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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
______________
FORM 8-K/A
______________
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report March 18, 1997
(Date of earliest event reported): January 3, 1997
HARBINGER CORPORATION
(Exact name of Company specified in its charter)
GEORGIA 0-26298 58-1817306
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
1055 LENOX PARK BOULEVARD, ATLANTA, GEORGIA 30319
(Address of principal executive offices) (Zip Code)
(404) 467-3000
(Company's telephone number, including area code)
This Form 8-K/A amends Registrant's previously filed Form 8-K, which was
dated and filed on or about January 16, 1997.
This document includes the financial statements and pro forma financial
information which had been omitted from the previously filed document as
permitted by Item 7(a)(4) of Form 8-K.
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Page 1 of 48
Exhibit Index on Page 4
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired. The following combined
financial statements for SupplyTech, Inc. and SupplyTech International,
LLC are attached hereto as Exhibit 99.4:
- Independent Auditors' Report - KPMG Peat Marwick LLP - 1996
- Independent Auditors' Report - Ciulla, Smith & Dale, LLP - 1995 and
1994
- Combined Balance Sheets as of December 31, 1996 and 1995
- Combined Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994
- Combined Statements of Shareholders' Equity (Deficit) for the
Years Ended December 31, 1996, 1995 and 1994
- Combined Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994
- Notes to Combined Financial Statements for the Years Ended December
31, 1996, 1995 and 1994
(b) Pro Forma Financial Information. Attached hereto as Exhibit 99.5 are the
unaudited pro forma consolidated condensed balance sheet of Harbinger
Corporation as of December 31, 1996 and the unaudited pro forma
consolidated condensed statements of operations of Harbinger Corporation
for each of the years in the three-year period ended December 31, 1996.
(c) Exhibits.
* 2.1 Merger Agreement, dated January 3, 1997 between the Company,
Harbinger Acquisition Corporation II and SupplyTech, Inc.
* 2.2 Georgia Certificate of Merger.
* 2.3 Michigan Certificate of Merger.
* 4.1 Registration Rights Amendment.
*99.1 Text of Press Release of Harbinger Corporation, dated January 6,
1997.
99.2 Employment Agreement, effective January 3, 1997 by and
between Harbinger Corporation and Ted A. Annis.
99.3 Employment Agreement, effective January 3, 1997 by and
between Harbinger Corporation and A. Gail Jackson.
99.4 Audited combined financial statements of SupplyTech, Inc. and
SupplyTech International, LLC for the years ended December 31,
1996, 1995 and 1994.
99.5 Unaudited pro forma consolidated condensed financial information
of Harbinger Corporation as of December 31, 1996 and for each of
the years in the three-year period ended December 31, 1996.
---------------------
* Previously filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HARBINGER CORPORATION
/s/ Joel G. Katz
---------------------------------------
JOEL G. KATZ
Chief Financial Officer
(Principal Financial Officer;
Principal Accounting Officer)
Date: March 18, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C> <C>
* 2.1 Merger Agreement, dated January 3, 1997 between the Company,
Harbinger Acquisition Corporation II and SupplyTech, Inc.
* 2.2 Georgia Certificate of Merger.
* 2.3 Michigan Certificate of Merger.
* 4.1 Registration Rights Amendment.
*99.1 Text of Press Release of Harbinger Corporation, dated January 6, 1997.
99.2 Employment Agreement, effective January 3, 1997 by and between 5
Harbinger Corporation and Ted A. Annis.
99.3 Employment Agreement, effective January 3, 1997 by and between 13
Harbinger Corporation and A. Gail Jackson.
99.4 Audited combined financial statements of SupplyTech, Inc. and 21
SupplyTech International, LLC for the years ended December 31, 1996,
1995 and 1994.
99.5 Harbinger Corporation unaudited pro forma consolidated condensed 41
financial information as of December 31, 1996 and for each of the
years in the three-year period ended December 31, 1996.
</TABLE>
- --------------------------
* Previously filed
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EXHIBIT 99.2
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of
the 3rd day of January, 1997 by and between Harbinger Corporation, a Georgia
corporation (the "Company") and Ted A. Annis, an individual ("Employee").
For and in consideration of the agreement to employ Employee described
below, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ or continue to employ Employee,
and Employee agrees to accept and continue such employment, upon the following
terms and conditions. Employee and the Company each acknowledge that this
Agreement is being entered in connection with the Company's acquisition of
Supply Tech, Inc., of which Employee is a shareholder.
2. DUTIES. (a) Employee shall assume the responsibilities and perform the
duties specified in Exhibit A ("Duties"). Such Duties may be revised from time
to time at the sole discretion of the Company. Employee agrees to devote his or
her full time and energy to the furtherance of the business of the Company and
shall not during the term hereof work or perform services in any advisory or
other capacity for any individual, firm, company, or corporation other than for
the Company without the Company's prior written consent. This Agreement may be
supplemented from time to time by rules and regulations of employment issued by
the Company, including, without limitation, such rules and regulations described
in the Company employee handbook, and Employee agrees to adhere to these rules
and regulations.
(b) If Employee desires to perform any services during the term hereof
for anyone other than the Company, whether or not Employee is compensated, then
Employee agrees to contact an officer of the Company to discuss this matter. The
Company will review the request and advise Employee of the Company's approval or
disapproval of the proposed outside work, in the Company's sole discretion. In
making its decision, the Company may consider such factors as whether the
outside work may be harmful to the business of the Company or interfere with
Employee's ability to satisfactorily discharge his or her Duties, whether the
outside work is based directly or indirectly on a business practice of the
Company or idea that was conceived by Employee while on the Company's payroll,
or whether such outside work could result in a violation of any covenants of
Employee in this Agreement. In this case, the Company will notify Employee of
the Company's approval or disapproval of such request to perform outside work
within a reasonable period of time after the Company is notified by Employee of
the request to perform such services. Unless the Company grants such approval
in writing, Employee agrees to refrain from such outside work.
3. COMPENSATION. The Company shall pay as compensation for all the
services to be rendered the salary and additional compensation, if any,
described in Exhibit B (the "Employee Compensation"). The Company's obligation
to pay Employee any Employee Compensation shall cease upon termination of
Employee's employment with the Company. Employee's annual salary shall be
prorated on a daily basis for the years in which Employee commences and
terminates his or her employment relationship with the Company.
4. TERM AND TERMINATION.
(a) Employee's employment under this Agreement shall begin on the date
hereof and shall continue through and until terminated by either party by
delivery of six months prior notice; provided that such notice may not be
delivered prior to July 3, 1998. The foregoing notwithstanding, the Company has
the right to terminate Employee's employment under this Agreement, by notice to
Employee in writing at any time, (i) for "Cause" or (ii) due to Disability (as
hereinafter defined) of Employee. Any such termination shall be effective upon
the date of service of such notice. Termination of Employee's employment under
this Agreement shall not affect Employee's continuing obligations under this
Agreement.
(b) For purposes of this Agreement, "Cause" means any of the following
reasons: (a) the Company reasonably determines that Employee's job performance
is unsatisfactory; (b) Employee violates any provision of this Employment
Agreement; (c) Employee is convicted of a felony, or a misdemeanor involving
moral turpitude; or (d) Employee engages in misconduct in the course and scope
of his employment with the Company. In the event of a termination for "Cause",
the Company shall be obligated to pay to Employee all compensation owing to
Employee under this Employment Agreement up to the date of such termination and
no more.
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(c) "Disability" means the illness or disability of the Employee that
prevents the performance of Employee's material obligations hereunder, and
which continues for a consecutive period of one hundred eighty (120) days or
longer or an aggregate period of one hundred eighty (180) days or longer in any
one-year period.
(d) Employee understands and agrees that this Employment Agreement will
terminate immediately, without notice, in the event of his death. The Employee
understands and agrees that in the event of his death, the Company will pay to
the Employee's estate all unpaid commissions, wages or other compensation
currently due and owing for services rendered by the Employee prior to his
death.
5. OWNERSHIP.
(a) For purposes of this Agreement, "Work Product" shall mean the data,
materials, documentation, computer programs, inventions (whether or not
patentable), and all works of authorship, including all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other property right, created or developed in whole or in part by Employee,
whether prior to the date of this Agreement or in the future, either (i) while
retained by the Company and that have been or will be paid for by the Company,
or (ii) while employed by the Company (whether developed during work hours or
not). All Work Product shall be considered work made for hire by the Employee
and owned by the Company. If any of the Work Product may not, by operation of
law, be considered work made for hire by Employee for the Company, or if
ownership of all right, title, and interest of the intellectual property rights
therein shall not otherwise vest exclusively in the Company, Employee hereby
assigns to the Company, and upon the future creation thereof automatically
assigns to the Company, without further consideration, the ownership of all
Work Product. The Company shall have the right to obtain and hold in its own
name copyrights, patents, registrations, and any other protection available in
the Work Product. Employee agrees to perform, during or after Employee's
employment, such further acts as may be necessary or desirable to transfer,
perfect, and defend the Company's ownership of the Work Product that are
reasonably requested by the Company.
(b) Employee agrees that during the term of employment, any money or other
remuneration received by Employee for services rendered to a customer or
potential customer of the Company shall be the property of the Company.
6. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) The Company may disclose to Employee certain Trade Secrets and
Confidential Information (defined below). Employee acknowledges and agrees
that the Trade Secrets and Confidential Information are the sole and exclusive
property of the Company (or a third party providing such information to the
Company) and that the Company or such third party owns all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other property right. Employee acknowledges and agrees that the disclosure of
the Trade Secrets and Confidential Information to Employee does not confer upon
Employee any license, interest or rights of any kind in or to the Trade Secrets
or Confidential Information. Employee may use the Trade Secrets and
Confidential Information solely for the benefit of the Company while Employee
is employed or retained by the Company. Except in the performance of services
for the Company, Employee will hold in confidence and not reproduce,
distribute, transmit, reverse engineer, decompile, disassemble, or transfer,
directly or indirectly, in any form, by any means, or for any purpose, the
Trade Secrets or the Confidential Information or any portion thereof. Employee
agrees to return to the Company, upon request by the Company, the Trade Secrets
and Confidential Information and all materials relating thereto.
(b) Employee's obligations under this Agreement with regard to the Trade
Secrets shall remain in effect for as long as such information shall remain a
trade secret under applicable law. Employee acknowledges that its obligations
with regard to the Confidential Information shall remain in effect while
Employee is employed or retained by the Company and for three (3) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, or a list of actual
or potential customers or suppliers, which (a) derives economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. As used herein,
"Confidential Information" means information, other than Trade Secrets, that is
of value to its owner and is treated as confidential, including, but not
limited to, future business plans, licensing strategies, advertising campaigns,
information regarding executives and employees, and the terms and conditions of
this Agreement.
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7. CUSTOMER NON-SOLICITATION. Employee agrees that for so long as Employee
is employed by the Company and for a period of one (1) year thereafter (but in
no event for a period of less than four (4) years following the date hereof)
("Non-Solicitation Period"), Employee shall not, on Employee's own behalf or on
behalf of any person, firm, partnership, association, corporation or business
organization, entity or enterprise, solicit, contact, call upon, communicate
with or attempt to communicate with any customer or prospect of the Company, or
any representative of any customer or prospect of the Company, with a view to
sale or providing of any deliverable or service competitive or potentially
competitive with any deliverable or service sold or provided or under
development by the Company during the time of two (2) years immediately
preceding cessation of Employee's employment with the Company, provided that the
restrictions set forth in this paragraph shall apply only to customers or
prospects of the Company, or representatives of customers or prospects of the
Company, with which Employee had contact during such two (2) year period. The
actions prohibited by this paragraph shall not be engaged in by Employee
directly or indirectly, whether as manager, salesperson, agent, technical
support, sales, or service representative, or otherwise.
8. EMPLOYEE NON-SOLICITATION. Employee agrees that Employee shall not call
upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an employee of the Company within the
Non-Solicitation Period, for the purpose of having such person work in any other
corporation, association, entity, or business engaged in providing any of the
following: (i) development and operation of computer networks (the "Hosts") to
facilitate electronic data interchange and electronic commerce ("EDI")
transactions and cash management services; (ii) development, marketing,
distribution, and licensing of personal computer, midrange, mainframe,
workstation and networking software to facilitate EDI and transaction processing
and other communications with the Hosts; (iii) development, marketing,
distribution, and licensing of software products for operation on personal
computers and workstations relating to the performance of cash management
services, including balance and transaction reporting, transfers, stop payments,
account reconciliation, check writing, financial record keeping, messaging, and
information services; and (iv) consulting, training, and implementation of the
products and services described in (i), (ii) and (iii) above (collectively the
"Company Business").
9. NONCOMPETITION. Employee agrees that, without the prior written consent
of the Company, Employee shall not, so long as Employee is employed hereunder
and for a period of one (1) year thereafter (but in no event for a period of
less than four (4) years following the date hereof) within the area described in
Exhibit C (the "Territory"), directly or indirectly perform the Duties on behalf
of any person, firm, corporation, or other entity in the Company Business, if
the Company is also then still engaged in the Company Business.
10. WARRANTIES OF EMPLOYEE.
(a) Employee warrants to the Company that (i) Employee is not presently
under any contract or agreement with any party that will prevent Employee from
performing the Duties assigned by the Company, and (ii) Employee is not in
breach of any agreement with respect to any trade secrets or confidential
information owned by any other party.
(b) Employee agrees to indemnify and hold harmless the Company, any
affiliated corporation, and their respective shareholders, directors, officers,
agents, and employees, from and against any and all liability, including
payment of attorneys' fees, arising directly or indirectly from a violation of
Section 10(a).
11. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Employee of any of the terms or conditions of this Agreement,
including without limitation Sections 5, 6, 7, 8 and 9 hereof, will result in
irrevocable harm to the Company and that the remedies at law for such breach
may not adequately compensate the Company for damages suffered. Accordingly,
Employee agrees that in the event of such breach, the Company shall be entitled
to injunctive relief or such other equitable remedy as a court of competent
jurisdiction may provide. Nothing contained herein will be construed to limit
the Company's right to any remedies at law, including the recovery of damages
for breach of this Agreement.
12. SEVERABILITY. If any provision or part of any provision of this
Agreement is held invalid or unenforceable by a court of competent jurisdiction,
such holding shall not affect the enforceability of any other provisions or
parts thereof, and all other provisions and parts thereof shall continue in full
force and effect.
13. MISCELLANEOUS. This Agreement shall not be amended or modified except by
a writing executed by both parties. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns. Due to the
personal nature of this Agreement, Employee shall not have the right to assign
Employee's rights or obligations under this Agreement without the prior written
consent of the Company. This Agreement shall be governed by the laws of the
State of Michigan without regard to its rules governing conflicts of law. Any
disputes arising out of this Agreement or the Transactions contemplated hereby
shall be subject to the jurisdiction of the State of Georgia, and the parties'
consent and submit to the jurisdiction and venue of the State of Georgia. This
Agreement and the attached Exhibits represent the entire understanding of the
parties
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concerning the subject matter hereof and supersede all prior communications,
agreements and understandings, whether oral or written, relating to the subject
matter hereof. All communications required or otherwise provided under this
Agreement shall be in writing and shall be deemed given when delivered to the
address provided below such party's signature (as may be amended by notice from
time to time), by hand, by courier or express mail, or by registered or
certified United States mail, return receipt requested, postage prepaid. The
exhibits attached hereto are incorporated herein by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals effective as of the date first above written.
HARBINGER CORPORATION
By: /s/ James C. Davis
--------------------------------------------------
James C. Davis, President, Group Operations
Date:
-------------------------------------------------
Address:
1055 Lenox Park Boulevard
Atlanta, Georgia 30319
EMPLOYEE:
/s/ Ted A. Annis
- -------------------------------------------------------
Ted A. Annis
Date:
--------------------------------------------------
Address:
-----------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
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EXHIBIT A
Job Description
Name: Ted Annis
Title: President and General Manager, Supply Tech Division
As President and GM of the Supply Tech Division, Mr. Annis reports to the
C.O.O. of Harbinger Corporation. He is responsible for the day-today
management of the division, including responsibility for achieving the
division's revenues and profit goals.
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EXHIBIT B
Annual Salary/Bonus
$140,000
<TABLE>
<S> <C>
Bonus Target: 50%
HC Revenues: 5%
HC OI: 10%
STI Revenues: 5%
STI OI: 25%
Product/Quality
Targets 5%
</TABLE>
Company Car (1997 Only):
Option to purchase current company car during 1997 at fair market value.
Current Company Car Arrangement OR, if car is purchased by you during 1997,
then $500/month for the remaining months of 1997.
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EXHIBIT C
Territory
United States of America
United Kingdom
Mexico
Italy
Australia
South America
Canada
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EXHIBIT 99.3
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective
as of the 3rd day of January, 1997 by and between Harbinger
Corporation, a Georgia corporation (the "Company") and A. Gail Jackson, an
individual ("Employee").
For and in consideration of the agreement to employ Employee
described below, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT. The Company agrees to employ or continue to employ
Employee, and Employee agrees to accept and continue such employment, upon the
following terms and conditions. Employee and the Company each acknowledge that
this Agreement is being entered in connection with the Company's acquisition of
Supply Tech, Inc., of which Employee is a shareholder.
2. DUTIES. (a) Employee shall assume the responsibilities and perform the
duties specified in Exhibit A ("Duties"). Such Duties may be revised from time
to time at the sole discretion of the Company. Employee agrees to devote his or
her full time and energy to the furtherance of the business of the Company and
shall not during the term hereof work or perform services in any advisory or
other capacity for any individual, firm, company, or corporation other than for
the Company without the Company's prior written consent. This Agreement may be
supplemented from time to time by rules and regulations of employment issued by
the Company, including, without limitation, such rules and regulations described
in the Company employee handbook, and Employee agrees to adhere to these rules
and regulations.
(b) If Employee desires to perform any services during the term hereof
for anyone other than the Company, whether or not Employee is compensated, then
Employee agrees to contact an officer of the Company to discuss this matter. The
Company will review the request and advise Employee of the Company's approval or
disapproval of the proposed outside work, in the Company's sole discretion. In
making its decision, the Company may consider such factors as whether the
outside work may be harmful to the business of the Company or interfere with
Employee's ability to satisfactorily discharge his or her Duties, whether the
outside work is based directly or indirectly on a business practice of the
Company or idea that was conceived by Employee while on the Company's payroll,
or whether such outside work could result in a violation of any covenants of
Employee in this Agreement. In this case, the Company will notify Employee of
the Company's approval or disapproval of such request to perform outside work
within a reasonable period of time after the Company is notified by Employee of
the request to perform such services. Unless the Company grants such approval
in writing, Employee agrees to refrain from such outside work.
3. COMPENSATION. The Company shall pay as compensation for all the services
to be rendered the salary and additional compensation, if any, described in
Exhibit B (the "Employee Compensation"). The Company's obligation to pay
Employee any Employee Compensation shall cease upon termination of Employee's
employment with the Company. Employee's annual salary shall be prorated on a
daily basis for the years in which Employee commences and terminates his or her
employment relationship with the Company.
4. TERM AND TERMINATION.
(a) Employee's employment under this Agreement shall begin on the date
hereof and shall continue through and until terminated by either party by
delivery of six months prior notice; provided that such notice may not be
delivered prior to July 3, 1998. The foregoing notwithstanding, the Company has
the right to terminate Employee's employment under this Agreement, by notice to
Employee in writing at any time, (i) for "Cause" or (ii) due to Disability (as
hereinafter defined) of Employee. Any such termination shall be effective upon
the date of service of such notice. Termination of Employee's employment under
this Agreement shall not affect Employee's continuing obligations under this
Agreement.
(b) For purposes of this Agreement, "Cause" means any of the following
reasons: (a) the Company reasonably determines that Employee's job performance
is unsatisfactory; (b) Employee violates any provision of this Employment
Agreement; (c) Employee is convicted of a felony, or a misdemeanor involving
moral turpitude; or (d) Employee engages in misconduct in the course and scope
of his employment with the Company. In the event of a termination for "Cause",
the Company shall be obligated to pay to Employee all compensation owing to
Employee under this Employment Agreement up to the date of such termination and
no more.
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(c) "Disability" means the illness or disability of the Employee that
prevents the performance of Employee's material obligations hereunder, and
which continues for a consecutive period of one hundred eighty (120) days or
longer or an aggregate period of one hundred eighty (180) days or longer in any
one-year period.
(d) Employee understands and agrees that this Employment Agreement will
terminate immediately, without notice, in the event of his death. The Employee
understands and agrees that in the event of his death, the Company will pay to
the Employee's estate all unpaid commissions, wages or other compensation
currently due and owing for services rendered by the Employee prior to his
death.
5. OWNERSHIP.
(a) For purposes of this Agreement, "Work Product" shall mean the data,
materials, documentation, computer programs, inventions (whether or not
patentable), and all works of authorship, including all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other property right, created or developed in whole or in part by Employee,
whether prior to the date of this Agreement or in the future, either (i) while
retained by the Company and that have been or will be paid for by the Company,
or (ii) while employed by the Company (whether developed during work hours or
not). All Work Product shall be considered work made for hire by the Employee
and owned by the Company. If any of the Work Product may not, by operation of
law, be considered work made for hire by Employee for the Company, or if
ownership of all right, title, and interest of the intellectual property rights
therein shall not otherwise vest exclusively in the Company, Employee hereby
assigns to the Company, and upon the future creation thereof automatically
assigns to the Company, without further consideration, the ownership of all
Work Product. The Company shall have the right to obtain and hold in its own
name copyrights, patents, registrations, and any other protection available in
the Work Product. Employee agrees to perform, during or after Employee's
employment, such further acts as may be necessary or desirable to transfer,
perfect, and defend the Company's ownership of the Work Product that are
reasonably requested by the Company.
(b) Employee agrees that during the term of employment, any money or
other remuneration received by Employee for services rendered to a customer or
potential customer of the Company shall be the property of the Company.
6. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) The Company may disclose to Employee certain Trade Secrets and
Confidential Information (defined below). Employee acknowledges and agrees
that the Trade Secrets and Confidential Information are the sole and exclusive
property of the Company (or a third party providing such information to the
Company) and that the Company or such third party owns all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other property right. Employee acknowledges and agrees that the disclosure of
the Trade Secrets and Confidential Information to Employee does not confer upon
Employee any license, interest or rights of any kind in or to the Trade Secrets
or Confidential Information. Employee may use the Trade Secrets and
Confidential Information solely for the benefit of the Company while Employee
is employed or retained by the Company. Except in the performance of services
for the Company, Employee will hold in confidence and not reproduce,
distribute, transmit, reverse engineer, decompile, disassemble, or transfer,
directly or indirectly, in any form, by any means, or for any purpose, the
Trade Secrets or the Confidential Information or any portion thereof. Employee
agrees to return to the Company, upon request by the Company, the Trade Secrets
and Confidential Information and all materials relating thereto.
(b) Employee's obligations under this Agreement with regard to the Trade
Secrets shall remain in effect for as long as such information shall remain a
trade secret under applicable law. Employee acknowledges that its obligations
with regard to the Confidential Information shall remain in effect while
Employee is employed or retained by the Company and for three (3) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, or a list of actual
or potential customers or suppliers, which (a) derives economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. As used herein,
"Confidential Information" means information, other than Trade Secrets, that is
of value to its owner and is treated as confidential, including, but not
limited to, future business plans, licensing strategies, advertising campaigns,
information regarding executives and employees, and the terms and conditions of
this Agreement.
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7. CUSTOMER NON-SOLICITATION. Employee agrees that for so long as Employee
is employed by the Company and for a period of one (1) year thereafter (but in
no event for a period of less than four (4) years following the date hereof)
("Non-Solicitation Period"), Employee shall not, on Employee's own behalf or on
behalf of any person, firm, partnership, association, corporation or business
organization, entity or enterprise, solicit, contact, call upon, communicate
with or attempt to communicate with any customer or prospect of the Company, or
any representative of any customer or prospect of the Company, with a view to
sale or providing of any deliverable or service competitive or potentially
competitive with any deliverable or service sold or provided or under
development by the Company during the time of two (2) years immediately
preceding cessation of Employee's employment with the Company, provided that the
restrictions set forth in this paragraph shall apply only to customers or
prospects of the Company, or representatives of customers or prospects of the
Company, with which Employee had contact during such two (2) year period. The
actions prohibited by this paragraph shall not be engaged in by Employee
directly or indirectly, whether as manager, salesperson, agent, technical
support, sales, or service representative, or otherwise.
8. EMPLOYEE NON-SOLICITATION. Employee agrees that Employee shall not
call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an employee of the Company within the
Non-Solicitation Period, for the purpose of having such person work in any
other corporation, association, entity, or business engaged in providing any of
the following: (i) development and operation of computer networks (the "Hosts")
to facilitate electronic data interchange and electronic commerce ("EDI")
transactions and cash management services; (ii) development, marketing,
distribution, and licensing of personal computer, midrange, mainframe,
workstation and networking software to facilitate EDI and transaction
processing and other communications with the Hosts; (iii) development,
marketing, distribution, and licensing of software products for operation on
personal computers and workstations relating to the performance of cash
management services, including balance and transaction reporting, transfers,
stop payments, account reconciliation, check writing, financial record keeping,
messaging, and information services; and (iv) consulting, training, and
implementation of the products and services described in (i), (ii) and (iii)
above (collectively the "Company Business").
9. NONCOMPETITION. Employee agrees that, without the prior written
consent of the Company, Employee shall not, so long as Employee is employed
hereunder and for a period of one (1) year thereafter (but in no event for a
period of less than four (4) years following the date hereof) within the area
described in Exhibit C (the "Territory"), directly or indirectly perform the
Duties on behalf of any person, firm, corporation, or other entity in the
Company Business, if the Company is also then still engaged in the Company
Business.
10. WARRANTIES OF EMPLOYEE.
(a) Employee warrants to the Company that (i) Employee is not presently
under any contract or agreement with any party that will prevent Employee from
performing the Duties assigned by the Company, and (ii) Employee is not in
breach of any agreement with respect to any trade secrets or confidential
information owned by any other party.
(b) Employee agrees to indemnify and hold harmless the Company, any
affiliated corporation, and their respective shareholders, directors, officers,
agents, and employees, from and against any and all liability, including
payment of attorneys' fees, arising directly or indirectly from a violation of
Section 10(a).
11. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Employee of any of the terms or conditions of this Agreement,
including without limitation Sections 5, 6, 7, 8 and 9 hereof, will result in
irrevocable harm to the Company and that the remedies at law for such breach
may not adequately compensate the Company for damages suffered. Accordingly,
Employee agrees that in the event of such breach, the Company shall be entitled
to injunctive relief or such other equitable remedy as a court of competent
jurisdiction may provide. Nothing contained herein will be construed to limit
the Company's right to any remedies at law, including the recovery of damages
for breach of this Agreement.
12. SEVERABILITY. If any provision or part of any provision of this
Agreement is held invalid or unenforceable by a court of competent jurisdiction,
such holding shall not affect the enforceability of any other provisions or
parts thereof, and all other provisions and parts thereof shall continue in full
force and effect.
13. MISCELLANEOUS. This Agreement shall not be amended or modified except by
a writing executed by both parties. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns. Due to the
personal nature of this Agreement, Employee shall not have the right to assign
Employee's rights or obligations under this Agreement without the prior written
consent of the Company. This Agreement shall be governed by the laws of the
State of Michigan without regard to its rules governing conflicts of law. Any
disputes arising out of this Agreement or the Transactions contemplated hereby
shall be subject to the jurisdiction of the State of Georgia, and the parties'
consent and submit to the jurisdiction and venue of the State of Georgia. This
Agreement and the attached Exhibits represent the entire understanding of the
parties
16
<PAGE> 5
concerning the subject matter hereof and supersede all prior communications,
agreements and understandings, whether oral or written, relating to the subject
matter hereof. All communications required or otherwise provided under this
Agreement shall be in writing and shall be deemed given when delivered to the
address provided below such party's signature (as may be amended by notice from
time to time), by hand, by courier or express mail, or by registered or
certified United States mail, return receipt requested, postage prepaid. The
exhibits attached hereto are incorporated herein by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals effective as of the date first above written.
HARBINGER CORPORATION
By: /s/ James C. Davis
--------------------------------------------------
James C. Davis, President, Group Operations
Date:
-------------------------------------------------
Address:
1055 Lenox Park Boulevard
Atlanta, Georgia 30319
EMPLOYEE:
/s/ A. Gail Jackson
- -------------------------------------------------------
A. Gail Jackson
Date:
--------------------------------------------------
Address:
-----------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
17
<PAGE> 6
EXHIBIT A
Job Description
Name: Gail Jackson
Title: Vice President, Technology, Supply Tech Division
As Vice President, Technology, Supply Tech Division, Ms. Jackson reports to the
President and GM of the Supply Tech Division. She is responsible for
management of the division's software development activities and all related
activities for developing and maintaining the division's software products.
This includes responsibility of the operating budget for this department. In
addition, Ms. Jackson is responsible for keeping current on industry standards
for the benefit of Harbinger Corporation.
18
<PAGE> 7
EXHIBIT B
Annual Salary/Bonus
$115,000
<TABLE>
<S> <C>
Bonus Target: 30%
HC Revenues: 3%
HC OI: 7%
STI Revenues: 3%
STI OI: 7%
Product/Quality
Targets 10%
</TABLE>
Company Car (1997 Only):
Option to purchase current company car during 1997 at fair market value.
Current Company Car Arrangement OR, if car is purchased by you during 1997,
then $500/month for the remaining months of 1997.
19
<PAGE> 8
EXHIBIT C
Territory
United States of America
United Kingdom
Mexico
Italy
Australia
20
<PAGE> 1
EXHIBIT 99.4
21
<PAGE> 2
INDEX TO COMBINED FINANCIAL STATEMENTS
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC
<TABLE>
PAGE
----
<S> <C>
Independent Auditors' Report - KPMG Peat Marwick LLP - 1996.................. F-2
Independent Auditors' Report - Ciulla, Smith & Dale, LLP - 1995 and 1994..... F-3
Combined Balance Sheets as of December 31, 1996 and 1995..................... F-4
Combined Statements of Operations for the Years Ended December 31, 1996,
1995 and 1994.............................................................. F-5
Combined Statements of Shareholders' Equity (Deficit) for the Years Ended
December 31, 1996, 1995 and 1994........................................... F-6
Combined Statements of Cash Flows for the Years Ended December 31, 1996,
1995 and 1994.............................................................. F-7
Notes to Combined Financial Statements for the Years Ended December 31, 1996,
1995 and 1994.............................................................. F-9
</TABLE>
HARBINGER CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
Unaudited Pro Forma Consolidated Condensed Balance Sheet as of
December 31, 1996.......................................................... F-22
Unaudited Pro Forma Consolidated Condensed Statements of Operations for
the Years Ended December 31, 1996, 1995 and 1994........................... F-23
Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information................................................................ F-26
</TABLE>
F-1
22
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
SupplyTech, Inc. and SupplyTech International, LLC:
We have audited the combined balance sheet of SupplyTech, Inc. and
SupplyTech International, LLC as of December 31, 1996 and the related combined
statements of operations, shareholders' equity (deficit), and cash flows for
the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined 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 combined financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the 1996 combined financial statements referred to above
present fairly, in all material respects, the financial position of SupplyTech,
Inc. and SupplyTech International, LLC, as of December 31, 1996, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Atlanta, Georgia
February 19, 1997
F-2
23
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
SupplyTech, Inc. and SupplyTech International, LLC:
We have audited the combined balance sheet of SupplyTech, Inc. and
SupplyTech International, LLC as of December 31, 1995 and the related combined
statements of operations, shareholders' equity (deficit), and cash flows for
each of the years in the two-year period ended December 31, 1995. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements 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 combined financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of SupplyTech,
Inc. and SupplyTech International, LLC, as of December 31, 1995, and the
results of their operations and their cash flows for each of the years in the
two-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Note 11 to the financial statements, the Company's 1995
accrued expenses previously reported as $903,000 should have been $1,903,000.
In addition, the Company's 1995 net intangible assets previously reported as
$2,617,000 should have been $1,457,000. These discoveries were made subsequent
to the issuance of the financial statements. The financial statements have
been restated to reflect these corrections.
/s/ CIULLA, SMITH & DALE LLP
----------------------------
CIULLA, SMITH & DALE, LLP
Southfield, Michigan
March 15, 1996
(except for Note 11, as to which
the date is February 19, 1997)
F-3
24
<PAGE> 5
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
---------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 664,000 $ 845,000
Accounts receivable, less allowances for returns
and doubtful accounts of $525,000 in 1996............. 2,095,000 2,056,000
Due from joint venture................................. 67,000 -
Other current assets................................... 350,000 439,000
----------- -----------
Total current assets............................. 3,176,000 3,340,000
----------- -----------
Property and equipment, less accumulated depreciation
and amortization....................................... 1,381,000 1,297,000
Investments in joint venture............................. - 37,000
Intangible assets, less accumulated amortization......... 1,742,000 1,457,000
Other assets............................................. 37,000 13,000
----------- -----------
$ 6,336,000 $ 6,144,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Note payable to bank.................................... $ 1,550,000 $ -
Note payable to related party........................... - 440,000
Current portion of long-term debt....................... 907,000 600,000
Accounts payable........................................ 1,483,000 506,000
Accrued expenses........................................ 3,956,000 1,903,000
Deferred revenues....................................... 3,442,000 2,647,000
----------- -----------
Total current liabilities......................... 11,338,000 6,096,000
----------- -----------
Long-term debt, excluding current portion................. 1,368,000 1,672,000
Investment in joint venture............................... 81,000 -
Shareholders' deficit:
Common stock; no par value; 500,000 shares authorized,
8,100 shares issued and outstanding as of
December 31, 1996 and 1995, respectively............. - -
Additional paid-in capital.............................. 32,000 32,000
Accumulated deficit..................................... (6,483,000) (1,656,000)
----------- -----------
Total shareholders' deficit....................... (6,451,000) (1,624,000)
----------- -----------
Commitments and contingencies............................. - -
$ 6,336,000 $ 6,144,000
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-4
25
<PAGE> 6
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994
------------------ ------------------ -------------------
<S> <C> <C> <C>
Revenues:
Services and hardware.................. $10,016,000 $ 8,076,000 $ 6,793,000
Software............................... 7,522,000 6,637,000 7,448,000
----------- ----------- -----------
Total revenues................... 17,538,000 14,713,000 14,241,000
----------- ----------- -----------
Direct costs:
Services and hardware.................. 5,006,000 4,011,000 3,310,000
Software............................... 747,000 602,000 408,000
----------- ----------- -----------
Total direct costs............... 5,753,000 4,613,000 3,718,000
----------- ----------- -----------
Gross margin................... 11,785,000 10,100,000 10,523,000
----------- ----------- -----------
Operating costs:
Selling and marketing.................. 7,128,000 4,916,000 5,073,000
General and administrative............. 4,865,000 3,815,000 2,752,000
Depreciation and amortization.......... 974,000 567,000 534,000
Product development.................... 3,368,000 2,118,000 2,133,000
Charge for purchased in-process product
development.......................... - 1,160,000 -
----------- ----------- -----------
Total operating costs............ 16,335,000 12,576,000 10,492,000
----------- ----------- -----------
Operating income (loss)........ (4,550,000) (2,476,000) 31,000
Interest expense (income), net........... 149,000 (3,000) (11,000)
Equity in losses of joint venture........ 119,000 - -
----------- ----------- -----------
Income (loss) before income
tax expense.................. (4,818,000) (2,473,000) 42,000
----------- ----------- -----------
Income tax expense....................... 516,000 19,000
----------- ----------- -----------
Net income (loss).............. $(4,818,000) $(2,989,000) $ 23,000
=========== =========== ===========
Pro forma net income (loss) (See Note 7)
Income (loss) before income tax expense
as reported.......................... $(4,818,000) $(2,473,000)
Pro forma income tax expense........... - -
----------- -----------
Pro forma net income (loss)............ $(4,818,000) $(2,473,000)
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-5
26
<PAGE> 7
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Retained Total
Common Stock Additional earnings shareholders'
-------------------- paid-in (accumulated equity
Shares Amount capital deficit) (deficit)
--------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993......... 8,100 $ - $ 2,000 $ 1,310,000 $ 1,312,000
Net income......................... - - - 23,000 23,000
----- -------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1994......... 8,100 - 2,000 1,333,000 1,335,000
Capital contribution by the members
upon formation of SupplyTech
International, LLC................ - - 30,000 - 30,000
Net loss........................... - - - (2,989,000) (2,989,000)
----- -------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1995......... 8,100 - 32,000 (1,656,000) (1,624,000)
Net loss........................... - - - (4,818,000) (4,818,000)
Cumulative currency translation
adjustment........................ - - - (9,000) (9,000)
----- -------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1996......... 8,100 $ - $32,000 $(6,483,000) $(6,451,000)
===== ======== ======== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-6
27
<PAGE> 8
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994
----------- ------------ ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss).................... $(4,818,000) $(2,989,000) $ 23,000
----------- ----------- ---------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Charge for purchased in-process
product development............... - 1,160,000 -
Depreciation and amortization...... 1,149,000 605,000 534,000
Loss on sale of property and
equipment......................... 54,000 65,000 14,000
Equity in losses of joint venture.. 119,000 - 59,000
Deferred income tax expense........ - 516,000 51,000
(Increase) decrease in:
Accounts receivable............... (39,000) 110,000 (585,000)
Due from joint venture............ (67,000) - 55,000
Other current assets.............. 224,000 (121,000) 230,000
Increase in:
Accounts payable.................. 962,000 107,000 139,000
Accrued expenses.................. 1,894,000 596,000 471,000
Deferred revenues................. 795,000 191,000 373,000
----------- ----------- ---------
Net cash provided by operating
activities....................... 273,000 240,000 1,364,000
----------- ----------- ---------
Cash flows from investing activities:
Purchases of property and equipment.. (812,000) (582,000) (539,000)
Proceeds from sale of property and
equipment.......................... 57,000 21,000 5,000
Organizational costs................ - (11,000)
Investments in acquisition,
purchased technology and
alliance agreement.................. (134,000) (450,000) -
Investment in joint venture.......... - (37,000) -
----------- ----------- ---------
Net cash used in investing
activities....................... (889,000) (1,059,000) (534,000)
----------- ----------- ---------
</TABLE>
See accompanying notes to combined financial statements.
F-7
28
<PAGE> 9
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds received from line of credit, net...... $ 1,550,000 $ - $ -
Proceeds received from (repayment of)
notes payable to related parties............. (1,091,000) 470,000 (54,000)
Principal payments under capital
lease obligations............................ (28,000) (49,000) (47,000)
----------- ---------- ----------
Net cash provided by (used in) financing
activities...................................... 431,000 421,000 (101,000)
----------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents..................................... (185,000) (398,000) 729,000
Effect of exchange rates on cash held in
foreign currencies.............................. 4,000 - -
Cash and cash equivalents at beginning
of year......................................... 845,000 1,243,000 514,000
----------- ---------- ----------
Cash and cash equivalents at end
of year......................................... $ 664,000 $ 845,000 $1,243,000
=========== ========== ==========
Supplemental disclosure of cash paid for
interest........................................ $ 173,000 $ 5,000 $ 6,000
=========== ========== ==========
Supplemental disclosure of non-cash investing and
financing activities:
Acquisition of business and assumption
of note payable.............................. $ 670,000 $ - $ -
=========== ========== ==========
Acquisition of purchased technology and
alliance agreement and assumption of
note payable................................. $ - $2,200,000 $ -
=========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-8
29
<PAGE> 10
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND PRESENTATION
The accompanying combined financial statements include the accounts of
SupplyTech, Inc. and SupplyTech International, LLC and subsidiaries (the
"Company"). The companies were controlled by common shareholders and were both
acquired through a merger with Harbinger Corporation on January 3, 1997 (see
Note 12).
SupplyTech, Inc. develops, markets, and supports software products to
enable businesses to engage in electronic commerce. The Company's products and
services are primarily targeted in the automotive, retail, manufacturing and
governmental industries. SupplyTech International, LLC primarily sells,
markets and supports software products developed by SupplyTech, Inc. in certain
international markets including Italy, Mexico and the United Kingdom.
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 combined 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 and hardware are
recognized upon shipment, net of estimated returns.
Services and Hardware
Revenues derived from services include maintenance and
implementation fees that are generally billed annually in advance.
Maintenance and implementation fees include fixed fees for providing customer
support and product updates and are recognized ratably over the service period.
Hardware revenues are derived from the resale of purchased computer equipment
and are recognized upon shipment.
Deferred Revenue
Deferred revenues represent payments received from customers or
billings invoiced to customers for software and services billed in
advance.
DIRECT COSTS
Direct costs for services include the costs of personnel to conduct
customer support, consulting and other personnel-related expenses. Direct
costs for software include duplication, packaging and amortization of purchased
technology.
F-9
30
<PAGE> 11
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 and amortization are provided 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, fixture and leasehold improvements 5 - 10 years
Transportation equipment 3 years
Building 10 years
</TABLE>
INVESTMENT IN JOINT VENTURE
The Company's 50% investment in SupplyTech Australia, Pty., an Australian
Corporation that sells, markets and services the Company's products in
Australia, is accounted for using the equity method of accounting. The
financial position and results of operations of SupplyTech Australia, Pty. are
insignificant.
INTANGIBLE ASSETS
Purchased Technology, Alliance Agreement and Goodwill
Purchased technology, alliance agreement and goodwill are being
amortized over periods of three to ten years. The Company evaluates
the recoverability of these intangible assets at each period end using the
undiscounted estimated future net operating 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.
Software Development Costs
Product development costs consist principally of compensation
and benefits paid to the Company's employees. 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 the Company's
products have reached this state of development almost concurrently with
general release, the Company has not capitalized any software development costs
in the accompanying combined financial statements, due to the amounts being
insignificant.
F-10
31
<PAGE> 12
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
INCOME TAXES
Effective January 1, 1995, SupplyTech, Inc. elected to be taxed as an S
Corporation under the Internal Revenue Code. SupplyTech International, LLC was
incorporated under the laws of the state of Michigan as a Limited Liability
Corporation ("LLC"). As a LLC, SupplyTech International, LLC has elected to be
taxed as a partnership under the Internal Revenue Code. As a result of these
elections, the Company has been taxed in a manner similar to a partnership for
1995 and 1996 and has not provided for any Federal or state income taxes as the
results of operations are passed through to, and the related income taxes
become the individual responsibility of the Company's shareholders.
Prior to January 1, 1995, the Company accounted 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 as income in the period that includes the enactment date.
The accompanying pro forma income tax information for 1996 and 1995
reflects the income tax expense that would have been reported if the Company
had been a C corporation and subject to SFAS No. 109 during these periods.
RECLASSIFICATIONS
Certain amounts in the accompanying 1995 and 1994 combined financial
statements have been reclassified to conform to the presentation adopted in the
1996 combined 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 receivable,
accounts payable, accrued expenses, and deferred revenues approximate fair
value due to the short-term maturities of these assets and liabilities. The
carrying values of the Company's long-term debt is less than fair value, but
such difference is insignificant. The Company's investment in joint venture
is accounted for using the equity method and pertains to a privately held
company for which a fair value is not readily available. The Company believes
the fair value of its joint venture investment exceeds the carrying value.
FOREIGN CURRENCY TRANSLATION
Foreign currency financial statements of the Company's foreign operations
and 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 foreign operations and foreign joint venture were
not significant to the Company's 1996 combined financial statements.
F-11
32
<PAGE> 13
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
2. ACQUISITION, PURCHASED TECHNOLOGY AND ALLIANCE AGREEMENT
PURCHASED TECHNOLOGY AND ALLIANCE AGREEMENT
On December 31, 1995, the Company entered into an agreement to purchase
certain software products and entered into an alliance agreement with General
Electric Information Services, Inc. ("GEIS"). The total purchase price was
$2.5 million, consisting of $300,000 in cash and the assumption of a note
payable to GEIS in the amount of $2.2 million. The Company recorded the
purchase of the technology and the alliance agreement based upon fair value
with $1,160,000 of the purchase price allocated to in-process product
development and charged to the combined statement of operations on December 31,
1995, $375,000 allocated to purchased technology, $950,000 allocated to the
alliance agreement and $15,000 allocated to tangible assets.
Certain terms of the alliance agreement include the referral of customers
to the Company by GEIS, the performance of certain software maintenance
services by GEIS, and a $1.2 million guaranteed payment by GEIS to the Company
for the two year period ending December 31, 1997 relating to software
maintenance revenues to be paid by GEIS to the Company.
ACQUISITION
Effective October 15, 1996, the Company acquired all of the common stock
of EDI Integration Services Limited ("EISL"), a company based in Hampshire,
United Kingdom for $804,000 consisting of $134,000 in cash and the assumption
of a $670,000 note payable. The Company recorded the acquisition using the
purchase method of accounting with $250,000 allocated to purchased technology,
$548,000 allocated to goodwill, and $6,000 allocated to tangible assets. The
results of operations of EISL have been included in the Company's accompanying
1996 statement of operations since the acquisition date.
The unaudited pro forma results of operations of the Company for 1996 and
1995 as if the acquisition described above had been effected on January 1, 1995
are summarized below:
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues........................ $17,927,000 $15,276,000
=========== ===========
Net loss........................ $(4,764,000) $(2,925,000)
=========== ===========
</TABLE>
The unaudited 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.
F-12
33
<PAGE> 14
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Computer and communications
equipment........................ $ 2,081,000 $ 1,653,000
Furniture, fixtures and leasehold
improvements..................... 932,000 937,000
Transportation equipment............. 134,000 143,000
Buildings............................ 59,000 59,000
----------- -----------
3,206,000 2,792,000
Less accumulated depreciation and
amortization................. (1,825,000) (1,495,000)
----------- -----------
$ 1,381,000 $ 1,297,000
=========== ===========
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Purchased technology............... $ 775,000 $ 525,000
Alliance Agreement................. 950,000 950,000
Goodwill........................... 548,000 -
Organization costs................. 30,000 30,000
---------- ----------
2,303,000 1,505,000
Less accumulated amortization.. (561,000) (48,000)
---------- ----------
$1,742,000 $1,457,000
========== ==========
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
State income, property, sales and other taxes.. $1,803,000 $1,000,000
Accrued salaries and wages..................... 542,000 173,000
Accrued litigation............................. 600,000 -
Accrued rent................................... 229,000 254,000
Accrued royalties.............................. 308,000 279,000
Other accrued expenses......................... 474,000 197,000
---------- ----------
$3,956,000 $1,903,000
========== ==========
</TABLE>
F-13
34
<PAGE> 15
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
6. NOTE PAYABLE TO BANK AND LONG-TERM DEBT
NOTE PAYABLE TO BANK
The Company maintains a revolving credit facility payable to a bank which
is effective through June 1997 and which provides a line of credit to the
Company up to $2.0 million, subject to the terms of the facility, bearing an
interest rate equal to the bank's prime rate. The credit facility is secured
by all of the Company's accounts receivable and restricts the Company, among
other things, from incurring additional indebtedness, as defined by the terms
of the facility. The Company had $1,550,000 outstanding under the credit
facility as of December 31, 1996.
LONG-TERM DEBT
Long-term debt outstanding as of December 31, 1996 and 1995 consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
6% promissory note payable to GEIS due in equal
quarterly principal installments of $137,500
plus accrued interest through September 1999
(see Note 2)................................... $1,650,000 $2,200,000
Non-interest bearing note payable to the former
shareholders of EISL due in equal quarterly
principal installments through September 1998
(see Note 2)................................... 625,000 -
Other............................................. - 72,000
---------- ----------
Total long-term debt....................... 2,275,000 2,272,000
Less current portion of long-term debt............ (907,000) (600,000)
---------- ----------
Long-term debt, excluding current
portion.................................. $1,368,000 $1,672,000
========== ==========
</TABLE>
Future annual minimum payments under long-term debt are as follows:
<TABLE>
<S> <C>
1997................................. $ 907,000
1998................................. 818,000
1999................................. 550,000
----------
$2,275,000
==========
</TABLE>
In previous years, the Company had entered into a capital lease with an
unrelated party for telephone equipment. The lease was canceled in 1996 when
the Company upgraded their telephone system under an operating lease
arrangement.
F-14
35
<PAGE> 16
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
7. INCOME TAXES
For 1994, the provision for income tax expense (benefit) includes income
taxes currently payable and those 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.
Effective January 1, 1995, SupplyTech, Inc. elected to be taxed as an S
corporation under the Internal Revenue Code. SupplyTech International, LLC was
incorporated under the laws of the state of Michigan as a Limited Liability
Corporation ("LLC"). As a LLC, SupplyTech International, LLC has elected to be
taxed as a partnership under the Internal Revenue Code. As a result of these
elections, the Company has been taxed in a manner similar to a partnership for
1995 and 1996 and has not provided for any Federal or state income taxes as the
results of operations are passed through to, and the related income taxes
become the individual responsibility of the Company's shareholders.
Although the income tax recognition of timing differences originating
before S corporation status was elected will reverse, they will not generate a
net deferred income tax asset for the Company because the S corporation
election is in effect. Thus, the net deferred income tax asset in the amount
of $516,000 recorded as of December 31, 1994 has been charged to income tax
expense in 1995.
The pro forma provision income tax expense for 1996 and 1995 reflects the
income tax expense that would have been reported if the Company had been a C
corporation and subject to SFAS No. 109 during these periods.
Actual income tax expense (benefit) for the years ended December 31, 1995
and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current:
Federal..................... $ - $(35,000)
Foreign..................... - 7,000
State....................... - (4,000)
-------- --------
Total current............ $ - $(32,000)
-------- --------
Deferred:
Federal..................... $462,000 $ 46,000
Foreign..................... - -
State....................... 54,000 5,000
-------- --------
Total deferred........... $516,000 $ 51,000
-------- --------
Total income tax expense.... $516,000 $ 19,000
======== ========
</TABLE>
F-15
36
<PAGE> 17
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Pro forma income tax expense (benefit) for the years ended December 31,
1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current:
Federal............................... $ - $ -
Foreign............................... - -
State................................. - -
--------- ---------
Total current..................... - -
--------- ---------
Deferred:
Federal............................... - -
Foreign............................... - -
State................................. - -
--------- ---------
Total deferred.................... - -
--------- ---------
Total income tax expense (benefit).... $ - $ -
========= =========
</TABLE>
Actual 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>
1994
-------
<S> <C>
Computed "expected" income tax expense............... $14,000
Increase in income tax expense resulting from:
State income taxes, net of federal income
tax benefit................................... 2,000
Other........................................... 3,000
-------
$19,000
=======
</TABLE>
Pro forma 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>
1996 1995
----------- ---------
<S> <C> <C>
Computed "expected" income tax benefit............ $(1,638,000) $(841,000)
Increase in income tax benefit resulting from:
Differences due to purchase accounting
adjustments................................ 230,000 -
Equity in foreign subsidiary.................. 45,000 -
Increase in the valuation allowance for
deferred income tax assets................. 1,325,000 805,000
Other......................................... 38,000 36,000
=========== =========
$ - $ -
=========== =========
</TABLE>
F-16
37
<PAGE> 18
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The significant components of actual deferred income tax expense for the
year ended December 31, 1994 is summarized as follows:
<TABLE>
<CAPTION>
1994
-------
<S> <C>
Deferred income tax expense..................... $51,000
Increase in the valuation allowance for deferred
income tax assets........................... -
-------
$51,000
=======
</TABLE>
Pro forma significant components of deferred income tax expense (benefit)
for the years ended December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<C> <C> <C>
Deferred income tax benefit..................... $(1,325,000) $(805,000)
Increase in the valuation allowance for deferred
income tax assets........................... 1,325,000 805,000
----------- ---------
$ - $ -
=========== =========
</TABLE>
8. SEGMENT INFORMATION, INTERNATIONAL OPERATIONS AND MAJOR CUSTOMERS
SEGMENT INFORMATION
The Company operates in a single industry segment: the development,
marketing and supporting of software products to enable businesses to engage in
electronic commerce.
INTERNATIONAL OPERATIONS
A summary of the Company's operations by geographic area as of and for the
year ended December 31, 1996 is presented below:
<TABLE>
<CAPTION>
United States Europe Mexico Eliminations Total
------------- ---------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues................... $16,445,000 $1,303,000 $358,000 $ (568,000) $17,538,000
Operating income (loss).... (4,524,000) 12,000 5,000 (43,000) (4,550,000)
Identifiable assets........ 5,398,000 3,795,000 112,000 (2,969,000) 6,336,000
</TABLE>
MAJOR CUSTOMERS
No single customer comprised 10% or greater of the Company's consolidated
revenues in 1996, 1995 and 1994.
F-17
38
<PAGE> 19
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. RELATED PARTY TRANSACTIONS
Two officers of the Company made advances to the Company totaling $440,000
during 1995 payable on demand with interest at 8.5%, payable annually. These
loans were paid in full by the Company during 1996. The Company paid these
officers interest of $4,065 which is included in interest expense during the
year ended December 31, 1996.
10. COMMITMENTS AND CONTINGENCIES
401(K) PROFIT SHARING PLAN
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan") for
the benefit of all eligible employees, which is intended to be a tax-qualified
defined contribution plan under Section 401(k) of the Internal Revenue Code.
Under the 401(k) Plan, employees who have completed six months of service and
are at least 21 years of age are eligible to participate. Subject to certain
Internal Revenue Code limitations, the Company has elected to make a matching
contribution of 25% of the first 6% of employee contributions. The
contribution made by the Company to the 401(k) Plan was $68,000, $51,000 and
$53,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
OPTION AGREEMENT
Pursuant to an agreement dated February 15, 1996, between SupplyTech, Inc.
and Endeavor Capital Management, LLC ("Endeavor"), Endeavor was retained to
assist SupplyTech, Inc. with strategy, operational and management issues,
raising capital, business expansion, and/or sale of SupplyTech, Inc.. The
Company is obligated to pay Endeavor a monthly retainer of $10,000 for these
services and certain other fees based on capital raised. The Company paid
$100,000 in retainer fees associated with this agreement during 1996.
Concurrent with the Endeavor agreement, Endeavor was granted an option to
purchase 657 shares (7.5%) of the Company's common stock at a price of $100 per
share which vests only upon the sale of the Company for an amount greater than
a specified amount.
LEASE COMMITMENTS
The Company leases office space, communication equipment and automobiles
under operating leases which extend through 2001. Rent expense under all
operating leases was approximately $788,000, $624,000 and $588,000 for the
years ended December 31, 1996, 1995 and 1994, 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>
1997................... $1,049,000
1998................... 1,051,000
1999................... 1,040,000
2000................... 985,000
2001................... 199,000
----------
$4,324,000
==========
</TABLE>
F-18
39
<PAGE> 20
SUPPLYTECH, INC. AND SUPPLYTECH INTERNATIONAL, LLC AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONTINGENCIES
The Company is subject to lawsuits, claims and other complaints arising
out of the ordinary conduct of its business. In the opinion of management,
based in part upon the advice of legal counsel, all matters are adequately
covered by accruals or involve such amounts that management believes that they
will not have a material adverse effect on the Company's results of operations
or financial position.
11. RESTATED FINANCIAL STATEMENTS
The Company has restated its financial statements for the year ended
December 31, 1995 due to the discovery of certain facts by management existing
at the date the financial statements were previously issued. Specifically the
Company has identified certain costs related to the GEIS product line purchase
as in-process product development which should have been expensed. In
addition, as a result of the Company's ongoing analysis of overall tax
exposures and the discovery of certain facts, an additional accrual for taxes
was required as of December 31, 1995. The impact of these adjustments on the
Company's combined balance sheet and statement of operations for 1995 is
summarized as follows:
<TABLE>
<CAPTION>
Previously
issued Restated
financial financial
statements Change statements
-------------- ------------ --------------
<S> <C> <C> <C>
Intangible assets, net... $2,617,000 $ 1,160,000 $ 1,457,000
========== =========== ===========
Accrued expenses......... $ 903,000 $ 1,000,000 $ 1,903,000
========== =========== ===========
Net loss................. $ (829,000) $(2,160,000) $(2,989,000)
</TABLE> ========== =========== ===========
12. SUBSEQUENT EVENT (UNAUDITED)
SALE OF THE COMPANY
On January 3, 1997, the Company was acquired by Harbinger Corporation in a
business combination transaction through a merger which included the exchange
of 2,400,000 shares of Harbinger Corporation common stock for all outstanding
equity of the Company. In connection with and immediately prior to this
transaction, Endeavor exercised its option to purchase 657 shares of the
Company at a price of $100 per share.
F-19
40
<PAGE> 1
EXHIBIT 99.5
F-20
41
<PAGE> 2
HARBINGER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed financial
information of Harbinger Corporation and subsidiaries (the "Company") set forth
below as of December 31, 1996 and for each of the years in the three-year
period ended December 31, 1996 give effect to the Company's acquisition of
SupplyTech, Inc. ("STI") and SupplyTech International, LLC ("STILLC")
(collectively, the "STI Merger") which will be accounted for by the Company
using the pooling-of-interests method of accounting.
The unaudited pro forma consolidated condensed financial information
should be read in conjunction with the historical consolidated financial
statements and notes of the Company and the historical combined financial
statements and notes of STI and STILLC. The unaudited pro forma consolidated
condensed financial information do not necessarily represent results which
would have occurred if the transactions had taken place on the dates indicated
nor are they necessarily indicative of the results of future operations.
F-21
42
<PAGE> 3
HARBINGER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------
Historical
-------------- Pro Forma Pro Forma
Company STI Adjustments Consolidated
-------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 8,395 $ 664 $ 9,059
Accounts receivable, net................ 9,795 2,095 11,890
Deferred income taxes................... 1,517 - 1,517
Due from joint ventures................. 1,760 67 1,827
Other current assets.................... 1,049 350 (150) (2) 1,249
------- ------ --------
Total current assets................... 22,516 3,176 25,542
------- ------ --------
Property and equipment, net.............. 6,845 1,381 (300) (2) 7,926
Investments in joint ventures............ 407 - 407
Intangible assets, net................... 11,405 1,742 (2,453) (2) 10,694
Deferred income taxes.................... 1,284 - 1,284
Other assets............................. 37 37
------- ------ --------
$42,457 $6,336 $ 45,890
======= ====== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable to bank.................... $ - $1,550 $ 1,550
Current portion of long-term debt....... - 907 907
Accounts payable........................ 1,570 1,483 3,053
Accrued expenses........................ 5,843 3,956 950 (1) 10,749
Deferred revenues....................... 3,751 3,442 7,193
------- ------ --------
Total current liabilities.............. 11,164 11,338 23,452
------- ------ --------
Long-term debt, excluding current portion - 1,368 1,368
Investments in joint ventures............ - 81 81
Shareholders' equity (deficit):
Common stock............................ 2 - 2
Additional paid in capital.............. 45,259 32 3,179 (1) 48,470
Accumulated deficit..................... (13,968) (6,483) (4,129) (1) (27,483)
(2,903) (2)
------- ------ --------
31,293 (6,451) 20,989
------- ------ --------
$42,457 $6,336 $ 45,890
======= ====== ========
</TABLE>
F-22
43
<PAGE> 4
HARBINGER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-------------------------------------------------------
Historical
----------------------- Pro Forma Pro Forma
Company STI Adjustments Consolidated
------------ --------- ----------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Services........................................................ $27,806 $10,016 $ 37,822
Software........................................................ 13,919 7,522 21,441
Total revenues................................................. 41,725 17,538 59,263
------- ------- --------
Direct costs:
Services........................................................ 8,619 5,006 13,625
Software........................................................ 2,165 747 2,912
--------
Total direct costs............................................. 10,784 5,753 16,537
------- ------- --------
Gross margin.................................................. 30,941 11,785 42,726
------- ------- --------
Operating costs:
Selling and marketing........................................... 7,929 7,128 15,057
General and administrative...................................... 7,799 4,865 12,664
Depreciation and amortization................................... 1,992 974 2,966
Product development............................................. 5,632 3,368 9,000
Charge for purchased in-process product
development, write-off of software
development costs and acquisition
related charges................................................ 8,775 - 8,775
------- ------- --------
Total operating costs......................................... 32,127 16,335 48,462
------- ------- --------
Operating loss................................................ (1,186) (4,550) (5,736)
Interest expense (income), net................................... (156) 149 (7)
Equity in losses of joint venture................................ 7,073 119 7,192
------- ------- --------
Loss before income tax expense................................... (8,103) (4,818) (12,921)
Income tax expense............................................... 146 - 146
------- -------- --------
Net loss......................................................... (8,249) (4,818) (13,067)
Preferred stock dividends........................................ (28) - (28)
------- ------- --------
Net loss applicable to
common shareholders............................................. $(8,277) $(4,818) $(13,095)
Net loss per common share........................................ $ (0.52) $ (0.71)
======= ========
Weighted average common and common
equivalent shares outstanding................................... 16,065 18,465
======= ========
</TABLE>
F-23
44
<PAGE> 5
HARBINGER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1995
------------------------------------------------------------
Historical
---------------------- Pro Forma Pro Forma
Company STI Adjustments Consolidated
----------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Services.................................. $16,418 $ 8,076 $24,494
Software.................................. 6,699 6,637 13,336
---------- -------- -------
Total revenues........................... 23,117 14,713 37,830
---------- -------- -------
Direct costs:
Services.................................. 4,323 4,011 8,334
Software.................................. 1,349 602 1,951
---------- -------- -------
Total direct costs..................... 5,672 4,613 10,285
---------- -------- -------
Gross margin........................ 17,445 10,100 27,545
---------- -------- -------
Operating costs:
Selling and marketing..................... 4,875 4,916 9,791
General and administrative................ 4,832 3,815 8,647
Depreciation and amortization............. 794 567 1,361
Product development....................... 3,809 2,118 5,927
Charge for purchased in-process product
development, write-off of software
development costs and acquisition
related charges........................ - 1,160 1,160
---------- -------- -------
Total operating costs.............. 14,310 12,576 26,886
---------- -------- -------
Operating income (loss)............ 3,135 (2,476) 659
Interest expense (income), net............. (65) (3) (68)
Equity in losses of joint ventures......... 1,266 - 1,266
---------- --------- -------
Income (loss) before income tax expense.... 1,934 (2,473) (539)
Income tax expense......................... 687 516 1,203
---------- -------- -------
Net income (loss).......................... 1,247 (2,989) (1,742)
Preferred stock dividends.................. (199) - (199)
---------- -------- -------
Net income (loss) applicable to
common shareholders....................... $ 1,048 $(2,989) $(1,941)
========== ======== =======
Net income (loss) per common share......... $ 0.08 $ (0.13)
========== =======
Weighted average common and common
equivalent shares outstanding............. 13,398 15,008
========== =======
</TABLE>
F-24
45
<PAGE> 6
HARBINGER CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
------------------------------------------------------
Historical Pro Forma
------------------------ Pro Forma ---------------
Company STI Adjustments Consolidated
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Services.................................. $10,688 $ 6,793 $17,481
Software.................................. 2,964 7,448 10,412
------- ------- -------
Total revenues......................... 13,652 14,241 27,893
------- ------- -------
Direct costs:
Services.................................. 3,011 3,310 6,321
Software.................................. 689 408 1,097
------- ------- -------
Total direct costs..................... 3,700 3,718 7,418
------- ------- -------
Gross margin......................... 9,952 10,523 20,475
------- ------- -------
Operating costs:
Selling and marketing..................... 2,922 5,073 7,995
General and administrative................ 3,132 2,752 5,884
Depreciation and amortization............. 512 534 1,046
Product development....................... 1,767 2,133 3,900
Charge for purchased in-process product
development, write off of software
development costs and acquisition
related charges........................ 4,317 - 4,317
------- ------- -------
Total operating costs................ 12,650 10,492 23,142
------- ------- -------
Operating income (loss).............. (2,698) 31 (2,667)
Interest expense (income), net............. 38 (11) 27
Equity in losses of joint venture.......... 227 - 227
------- ------- -------
Income (loss) before income tax expense.... (2,963) 42 (2,921)
Income tax expense (benefit)............... (1,052) 19 (1,033)
------- ------- -------
Net income (loss).......................... (1,911) 23 (1,888)
Preferred stock dividends.................. (200) - (200)
------- ------- -------
Net income (loss) applicable to
common shareholders....................... $(2,111) $ 23 $(2,088)
======= ======= =======
Net loss per common share.................. $ (0.21) $ (0.16)
======= =======
Weighted average common and common
equivalent shares outstanding............. 10,293 12,693
======= =======
</TABLE>
F-25
46
<PAGE> 7
HARBINGER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION
On January 3, 1997, the Company completed the acquisition of SupplyTech,
Inc., a Michigan corporation ("STI"), and its affiliate, SupplyTech
International, LLC, a Michigan limited liability company ("STILLC") (the "STI
Merger"), for two million four hundred thousand shares of the Company's common
stock, par value of $0.0001 per share. STI was acquired in a merger
transaction pursuant to the terms of a Merger Agreement, dated as of January 3,
1997, by and among the Company, STI and Harbinger Acquisition Corporation II, a
Georgia corporation and a wholly owned subsidiary of the Company. STI survived
the merger as a wholly owned subsidiary of the Company. STILLC was acquired
simultaneously by the Company in a series of related stock purchase
transactions, which included the exchange of the Company's common stock for all
the outstanding shares of STILLC. The STI Merger will be accounted for by the
Company using the pooling-of-interest method of accounting.
The accompanying unaudited pro forma consolidated condensed financial
information illustrate the estimated effects of the transaction described above
as if it had occurred as of December 31, 1996 with respect to the unaudited pro
forma consolidated condensed balance sheet. The accompanying unaudited pro
forma consolidated condensed statements of operations for each of the years in
the three-year period ended December 31, 1996 give retroactive effect to the
STI Acquisition. These unaudited pro forma consolidated condensed statements of
operations do not include adjustments to record the transaction costs of the
STI Merger totaling $4.1 million, nor do they reflect write-downs of certain
assets of $2.9 million expected to result from the STI Merger, both of which
will be recorded in the Company's consolidated statement of operations during
the first quarter of 1997.
Additionally, the Company anticipates that it will incur integration costs
related to the STI Merger of $2.5 million to $3.5 million during 1997. These
costs have not been reflected in the accompanying unaudited pro forma
consolidated condensed balance sheet or unaudited pro forma consolidated
condensed statements of operations.
There is no pro forma provision for income taxes for 1995 and 1996 to
reflect the tax expense (benefit) that would have been reported if SupplyTech
Inc. (a S corporation for income tax reporting purposes) and SupplyTech
International LLC (a partnership for income tax reporting purposes) had been a
C corporation during those periods since any income tax expense (benefit) would
be offset by a valuation allowance.
The historical financial statements are derived from the audited financial
statements of the Company and the audited combined financial statements of STI
and STILLC.
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<PAGE> 8
HARBINGER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION
The unaudited pro forma consolidated condensed financial information does
not purport to represent what the results of operations or financial position
of the Company would actually have been if the STI Merger had occurred on such
dates or to project the results of operations or financial position of the
Company for any future date or period. The unaudited pro forma consolidated
condensed financial information should be read together with the historical
consolidated financial statements and notes of the Company and the historical
combined financial statements and notes of STI and STILLC. The unaudited pro
forma consolidated condensed balance sheet reflects the following adjustments:
1) Reflects adjustments to record the transaction costs of the
merger totaling $4.1 million which include accrued transaction costs
of $950,000 and investment brokerage fees in the form of common
stock of $3.2 million.
2) Reflects adjustments to record the write-down of certain
assets to net realizable value totaling $2.9 million due to
duplicative assets and products of the combined companies.
All share, per share and shareholders' equity amounts for the Company have
been adjusted to reflect a three-for-two stock split effected in the form of a
150% stock dividend paid on January 31, 1997.
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