to surrender his or her Option in whole or in part also shall
incorporate such additional restrictions on the exercise or surrender of such
Option as the Committee deems necessary to satisfy the conditions to the
exemption under Rule 16b-3 (or any successor exemption) to Section 16(b) of the
Exchange Act.
Section 9.
STOCK APPRECIATION RIGHTS
9.1 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock Appreciation
Rights may be, but are not required to be, granted by the Committee in
connection with grant of an Option. All Stock Appreciation Rights shall be in
such form as the Committee may from time to time determine and shall be subject
to the following terms and conditions:
(a) TERM AND EXERCISE. A Stock Appreciation Right shall be exercisable
only: (i) with the approval of the Committee, (ii) during the Term of the
Option to which it relates, (iii) at such times as the Option to which it
relates is exercisable, and (iv) if the Fair Market Value of the Shares subject
to the Option surrendered (on the date surrendered) minus the aggregate Option
Price of the Shares subject to the Option surrendered is a positive amount.
(b) PAYMENT. In the event the Committee agrees to permit exercise of the
Stock Appreciation Rights, the Optionee shall surrender to the Company the
right to exercise the Option with respect to a specified number of Shares as to
which the Option is then exercisable. In return, the Optionee shall receive
from the Company no more than an amount payable in cash and/or in Shares (as
determined by the Committee after considering the request of the Optionee)
equal to the difference between the aggregate Fair Market Value of the
Shares as to which the Optionee has surrendered the Option and the Option Price
with respect thereto. In the event the Committee determines to tender Shares
in full or partial payment of the Stock Appreciation Right, the number of
Shares to be issued to the Optionee shall be based on the Fair Market Value of
the Shares as of the date of exercise of the Stock Appreciation Right. No
fractional Shares shall be issued to Optionees upon exercise of a Stock
Appreciation Right. Instead, the Company shall pay the Optionee the value of
such fractional Share based upon the Fair Market Value of a Share on the date
the Stock Appreciation Right is exercised.
(c) NONTRANSFERABILITY. A Stock Appreciation Right granted under the Plan
shall be transferable only when the Option to which it relates is transferable.
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9.2 OTHER TERMS AND CONDITIONS. Option Agreements reflecting Stock
Appreciation Rights which are granted under the Plan may contain such other
terms and as are conditions not inconsistent with the provisions of the Plan as
the Committee may deem appropriate from time to time.
9.3 NOTIFICATION OF REQUEST TO EXERCISE.
(a) The Optionee shall request the Committee's approval to exercise a
Stock Appreciation Right by written notice to the Secretary of the Company at
the principal executive offices of the Company. Such written notice shall
state the number of Shares subject to the Option for which approval of the
exercise of the Stock Appreciation Right is requested and the Optionee's
preferred form of payment of the Stock Appreciation Right, as hereinafter
provided. The Optionee may indicate his or her preference to receive payment
of the Stock Appreciation Right in cash or in a combination thereof.
Notwithstanding anything to the contrary contained herein, the Committee shall
have absolute discretion in determining whether the request for approval of the
exercise of the Stock Appreciation Right shall be approved and, if such
approval is given, whether payment shall be made in cash or in a combination
thereof.
(b) Within thirty (30) days after the delivery to the Secretary of the
Optionee's request to exercise the Stock Appreciation Right as provided above,
the Committee shall inform the Optionee in writing of its determination to the
Optionee. The Optionee must act on any approved exercise of a Stock
Appreciation Right within thirty (30) days after the date of such determination
by the Committee (or such longer period as may be permitted by the Committee)
and in accordance with the terms approved by the Committee. Exercise shall be
by written notice actually delivered, or mailed by certified or registered
mail, return receipt requested, to the Secretary of the Company at the
principal executive office of the Company.
9.4 EFFECT OF EXERCISE. Upon exercise of a Stock Appreciation Right, the
Option to which it relates shall lapse with respect to the Shares as to which
the Stock Appreciation Right is exercised and such Shares shall not be
available for further grant of Options.
Section 10.
SECURITIES REGISTRATION
Each Option Agreement may provide that, upon the receipt of Shares as a
result of the surrender or exercise of an Option, the Consultant, Director or
Key Employee shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Option Agreement also may
provide that, if so requested by the Company, the Consultant, Director or Key
Employee shall make a written representation to the Company that he or she will
not sell or offer to sell any of such Shares unless a registration statement
shall be in effect with respect to such Shares under the Securities Act of
1933, as amended ("1933 Act") and any applicable state securities law or unless
he or she shall have furnished to the Company an opinion, in form and substance
satisfactory to the Company, of legal counsel acceptable to the Company, that
such registration is
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not required. Certificates representing the Shares transferred upon
the exercise or surrender of an Option granted under this Plan may at the
discretion of the Company bear a legend to the effect that such Shares have not
been registered under the 1933 Act or any applicable state securities law and
that such Shares may not be sold or offered for sale in the absence of an
effective registration statement as to such Shares under the 1933 Act and any
applicable state securities law or an opinion, in form and substance
satisfactory to the Company, of legal counsel acceptable to the Company, that
such registration is not required.
Section 11.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash or
property or for a combination of cash and property or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares
are converted into another security or into the right to receive securities or
property and such agreement does not provide for the assumption or substitution
of the Options granted under this Plan, each Option at the direction and
discretion of the Board, or as is otherwise provided in the Option Agreements,
may be cancelled unilaterally by the Company in exchange for the whole Shares
(or, subject to satisfying the conditions to the exemption under Rule 16b-3 or
any successor exemption to Section 16(b) of the Exchange Act, for the whole
Shares and the cash in lieu of a fractional Share) which each Optionee
otherwise would receive if he or she had the right to surrender his or her
outstanding Option in full under Section 11 of this Plan and he or she
exercised that right exclusively for Shares on a date fixed by the Board which
comes before such sale or other corporate transaction.
Section 12.
TERMINATION AND AMENDMENT OF PLAN
The Board may amend, terminate or suspend the Plan at any time, in its
sole and absolute discretion; provided, however, that if required to qualify
the Plan under Rule 16b-3 promulgated under Section 16 of the Exchange Act, no
amendment shall be made more than once every six months that would change the
amount, price or timing of the Annual Grants and Interim Grants, other than to
comport with changes in the Code, or the rules and regulations promulgated
thereunder; and provided, further, that if required to qualify the Plan under
Rule 16b-3, no amendment shall be made without the approval of the Company's
stockholders that would (a) materially increase the number of Shares that may
be issued under the Plan; (b) materially modify the requirements as to
eligibility for participation in the Plan; or (c) otherwise materially increase
the benefits accruing to participants under the Plan.
Section 13.
AMENDMENT OR TERMINATION OF PLAN
This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the shareholders of the Company (1) to
increase the number of Shares reserved under Section 3 except as set forth in
Section 3.2, (2) to extend the maximum life of the Plan or
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the maximum exercise period under Section 7.4, (3) to decrease the
minimum Exercise Price under Section 7.2, or (4) to change the designation of
Consultants, Directors or Key Employees eligible for Options under Section 7.1.
The Board also may suspend the granting of Options under this Plan at any time
and may terminate this Plan at any time; provided, however, the Company shall
not have the right to modify, amend or cancel any Option granted before such
suspension or termination unless (1) the Optionee consents in writing to such
modification, amendment or cancellation or (2) there is a dissolution or
liquidation of the Company or a transaction described in Section 3.2 or Section
11 of this Plan.
Section 14.
MISCELLANEOUS
14.1 SHAREHOLDER RIGHTS. No Consultant, Director or Key Employee shall
have any rights as a shareholder of the Company as a result of the grant of an
Option to him or to her under this Plan or his or her exercise or surrender of
such Option pending the actual delivery of Shares subject to such Option to
such Consultant, Director or Key Employee.
14.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option to a Key Employee
under this Plan shall not constitute a contract of employment and shall not
confer on a Key Employee any rights upon his or her termination of employment
in addition to those rights, if any, expressly set forth in the Option
Agreement which evidences his or her Option.
14.3 WITHHOLDING. The exercise or surrender of any Option granted under
this Plan shall constitute the Optionee's full and complete consent to whatever
action the Committee directs to satisfy the federal and state tax withholding
requirements, if any, which the Committee in its discretion deems applicable to
such exercise or surrender. In addition to and at the time of payment of the
Exercise Price, the Optionee shall pay to the Company in cash the full amount
of any federal, state and local income, employment or other taxes required to
be withheld from the income of such Optionee as a result of such exercise;
provided, however, that in the discretion of the Committee any Option Agreement
may provide that all or any portion of such tax obligations, together with
additional taxes not exceeding the actual additional taxes to be owed by the
Optionee as a result of such exercise, may, upon the irrevocable election of
the Optionee, be paid by tendering to the Company whole Shares of Common Stock
duly endorsed for transfer and owned by the Optionee, or by authorizing the
Company to withhold Shares of Common Stock otherwise issuable upon exercise of
the Option, in either case in that number of Shares having a Fair Market Value
on the date of exercise equal to the amount of such taxes thereby being paid,
in all cases subject to such restrictions as the Committee may from time to
time determine, including any such restrictions as may be necessary or
appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3
under the Exchange Act.
14.4 TRANSFER. The transfer of a Key Employee between or among the
Company, a Subsidiary or a Parent shall not be treated as a termination of his
or her employment under this Plan.
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<PAGE> 15
14.5 CONSTRUCTION. This Plan shall be construed under the laws of the
State of Georgia.
- 14 -
<PAGE> 1
EXHIBIT 10.49
<PAGE> 2
AMENDED AND RESTATED
HARBINGER CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The Amended and Restated Harbinger Corporation Employee Stock Purchase
Plan (the "Plan") is intended to encourage employee stock ownership by offering
employees of Harbinger Corporation and its subsidiaries Purchase Rights (as
such term is defined in Section 2) to purchase shares of Common Stock. The Plan
is intended to operate as a bifurcated plan, providing benefits as an "employee
stock purchase plan" as defined in Section 423 of the Internal Revenue Code of
1986, as amended ("Code"), to those employees eligible to participate in and
receive benefits under such a plan, and providing similar benefits through an
employee stock purchase plan not intended to satisfy Code Section 423 to
eligible employees who may not benefit under a plan satisfying Code Section
423. The provisions of the Plan shall, accordingly, be construed so as to
comply with the requirements of Section 423 of the Code, whenever possible.
2. DEFINITIONS.
"BASE PAY" means regular straight-time and overtime earnings received from
the Company, excluding payments for incentive compensation, bonuses and other
special payments.
"BOARD" mean the Board of Directors of the Harbinger Corporation.
"COMMITTEE" means the Compensation Committee of the Board.
"COMMON STOCK" or "STOCK" means the Common Stock, par value $.001 per
share, of Harbinger Corporation, and any other stock or securities (including
any other share or securities of an entity other than Harbinger Corporation)
for or into which the outstanding shares of such stock are hereinafter
exchanged or changed.
"COMPANY" means Harbinger Corporation.
"CUSTODIAN" means Smith Barney, Inc., whose address is 388 Greenwich
Street, 28th Floor, New York, New York 10013, or such other person as the
Committee shall designate from time to time.
"EFFECTIVE DATE" means the date set by the Board for the Plan to become
effective, which date shall be the first day of a Purchase Period, and which
shall be at least one hundred and eighty (180) days after the effective date of
the initial public offering for Harbinger Corporation, or such earlier date as
is approved by the underwriter of such initial offering. The Effective Date
shall be subject to shareholder approval pursuant to Section 17.
<PAGE> 3
"EXERCISE DATE" means the last day of a Purchase Period (as such term is
defined in Section 4(b) hereof), on which date all Participants' outstanding
Purchase Rights will automatically be exercised.
"FAIR MARKET VALUE" means the closing "asked" price of the shares of
Stock in the over-the-counter market on the day on which such value is to be
determined or, if such "asked" price is not available, the last sales price on
such day or, if no shares were traded on such day, on the next preceding day on
which the shares were traded, as reported by the National Association of
Securities Dealers Automatic Quotation System (NASDAQ) or other national
quotation service. If the shares are listed on a National Securities Exchange,
"fair market value" means the closing price of the shares on such National
Securities Exchange on the day of which such value is to be determined or, if
no shares were traded on such day, on the next preceding day on which shares
were traded, as reported by National Quotation Bureau, Inc. or other national
quotation service. If at any time shares of Common Stock are not traded on an
exchange or in the over-the-counter market, Fair Market Value shall be the
value determined by the Board of Directors or Committee administering the Plan,
taking into consideration those factors affecting or reflecting value which
they deem appropriate.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"PARTICIPANT" means an employee of the Company or of a parent or
subsidiary of the Company who has enrolled in the Plan by completing a
Participation Form (as such term is defined in Section 5 hereof) with the Plan
Administrator. For purposes of the Plan, a parent means a company which owns a
majority interest in the Company and effectively controls the Company, and a
subsidiary means a company in which the Company owns a majority interest and
which the Company effectively controls. For purposes of employees
participating in the portion of the Plan satisfying Code Section 423, the terms
parent and subsidiary have the meanings set forth in Code Sections 424(e) and
(f), respectively.
"PLAN ADMINISTRATOR" means the Director of Human Resources of the Company,
or any such other person so designated by the Committee.
"PURCHASE PERIOD" means a calendar quarter period as defined in Section
4(b) hereof.
"PURCHASE RIGHT" means a Participant's option to purchase shares of Common
Stock that is deemed to be granted to a Participant during a Purchase Period
pursuant to Section 7.
"SECTION 16(B) INSIDER" means those persons subject to the requirements of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
"TRADING DAY" refers to a day during which the NASDAQ National Market
System is available for trading shares of Common Stock.
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<PAGE> 4
3. ELIGIBILITY.
(a) Participation in the Plan is voluntary. All full-time employees of the
Company, including officers and directors who are full-time employees but who
are not members of the Committee, who have completed at least six (6) months of
continuous service with the Company are eligible to participate in the Plan.
The employee's entry date in the Plan shall be the first day of the Purchase
Period immediately following the date the employee has satisfied the
eligibility provisions. Full-time employees mean those employees who work at
least twenty (20) hours per week and for more than five (5) months in any
calendar year.
(b) Notwithstanding any provision of the Plan to the contrary, no employee
may participate in that part of the Plan which is intended to satisfy Code
Section 423 if prior to the grant of Purchase Rights or if following a grant of
Purchase Rights under the Plan, the employee would own, directly or by
attribution, stock, Purchase Rights or other stock options to purchase stock
representing five percent (5%) or more of the total combined voting power or
value of all classes of the Company's stock as defined in Code Section
423(b)(3).
4. SECURITIES SUBJECT TO THE PLAN AND PURCHASE PERIODS.
(a) The maximum number of shares which may be granted and purchased
under the Plan may not exceed One Hundred and Fifty Thousand (150,000) shares
of Common Stock (subject to adjustment as provided in Section 15), which may be
authorized but unissued shares, re-acquired shares or shares bought on the open
market. If any Purchase Right granted shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Common Stock
shall again become available for purposes of the Plan, unless the Plan has been
terminated.
(b) Purchase Period means each three month calendar quarter period,
beginning on January 1, April 1, July 1, and October 1, with the first such
Purchase Period beginning concurrently with the Effective Date of the Plan.
5. PARTICIPATION.
Eligible employees become Participants in the Plan by authorizing payroll
deductions for the purpose through a "Participation Form" filed with the Plan
Administrator no later than fifteen (15) days prior to the start date of a
Purchase Period.
6. PAYROLL DEDUCTIONS.
(a) In order to purchase Common Stock each Participant must elect and
indicate on the Participation Form the amount he/she wishes to authorize the
Company to deduct at regular payroll intervals during the Purchase period,
expressed either as (1) an integral percentage amount ranging from one percent
(1%) to fifteen percent (15%) of such Participant's Base Pay for the applicable
payroll period, with a minimum deduction of $10.00 per payday during the
Purchase Period, or (2) a dollar amount to be deducted pro rata at regular
payroll intervals during the Purchase Period, with a minimum deduction of $10
per payday and a maximum dollar
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<PAGE> 5
amount per payday to be set by the Committee. The Committee shall
determine from time to time whether method (1) or (2), or both, shall be
utilized. The Participation Form will include authorization for the Company to
make payroll deductions from the Participant's Base Pay.
(b) A Participant may not be granted Purchase Rights under the Plan with
respect to more than Fifteen Thousand Dollars ($15,000.00) worth of Common
Stock for any calendar year such Purchase Rights to purchase Common Stock are
outstanding pursuant to the terms of the Plan. The Fifteen Thousand Dollar
($15,000.00) limit is determined according to the Fair Market Value of the
Common Stock on the first day (the grant date) of the Purchase Period.
Participants will be notified if these limitations become applicable to them.
(c) The amounts deducted from the Participant's Base Pay shall be credited
to a bookkeeping account established in the Participant's name under the Plan,
but no actual separate account will be established by the Company to hold such
amounts. There shall be no interest paid on the balance credited to a
Participant's account. Amounts deducted from the participant's Base Pay may be
commingled with the general assets of the Company and may be used for its
general corporate purposes prior to the purchase of Common Stock for a Purchase
Period.
(d) Payroll deductions shall begin on the first payday of each Purchase
Period, and shall end on the last payday of each Purchase Period. Eligible
employees may participate in the Plan and purchase shares only through payroll
deductions. Notwithstanding the above, a Participant on an approved leave of
absence may continue participating in the Plan by making cash payments to the
Company within a normal pay period equal to the amount of the normal payroll
deduction had a leave of absence not occurred. The right of a Participant on an
approved leave of absence to continue participating in the Plan shall terminate
upon the expiration of twelve (12) weeks of leave, unless the Participant's
right to re-employment by the Company after a longer leave is guaranteed by
statute or contract, in which case termination of the right to participate will
occur upon the expiration of such extended period.
(e) So long as a Participant remains an employee of the Company, payroll
deductions will continue in effect from Purchase Period to Purchase Period,
unless at least fifteen (15) calendar days prior to the first day of the next
succeeding Purchase Period the Participant:
(i) elects a different rate by filing a new Participation Form with
the Plan Administrator; or
(ii) withdraws from the Plan in accordance with Section 9 hereof.
(f) Unless a Participant files with the Plan Administrator a new
Participation Form electing to withdraw prior to fifteen (15) calendar days
before the beginning of the next Purchase Period as permitted under the Plan,
such Participant's payroll deductions will continue throughout the next
Purchase Period and his or her Purchase Right to purchase Common Stock will be
deemed to be fully and automatically exercised on the last day of such Purchase
Period with respect to payroll deductions made during that Purchase Period.
-4-
<PAGE> 6
7. GRANT OF PURCHASE RIGHT.
(a) Subject to the effective date provisions of Section 17, at 5:01 p.m.
Eastern Standard Time, on the last day of each Purchase Period (the Exercise
Date), each Participant who has not withdrawn from the Plan pursuant to Section
9 shall be deemed to have been granted a Purchase Right as of the first day of
the Purchase Period to purchase as many full shares of Common Stock as can be
purchased with the balance credited to such Participant's account as of the
Exercise Date.
(b) The price at which each Purchase Right to purchase Common Stock shall
be exercised is the lower of:
(i) 85% of the Fair Market Value of the Common Stock on the NASDAQ
National Market System on the first Trading Day of a Purchase Period; or
(ii) 85% of the Fair Market Value of the Common Stock on the NASDAQ
National Market System on the last Trading Day of such Purchase Period.
(c) The number of shares purchasable by each Participant per Purchase
Period will be the number of whole and fractional shares obtained by dividing
the amount credited to the Participant's Account as of the Exercise Date in the
Purchase Period by the purchase price in effect for the Purchase Period.
(d) A Participant may not purchase shares of Stock with a Fair Market
Value exceeding Three Thousand, Seven Hundred and Fifty Dollars ($3,750) for
any particular Purchase Period. The Committee has the power, exercisable at any
time prior to the start of a Purchase Period, to increase or decrease the
dollar value maximum for that Purchase Period, subject to the limitations in
Section 6(b). The maximum, as thus adjusted, will continue in effect from
Purchase Period to Purchase Period until the Committee once exercises its power
to adjust the maximum.
8. EXERCISE OF PURCHASE RIGHT.
(a) Subject to the effective date provisions of Section 17, each
outstanding Purchase Right shall be deemed automatically exercised as of 5:01
p.m. of the Exercise Date (the last day of the Purchase Period). The exercise
of the Purchase Right is accomplished by applying the balance credited to each
Participant's account as of the Exercise Date to the purchase on the Exercise
Date of whole and fractional shares of Common Stock at the purchase price in
effect for the Purchase Period.
(b) If a Participant purchases the maximum share amount set forth in
Section 7(d), any amount not applied to the purchase of Common Stock for that
Purchase Period will be held for the purchase of Stock in the next Purchase
Period.
(c) If the number of Shares for which Purchase Rights are exercised
exceeds the number of Shares available in any Purchase Period under the Plan,
the Shares available for
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<PAGE> 7
exercise will be allocated by the Plan Administrator pro rata among the
Participants in such Purchase Period in proportion to the relative amounts
credited to their accounts. Any amounts not thereby applied to the purchase of
Common Stock under the Plan will be refunded to the Participants after the end
of the Purchase Period.
9. WITHDRAWAL AND TERMINATION OF PURCHASE RIGHTS.
(a) A Participant may withdraw from the Plan during a Purchase Period by
providing written notice to the Plan Administrator on or before 5:00 p.m. of
the last business day of such Purchase Period. Such withdrawal will become
effective upon receipt by the Plan Administrator of such notice, and payroll
deductions will cease as soon as is administratively feasible from the date of
such notice, and no additional payroll deductions will be made on behalf of
such Participant during the Purchase Period. Such notice shall be on a form
(the "Withdrawal Form") provided by the Plan Administrator for that purpose.
The Withdrawal Form will permit such a Participant to elect to receive all
accumulated payroll deductions as a refund without penalty or to exercise such
Participant's outstanding Purchase Rights to purchase Stock on the following
Exercise Date in the amount of all payroll deductions withheld during the
Purchase Period prior to the Participant's withdrawal.
(b) Any Participant (other than a Section 16(b) Insider) who withdraws
from the Plan pursuant to Section 9(a) will not be eligible to rejoin the Plan
until the second (2nd) Purchase Period following the Purchase Period of
withdrawal. A Participant wishing to resume participation may re-enroll in the
Plan by completing and filing a new Participation Form for a subsequent
Purchase Period by following the applicable enrollment procedures.
(c) In the event a Participant who is a Section 16(b) Insider ceases
participation in the Plan, whether as a result of withdrawal during a Purchase
Period or of such Participant's decision to discontinue his or her enrollment
for subsequent Purchase Periods, such insider may not re-enroll in the Plan
until the Purchase Period beginning coincident with or immediately following
the expiration of a six (6) month period beginning upon the effective date of
such Section 16(b) Insider's withdrawal from the Plan.
(d) If a Participant ceases to be an employee of the Company for any
reason during a Purchase Period, his or her outstanding Purchase Right will
immediately terminate, and all sums previously collected from such Participant
during such Purchase Period under the terminated Purchase Right will be
refunded to the Participant.
10. RIGHTS AS SHAREHOLDER.
(a) A Participant is not a shareholder in shares to be purchased during a
Purchase Period until the Purchase Right is exercised on the Exercise Date.
Thus, a Participant will not have a right to any dividend or distribution made
prior to the Exercise Date on shares of Common Stock purchased during the
Purchase Period.
(b) Upon a written request made to the Custodian, the Participant will be
entitled to receive, as soon as practicable after the Exercise Date, a stock
certificate for the number of
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<PAGE> 8
purchased shares The Custodian may impose upon, or pass through to,
the Participant a reasonable fee for the transfer of shares of Common Stock in
the form of stock certificates from the Custodian to the Participant. It is
the responsibility of each Participant to keep his or her address current with
the Company through the Plan Administrator and with the Custodian.
11. SALE OF COMMON STOCK ACQUIRED UNDER THE PLAN.
(a) Participants may sell the shares of Common Stock they acquire under
the Plan only in compliance with the restrictions set forth below.
(i) Section 16(b) Insiders may be subject to certain restrictions in
connection with their transactions under the Plan and with respect to the sale
of shares of Stock obtained under the Plan, including, but not limited to, the
Company's Insider Trading Policy.
(ii) Sales of Stock obtained under the Plan by a Participant must comply
with the Company's Insider Trading Policy, as the same may exist from time to
time.
(iii) No Participant purchasing shares of Common Stock under the Plan
shall be entitled to sell such shares of Stock until the first day of the
second (2nd) Purchase Period immediately following the Purchase Period in which
the shares of Stock were obtained. For purposes of this restriction, the
Company may, at its option, include the following legend on any certificates
representing the Stock so purchased:
"The shares represented by this Certificate are subject to
certain restrictions on sale and disposition contained in the
Amended and Restated Harbinger Corporation Employee Stock Purchase
Plan, a copy of which is on file with the Corporation."
(b) The Participant understands and agrees that, in order to insure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) A Participant shall immediately inform the Plan Administrator in
writing if the Participant transfers any shares purchased through the Plan
within two (2) years from the date of grant of the related Purchase Right. Such
transfer shall include disposition by sale, gift or other manner. The
Participant may be requested to disclose the manner of the transfer, the date
of the transfer, the number of shares involved and the transfer price. By
executing the Participation Form, each Participant obligates himself or herself
to provide such information to the Plan Administrator.
(d) The Company is authorized to withhold from any payment to be made to a
Participant, including any payroll and other payments not related to the Plan,
amounts of withholding and other taxes due in connection with any transaction
under the Plan, and a Participant's enrollment in the Plan will be deemed to
constitute his or her consent to such withholding.
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<PAGE> 9
12. PLAN ADMINISTRATION.
(a) The Plan shall be administered by the Committee. No member of the
Board will be eligible to participate in the Plan during his or her period of
Committee service.
(b) The Committee shall have the plenary power, subject to and within the
limited of the express provisions of the Plan:
(i) to determine the commencement and termination date of the
offering of Common Stock under the Plan; and
(ii) to interpret the terms of the Plan, established and revoke
rules for the administration of the Plan and correct or reconcile any defect or
inconsistency in the Plan.
(c) The Committee may delegate all or part of its authority to administer
the Plan to the Plan Administrator, who may in turn delegate the day-to-day
operations of the Plan to the Custodian. The Custodian will establish and
maintain, as agent for the Participants, accounts for the purpose of holding
shares of Common Stock and/or cash contributions as may be necessary or
desirable for the administration of the Plan.
(d) The Board may waive or modify any requirement that a notice or
election be made or filed under the Plan a specified period in advance in an
individual case or by adoption of a rule or regulation under the Plan, without
the necessity of an amendment to the Plan.
13. TRANSFERABILITY.
(a) Any account maintained by the Custodian for the benefit of a
Participant with respect to shares acquired pursuant to the Plan may only be in
the name of the Participant; provided, however, that the Participant may elect
to maintain such account with right of joint ownership with such Participant's
spouse. Such election may only be made on a form (the "Joint Account Form")
provided by the Company.
(b) Neither payroll deductions credited to a Participant's account nor any
Purchase Rights or other rights to acquire Common Stock under the Plan may be
assigned, transferred, pledged or otherwise disposed of by Participants other
than by will or the laws of descent and distribution and, during the lifetime
of a Participant, Purchase Rights may be exercised only by the Participant.
14. MERGER OR LIQUIDATION OF THE COMPANY.
In the event the Company merges with another corporation and the Company is
not the surviving entity, or in the event all or substantially all of the stock
or assets of the Company is acquired by another company, or in the event of
certain other similar transactions, the Committee may, in its sole discretion
and in connection with such transaction, cancel each outstanding Purchase Right
and refund all sums previously collected from Participants under the canceled
outstanding Purchase Rights, or, in its discretion, cause each Participant with
outstanding
- 8 -
<PAGE> 10
Purchase Rights to have his or her outstanding Purchase Right exercised
immediately prior to such transaction and thereby have the balance of his or her
account applied to the purchase of whole and fractional shares of Common Stock
(subject to the maximum dollar limitation of Section 7(d)) at the purchase price
in effect for the Purchase Period, which would be treated as ending with the
effective date of such transaction. The balance of the account not so applied
with be refunded to the Participant. In the event of a merger in which the
Company is the surviving entity, each Participant is entitled to receive, for
each share as to which such Participant's Outstanding Purchase Rights are
exercised as nearly as reasonably may be determined by the Committee, in its
sole discretion, the securities or property that a holder of one share of Common
Stock was entitled to receive upon the merger.
15. ADJUSTMENT FOR CHANGES IN CAPITALIZATION.
To prevent dilution or enlargement of the rights of Participants under the
Plan, appropriate adjustments may be made in the event any change is made to
the Company's outstanding Common Stock by reason of any stock dividend, stock
split, combination of shares, exchange of shares or other change in the Common
Stock effected without the Company's receipt of consideration. Adjustments may
be made to the maximum number and class of securities issuable under the Plan,
the maximum number and class of securities purchasable per outstanding Purchase
Right and the number and class of securities and price per share in effect
under each outstanding Purchase Right. Any such adjustments may be made
retroactively effective to the beginning of the Purchase Period in which the
change in capitalization occurs, and any such adjustment will be made by the
Committee in its sole discretion.
16. AMENDMENT AND TERMINATION.
The Committee may terminate or amend the Plan at any time, subject to the
following restrictions. First, the provisions of Sections 4, 5, 6, 7 and 8
which govern the formula for the automatic grant of Purchase Rights under the
Plan may not be amended more than once in any six (6) month period. Second,
any termination or amendment made to the Plan may not affect or change Purchase
Rights previously granted under the Plan without the consent of the affected
Participant, and any amendment that materially increases the benefits or number
of shares under the Plan (except for certain allowable adjustments in the event
of changes to the Company's capital structure or for changes authorized by the
Plan to be made by the Committee or the Plan Administrator) or materially
modifies the eligibility requirements of the Plan shall be subject to
shareholder approval. If not sooner terminated by the Committee, the Plan
shall terminate at the time Purchase Rights have been exercised with respect to
all shares of Common Stock reserved for grant under the Plan.
17. SHAREHOLDER APPROVAL AND EFFECTIVE DATE.
The Plan is subject to the approval of shareholders of the Company holding
a majority of the shares of the Common Stock.
The Plan (as amended and restated) shall be deemed to have been adopted as
of the Effective Date (January 1, 1996) upon the date of its approval by the
shareholders of the
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<PAGE> 11
Company. Until the Plan is approved by the shareholders, no Purchase
Rights shall be deemed granted or exercised under Sections 7 and 8. Upon
approval of the Plan by the Company's shareholders, Purchase Rights shall be
deemed granted and exercised as of the appropriate dates in the Plan as of the
Effective Date, and shares of Stock purchased shall be deemed purchased as of
the applicable Exercise Date. In the event the Plan is not approved by the
shareholders on or before June 30, 1996, the Plan shall be deemed not to have
been adopted, and all payroll deduction amounts withheld on behalf of
Participants pursuant to Section 6 shall be refunded to such Participants.
18. NO EMPLOYMENT RIGHTS.
Participation in the Plan will not impose any obligations upon the Company
to continue the employment of the Participant for any specific period and will
not affect the right of the Company to terminate such person's employment at
any time, with or without cause.
19. COSTS.
Except as set forth in Section 10(b), costs and expenses incurred in the
administration of the Plan and the maintenance of accounts with the Custodian
may be shared by the Participant and the Company, to the extent provided in
this Section 19. Any brokerage fees and commissions for the purchase of Common
Stock under the Plan (including shares of Common Stock purchased upon
reinvestment of dividends and distributions) will be shared equally by the
Participant and the Company, but any brokerage fees and commission for the sale
of shares of Common Stock under the Plan by a Participant will be borne by such
Participant.
20. REPORTS.
After the close of each Purchase Period, each Participant in the Plan will
receive a report from the Custodian indicating the amount of the Participant's
contributions to the Plan during the Purchase Period, the amount of the
contributions applied to the purchase of Common Stock for the Purchase Period,
the purchase price per share in effect for the Purchase Period and the amount
of the contributions (if any) carried over to the next Purchase Period.
21. GOVERNING LAW.
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan will be determined in accordance with laws of
the State of Georgia, without giving effect to principles of conflicts of laws,
and applicable Federal law.
22. COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
The Plan, the granting and exercising of Purchase Rights hereunder, and
the other obligations of the Company, the Plan Administrator and the Custodian
under the Plan will be subject to all applicable federal and state laws, rules,
and regulations, and to such approvals by any regulatory or governmental agency
as may be required. The Company may, in its discretion, postpone the issuance
or delivery of shares of Common Stock upon exercise of Purchase Rights
- 10 -
<PAGE> 12
until completion of such registration or qualification of such shares
of Common Stock or other required action under any federal or state law, rule,
or regulation, listing or other require action with respect to any automated
quotation system or stock exchange upon which the shares of Common Stock or
other Company securities are designated or listed, or compliance with any other
contractual obligation of the Company, as the Company may consider appropriate,
and may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
deliver of shares of Common Stock in compliance with applicable laws, rules,
and regulations, designation or listing requirements, or other contractual
obligations.
23. EFFECT OF PLAN.
The provisions of the Plan shall, in accordance with its terms, be binding
upon and inure to the benefit of, all successors of each employee participating
in the Plan, including, without limitation, such employee's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
employee.
- 11 -
<PAGE> 1
EXHIBIT 10.50
<PAGE> 2
AMENDMENT TO THE
HARBINGER CORPORATION
AMENDED AND RESTATED 1989 STOCK OPTION PLAN
THIS AMENDMENT TO THE HARBINGER CORPORATION AMENDED AND RESTATED 1989
STOCK OPTION PLAN (the "Amendment") is made effective as of the 24th day of
January, 1996 by Harbinger Corporation, a corporation organized and existing
under the laws of the State of Georgia (the "Company");
W I T N E S S E T H:
WHEREAS, the Company has previously adopted, and currently maintains, the
Harbinger Corporation Amended and Restated 1989 Stock Option Plan (the "Plan"),
under which optionees may be granted stock options to purchase shares of common
stock, $.0001 par value per share, of the Company; and
WHEREAS, the Company has determined that it is in its best interests to
amend the provisions of the Plan relating to the expiration of non-qualified
stock options granted under the Plan;
NOW, THEREFORE, the Plan is hereby amended, effective as of January 24,
1996, by substituting the following for the first sentence of Subsection 1.5(c)
of the Plan:
"An Optionee's Incentive Stock Option shall expire on the earlier
of the expiration of: (i) the date specified in the Incentive
Stock Option, which, if the Optionee is a Key Employee, shall in
no event be later than three (3) months after the termination of
the Key Employee's employment by the Company, a Parent or a
Subsidiary for any reason other than death or disability (as
defined in Section 422(c) of the Code), and if the Optionee is a
Director, shall be no later than five (5) years after the date of
termination of such Optionee's role as a Director of the Company,
a Parent or Subsidiary, as the case may be, and if the Optionee is
a Consultant, shall be no later than one (1) year after the date
of termination of such Optionee's role as a Consultant of the
Company, a Parent or Subsidiary, as the case may be, or (ii) the
Term specified in Section 2.1 or 3.1(a), as the case may be. An
Optionee's Nonqualified Stock Option shall expire as of the date
determined by the Committee, in its sole discretion, and as
specified in the Nonqualified Stock Option."
Except as specifically amended herein, the Plan shall remain in full force
and effect as prior to this Amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
effective as of the day and year first above written.
HARBINGER CORPORATION
/s/ C. Tycho Howle
-------------------------------------------
C. Tycho Howle, Chief Executive Officer
- 1 -
<PAGE> 1
EXHIBIT 10.51
<PAGE> 2
FIRST AMENDMENT TO ALLIANCE AGREEMENT
BETWEEN
SYSTEM SOFTWARE ASSOCIATES, INC.
AND
HARBINGER CORPORATION
This FIRST AMENDMENT ("Amendment") dated the 15th day of February, 1996 and
effective as of December 31, 1995, is between HARBINGER CORPORATION
(hereinafter "Harbinger") and SYSTEM SOFTWARE ASSOCIATES, INC. (hereinafter
"SSA"). This Amendment amends and revises the Alliance Agreement between
Harbinger and SSA entered into as of July 21, 1995 (hereinafter "the
Agreement").
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Harbinger and SSA agree as follows:
1. Subparagraph (i) of Section 6F shall be deemed deleted in its entirety and
replaced with the following:
(i) SSA shall remain obligated to make the Minimum Royalty Payments to
Harbinger as set forth above irrespective of the date of termination
and, notwithstanding anything which may be stated to the contrary,
Harbinger's election not to perform any enhancements under Section
3C(xii).
2. Except as set forth in Paragraph 1 above, the terms and conditions of the
Agreement remain in full force and effect between Harbinger and SSA. Upon
execution by both parties hereto, this First Amendment shall be attached to and
form a part of the Agreement. This First Amendment may be executed in
duplicates, all of which when taken together shall constitute the full and
binding agreement of the parties.
This First Amendment shall be effective as of the 31st day of December, 1995.
Acceptance By: Acceptance By:
SYSTEM SOFTWARE ASSOCIATES, HARBINGER CORPORATION
INC.
/s/ J. J. Skadra /s/ Joel G. Katz
--------------------------------- -----------------------------
Signature Signature
Chief Financial Officer Vice President - Finance
--------------------------------- -----------------------------
Title Title
- 1 -
<PAGE> 1
EXHIBIT 10.52
<PAGE> 2
SUPPLEMENTAL AGREEMENT
THIS AGREEMENT is made and entered effective as of December 29, 1995 (the
"Effective Date") by and among Harbinger, N.V. ("HNV"), Harbinger Corporation
("HC"), Vulcan Ventures, Inc. ("VVI"), and AXA Equity & Law Life Assurance
Society, Ltd. ("E&L").
1. BACKGROUND
1.1. E&L has entered into a Subscription Agreement with HNV effective
December 29, 1995 whereby E&L purchased 150,000 shares of HNV's common shares
for a purchase price of $US150,000.00. VVI has entered into a Subscription
Agreement with HNV effective December 29, 1995 whereby VVI purchased 450,000
shares of HNV's common shares for a purchase price of $US450,000.00. HC has
entered into a Subscription Agreement with HNV effective December 29, 1995
whereby HC purchased 150,000 shares of HNV's common shares for a purchase price
of $US150,000.00.
1.2. As part of the inducement for E&L and VVI to purchase the HNV shares
as set forth above, representatives of HC, E&L and VVI discussed the
willingness of HC to provide an incentive for E&L and VVI to purchase the HNV
shares. E&L and VVI contemplated that HC would take appropriate action to
compensate both E&L and VVI for their agreement to purchase additional shares
of HNV common shares as noted above.
1.3. In fulfillment of its commitment to E&L and VVI as noted above, HC is
entering into this Agreement for the purpose of granting a contractual right to
E&L and VVI to receive a warrant to purchase shares of the common stock of HC
(the "Warrant") in certain circumstances, as set forth below. The parties
agree and acknowledge that this Agreement and the obligations set forth herein
are subject to and shall be effective only upon approval or ratification of
this Agreement by the Board of Directors of HC.
2. PERFORMANCE CRITERIA
2.1. The parties acknowledge that HNV through its Board of Directors has
established a business plan contemplating financial performance of HNV for
fiscal year 1996 (the "Business Plan"). Within fifteen (15) calendar days
after June 30, 1996, an authorized representative of HNV shall provide a
written report (the "HNV Report") to E&L, VVI and HC as to the actual financial
performance of HNV or its successor as of June 30, 1996 in comparison with the
financial performance set forth in the Business Plan.
2.2. Prior to June 30, 1996, HNV shall upon a request from an authorized
representative of HC, E&L or VVI provide the requesting party a written status
report as to the financial performance of HNV as of the date of such request,
including a comparison of actual financial performance of HNV with the Business
Plan.
<PAGE> 3
3. GRANT OF WARRANT
3.1. Upon receipt by E&L and VVI of the HNV Report (which shall be
delivered to E&L and VVI on or before July 15, 1996 as set forth above), and if
the HNV Report discloses that the actual financial performance of HNV does not
meet or exceed the Business Plan, then:
(i) the Warrant to purchase 37,500 shares of HC Common Stock
shall be granted to VVI; and
(ii) the Warrant to purchase 12,500 shares of HC Common Stock
shall be granted to E&L.
3.2. The terms and conditions of the Warrant shall be substantially the
same as those set forth in the form of Warrant attached hereto at Exhibit A,
with an exercise price equal to the price per share of HC Common Stock as
reported on the Nasdaq National Market System as of the close of trading on
Friday, June 28, 1996.
3.3. If the HNV Report discloses that the actual financial results of HNV
or its successor meet or exceed the HNV Business Plan, then HC shall have no
obligations of any kind to VVI or E&L to grant the Warrants or to provide any
other consideration to VVI or E&L.
4. REPRESENTATIONS
4.1. E&L and VVI agree and acknowledge that the grant of the Warrants as
set forth above shall be subject to compliance with all applicable securities
laws, including but not limited to the U.S. Securities Act of 1933 as amended
("Securities Act") and applicable state and other securities laws. Similarly,
the issuance of shares in accordance with the exercise of the Warrants shall be
subject to compliance with applicable securities laws and the other terms and
conditions at set forth in the Warrants.
4.2. E&L and VVI each severally represent and warrant that:
(i) The execution and delivery of this Agreement, and the
acquisition of the Warrant and of any Shares to be acquired upon exercise
thereof are undertaken for investment purposes only and with no present
intention of dividing or allow others to participate in this investment or
reselling or otherwise participating, directly or indirectly, in a distribution
of any securities obtained, and that each of E&L and VVI shall not make any
sale, transfer or other disposition of the any securities without registration
under the Securities Act or applicable securities laws of any other jurisdiction
or unless an exemption from registration is available under those acts and laws,
respectively; and, in the case of an exemption, unless upon request of HC, HC
has received an opinion of counsel satisfactory to HC that such transaction is
in compliance with the Securities Act and the applicable laws of all other
jurisdictions.
(ii) Any securities acquired hereunder have not been, and will not
be, registered with the United States Securities and Exchange Commission under
the Securities Act nor under applicable securities laws of any other
jurisdiction in reliance upon exemption(s)
-2-
<PAGE> 4
contained in the Securities Act and under regulations promulgated under the
Securities Act and exemptions contained in applicable securities laws of any
other jurisdiction and that E&L's, VVI's and HC's reliance upon such exemptions
is based in part upon the representations, warranties and agreements contained
in this Agreement.
(iii) E&L and VVI are accredited investors as defined in Regulation D
promulgated under the Securities Act and are familiar with the business in
which HC is engaged and, based upon their respective knowledge and experience
in financial and business matters, VVI and E&L are each an accredited investor
familiar with investments of the sort that E&L and VVI may be undertaking
herein, that E&L and VVI are fully aware of the problems and risks involved in
making an investment of this type, and that E&L and VVI are capable of
evaluating the merits and risks of this possible investment.
(iv) Each of E&L and VVI have made such inquiry into the structure
and operations of the HC as each of VVI and E&L and their respective advisors
have thought necessary and prudent in connection with the execution of this
Agreement. Each of E&L and VVI are existing shareholders of HC and have
knowledge of the current status of the business affairs and operation of HC and
HNV.
4.3. Each of the undersigned represent the accuracy of the statements
contained herein.
5. GENERAL
5.1. Except as expressly set forth in this Agreement, neither HC nor HNV
shall have any other obligations or liability of any kind to E&L or VVI with
respect to the purchase by E&L and VVI of the HNV Common Shares as specified
above.
5.2. This Agreement will be construed, governed and interpreted in
accordance with the laws of the State of Georgia, USA, without giving effect to
its conflict of law principles.
5.3. This Agreement may not be amended, modified or altered in any way
without the written consent of all the parties hereto.
5.4. Any dispute with regard to the terms, conditions or interpretation of
this Agreement shall be subject to arbitration to be conducted in Atlanta,
Georgia by the American Arbitration Association in accordance with its then
current rules and procedures.
-3-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement this 29th day
of March, 1996.
HARBINGER CORPORATION
By: /s/ C. Tycho Howle
--------------------------
Title: Chief Executive Officer
-----------------------
Date: March 29, 1996
------------------------
HARBINGER, N.V.
By: /s/ James C. Davis
--------------------------
Title: Managing Director
-----------------------
Date: March 29, 1996
VULCAN VENTURES, INC.
By:
---------------------------
Title:
------------------------
Date:
------------------------
AXA EQUITY & LAW LIFE ASSURANCE
SOCIETY, LTD.
By:
----------------------------
Title:
-------------------------
Date:
-------------------------
-4-
<PAGE> 6
EXHIBIT A
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
(COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") BUT HAVE BEEN OFFERED
AND SOLD IN RELIANCE ON THE EXEMPTIONS FROM REGISTRATION PROVIDED BY REGULATION
D AND REGULATION S PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES MAY NOT
BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF,
UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT OR THE
CORPORATION HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION
AND ITS COUNSEL STATING THAT SUCH DISPOSITION DOES NOT REQUIRE REGISTRATION
UNDER THE SECURITIES ACT AND THAT SUCH DISPOSITION IS IN COMPLIANCE WITH ALL
OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES.
HARBINGER CORPORATION
WARRANT
FOR THE PURCHASE
OF SHARES OF COMMON STOCK
WARRANT NO: ____________________ DATE OF GRANT: , 1996
HOLDER: ________________________
NUMBER OF SHARES: _______________ PURCHASE PRICE PER SHARE: $_____
FOR VALUE RECEIVED, HARBINGER CORPORATION, a Georgia corporation (the
"Company"), hereby certifies that ______________________________________ (the
"Holder"), is entitled, subject to the provisions of this Warrant, to purchase
from the Company, during the period commencing on the date hereof and ending on
the Expiration Date (as defined in Section 1 below), up to _________________
fully paid and non-assessable shares of Common Stock at the Purchase Price Per
Share set forth above (the "Exercise Price").
The term "Common Stock" means the Common Stock, par value $.0001 per
share, of the Company as constituted on , 1996 (the "Issue Date"). The number
of shares of Common Stock to be received upon the exercise of this Warrant may
be adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter referred to as "Warrant Stock." The term "Other Securities" means
any other equity or debt securities that may be issued by the Company in
addition thereto or in substitution for the Warrant Stock. The term "Company"
means and includes the corporation named above as well as (i) any immediate or
more remote successor corporation resulting from the merger or consolidation of
such corporation (or any immediate or more remote successor corporation of such
corporation) with another corporation, or (ii) any corporation to which such
corporation (or any immediate or more remote successor corporation of such
corporation) has transferred its property or assets as an entirety or
substantially as an entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed
or mutilated shall be at any time enforceable by anyone.
The Holder agrees with the Company that this Warrant is issued, and all
the rights hereunder shall be held, subject to all of the conditions,
limitations and provisions set forth herein.
<PAGE> 7
1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
at any time, or from time to time, during the period commencing on the date
hereof and expiring 5:00 p.m. Eastern Time on the second anniversary of the
date hereof (the "Expiration Date") or, if such day is a day on which banking
institutions in New York are authorized by law to close, then on the next
succeeding day that shall not be such a day (provided, however, that in no
event may this warrant be exercised after , 199__), by presentation and
surrender of this Warrant to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Warrant Exercise Form
attached hereto duly executed and accompanied by payment (either in cash or by
certified or official bank check, payable to the order of the Company) of the
Exercise Price for the number of shares specified in such form and instruments
of transfer, if appropriate, duly executed by the Holder or his or her duly
authorized attorney. If this Warrant should be exercised in part only, the
Holder shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the shares purchasable hereunder. Upon receipt by the Company of
this Warrant, together with the Exercise Price, at its office, or by the stock
transfer agent of the Company at its office, in proper form for exercise, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder. The Company
shall pay any and all documentary stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of shares of Common Stock on
exercise of this Warrant.
2. RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and Other Securities) from
time to time receivable upon exercise of this Warrant. All such shares (and
Other Securities) shall be duly authorized and, when issued upon such exercise,
shall be validly issued, fully paid and non-assessable and free of all
preemptive rights.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant. For purposes of this Warrant, the
fair market value of a share of Common Stock shall be determined as follows:
(a) If the Common Stock is listed on a national securities exchange
within the United States or admitted to unlisted trading privileges on such
exchange or listed for trading on The Nasdaq Stock Market, the current market
value shall be the average of the last reported sale price of the Common Stock
on such exchange or system for the ten trading days immediately preceding the
date of exercise of this Warrant or if no such last sale is made or reported on
any of such trading days, the average of the closing bid and closing asked
prices for such day on such exchange or system; or
(b) If the Common Stock is not so listed or admitted to unlisted trading
privileges, the current market value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current market
value shall be an amount, not less than book value thereof as at the end of the
most recent fiscal year of the Company ending prior to the date of the exercise
of the Warrant, determined in such reasonable manner as may be prescribed by
the Board of Directors of the Company.
4. HOLDER DOES NOT HAVE THE RIGHTS OF A SHAREHOLDER. The Holder shall
not, by virtue hereof, be entitled to any rights of a shareholder in the
Company, either at law or in equity, and the rights of the Holder are limited
to those expressed in this Warrant.
5. ANTI-DILUTION PROVISIONS.
5.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Common Stock (or other securities at the
time receivable upon the exercise of the Warrant)
-2-
<PAGE> 8
by recapitalization, reclassification or split-up thereof, or if the Company
shall declare a stock dividend or distribute shares of Common Stock to its
stockholders, the number of shares of Common Stock subject to this Warrant
immediately prior to such subdivision shall be proportionately increased, and if
the Company shall at any time combine the outstanding shares of Common Stock by
recapitalization, reclassification or combination thereof, the number of shares
of Common Stock subject to this Warrant immediately prior to such combination
shall be proportionately decreased. Any such adjustment, and any adjustment to
the Exercise Price pursuant to this Section 5.1; shall be effective at the close
of business on the effective date of such subdivision or combination or if any
adjustment is the result of a stock dividend or distribution then the effective
date for such adjustment based thereon shall be the record date therefor.
Whenever the number of shares of Common Stock purchasable upon the exercise of
this Warrant is adjusted, as provided in this Section 5.1, the Exercise Price
shall be adjusted to the nearest cent by multiplying such Exercise Price
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Common Stock purchasable upon the exercise
immediately prior to such adjustment, and (y) the denominator of which shall be
the number of shares of Common Stock so purchasable immediately thereafter.
5.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case
of any reorganization of the Company (or any other corporation, the securities
of which are at the time receivable on the exercise of this Warrant) after the
Issue Date or in case after such date the Company (or any such other
corporation) shall consolidate with or merge into another corporation or convey
all or substantially all of its assets to another corporation, then, and in each
such case, the Holder of this Warrant upon the exercise thereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the securities and property receivable upon the exercise of this Warrant prior
to such consummation, the securities or property to which such Holder would have
been entitled upon such consummation if such Holder had exercised this Warrant
immediately prior thereto; in each such case, the terms of this Warrant shall be
applicable to the securities or property receivable upon the exercise of this
Warrant after such consummation.
5.3 RESTRICTIONS ON CERTAIN ACTIONS. The Company shall not, by
amendment of its Articles of Incorporation or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant. Without limiting the generality
of the foregoing, while any Warrant is outstanding, the Company (a) shall not
permit the par value, if any, of the shares of stock receivable upon the
exercise of this Warrant to be above the amount payable therefor upon such
exercise and (b) shall take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue or sell fully paid and
non-assessable stock upon the exercise of all Warrants at the time outstanding.
5.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in the
number of shares of Common Stock receivable on the exercise of the Warrant, the
Company at its expense shall promptly compute such adjustment in accordance with
the terms of the Warrant and prepare a certificate executed by an executive
officer of the Company setting forth such adjustment and showing in detail the
facts upon which such adjustment is based. The Company shall forthwith mail a
copy of each such certificate to the Holder.
6. TRANSFER TO COMPLY WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS.
This Warrant and any Warrant Stock or Other Securities may not be sold,
transferred, pledged, hypothecated or otherwise disposed of except as follows:
(a) to a person who, in the opinion of counsel to the Company, is a person to
whom this Warrant or the Warrant Stock or Other Securities may legally be
transferred without registration and without the delivery of a current
prospectus under the Securities Act with respect thereto, and in compliance
with all other laws, rules, regulations, and ordinances, and then only against
receipt of an agreement of such person to comply with the provisions of this
Section 6 with respect to any resale or other disposition of such securities;
or (b) to any person upon delivery of a prospectus then meeting the
requirements of the Securities Act relating to such securities and the offering
thereof for such sale or disposition. In the event any Holder shall propose to
sell, transfer, pledge, or hypothecate or otherwise dispose of this Warrant,
such Holder shall first (i) surrender of this Warrant to the Company or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer tax, and (ii)
deliver to the Company of the opinion of counsel to the Holder as required by
the legend set forth at Section 7 hereof. Upon receipt of the foregoing and
-3-
<PAGE> 9
provided that the Company has received an opinion of its counsel that such
proposed sale, transfer, pledge or hypothecation is in compliance with all
applicable laws, rules, regulations and ordinances, the Company shall execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be canceled.
7. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of the Warrants
and the issuance of any of the shares of Warrant Stock, all certificates
representing shares shall bear on the face thereof substantially the following
legend:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND ISSUABLE UPON EXERCISE
HEREOF (COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
PROVISIONS OF THE SECURITIES LAWS OF ANY OTHER JURISDICTION, BUT HAVE BEEN
ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN
RELIANCE ON STATUTORY EXEMPTIONS UNDER THE SECURITIES ACT, AND IN COMPLIANCE
WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. THE
SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT, AND
WHICH IS IN COMPLIANCE WITH ALL OTHER APPLICABLE SECURITIES LAWS, RULES,
REGULATIONS AND ORDINANCES, OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE WITH SUCH APPLICABLE
LAWS, RULES, REGULATIONS AND ORDINANCES; AND IN THE CASE OF AN EXEMPTION,
ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE
SECURITIES UNDER THE SECURITIES ACT, AND THAT SUCH TRANSACTION IS IN
COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND
ORDINANCES.
8. NOTICES. All notices required hereunder shall be in writing and shall
be deemed given when delivered personally, when delivered by facsimile against
an electronic acknowledgment of delivery thereto, when delivered by a reputable
world-wide courier contracting for delivery in three days or less, or five days
after mailing when mailed by certified or registered mail, return receipt
requested, to the Company or the Holder, as the case may be, for whom such
notice is intended, at the address of such party as set forth below, or at such
other address of which the Company or the Holder has been advised by notice
hereunder.
9. APPLICABLE LAW. The Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the State of
Georgia, United States of America, without giving effect to the conflict of
laws rules applicable therein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on
its behalf, in its corporate name, by its duly authorized officer, all as of
the day and year first above written.
Attest: HARBINGER CORPORATION
By:
- - ---------------------------- --------------------------------
Joel G. Katz, Secretary C. Tycho Howle, Chairman and
Chief Executive Officer
[Corporate Seal]
Address of Holder Address of Company:
- - ---------------------------- 1055 Lenox Park Boulevard
- - ---------------------------- Atlanta, Georgia 30319
-4-
<PAGE> 10
THE RIGHT TO ASSIGN THIS WARRANT IS LIMITED BY THE TERMS AND CONDITIONS OF
THE WARRANT TO WHICH THIS ASSIGNMENT FORM IS ATTACHED. SUCH WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS
REGISTERED PURSUANT TO PROVISIONS OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED, OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION IS OBTAINED,
WHICH OPINION AND WHICH COUNSEL SHALL BE SATISFACTORY TO THE CORPORATION IN ITS
SOLE DISCRETION, IS DELIVERED TO THE CORPORATION STATING THAT SUCH SALE, OFFER
FOR SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION UNDER SUCH ACT AND IS OTHERWISE IN COMPLIANCE WITH ALL OTHER
APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES.
ASSIGNMENT FORM
FOR VALUE RECEIVED, _______________ hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please typewrite or print in block letters)
the right to purchase Common Stock of Harbinger Corporation, a Georgia
corporation (the "Company"), represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _______________________________ Attorney, to transfer
the same on the books of the Company with full power of substitution in the
premises.
DATED: ______________, 199_.
THIS ASSIGNMENT SHALL NOT BE VALID UNLESS AND UNTIL CONSENTED TO BY THE COMPANY
AS EVIDENCED BY THE SIGNATURE BELOW.
_____________________________
Signature
______________________________
Signature, if jointly held
ASSIGNMENT CONSENTED TO:
Harbinger Corporation
By:___________________________
C. Tycho Howle, CEO
-5-
<PAGE> 11
EXHIBIT A
[ATTACHMENT TO WARRANT]
THE SHARES OF COMMON STOCK OF HARBINGER CORPORATION ("HARBINGER") WHICH
WILL BE ISSUED UPON THE EXERCISE OF THE WARRANTS (THE "SECURITIES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER THE PROVISIONS OF THE SECURITIES LAWS OF ANY OTHER
JURISDICTION, BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR
PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE
SECURITIES ACT, AND IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES,
REGULATIONS AND ORDINANCES. THE SECURITIES MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
PROVISIONS OF THE SECURITIES ACT, AND WHICH IS IN COMPLIANCE WITH ALL OTHER
APPLICABLE SECURITIES LAWS, RULES, REGULATIONS AND ORDINANCES, OR PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE
WITH SUCH APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES; AND IN THE CASE
OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION
OF THE SECURITIES UNDER THE SECURITIES ACT, AND THAT SUCH TRANSACTION IS IN
COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES.
HARBINGER CORPORATION
WARRANT EXERCISE AGREEMENT
(INCLUDING INVESTOR SUITABILITY REPRESENTATIONS)
This WARRANT EXERCISE AGREEMENT (the "Agreement") dated as of
_____________, 19___ is made and entered into between HARBINGER CORPORATION, a
Georgia corporation ("HARBINGER" or the "Company"); and the person executing
this Agreement as the investor (the "Investor"). By executing this Agreement,
Investor acknowledges that Investor understands that the Company is relying
upon the accuracy of the representations and warranties of Investor contained
herein in complying with its obligations under applicable securities laws.
W I T N E S S E T H :
WHEREAS, the Investor desires to exercise a Warrant to acquire shares of
the Company's Common Stock (the "Common Stock"); and
WHEREAS, the Company intends to use the proceeds of the sale of the Common
Stock to supplement working capital; and
WHEREAS, the Company has furnished to the Investor a copy of the
information required by Rule 502(b)(2)(ii) of Regulation D promulgated under
the Securities Act (the "Disclosure Information"); and
NOW, THEREFORE, for and in consideration of ten dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Investor agree as follows:
1. EXERCISE OF THE WARRANTS. Subject to the terms and conditions set
forth herein, Investor hereby exercises the Warrant to acquire the number of
shares of Common Stock of HARBINGER set forth below the
-1-
<PAGE> 12
Investor's signature hereto (the "Securities"). The Warrant shall be deemed
exercised only when and if this Agreement is countersigned by HARBINGER.
HARBINGER shall countersign this Agreement only if HARBINGER determines that
this Agreement is fully completed and executed by the Investor and that the
Investor has represented that the Investor is an "accredited investor" as
defined under Regulation D promulgated under the Securities Act ("Regulation D")
and/or that Investor is not a "U.S. Person" as defined under Regulation S
promulgated under the Securities Act ("Regulation S").
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES. Investor represents,
warrants and covenants to HARBINGER as of the date hereof that:
a. Investor acknowledges that he has received and reviewed a copy of the
Disclosure Information. Investor also acknowledges that the Company has
represented to the Investor that the Company has not experienced any material
developments in its business, its prospects or its financial condition that is
not described in the Disclosure Information. Investor is a resident of the
jurisdiction shown in Investor's address below and will be the sole party in
interest as to the Securities subscribed for and is acquiring the Securities
for Investor's own account, for investment only and not with a view toward the
resale or distribution thereof.
b. Investor must bear the economic risk of this investment for an
indefinite period of time because the Securities are not registered under the
Securities Act or the securities laws of any state or other jurisdiction.
Investor has been advised that the Securities are not being registered under
the Securities Act upon the basis that the transactions involving their sale
are exempt from such registration requirements as transactions by an issuer not
involving any public offering in reliance on Sections 4(2) and 3(b) of the
Securities Act, and that reliance by HARBINGER on such exemption is predicated
in part on Investor's representations set forth in this Agreement. Investor
acknowledges that HARBINGER makes no representations of any kind concerning its
intent or ability to offer or sell the Securities to the public, under Rule 144
or otherwise. Investor further understands that HARBINGER makes no covenant,
representation or warranty with respect to the registration of the Securities
under the Securities Exchange Act of 1934, as amended, or its dissemination to
the public of any current financial or other information concerning HARBINGER.
c. Investor is able to bear the economic risk of losing Investor's entire
investment in HARBINGER, which is not disproportionate to Investor's net worth,
and that Investor has adequate means of providing for Investor's current needs
and personal contingencies without regard to the investment in HARBINGER.
Investor further represents and warrants that Investor is an "accredited
investor" as defined in Rule 501(a) of Regulation D and the Investor is not a
"U.S. Person" as defined in Rule 902 of Regulation S.
d. In connection with Investor's purchase of any of the Securities no
oral or written representations or warranties have been made to Investor other
than those as may be contained in the Disclosure Information. Investor
acknowledges that no person is authorized to give any information or to make any
statement not contained in the Disclosure Information, a copy of which Investor
acknowledges has previously been received, and that any information or statement
not contained therein or contemplated or permitted thereby must not be relied
upon as having been authorized by HARBINGER or any Affiliate, or any
professional advisors thereto.
e. To the extent Investor has deemed necessary, Investor has consulted
with Investor's attorney, financial advisors and others regarding all
financial, securities and tax aspects of the proposed investment, and that said
advisors have reviewed the Disclosure Information, this Agreement and all
documents relating thereto on Investor's behalf. Investor and Investor's
advisors have sufficient knowledge and experience in business and financial
matters to evaluate HARBINGER, to evaluate the risks and merits of an
investment in HARBINGER, to make an informed investment decision with respect
thereto, and to protect Investor's interest in connection with Investor's
purchase of the Securities without need for the additional information which
would be required to be included in more complete registration statements
effective under the 1933 Act. Investor acknowledges that an investment in
HARBINGER involves a high degree of risk, and Investor represents that Investor
and Investor's advisors have engaged in a complete and thorough independent
analysis of HARBINGER (including the financial condition of HARBINGER) and have
independently determined the advisability and suitability of Investor's
investment in HARBINGER while taking into account Investor's level of
sophistication, financial resources
-2-
<PAGE> 13
(including the percentage of Investor's total assets that this investment will
represent), tolerance for risk, and investment objectives.
f. Investor and Investor's advisors have had an opportunity to ask
questions of and to receive answers from the officers of HARBINGER and to
obtain additional information in writing to the extent that HARBINGER possesses
such information or could acquire it without unreasonable effort or expense:
(i) relative to HARBINGER and the offering of the Securities; and (ii)
necessary to verify the accuracy of any information, documents, books and
records furnished. All such materials and information requested by Investor
and Investor's advisors (including information requested to verify information
previously furnished) have been made available and examined by Investor or
Investor's advisors. Investor further acknowledges that Investor and
Investor's advisors have met with (or have been provided an opportunity to meet
with) an executive officer of HARBINGER, or have had an opportunity to ask any
and all questions of, and receive answers to their satisfaction from, such
executive officer. Investor acknowledges that all discussions with executive
officers of HARBINGER as well as any written information issued by HARBINGER,
were intended to describe the aspects of HARBINGER's business and prospects
which it believes to be material but were not necessarily a thorough or
exhaustive description. Investor acknowledges that HARBINGER has not provided
any information to Investor regarding HARBINGER's future prospects for success
nor has HARBINGER made any representations or warranties to Investor (other
than those explicit representations and warranties that may be contained in the
Disclosure Information) regarding the merits or advisability of purchasing the
Securities.
g. Investor agrees that Investor will not attempt to pledge, transfer,
convey or otherwise dispose of the Securities in the United States except in a
transaction made pursuant to the following offering restrictions: all offers
and sales of the Securities to a U.S. person or inside the United States prior
to the expiration of a one-year period immediately following the date of this
Subscription Agreement shall be made only upon receipt by the Company of an
opinion of counsel satisfactory to the Company that such transaction complies
with all applicable securities laws and only (i) in accordance with the
provisions of Rules 903 or 904 of Regulation S, or (ii) pursuant to the
registration requirements under the 1933 Act, or (ii) pursuant to an available
exemption from registration under the 1933 Act. Investor consents to the
placement of legends on any certificates or documents representing any of the
Securities stating that they have not been registered under the 1933 Act or any
applicable securities laws of other jurisdictions and setting forth or referring
to such offering restrictions. Investor is aware that the Company will make a
notation in its appropriate records, and notify its transfer agent, with respect
to the restrictions on the transferability of the Securities.
h. Investor is the beneficial owner of the Warrants registered in his
name, that such Warrants are free and clear of all liens and encumbrances, and
that there are no liens or encumbrances on Investor's right to receive the
Securities on the exercise of the Warrant.
3. INDEMNIFICATION AND RELEASE. Investor recognizes that the sale of the
Securities to him will be based upon his representations and warranties set
forth above and on the Disclosure Information supplied by Investor to
HARBINGER. Investor agrees to indemnify and to hold harmless HARBINGER, and
its affiliates from and against any and all loss, damage, liability or expense,
including costs and reasonable attorney's fees, arising out of or based upon
any false representation or warranty made by the Investor in this Warrant
Exercise Agreement and/or any failure by Investor to fulfill any covenants or
agreements set forth herein or in the other documents executed and delivered by
him in connection with this transaction. Investor hereby forever releases,
dismisses, and discharges, HARBINGER and its affiliates, and their respective
officers, directors, employees, shareholders, successors, assigns, and
transferees (collectively the "Released Persons"), from any and all now or
hereafter existing actions, causes of action, suits, damages, debts, claims,
counterclaims, obligations and liabilities of any nature whatsoever, known or
unknown, suspected or unsuspected (collectively the "Released Claims"), that
Investor may have against any of the Released Persons, including, without
limitation, any Released Claim which in whole or in part is based upon or
arises out of the purchase and sale of the Securities pursuant to this
Subscription Agreement.
4. REPRESENTATIONS BY HARBINGER. HARBINGER represents and warrants to
Investor as follows:
-3-
<PAGE> 14
a. HARBINGER is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia and has the corporate power to
conduct its business.
b. The execution, delivery and performance of this Agreement by HARBINGER
has been duly approved by the Board of Directors of HARBINGER.
c. The issuance of the Securities has been duly authorized and when paid
for and issued pursuant to the terms hereof, the Securities will be validly
issued, fully paid, and non-assessable.
5. TERMS OF OFFERING. No commission or similar compensation will be paid
in connection with the purchase of the Securities pursuant to the exercise of
the Warrants.
6. SURVIVAL OF REGISTRATION RIGHTS AND OTHER INVESTOR PROTECTIONS.
Neither the execution of this Agreement nor the exercise or partial exercise of
the Warrant shall terminate the registration rights of the Investor set forth
in the Warrant, which shall survive such execution and exercise.
7. FURTHER INVESTOR SUITABILITY REPRESENTATIONS.
Investor understands that the Securities offered by HARBINGER will not be
registered under the 1933 Act. Investor also understands that in order to
ensure that the offering and sale of the Securities are exempt from
registration under the 1933 Act, HARBINGER is required to have reasonable
grounds to believe that Investor qualifies as an "accredited investor" as
defined in Rule 501(a) of Regulation D and that Investor is not a U.S. Person
as defined by Regulation S. Investor understands that the information supplied
in this section will be disclosed to no one other than officers and agents of
HARBINGER without Investor's consent unless it is necessary for HARBINGER to use
such information to support the exemptions from registration under the 1933 Act
and under the law of any state or other jurisdiction.
In order to induce HARBINGER to permit Investor to purchase a portion of
the Securities, Investor makes the following representations and warranties.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned understands, however, that the Company may
present this Questionnaire to such parties as it deems appropriate if called
upon to establish that the proposed offer and sale of the Securities is exempt
from registration under the Securities Act, or meets the requirements of other
applicable securities laws. Further, the undersigned understands that the
offering is required to be reported to the U.S. Securities and Exchange
Commission.
I. PLEASE INITIAL TO CERTIFY THAT THE FOLLOWING STATEMENTS ARE TRUE,
CORRECT AND COMPLETE.
<TABLE>
<S> <C>
[ ] 1. Investor is a partnership, corporation or other organization with total assets
(Initials) in excess of U.S. $5,000,000.
[ ]
(Initials) 2. Investor is not a "U.S. Person" as defined in Rule 902 of Regulation S.
[ ] 3. Investor is not a resident of the United States for federal income tax
(Initials) purposes.
[ ] 4. Investor has no affiliation with the U.S. National Association of Securities
(Initials) Dealers ("NASD").
</TABLE>
-4-
<PAGE> 15
II. OTHER CERTIFICATIONS.
By signing the Signature Page, the undersigned certifies the following:
(a) that the purchase of Warrants will be solely for the account of the
undersigned and not for the account of any other person or entity; and
(b) that the name and address set forth in this Questionnaire are true,
correct and complete.
III. GENERAL INFORMATION.
Name of Purchaser:______________________________________________________________
Address: _______________________________________________________________________
(Number and Street)
________________________________________________________________________________
(City) (State) (County) (Zip Code)
Telephone Number: --- ---
___________________________________________________
(Country Code) (Area Code) (Number)
The undersigned represents that (a) the undersigned has read and
understands this Subscription Agreement and (b) the information contained in
this Questionnaire is complete and accurate.
_________________________________ __________________________________, 19___
Number of Shares subscribed for Date
_______________________________________
Name of Investor (Please Type or Print)
By:_____________________________________
Authorized Signature
_______________________________________
Name of Person Authorized to Sign
(Please Type or Print)
-5-
<PAGE> 1
EXHIBIT 11.1
<PAGE> 2
HARBINGER CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED PER SHARE EARNINGS
<TABLE>
<C> <C> <C> <C>
1995 1994 1993
PRIMARY
Weighted average common
stock outstanding....................... 8,405,000 6,862,000 6,744,000
Net effect of dilutive stock options and
warrants - based on the treasury
method.................................. 527,000 - -
---------- ------------ ----------
Total................................... 8,932,000 6,862,000 6,744,000
========== ============ ==========
Net income applicable to common
stockholders............................ $1,048,000 $(2,111,000) $3,242,000
========== ============ ==========
Net income per share applicable to
common stockholders..................... $0.12 $(0.31) $0.48
========== ============ ==========
FULLY DILUTED
Weighted average common stock
outstanding............................. 8,405,000 6,862,000 7,112,000
Net effect of dilutive stock options and
warrants - based on the treasury
method.................................. 785,000 - -
---------- ------------ ----------
Total................................... 9,190,000 6,862,000 7,112,000
========== ============ ==========
Net income applicable to common
stockholders............................ $1,048,000 $(2,111,000) $3,242,000
========== ============ ==========
Net income per share applicable to
common stockholders..................... $0.11 $(0.31) $0.46
========== ============ ==========
</TABLE>
<PAGE> 1
EXHIBIT 13.1
<PAGE> 2
Selected Financial Data
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------
Year ended December 31,
- - ---------------------------------------------------------------------------------------------------
(in thousands, except per share data) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Revenues $23,117 $ 13,652 $10,536 $ 6,717 $ 5,505
Direct costs 5,672 3,700 2,752 1,811 1,433
---------------------------------------------------------
Gross margin 17,445 9,952 7,784 4,906 4,072
---------------------------------------------------------
Operating income before charge
for purchased in-process product
development and write-off of software
development costs 3,135 1,619 1,142 166 119
---------------------------------------------------------
Charge for purchased in-process product
development and write-off of
software development costs - 4,317 - - -
Operating income (loss) 3,135 (2,698) 1,142 166 119
=========================================================
Net income (loss) applicable to
common shareholders $ 1,048 $ (2,111) $ 3,242 $ (353) $ 46
=========================================================
Net income (loss) per share
of common stock $ 0.12 $ (0.31) $ 0.48 $ (0.08) $ (0.03)
=========================================================
Weighted average common and common
equivalent shares outstanding 8,932 6,862 6,744 5,645 5,601
=========================================================
<CAPTION>
BALANCE SHEET DATA:
At December 31,
---------------------------------------------------------
(in thousands) 1995 1994 1993 1992 1991
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital 14,320 2,726 3,790 150 393
Total assets 40,260 15,661 12,201 4,832 3,100
Long-term obligations, redeemable
preferred stock and puttable
common stock 4,675 2,943 4,944 7,138 1,081
Shareholders' equity 29,133 5,399 4,337 (4,457) 821
</TABLE>
1
<PAGE> 3
Quarterly Results of Operations
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
Three Months Ended
- - -----------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31,
(in thousands, except per share data) 1994 1994 1994 1994*
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $2,993 $3,542 $3,410 $ 3,707
=========================================
Gross margin 2,131 2,581 2,452 2,788
=========================================
Operating income (loss) 211 348 236 (3,493)
=========================================
Net income (loss) applicable to common
shareholders $ 43 $ 115 $ 55 $(2,324)
=========================================
Net income (loss) per share of common
stock and common stock equivalents $ 0.01 $ 0.02 $ 0.01 $(0.30)
=========================================
Weighted average common and common
equivalent shares outstanding 7,513 7,631 7,597 7,779
=========================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
- - ------------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31,
(in thousands, except per share data) 1995 1995 1995 1995
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $4,542 $5,288 $6,102 $ 7,185
==========================================
GROSS MARGIN 3,418 4,055 4,505 5,467
==========================================
OPERATING INCOME 472 616 740 1,307
==========================================
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 166 $ 209 $ 147 $ 526
==========================================
NET INCOME PER SHARE OF COMMON
STOCK AND COMMON STOCK EQUIVALENTS $ 0.02 $ 0.03 $ 0.02 $ 0.05
==========================================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 7,926 7,913 9,567 10,908
==========================================
- - ------------------------------------------------------------------------------------
</TABLE>
* Includes pre-tax charge of $4.3 million, for purchased in-process product
development and write-off of software development costs.
<PAGE> 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The Company generates revenues from various sources, including revenues
for services and license fees for software sales. Revenues for services
principally include subscription fees for transactions on the Company's VAN,
software maintenance and implementation charges and charges for consulting and
training services. Subscription fees are based on a combination of monthly
access charges and transaction-based usage charges. Software maintenance and
implementation charges represent recurring charges and are deferred and
recognized ratably over 12 months. Charges for consulting and training services
are based on actual services rendered and are recognized as services are
performed. License fees for software sales are recognized at the time of
product installation for the Company's PC-based EDI software products, and upon
the latter of shipment or fulfillment of all significant post-contract vendor
obligations for the Company's other software products. The Company accepts
product returns for a specified period after delivery of software. License fees
include royalty revenues under the Company's Alliance Agreement with System
Software Associates, Inc. ("SSA") which are recognized as reported by SSA in
relicensing the Company's software products.
The Company modified its pricing structure for maintenance and
implementation charges in March 1993 to be more consistent with customary
pricing within the Company's industry. This included an increase in the
recurring annual maintenance charges which were phased in over a 24-month
period as maintenance contracts were renewed. In addition, the Company
instituted a recurring annual software implementation charge to cover the costs
of developing and updating custom software templates, known as Trading Partner
Packs, for particular industries and trading partners. Most new software
purchasers are required to contract for both software maintenance and
implementation services.
Effective December 31, 1994, the Company completed the acquisition (the
"TI Acquisition") of certain assets from Texas Instruments, Incorporated
relating to its EDI Software business. Effective July 21, 1995, the Company
entered into a strategic alliance relationship with SSA (the "SSA Alliance")
pursuant to which the Company acquired from SSA computer software that performs
EDI functions on IBM AS/400 midrange computers and licensed to SSA the
Company's AS/400, UNIX and PC-based EDI software and related tools and
utilities, under agreements whereby SSA may remarket this Harbinger software to
licensees of SSA's Business Planning and Control System. Through the TI
Acquisition and the SSA Alliance, the Company acquired software products and
technologies that complement the Company's existing software product line.
In December 1994, the Company founded Harbinger NET Services, LLC
("HNS") to develop products and services to facilitate electronic commerce
using the Internet. HNS was capitalized with an initial investment of
approximately $360,000 from the Company and approximately $340,000 from certain
other investors, including certain shareholders, executive officers and
directors of the Company. In June 1995, the Company purchased additional HNS
common shares for $2.0 million in cash and a note for $6.0 million, which was
paid in full from the proceeds of the Company's initial public offering. Also,
in June 1995, BellSouth invested $3.0 million in HNS in exchange for a
five-year subordinated convertible debenture bearing interest at the rate of 6%
per annum. The BellSouth debenture will convert automatically into common
shares of HNS at such time, if ever, as BellSouth is permitted to make
unrestricted equity investments in companies such as HNS under the terms of a
consent decree applicable to BellSouth. Assuming the immediate conversion of
the BellSouth debenture and exercise of outstanding HNS options, the Company
and BellSouth would own approximately 70% and 24%, respectively, of HNS common
shares outstanding following such conversion, and Harbinger shareholders,
officers and directors would own 6% of HNS common shares outstanding following
such conversion. HNS will concentrate its efforts on the design and development
of software products and services to facilitate mass deployment of electronic
commerce transactions over the Internet. The Company expects that it will
realize significant losses on its investment in HNS through 1996, and such
significant losses may continue thereafter. Since the Company reports its
interest in HNS's losses by the equity method of accounting, the Company's net
income and net income per share, if any, will be materially adversely affected
by any significant losses incurred by HNS.
10
<PAGE> 5
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percentage
relationship of certain statement of operations data items to total revenues.
<TABLE>
<CAPTION>
Percentage of Total Revenues
---------------------------------
Year Ended December 31,
---------------------------------
1995 1994 1993
---------------------------------
<S> <C> <C> <C>
Revenues:
Services 71.0% 78.3% 65.3%
Software 29.0 21.7 34.7
---------------------------------
Total revenues 100.0 100.0 100.0
---------------------------------
Direct costs:
Services 18.7 22.1 21.0
Software 5.8 5.0 5.1
---------------------------------
Total direct costs 24.5 27.1 26.1
---------------------------------
Gross margin 75.5 72.9 73.9
Operating costs:
Selling and marketing 21.1 21.4 21.8
General and administrative 20.9 22.9 27.3
Product development 16.5 13.0 10.4
Depreciation and amortization 3.4 3.8 3.5
Charge for purchased in-process product development
and write-off of software development costs - 31.6 -
---------------------------------
Total operating costs 61.9 92.7 63.0
---------------------------------
Operating income (loss) 13.6 (19.8) 10.9
---------------------------------
Interest expense (income), net (0.3) 0.2 1.0
Equity in losses of joint ventures 5.5 1.7 0.4
---------------------------------
Income (loss) before income tax expense (benefit) 8.4 (21.7) 9.5
Income tax expense (benefit) 3.0 (7.7) (24.4)
---------------------------------
Net income (loss) 5.4% (14.0)% 33.9%
=================================
</TABLE>
1995 COMPARED TO 1994 AND 1994 COMPARED TO 1993
Revenues. Total revenues increased from $10.5 million in 1993 to $13.7
million in 1994 and $23.1 million in 1995. Revenues for services increased from
$6.9 million in 1993 to $10.7 million in 1994 and to $16.4 million in 1995.
These increases reflect an increase in the number of subscribers utilizing the
Company's VAN, as well as increases in the average volume of transmissions by
subscribers. Revenues from software maintenance and implementation also
increased in each year, reflecting both an increase in the number of customers
and the effect of the modification of the Company's pricing structure for these
services in March 1993. Revenue from software sales decreased from $3.7 million
in 1993 to $3.0 million in 1994, but increased to $6.7 million in 1995. The
increase in 1995 as compared to 1994 was the result of the effect of $2.0
million in software sales attributable to products acquired from TI, $1.5
million in royalties for software products sold through the SSA channel and
software sold in connection with several new hub programs. Software sales in
1994 included international sublicense revenues of approximately $500,000 which
were substantially non-recurring. The decrease in 1994 as compared to 1993 was
attributable to lower unit sales resulting from a lower number of trading
partner seminars arranged and conducted by the Company, to delays in the
Company's introduction of its Windows-based PC software products and to
decreased international license fees derived from the Company sublicense
arrangement with Sprint. The Company restructured its sales force to focus on a
more effective implementation of its trading community strategy in 1995.
Direct Costs. Direct costs for services increased from $2.2 million in
1993 to $3.0 million in 1994 and $4.3 million in 1995. As a percentage of
services revenues, these costs were 32.2% in 1993, 28.1% in 1994 and 26.3% in
1995. The decreases as a percentage of services revenues from 1993 to 1995
reflect greater margins achieved from increased services revenues. Direct
software costs increased from
11
<PAGE> 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
$534,000 in 1993 to $689,000 in 1994 and $1.3 million in 1995. Direct
software costs, as a percentage of software revenues, were 14.6% in 1993, 23.2%
in 1994 and 20.1% in 1995. The decrease in direct software costs as a
percentage of software revenues from 1994 to 1995 primarily reflects the effect
of higher margin royalty revenues and the sales of higher margin products
acquired from TI. The increase in direct software costs as a percentage of
software revenues from 1993 to 1994 primarily reflects both increased software
amortization and higher sales of lower margin products. Total direct costs for
software are expected to increase each year to reflect the amortization of
purchased technology and software development costs.
Selling and Marketing. Selling and marketing expenses increased from $2.3
million in 1993 to $2.9 million in 1994 and $4.9 million in 1995. As a
percentage of revenues, these expenses were 21.8% in 1993, 21.4% in 1994, and
21.1% in 1995. The decreases between years principally reflect the effect of
increased services revenues and efficiencies associated with other costs to
support increased sales activity.
General and Administrative. General and administrative expenses increased
from $2.9 million in 1993 to $3.1 million in 1994 and $4.8 million in 1995. As
a percentage of revenues, these expenses decreased from 27.3% in 1993 to 22.9%
in 1994 and 20.9% in 1995. These decreases as a percentage of revenues reflect
efficiencies associated with expanding the Company's operations and the effect
of increases in software and service revenues.
Product Development. Total expenditures for product development, including
capitalized expenses, increased from $1.9 million in 1993 to $2.2 million in
1994 and $4.8 million in 1995. The Company capitalized product development
expense of $826,000, $394,000 and $962,000, respectively, in 1993, 1994 and
1995, which represented 43.0%, 18.2% and 20.2% of total expenditures for
product development in these respective periods. The increase in the amount
capitalized, as a percentage of total expenditures for product development,
from 1994 to 1995 reflects the fact that the Company incurred greater expenses
in 1995 on products that had reached technological feasibility. As a percentage
of revenues, product development costs increased from 10.4% in 1993 to 13.0% in
1994 and to 16.5% in 1995. The increase from 1994 to 1995 principally reflects
substantially increased product development expenditures in 1995, including
costs related to the continuing development of technologies acquired in
connection with the TI Acquisition and the SSA Alliance. Amortization of
capitalized product development cost totaled $231,000, $387,000 and $868,000 in
1993, 1994 and 1995, respectively. Additionally, the company has invested $8.4
million in HNS to develop products and services to facilitate electronic
commerce using the Internet.
Charge for Purchased In-Process Product Development and Write-off of
Software Development Costs. The Company incurred an expense of $4.3 million in
1994 as a charge for purchased in-process product development and write-off of
software development costs. In connection with the TI Acquisition, the Company
acquired in-process software development for several software products. Since
the Company determined that certain of the acquired technologies had not
reached technological feasibility, the Company expensed the portion of the
purchase price allocable to such in-process product development. Also, the
Company wrote-off software development costs related to the Company's then
existing Windows-based PC product which, as a result of the TI Acquisition, has
been integrated with technologies acquired from TI to create a new
Windows-based product offering.
Equity in Losses of Joint Ventures. The Company recognized, as its equity
in the losses of Harbinger NV, $41,000 in 1993, $227,000 in 1994 and $313,000
in 1995. These increases reflect the impact of the operations of Harbinger NV
for the full year in 1994 and 1995 as compared to two months in 1993, and the
increasing losses from these operations. In addition, the Company recognized,
as its equity in the losses of HNS, $953,000 in 1995 reflecting the Company's
allocation of losses associated with this joint venture with BellSouth.
Income Taxes. The Company recorded an income tax expense of $687,000 and
an income tax benefit of $1.1 million in 1995 and 1994, respectively, which
represents an effective tax rate of approximately 35% and 36% for each of those
respective periods. Pre-tax income of $7.6 million will be required in future
years to fully utilize the deferred tax assets of $2.9 million as of December
31, 1995. During 1993, the Company determined that the valuation allowance
recorded upon adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" was no longer necessary. Therefore, the Company
reversed the valuation allowance which resulted in a tax benefit in 1993 of
$2.6 million.
Net Income. The Company realized net income of $1.2 million in 1995 as
compared to a net loss of $1.9 million in 1994 and net income of $3.6 million
in 1993. The net loss in 1994 reflects principally the effect of the charge for
purchased in-process product development and write-off of software development
costs of $4.3 million in connection with the TI Acquisition. Without this
charge, the
12
<PAGE> 7
Company's net income for 1994 would have been approximately $867,000.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations through a
combination of private equity and debt financings, a bank line of credit and
cash flows from operations. In 1995, 1994 and 1993, the Company generated cash
from operating activities of $2.9 million, $3.4 million and $1.2 million,
respectively. The Company used net cash in investing activities of $11.8 million
in 1995 as compared to $511,000 in 1994 and $3.5 million in 1993. Cash used in
investing activities for 1995 included principally investment in joint ventures
and purchases of property and equipment. The Company generated net cash from
financing activities of $16.2 million in 1995, representing principally proceeds
from its initial public offering in August 1995. Financing activities generated
cash of $1.0 million in 1994 and $2.6 million in 1993, representing principally
the proceeds from the issuance of securities.
The Company's bank credit facility consists of a revolving line of credit
which bears interest at prime plus 0.625% and permits the Company to borrow a
maximum of $4.0 million, limited to a borrowing base determined on the balance
of the Company's qualified receivables. This facility, which also provides the
Company with a 24-month termout feature for up to $2.0 million, contains
certain restrictive covenants and is secured by substantially all of the
Company's assets. The covenants include restrictions on the Company's capital
expenditures and net losses, and require the Company to maintain certain
financial ratios. The Company pays a commitment fee on the unused portion of
this revolving credit facility. As of December 31, 1995, the Company had no
outstanding balance on this facility.
The Company's principal commitments consist of leases on its headquarters
facilities, obligations under its bank credit facility and a $1.0 million loan
commitment to Harbinger NV. Advances on the proposed Harbinger NV loan
commitment will be funded on a monthly basis as determined by the Company,
subject to the right of the Company at any time to discontinue advances under
the loan agreement (except that in the event of the orderly liquidation of
Harbinger NV, the Company must fund amounts necessary to enable Harbinger NV to
satisfy its commitments). Under the Company's agreements with Harbinger NV,
Harbinger NV is required to pay the Company a minimum of $2.0 million in
royalties by December 31, 1997. The Company recognized no royalty revenue for
1994 or 1995 and does not believe that Harbinger NV will be able to meet this
commitment by December 31, 1997.
The Company currently has no material commitments for capital
expenditures. Revenues for 1995 include minimum royalties payable to the
Company by SSA of $1.4 million which was paid in January 1996. The terms of the
distribution arrangement provides for SSA to pay the Company royalties through
December 2000 based upon future software and services revenues that SSA derives
from the sale of the Company's products including certain minimum royalties of
$5.7 million in 1996. Under the royalty arrangement, royalties are not payable
to Harbinger until 30 days after SSA has received payment from its customer.
Accordingly, it is conceivable that the Company will not receive any payments
on the 1996 guaranteed minimum until January 1997. The Company may from time to
time issue debt or equity securities and otherwise raise long-term capital to
finance the expansion of its business.
The Company does not believe that inflation has had a material impact on
its business. However, there can be no assurance that Harbinger's business will
not be affected by inflation in the future.
RECENT ACCOUNTING PRONOUNCEMENT
On October 23, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 allows companies to retain the
current approach set forth in APB Opinion No. 25 "Accounting for Stock Issued
to Employees" ("APB Opinion No. 25"), for recognizing stock-based expense in
their financial statements in lieu of the new accounting method prescribed by
SFAS No. 123 based on the estimated fair value of employee stock options.
Companies that do not follow the new fair value based method will be required
to provide expanded footnote disclosures. The provisions of SFAS No. 123 are
effective for fiscal years beginning after December 15, 1995. However,
disclosure of the pro forma net income and earnings per share, as if the fair
value method of accounting for stock-based compensation had been elected, is
required for all awards granted in fiscal years beginning after December 15,
1994.
The Company intends to continue accounting for stock-related compensation
using APB Opinion No. 25 and will provide the expanded footnote disclosures
required under SFAS No. 123 beginning with its 1996 financial statements.
13
<PAGE> 8
Balance Sheets
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------
December 31,
-------------------------------
1995 1994
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,918,000 $ 4,642,000
Accounts receivable, less allowances for returns and
doubtful accounts of $537,000 and $270,000 in
1995 and 1994, respectively 5,624,000 3,366,000
Royalty receivable 1,382,000 -
Deferred income taxes 999,000 1,760,000
Due from joint ventures 566,000 50,000
Other current assets 283,000 227,000
-------------------------------
Total current assets 20,772,000 10,045,000
-------------------------------
Property and equipment, less accumulated
depreciation and amortization 3,772,000 2,107,000
Investments in joint ventures 7,480,000 232,000
Intangible assets, less accumulated amortization 6,298,000 1,414,000
Deferred income taxes 1,938,000 1,863,000
-------------------------------
$40,260,000 $15,661,000
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,335,000 $ 886,000
Accrued expenses 2,759,000 1,446,000
Deferred revenues 2,358,000 1,662,000
Note payable - 3,325,000
--------------------------------
Total current liabilities 6,452,000 7,319,000
--------------------------------
Commitments and contingencies
Redeemable preferred stock:
Series B, $10.00 par value; 48,000 shares issued and
outstanding at December 31, 1994 - 480,000
Series C, $10.00 par value; 250,000 shares issued and
outstanding at December 31, 1994 - 2,463,000
Zero Coupon, $1.00 redemption value; 4,000,000
shares issued and outstanding at December 31, 1995 - -
--------------------------------
Total redeemable preferred stock - 2,943,000
--------------------------------
Puttable common stock $0.0001 par value;
550,000 shares issued and outstanding 4,675,000 -
Shareholders' equity:
Preferred stock, including redeemable preferred stock;
20,000,000 shares authorized --
Series C, $10.00 par value; 250,000 shares issued and
outstanding at December 31, 1995 2,485,000 -
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 9,690,684 and 7,397,434 shares issued and
outstanding at December 31, 1995 and 1994, respectively 1,000 1,000
Additional paid-in capital 32,201,000 11,977,000
Accumulated deficit (5,554,000) (6,579,000)
--------------------------------
Total shareholders' equity 29,133,000 5,399,000
--------------------------------
$40,260,000 $15,661,000
===============================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 9
Statements of Operations
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Services $16,418,000 $10,688,000 $ 6,880,000
Software 6,699,000 2,964,000 3,656,000
----------------------------------------------
Total revenues 23,117,000 13,652,000 10,536,000
----------------------------------------------
Direct costs:
Services 4,323,000 3,011,000 2,218,000
Software 1,349,000 689,000 534,000
---------------------------------------------
Total direct costs 5,672,000 3,700,000 2,752,000
---------------------------------------------
Gross margin 17,445,000 9,952,000 7,784,000
---------------------------------------------
Operating costs:
Selling and marketing 4,875,000 2,922,000 2,298,000
General and administrative 4,832,000 3,132,000 2,880,000
Depreciation and amortization 794,000 512,000 371,000
Product development 3,809,000 1,767,000 1,093,000
Charge for purchased in-process product
development and write-off of software
development costs - 4,317,000 -
----------------------------------------------
Total operating costs 14,310,000 12,650,000 6,642,000
----------------------------------------------
Operating income (loss) 3,135,000 (2,698,000) 1,142,000
Interest expense (income), net (65,000) 38,000 103,000
Equity in losses of joint ventures 1,266,000 227,000 41,000
----------------------------------------------
Income (loss) before income
tax expense (benefit) 1,934,000 (2,963,000) 998,000
Income tax expense (benefit) 687,000 (1,052,000) (2,571,000)
----------------------------------------------
Net income (loss) 1,247,000 (1,911,000) 3,569,000
Preferred stock dividends (199,000) (200,000) (327,000)
----------------------------------------------
Net income (loss) applicable to common shareholders $ 1,048,000 $(2,111,000) $ 3,242,000
==============================================
Net income (loss) per share of common stock $ 0.12 $ (0.31) $ 0.48
==============================================
Weighted average common and common equivalent
shares outstanding 8,932,000 6,862,000 6,744,000
==============================================
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 10
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
---------------------------------------------------------------------------------------------------------
Preferred stock,
Series C Common stock Additional Total
---------------- ------------------ paid-in Accumulated Subscription shareholders'
Shares Amount Shares Amount capital deficit receivable equity
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1992 - $ - 5,688,305 $1,000 $ 3,254,000 $(7,689,000) $(23,000) $(4,457,000)
Sale of common stock - - 363,637 - 1,943,000 - - 1,943,000
Conversion of Series A
preferred stock to
common stock - - 360,361 - 1,081,000 - - 1,081,000
Issuance of common
stock in redemption
of Series B
preferred stock - - 301,209 - 2,346,000 - - 2,346,000
Warrants issued - - - - 66,000 - - 66,000
Exercise of stock options - - 34,206 - 93,000 - - 93,000
Receipt of subscription
receivable - - - - - - 23,000 23,000
Net income - - - - - 3,569,000 - 3,569,000
Preferred stock dividends - - - - - (327,000) - (327,000)
-------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1993 - - 6,747,718 1,000 8,783,000 (4,447,000) - 4,337,000
Exercise of stock
options and warrants - - 336,236 - 1,193,000 - - 1,193,000
Issuance of common
stock in redemption
of Series B
preferred stock - - - - 5,000 - - 5,000
Amortization of discount
on Series C preferred
stock - - - - - (21,000) - (21,000)
Conversion of debt to
common stock - - 313,480 - 1,996,000 - - 1,996,000
Net loss - - - - - (1,911,000) - (1,911,000)
Preferred stock dividends - - - - - (200,000) - (200,000)
-------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1994 - - 7,397,434 1,000 11,977,000 (6,579,000) - 5,399,000
Exercise of stock options
and warrants - - 610,714 - 1,945,000 - - 1,945,000
Purchase and retirement
of treasury stock - - (1,000) - (5,000) - - (5,000)
Sale of common stock - - 1,683,536 - 18,284,000 - - 18,284,000
Reclassification of
Series C preferred
stock to shareholders'
equity 250,000 2,485,000 - - - - - 2,485,000
Amortization of discount
on Series C preferred
stock - - - - - (23,000) - (23,000)
Net income - - - - - 1,247,000 - 1,247,000
Preferred stock dividends - - - - - (199,000) - (199,000)
-------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1995 250,000 $2,485,000 9,690,684 $1,000 $32,201,000 $(5,554,000) - $29,133,000
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 11
Statements of Cash Flows
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
Years Ended December 31,
-------------------------------------------------
1995 1994 1993
-------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,247,000 $ (1,911,000) $ 3,569,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Charge for purchased in-process product
development and write-off of
capitalized software - 4,317,000 -
Depreciation and amortization 1,666,000 899,000 621,000
Gain on sale of property and equipment - (3,000) -
Discount amortization on subordinated debt - 19,000 26,000
Equity in losses of joint ventures 1,266,000 227,000 41,000
Deferred income tax expense (benefit) 687,000 (1,052,000) (2,571,000)
(Increase) decrease in:
Accounts receivable (2,303,000) 35,000 (1,396,000)
Royalty receivable (1,382,000) - -
Due from joint ventures (516,000) 140,000 (190,000)
Other current assets (68,000) (69,000) (63,000)
Note receivable - 180,000 -
Increase in:
Accounts payable and accrued expenses 1,603,000 70,000 601,000
Deferred revenues 696,000 517,000 590,000
-------------------------------------------------
Net cash provided by operating activities 2,896,000 3,369,000 1,228,000
-------------------------------------------------
Cash flows from investing activities:
Short-term investment - 1,000,000 (1,000,000)
Purchases of property and equipment (2,364,000) (899,000) (867,000)
Additions to software development costs (962,000) (394,000) (826,000)
Purchased technology - (218,000) (260,000)
Investment in joint ventures (8,514,000) - (500,000)
-------------------------------------------------
Net cash used in investing activities (11,840,000) (511,000) (3,453,000)
-------------------------------------------------
Cash flows from financing activities:
Dividends paid on preferred stock (199,000) (167,000) (276,000)
Exercise of stock options and warrants 1,945,000 1,149,000 93,000
Repayment of note payable (3,325,000) - -
Proceeds from issuance of common stock 18,284,000 - 1,943,000
Proceeds from issuance of Series C preferred
stock and warrants - - 2,489,000
Purchase of treasury stock (5,000) - -
Redemption of Series B preferred stock (480,000) - (1,101,000)
Repayments under credit facility - - (380,000)
Payments of long-term debt - - (177,000)
Principal payments under capital lease obligations - - (8,000)
-------------------------------------------------
Net cash provided by financing activities 16,220,000 982,000 2,583,000
-------------------------------------------------
Net increase in cash and cash equivalents 7,276,000 3,840,000 358,000
Cash and cash equivalents at beginning of year 4,642,000 802,000 444,000
-------------------------------------------------
Cash and cash equivalents at end of year $ 11,918,000 $ 4,642,000 $ 802,000
=================================================
Supplemental disclosure of cash paid for interest $ 123,000 $ 150,000 $ 158,000
=================================================
Supplemental disclosure of noncash investing activities:
Acquisition of technology and distribution agreement
in exchange for common stock $ 4,675,000 $ - $ -
=================================================
Acquisition of business in exchange for note and
assumption of liabilities $ - $ 3,826,000 $ -
=================================================
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 12
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND PRESENTATION
Harbinger Corporation (the "Company") develops, markets and supports
software products and provides computer communications network and consulting
services to enable businesses to engage in electronic commerce. The Company's
products and services are used by more than 17,000 customers in targeted
industries, including the petroleum, chemical, utility, financial services,
electronics, distribution, aerospace, textile/apparel and healthcare
industries.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
REVENUE RECOGNITION
Software
Revenues derived from software license fees are recognized upon
installation of the Company's PC-based products and are recognized upon
shipment for all other software products. Royalty revenues are recognized as
reported.
Services
Revenues derived from services include subscription fees, maintenance and
implementation fees and consulting and training fees. Subscription fees include
both fixed and usage based fees for use of the Company's value-added network
and are recognized over the service period and as transactions are processed.
Maintenance and implementation fees are generally billed annually in advance,
include fixed fees for customer support and product updates and are recognized
ratably over the service period. Consulting and training fees are billed under
both time and materials and fixed fee arrangements and are recognized as
services are performed.
Deferred revenue
Deferred revenues represent payments received from customers for software
and services billed in advance.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Computer and communications equipment 3 - 5 years
Furniture, fixtures and leasehold improvements 5 - 10 years
</TABLE>
INVESTMENTS IN JOINT VENTURES
The Company's 93% investment in Harbinger NET Services, LLC (HNS) and its
20% investment in Harbinger NV (HNV) (collectively, the Joint Ventures) are
accounted for using the equity method of accounting. The Company applies the
equity method of accounting for its investment in HNS because of a
shareholders' agreement among all HNS shareholders which provides for all
significant operating and management decisions for HNS to be vested in the HNS
board of managers and provides that the Company can elect only a minority of
the HNS board of managers until December 31, 1996.
INTANGIBLE ASSETS
Purchased technology, goodwill and other intangible assets
Purchased technology, goodwill and other intangible assets are being
amortized over periods of up to five years. The Company evaluates the
recoverability of these intangible assets at each period end using the
undiscounted estimated future cash flows expected to be derived from such
assets. If such evaluation indicates a potential impairment, the Company uses
fair value in determining the amount of these intangible assets that should be
written off.
18
<PAGE> 13
Software development costs
The Company capitalizes certain software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." Costs
incurred internally to create a computer software product or to develop an
enhancement to an existing product are charged to expense when incurred as
research and development until technological feasibility has been established
for the product or enhancement. Thereafter, all software production costs are
capitalized and reported at the lower of unamortized cost or net realizable
value. Capitalization ceases when the product or enhancement is available for
general release to customers. Software development costs are amortized on a
product-by-product basis at the greater of the amounts computed using (a) the
ratio of current gross revenues for a product or enhancement to the total
current and anticipated future gross revenues for that product or enhancement
or (b) the straight-line method over the remaining estimated economic life of
the product or enhancement, not to exceed five years. The Company evaluates the
recoverability of its software development costs at each period end using the
undiscounted estimated future cash flows expected to be derived from the
software product or enhancement. If such evaluation indicates a potential
impairment, the Company uses fair value in determining the amount of software
development costs that should be written off.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred income tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
EARNINGS PER SHARE
Net income per share has been computed using the weighted average common
and common equivalent shares outstanding. Stock options and warrants issued in
the twelve months prior to the Company's initial public offering have been
considered outstanding and included in the computations of weighted average
common and common equivalent shares outstanding for all periods presented, even
if anti-dilutive. Net income per share computed on a fully diluted basis is not
significantly different than net income per share computed using the primary
method described above.
RECLASSIFICATIONS
Certain amounts in the accompanying 1994 and 1993 financial statements
have been reclassified to conform to the presentation adopted in the 1995
financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company uses financial instruments in the normal course of its
business. The carrying values of cash equivalents, accounts and royalty
receivable, accounts payable, accrued expenses and deferred revenues
approximate fair value due to the short-term maturities of these assets and
liabilities. The Company's investments in joint ventures are accounted for
using the equity method and pertain to privately held companies for which fair
values are not readily available. The Company believes the fair values of its
joint venture investments exceed the carrying values.
FOREIGN CURRENCY TRANSLATION
Foreign currency financial statements of the Company's foreign joint
venture are translated into U.S. dollars at current exchange rates, except for
revenues, costs and expenses and net losses which are translated at average
exchange rates during each reporting period. Net exchange gains or losses
resulting from the translation of assets and liabilities of the Company's
equity investment in its foreign joint venture were not significant to the
Company's 1995 financial statements.
RECENT ACCOUNTING PRONOUNCEMENT
On October 23, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123
19
<PAGE> 14
Notes to Financial Statements (Continued)
allows companies to retain the current approach set forth in APB Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB Opinion No. 25") for
recognizing stock-based expense in their financial statements in lieu of the
new accounting method prescribed by SFAS No. 123 based on the estimated fair
value of employee stock options. Companies that do not follow the new fair
value based method will be required to provide expanded footnote disclosures.
The provisions of SFAS No. 123 are effective for fiscal years beginning after
December 15, 1995. However, disclosure of the pro forma net income and earnings
per share, as if the fair value method of accounting for stock-based
compensation had been elected, is required for all awards granted in fiscal
years beginning after December 15, 1994.
The Company intends to continue accounting for stock related compensation
using APB Opinion No. 25 and will provide the expanded footnote disclosures
required under SFAS No. 123 beginning with its 1996 financial statements.
2. ACQUISITION
On December 31, 1994, the Company acquired certain assets and assumed
certain liabilities of the EDI business unit of Texas Instruments, Incorporated
in exchange for a $3.325 million note, the assumption of liabilities of
$526,000, and an agreement to pay royalties through 1998 based upon future
software license fee revenues derived from certain of the software products
acquired if such revenues exceed certain specified levels. The Company has
accounted for the transaction using the purchase method of accounting and the
results of operations of the business acquired have been included in the
Company's accompanying statement of operations since the acquisition date. The
Company paid the $3.325 million note in January 1995 and did not incur any
additional royalties under the terms of the agreement for the period ended
December 31, 1995. Of the total purchase price of $3.851 million, $2.66 million
was allocated to in-process product development and charged to the statement of
operations at the acquisition date, $441,000 was allocated to purchased
technology, $318,000 was allocated to tangible assets (primarily working
capital and equipment) and $432,000 was allocated to goodwill. The unaudited
pro forma results of operations of the Company for 1994 as if the transaction
described above had been effected on January 1, 1994 are summarized below:
<TABLE>
<S> <C>
Revenues $ 15,738,000
============
Net loss applicable to common shareholders $ (2,894,000)
============
Net loss per share of common stock $ (0.42)
============
</TABLE>
The pro forma results do not necessarily represent results which would
have occurred if the acquisition had taken place on the date indicated nor are
they necessarily indicative of the results of future operations.
3. PURCHASED TECHNOLOGY AND DISTRIBUTION AGREEMENT
On July 21, 1995, the Company entered into a distribution arrangement and
purchased certain software products and equipment from SSA in exchange for the
issuance of 550,000 shares of the Company's common stock valued at $4,675,000 at
the date of issuance and the issuance of 4 million shares of the Company's Zero
Coupon Redeemable Preferred Stock. The Company also provided SSA with an option
to put the 550,000 shares of common stock issued back to the Company for cash on
January 31, 1997 exercisable only if the market value of the common stock on
that date is less than $9.00 per share. The Zero Coupon Redeemable Preferred
Stock issued has no voting or dividend rights, vests only if SSA attains certain
royalty targets for the years 1997 through 2000 and contains mandatory
redemption provisions of $1.00 per share payable in cash or the Company's common
stock at the option of the holder thirty days after the end of each year. The
Company will accrete the Zero Coupon Redeemable Preferred Stock to its
redemption price as it becomes probable that it will be earned through a
reduction in royalty revenues in the period earned.
The terms of the distribution arrangement provide for SSA to pay the
Company royalties through December 2000 based upon future software and service
revenues that SSA derives from the sale of the Company's products including
certain minimum royalties of $1.4 million for 1995 and $5.7 million in 1996.
Payments by SSA to the Company under these minimum royalty provisions in
20
<PAGE> 15
excess of royalties on actual software and service revenues will be
creditable against SSA royalty obligations through 1997. Royalty revenues are
recognized as reported by SSA in relicensing the Company's products and
providing post-contract support services to end-users.
The Company has allocated $2.3 million of the fair value of the common
stock issued to purchased technology and $2.4 million to other intangibles (the
distribution arrangement) based upon their estimated relative fair values.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
Computer and communications
equipment $4,696,000 $2,932,000
Furniture, fixtures and
leasehold improvements 1,618,000 983,000
------------------------
6,314,000 3,915,000
Less accumulated depreciation
and amortization (2,542,000) (1,808,000)
------------------------
$3,772,000 $2,107,000
========================
</TABLE>
5. INVESTMENTS IN JOINT VENTURES
INVESTMENT IN HNS
The Company founded HNS to develop products and services to facilitate
electronic commerce using the Internet. In March 1995, HNS was capitalized with
an investment of approximately $360,000 from the Company and approximately
$340,000 from certain other investors, including certain shareholders,
executives, officers and directors of the Company. In June 1995, the Company
and BellSouth Corporation ("BellSouth") contributed cash for stock and
convertible debt of HNS in the amounts of $8.0 million and $3.0 million,
respectively. The Company owns an equity interest in HNS of approximately 93%
or 70%, assuming the conversion of the BellSouth Debenture and the exercise of
outstanding HNS options by certain shareholders of Harbinger Corporation. The
Company recognized equity in losses of HNS of $953,000 for the year ended
December 31, 1995.
The Operating agreement among the Company, HNS and its shareholders grants
certain designated shareholders, presently including the Company and BellSouth,
the right after December 1, 1996 to initiate a buy-sell procedure with respect
to the shares owned by such designated shareholders. Under this buy-sell
arrangement, any such designated shareholder may offer to buy or sell the HNS
shares held by the other designated shareholders at a specified price, in which
case the other designated shareholders will have the right to elect either to
sell their shares or purchase the shares of the designated shareholder
initiating the buy-sell procedure.
The Company has several agreements with HNS governing certain transactions
between them, including the use of personnel, the management and operation of
HNS, the use by HNS of the Company's products and services, the Company's right
to license and distribute HNS products, if any, derived from the Company's
products and the payment by HNS and the Company of royalties and other amounts.
Amounts charged to HNS by the Company for services provided during the period
ending December 31, 1995 were $324,000. This included $94,000 in general and
administrative, $36,000 in selling and marketing and $194,000 in product
development costs. These amounts have been included in the statement of
operations for the Company as a reduction of expense in the above categories.
Additionally, the Company paid expenses of $413,000 that have been reimbursed
by HNS. At December 31, 1995, the Company had an amount due from HNS of
approximately $97,000 for such services provided and certain direct expenses
incurred by the Company on behalf of HNS.
The following table sets forth the condensed balance sheet and statement of
operations of HNS as of and for the year ended December 31, 1995:
Balance sheet:
<TABLE>
<S> <C> <C> <C>
Cash $10,645,000 Accounts payable
and other current
liabilities $ 353,000
Long-term debt 3,000,000
Other assets 261,000 Shareholders' equity 7,553,000
----------- -----------
$10,906,000 $10,906,000
=========== ===========
Statement of operations:
Operating costs:
Selling and marketing $ 84,000
General and administrative 133,000
Depreciation and amortization 21,000
Product development 1,077,000
-----------
Total operating costs 1,315,000
-----------
Operating loss (1,315,000)
-----------
Interest income (165,000)
-----------
Net loss $(1,150,000)
===========
</TABLE>
21
<PAGE> 16
Notes to Financial Statements (Continued)
INVESTMENT IN HNV
On November 5, 1993, the Company acquired a 20% interest in HNV, a new
venture headquartered in The Netherlands, which was formed to offer electronic
commerce services in the European marketplace. The initial capitalization of
HNV consisted of an investment of $500,000 from the Company and $2,000,000 from
certain other investors, including certain shareholders of the Company. In
December 1995, the Company and certain other investors, including certain
shareholders of the Company, contributed an additional $150,000 and $600,000 to
HNV, respectively. The Company has a $1.0 million loan commitment to HNV.
Advances on the proposed loan commitment will be funded on a monthly basis
as determined by the Company, subject to the right of the Company at any time
to discontinue advances under the loan agreement (except that in the event of
the orderly liquidation of HNV, the Company must fund amounts necessary to
enable HNV to satisfy its commitments). HNV has a license to use the Company's
network and PC technology and will pay the Company certain royalty fees based
on a percentage of software and network revenues, as defined. The Company
recognized no royalty revenue for 1994 or 1995. Under a management agreement,
the Company provides certain consulting and management services to HNV. At
December 31, 1995, the Company had an amount due from HNV of approximately
$469,000 for such services provided and certain direct expenses incurred by the
Company on behalf of HNV, which was paid in January 1996.
Under a shareholders' agreement dated November 5, 1993 among the
shareholders of HNV, during the period commencing November 5, 1994 and ending
November 4, 1997 the Company has an option (the "Call Option") to purchase from
the other shareholders of HNV all of their shares of HNV at a purchase price,
which shall be one of the following two choices (with each HNV shareholder
entitled to an independent selection of the purchase price choice): (i) one
share of the Company's common stock for each seven shares of HNV common stock
held by the shareholder at the time the Company exercises the Call Option, or
(ii) the total amount contributed to the capital of HNV by the respective
shareholder plus 30% compounded annual interest calculated from the date of the
original capital contribution. The shareholders' agreement includes
restrictions on the transfer of the securities of HNV and provides a put-call
option to any shareholder holding 9% or more of the outstanding common shares
of HNV at any time on or after November 5, 1994. Notwithstanding the call
option held by the Company, the put-call option provided for in the
shareholders' agreement does not require the shareholder to accept the put. The
shareholders' agreement is effective until the earlier of December 31, 1999 or
termination by written agreement of HNV and shareholders holding at least 80%
of the aggregate issued shares.
The Company recognized equity in losses of HNV of $313,000, $227,000 and
$41,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Amounts charged to HNV by the Company for services provided during the
years ended December 31, 1995, 1994 and 1993 were:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------
<S> <C> <C> <C>
General and administrative $182,000 $187,000 $88,000
Selling and marketing - 6,000 2,000
Product development 27,000 40,000 4,000
Services - direct costs 63,000 47,000 -
Depreciation 4,000 5,000 1,000
-------------------------------
$276,000 $285,000 $95,000
===============================
</TABLE>
These amounts have been included in the statements of operations for the
Company as a reduction of expense in the above categories. Additionally, the
Company paid expenses of $95,000, $95,000 and $39,000 for the years ended
December 31, 1995, 1994 and 1993, respectively, that were reimbursed by HNV.
During the year ended December 31, 1995 the Company reimbursed HNV for
$488,000 for the cost of facilities in Hoorne, The Netherlands, which the
Company assumed in connection with the SSA alliance. This included $221,000 in
general and administrative costs and $267,000 in product development costs.
22
<PAGE> 17
6. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
Software development costs $2,423,000 $1,461,000
Purchased technology 2,772,000 441,000
Goodwill and other
intangible assets 2,911,000 388,000
------------------------
8,106,000 2,290,000
Less accumulated amortization (1,808,000) (876,000)
------------------------
$6,298,000 $1,414,000
========================
</TABLE>
During 1994, the Company wrote off $1,659,000 in capitalized software
development costs related to products which the Company stopped marketing.
Approximately $1,419,000 of such amount relates to a product development effort
that was discontinued as a result of certain technology acquired in connection
with the acquisition described in Note 2.
7. ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
Accrued salaries and wages $1,635,000 $ 608,000
Accrued rent 353,000 405,000
Other accrued expenses 771,000 433,000
------------------------
$2,759,000 $1,446,000
========================
</TABLE>
8. INCOME TAXES
The provision for income taxes includes income taxes deferred because of
temporary differences between the financial statement and tax bases of assets
and liabilities and any increase or decrease in the valuation allowance for
deferred income tax assets.
Income tax expense (benefit) for the years ended December 31, 1995, 1994
and 1993 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
Current $ - $ - $ -
Deferred 687,000 (1,052,000) (2,571,000)
----------------------------------
$687,000 $(1,052,000) $(2,571,000)
==================================
</TABLE>
The significant components of the deferred income tax expense (benefit)
for the years ended December 31, 1995, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
Deferred income tax
expense (benefit) $687,000 $(1,052,000) $ 355,000
Decrease in the
beginning of the
year balance of the
valuation allowance
for deferred income
tax assets - - (2,926,000)
----------------------------------
$687,000 $(1,052,000) $(2,571,000)
==================================
</TABLE>
The income tax effects of the temporary differences that give rise to the
Company's deferred income tax assets and liabilities as of December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------
<S> <C> <C>
Deferred income tax assets:
Net operating loss ("NOL")
carryforward $ 894,000 $2,095,000
Deferred revenue 542,000 329,000
Intangible assets 943,000 1,010,000
Other 825,000 375,000
------------------------
Gross deferred income
tax assets 3,204,000 3,809,000
Deferred income tax liabilities -
principally due to
depreciation (267,000) (186,000)
------------------------
Net deferred income
tax assets 2,937,000 3,623,000
Less current deferred income
tax assets 999,000 1,760,000
------------------------
Noncurrent deferred income
tax assets $1,938,000 $1,863,000
========================
</TABLE>
Income tax expense (benefit) differs from the amounts computed by applying
the federal statutory income tax rate of 34% to income (loss) before income
taxes as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------
<S> <C> <C> <C>
Computed "expected"
income tax (benefit)
expense $658,000 $(1,007,000) $ 339,000
State income taxes,
net of federal
income tax benefit 77,000 (78,000) 26,000
Decrease in the
valuation allowance
for the deferred
income tax assets - - (2,926,000)
Other (48,000) 33,000 (10,000)
----------------------------------
$687,000 $(1,052,000) $(2,571,000)
==================================
</TABLE>
23
<PAGE> 18
Notes to Financial Statements (Continued)
The increase (decrease) in net deferred income tax assets for the years
ended December 31, 1995, 1994 and 1993, was $687,000, $1,052,000 and
$(355,000), respectively. The decrease in the valuation allowance for deferred
income tax assets for the year ended December 31, 1993 was $2,926,000. Under
SFAS No. 109, deferred income tax assets and liabilities are recognized for
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities which will result in future deductible or taxable
amounts and for net operating loss and tax credit carryforwards. A valuation
allowance is then established to reduce the deferred income tax assets to the
level at which it is "more likely than not" that the tax benefits will be
realized. Realization of tax benefits of deductible temporary differences and
operating loss and tax credit carryforwards depends on having sufficient
taxable income within the carryback and carryforward periods. Sources of
taxable income that may allow for the realization of tax benefits include (1)
taxable income in the current year or prior years that is available through
carryback, (2) future taxable income that will result from the reversal of
existing taxable temporary differences and (3) future taxable income generated
by future operations. The Company believes that realization of the deferred
income tax assets recorded at December 31, 1995 is more likely than not.
At December 31, 1995, the Company has NOL carryforwards for tax purposes
of approximately $5.9 million which expire at various dates through the year
2009 unless utilized. The Company's NOL at December 31, 1995 includes $3.6
million in income tax deductions related to stock options not included in the
table of deferred income tax assets included above, which will be reflected as
a credit to additional paid-in capital when realized.
9. SHAREHOLDERS' EQUITY
AMENDMENT TO THE ARTICLES OF INCORPORATION
Effective June 1995, the Company increased its authorized shares of common
stock and preferred stock to 100,000,000 and 20,000,000, respectively, and
established a par value of $0.0001 per share for the Company's authorized but
unissued capital stock.
INITIAL PUBLIC OFFERING
In August 1995, the Company completed an initial public offering of its
common stock. The Company sold 1,683,536 shares at $12.00 per share resulting
in net proceeds to the Company, after underwriters commissions and offering
expenses, of $18.3 million.
PREFERRED STOCK, SERIES C
In 1993, the Company sold Series C redeemable preferred stock and warrants
in a private placement resulting in proceeds of $2.5 million. The terms of the
Series C redeemable preferred stock include a 7% cash dividend payable
quarterly and a mandatory redemption on March 1, 1996. The proceeds of the
placement were allocated between the preferred stock and warrants based on
their estimated relative fair values. This resulted in a discount from the face
amount of the stock of approximately $66,000 which was allocated to the
warrants. The warrants were exercised during fiscal 1995.
In June 1995, the Company entered into agreements with holders of its
Series C redeemable preferred stock to provide for the conversion on March 1,
1996 of all Series C redeemable preferred stock to the Company's Common Stock.
The number of shares of common stock issuable upon conversion will be
determined by dividing (i) the issue price of $10.00 times the number of shares
of the Series C redeemable preferred stock outstanding by (ii) 95% of the
average trading price of the common stock, as defined. As a result of the June
1995 agreement, the Company reclassified the preferred stock from redeemable
preferred stock to shareholders' equity. See Note 12.
RESTRICTED NET ASSETS
The 1995 balance sheet includes restricted net assets related to
investments in joint ventures of $7,480,000.
STOCK OPTIONS
On January 24, 1996, the Board of Directors adopted the 1996 Stock Option
Plan which provides for the grant of up to 1,750,000 options plus an amount
equal to the number of all shares that are either not subject to options
granted under the 1989 Stock Option Plan or were subject to options granted
thereunder that expire without exercise to officers and key employees, subject
to stock-
24
<PAGE> 19
holder approval of the plan. Options granted under the terms of the
plan vest ratably over four years and are granted with an exercise price no
less than the fair market value of common stock on the grant date. All options
granted expire seven years from the date of the grant.
The stock option committee of the Board of Directors is currently
authorized under the 1989 Stock Option Plan to issue options to acquire up to
1,500,000 shares of common stock at an option price no less than the fair
market value of common stock on the option grant date. Options granted prior to
July 1994 vest ratably at one-third per year and options granted since July
1994 vest ratably at one-fourth per year. All options granted expire seven
years from the date of grant. At December 31, 1995, there were options
outstanding to purchase 1,010,574 shares of the Company's common stock, of
which options to purchase 402,565 shares were exercisable. There were 76,104
options available for grant at December 31, 1995.
In 1993, the Board of Directors authorized the creation of a stock option
plan for nonemployee members of the Company's Board of Directors (the
"Nonemployee Directors Plan"). A total of 150,000 shares of common stock has
been reserved for issuance under the Nonemployee Directors Plan at an option
price no less than the fair value of the common stock on the option grant date.
Options expire seven years from the date of grant. The options granted under
the Nonemployee Directors Plan vest annually based on attendance at regularly
scheduled board meetings. Options for 60,000 shares of common stock were
outstanding and exercisable as of December 31, 1995. There were 78,750 options
available for grant at December 31, 1995.
In addition to outstanding options granted under the Company's existing
stock option plans, the Company has granted options to acquire 70,000 shares of
common stock to certain existing and former nonemployee directors for past
services. As of December 31, 1995, all were outstanding and exercisable.
The following table summarizes option activity for the three years ended
December 31, 1995:
<TABLE>
<CAPTION>
Stock Options
------------------------------
Number Range
------------------------------
<S> <C> <C> <C>
January 1, 1993 787,583 $1.17 - $ 3.50
Granted 236,000 4.00 - 4.88
Exercised (34,206) 1.17 - 3.50
Forfeited/canceled (57,667) 2.50 - 4.00
------------------------------
December 31, 1993 931,710 1.17 - 4.88
Granted 243,000 6.38
Exercised (136,236) 1.17 - 6.38
Forfeited/canceled (62,133) 3.50 - 6.38
------------------------------
December 31, 1994 976,341 1.17 - 6.38
Granted 489,000 6.38 - 13.75
Exercised (214,464) 1.17 - 6.38
Forfeited/canceled (110,303) 3.50 - 7.00
------------------------------
December 31, 1995 1,140,574 $1.17 - $13.75
==============================
</TABLE>
10. RELATED PARTY TRANSACTIONS
The Company paid fees to Westinghouse Communications, Inc.
("Westinghouse") of approximately $930,000, $520,000 and $249,000 in 1995, 1994
and 1993, respectively, under telecommunications agreements with Westinghouse.
Westinghouse owned more than 5% of the Company until the sale of its investment
in the Company's common stock in August 1995.
11. COMMITMENTS
EMPLOYEE BENEFIT PLANS
401(k) Profit sharing plan
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan") for
the benefit of employees, which is intended to be a tax-qualified defined
contribution plan under Section 401(k) of the Code. Under the 401(k) Plan,
employees who have completed one year of service and at
25
<PAGE> 20
Notes to Financial Statements (Continued)
least 1,000 hours of service during that period are eligible to
participate. Subject to certain Code limitations, the Company may make a
matching contribution at a rate determined by the Board of Directors of the
Company each year. The Board of Directors approved the contribution by the
Company to the 401(k) Plan of $27,000, $19,000 and $9,500 for the years 1995,
1994 and 1993, respectively.
Employee Stock Purchase Plan
Effective January 1, 1996, the Company began offering employees the right
to purchase shares of the Company's common stock at a 15% discount from market
value pursuant to the Employee Stock Purchase Plan (the "Purchase Plan"),
conditioned upon stockholder approval of the plan. Under the Purchase Plan,
full-time employees, except persons owning 5% or more of the Company's common
stock, are eligible to participate after six months of employment. A maximum of
150,000 shares of common stock are issuable under the Purchase Plan.
CREDIT FACILITY
The Company maintains a credit facility which provides $4 million in
borrowing availability, subject to the terms of the facility, at an interest
rate of prime plus 0.625% and requires the Company to pay a commitment fee on
the unused portion of 0.25%. The credit facility requires, among other things,
the Company to maintain certain minimum financial ratios and restricts the
Company from making certain investments, incurring additional indebtedness and
making capital expenditures in excess of certain specified levels, as defined
in the terms of the facility. No amounts were outstanding under the facility at
December 31, 1995 or 1994.
LEASES
The Company leases office space and automobiles under operating leases
which extend through 2000. Rent expense under all operating leases was
approximately $784,000, $655,000 and $504,000 for 1995, 1994 and 1993,
respectively. Future minimum lease payments under operating leases with
noncancelable lease terms in excess of one year for the next five years and in
the aggregate are as follows:
<TABLE>
<S> <C>
1996 $1,142,000
1997 1,233,000
1998 319,000
1999 153,000
2000 38,000
----------
$2,885,000
==========
</TABLE>
CONTINGENT WARRANT COMMITMENT
The Company is committed to issue warrants in June 1996 to two
shareholders if certain events do not occur with respect to the performance of
an affiliated company. The warrants, if issued, will enable the holders to
acquire 50,000 shares of the Company's common stock at a price equivalent to
fair market value at the date of issuance.
12. SUBSEQUENT EVENTS (UNAUDITED)
On January 24, 1996, the Board of Directors adopted the 1996 Stock Option
Plan which provides for the grant of up to 1,750,000 options plus an amount
equal to the number of all shares that are either not subject to options
granted under the 1989 Stock Option Plan or were subject to options granted
thereunder that expire without exercise to officers and key employees, subject
to stockholder approval of the plan. Options granted under the terms of the
plan vest ratably over four years and are granted with an exercise price no
less than the fair market value of common stock on the grant date. All options
granted expire seven years from the date of the grant.
On March 1, 1996, the Company exchanged 140,692 shares of common stock for
all outstanding shares of the Company's Series C Preferred Stock.
26
<PAGE> 21
Independent Auditors' Report
KPMG Peat Marwick LLP
The Board of Directors and Shareholders
Harbinger Corporation:
We have audited the accompanying balance sheet of Harbinger Corporation as
of December 31, 1995 and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
accompanying financial statements of Harbinger Corporation as of December 31,
1994 and for the two year period then ended, were audited by other auditors
whose report thereon dated March 14, 1995 expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present
fairly, in all material respects, the financial position of Harbinger
Corporation as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Atlanta, Georgia
February 9, 1996
27
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K for the fiscal year ended December 31,
1995 into Harbinger Corporation's previously filed Registration Statement on
Form S-8 (File No. 33-96774).
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
--------------------------
Atlanta, Georgia
March 26, 1996
- 1 -
<PAGE> 1
EXHIBIT 23.2
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Harbinger Corporation
We consent to the incorporation by reference in the Registration
Statement (No. 33-96774) on Form S-8 of our report dated February 9, 1996,
relating to the balance sheet of Harbinger Corporation as of December 31, 1995
and the related statements of operations, shareholders' equity, and cash flows
for the year then ended, which report appears in the 1995 Annual Report to
Shareholders and is incorporated by reference in the 1995 Annual Report on Form
10-K of Harbinger Corporation.
KPMG PEAT MARWICK LLP
/s/ KPMG Peat Marwick LLP
---------------------------
Atlanta, Georgia
March 26, 1996
-1-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE YEAR ENDED DEC-31-1995,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,918
<SECURITIES> 0
<RECEIVABLES> 6,161
<ALLOWANCES> 537
<INVENTORY> 0
<CURRENT-ASSETS> 20,772
<PP&E> 6,314
<DEPRECIATION> 2,542
<TOTAL-ASSETS> 40,260
<CURRENT-LIABILITIES> 6,452
<BONDS> 4,675
2,485
0
<COMMON> 32,202
<OTHER-SE> (5,554)
<TOTAL-LIABILITY-AND-EQUITY> 40,260
<SALES> 6,699
<TOTAL-REVENUES> 23,117
<CGS> 1,349
<TOTAL-COSTS> 5,672
<OTHER-EXPENSES> 14,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 1,934
<INCOME-TAX> 687
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,048
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.11
</TABLE>
