<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HARBINGER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
(Bulletin No. 161, 02-03-95)
0147109.11
<PAGE> 2
HARBINGER CORPORATION
1055 Lenox Park Boulevard
Atlanta, Georgia 30319
(404) 467-3000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Harbinger Corporation (the "Company") will be held at the Grand Hyatt Atlanta,
3300 Peachtree Road, N.E., Atlanta, Georgia 30305, at 9:00 a.m., Atlanta,
Georgia time, on Friday, April 25, 1997 (the "Meeting"), to consider and act
upon:
1. the election of 6 persons to serve as members of the Company's
Board of Directors;
2. a proposal to increase the number of share available for
issuance under the Company's 1996 Stock Option Plan from 2,625,000
shares to 4,125,000 shares, an increase of 1,500,000 shares;
3. a proposal to ratify the selection of independent public
accountants for the Company's current fiscal year; and
4. such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 14, 1997,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
By Order of the Board of Directors,
/s/ Joel G. Katz
-----------------
Joel G. Katz,
Secretary
April 2, 1997
Atlanta, Georgia
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE WHICH HAS BEEN PROVIDED.
NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES. IN THE EVENT YOU ARE
ABLE TO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
<PAGE> 3
HARBINGER CORPORATION
1055 LENOX PARK BOULEVARD
ATLANTA, GEORGIA 30319
--------------------
PROXY STATEMENT
--------------------
APRIL 25, 1997
-------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
SHAREHOLDERS MEETING
This Proxy Statement and the enclosed proxy ("Proxy") are furnished on
behalf of the Board of Directors of Harbinger Corporation, a Georgia
corporation (the "Company"), for use at the Annual Meeting of Shareholders to
be held on April 25, 1997 at 9:00 o'clock a.m., Atlanta, Georgia time (the
"Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the Grand Hyatt Atlanta, 3300 Peachtree
Road, N.E., Atlanta, Georgia 30305. The Company intends to mail this Proxy
Statement and the accompanying Proxy card on or about April 3, 1997, to all
shareholders entitled to vote at the Annual Meeting.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of Common Stock at the close of business on March
14, 1997 will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on March 14, 1997, the Company had outstanding and
entitled to vote 19,007,855 shares of Common Stock. Each holder of record of
Common Stock on such date will be entitled to one vote for each share held on
all matters to be voted upon at the Annual Meeting. Any shareholder who signs
and returns a Proxy has the power to revoke it at any time before it is
exercised by providing written notice of revocation to the Secretary of the
Company or by filing with the Secretary of the Company a Proxy bearing a later
date. The holders of a majority of the total shares of Common Stock
outstanding on the record date, whether present at the Annual Meeting in person
or represented by Proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The shares held by each shareholder who signs
and returns the enclosed form of Proxy will be counted for the purposes of
determining the presence of a quorum at the meeting, whether or not the
shareholder abstains on all or any matter to be acted on at the meeting.
Abstentions and broker non-votes both will be counted toward fulfillment of
quorum requirements. A broker non-vote occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that proposal
and has not received instructions from the beneficial owner.
COUNTING OF VOTES
The purpose of the Annual Meeting is to consider and act upon the matters
which are listed in the accompanying Notice of Annual Meeting and set forth in
this Proxy Statement. The enclosed form of Proxy provides a means for a
shareholder to vote for all of the matters listed in the accompanying Notice of
Annual Meeting and described in the Proxy Statement. The enclosed form of
Proxy also provides a means for a shareholder to vote for all of the nominees
for Director listed thereon or to withhold authority to vote for one or more of
such nominees. The Company's Bylaws provide that Directors are elected by a
plurality of the votes cast. Plurality means that more votes must be cast in
favor of the election of a Director than those cast against election of such
Director. Accordingly, the withholding of authority by a shareholder
(including broker non-votes) will not be counted in computing a plurality and
thus will have no effect on the results of the election of such nominees.
1
<PAGE> 4
The accompanying form of Proxy also provides a means for a shareholder to
vote for, against or abstain from voting on each of the other matters to be
acted upon at the Annual Meeting. Each Proxy will be voted in accordance with
the shareholder's directions. The affirmative vote of a majority of the shares
of Common Stock present in person or represented by a Proxy and entitled to
vote on proposal two set forth in the accompanying Notice of Annual Meeting is
required for the approval of such proposal. Approval of any other matters as
may properly come before the meeting also will require the affirmative vote of
a majority of the shares of Common Stock present in person or represented by a
Proxy and entitled to vote at the meeting. Abstentions with respect to
proposal two will have the same effect as a vote against these proposals. With
respect to broker non-votes, the shares will not be considered present at the
meeting for the proposal to which authority was withheld. Consequently, broker
non-votes will not be counted with regard to the proposal, but they will have
the effect of reducing the number of affirmative votes required to approve the
proposal, because they reduce the number of shares present or represented from
which a majority is calculated.
PROXIES
When the enclosed Proxy is properly signed and returned, the shares which
it represents will be voted at the Annual Meeting in accordance with the
instructions noted thereon. In the absence of such instructions, the shares
represented by a signed Proxy will be voted in favor of the nominees for
election to the Board of Directors, and in favor of the approval of proposal
two.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the amount and percent of shares of Common
Stock which, as of March 18, 1997, are deemed under the rules of the
Securities and Exchange Commission (the "Commission") to be "beneficially
owned" by each member of the Board of Directors of the Company, by each nominee
to become a member of the Board of Directors, by each Executive Officer of the
Company, by all Directors, Nominees and Executive Officers of the Company as a
group, and by any person or "group" (as that term is used in the Securities Act
of 1934, as amended) known to the Company as of that date to be a "beneficial
owner" of more than 5% of the outstanding shares of Common Stock of the
Company. The Company effected a three-for-two stock split paid in the form of
a stock dividend on January 31, 1997 to shareholders of record as of January
17, 1997.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED(1)
---------------------------
NUMBER OF PERCENTAGE
SHARES OF OF
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS COMMON STOCK CLASS
- ------------------------------------------ ------------ -----
<S> <C> <C>
C. Tycho Howle(2)................................................... 1,281,617 6.7%
David T. Leach(3)................................................... 483,042 2.5
James C. Davis(4)................................................... 309,591 1.6
George S. Hart(5)................................................... 120,727 *
Joel G. Katz(6)..................................................... 49,872 *
William B. King(7).................................................. 55,566 *
Stuart L. Bell(8)................................................... 34,125 *
William D. Savoy(9)................................................. 2,375,986 12.5
Benn R. Konsynski(10)............................................... 8,926 *
Klaus Neugebauer.................................................... -- --
Ad Nederlof......................................................... -- --
David A. Meeker(11)................................................. 27,700 *
James M. Travers(12)................................................ 26,400 *
Theodore C. Annis................................................... 1,041,552 5.5
A. Gail Jackson..................................................... 1,041,552 5.5
All executive officers and directors as a group (15 persons)(13)... 6,856,656 35.0
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF OF
5% SHAREHOLDERS COMMON STOCK CLASS
- --------------- ------------ -----
<S> <C> <C>
Vulcan Ventures, Inc./Paul G. Allen(14)..........................
110 110th Avenue, NE, Suite 550, Bellevue, WA 98004 2,379,736 12.5%
Warburg, Pincus Counsellors, LLC(15).............................
466 Lexington Avenue New York, NY 10017 1,276,350 6.7
AXA Equity & Law Assurance Society Plc(16).......................
20 Lincoln's Inn Field, London, England WC2A 3ES 1,252,401 6.6
</TABLE>
- -------------
* Less than 1% of the outstanding Common Stock.
(1) Information with respect to "beneficial ownership" shown in the table
above is based on information supplied by the directors, executive
officers of the Company and filings made with the Commission or furnished
to the Company by other shareholders.
(2) Includes 784,160 shares held of record by Mr. Howle, 57,200 shares held
of record by Mr. Howle's wife, an aggregate of 14,391 shares held by Mr.
Howle's children, 178,250 shares held in a family limited partnership for
the benefit of Mr. Howle, his wife and children, 200,000 shares held by a
trust for the benefit of Mr. Howle and his wife, 10,116 shares held in a
foundation created by Mr. Howle, and 37,500 shares subject to options
exercisable within 60 days. Mr. Howle disclaims beneficial ownership of
all such shares, other than the shares held of record by Mr. Howle or for
his benefit. Mr. Howle's address is 1055 Lenox Park Boulevard, Atlanta,
GA 30319.
(3) Includes 266,792 shares held jointly by Mr. Leach and his wife, and
191,250 shares subject to options exercisable within 60 days.
(4) Includes 240,216 shares held jointly by Mr. Davis and his wife, and
69,375 shares subject to options exercisable within 60 days.
(5) Includes 93,750 shares subject to options exercisable within 60 days.
(6) Includes 49,499 shares subject to options exercisable within 60 days.
(7) Includes 36,000 shares subject to options exercisable within 60 days.
(8) Includes 11,625 shares subject to options exercisable within 60 days.
(9) Includes 31,875 shares subject to options exercisable within 60 days.
Also includes 2,323,486 shares beneficially owned by Vulcan
Ventures, Inc. and Paul G. Allen, as to which Mr. Savoy disclaims
beneficial ownership.
(10) Includes 5,626 shares subject to options exercisable within 60 days
(11) Includes 26,950 shares subject to options exercisable within 60 days.
(12) Includes 26,400 shares subject to options exercisable within 60 days.
(13) Includes 579,850 shares subject to options exercisable within 60 days.
(14) Includes 2,323,486 shares and 56,250 shares subject to warrants
exercisable within 60 days beneficially owned by Paul G. Allen. Excludes
31,875 shares held beneficially by Mr. Savoy, as to which Mr. Allen
disclaims beneficial ownership.
(15) According to a Schedule 13G filed by Warburg, Pincus Counselors, Inc.
("Warburg, Pincus") dated January 9, 1997, Warburg, Pincus, a
registered investment advisor beneficially owns 1,276,350 shares of
Common Stock. According to the Schedule 13G, Warburg, Pincus
has sole voting power to 868,050 shares, shared voting power as to
197,850 shares and sole despositive power as to 1,272,300 shares.
(16) Includes 18,750 shares subject to warrants exercisable within 60 days.
3
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
INTRODUCTION
At the Annual Meeting, six directors are to be elected for the terms
described below. The Board of Directors of the Company is divided into three
classes that serve staggered three-year terms and are as nearly equal in number
as possible. At a meeting of the Board of Directors in January 1997, the size
of the Board was increased from seven to nine members. William B. King, Stuart
L. Bell and James C. Davis are nominees to serve as Class I directors for a
term expiring at the Company's Annual Meeting of Shareholders in 2000. Messrs.
King and Bell currently are Class I directors whose terms expire at the Annual
Meeting. If elected, Mr. Davis will fill a vacant board seat. Klaus
Neugebauer and Ad Nederlof are nominees to serve as Class II directors for a
term expiring at the Company's Annual Meeting of Shareholders in 1998. If
elected, Dr. Neugebauer will fill a newly created Board seat and Mr. Nederlof
will fill a vacant board seat. Benn Konsynski is a nominee to serve as a Class
III director for a term expiring at the Company's Annual Meeting of
Shareholders in 1999. If elected, Dr. Konsynski will fill a newly created
Board seat.
The Board of Directors has adopted a policy statement that provides as
follows: "[i]t is the policy of Harbinger Corporation, in order to ensure full
representation of the Company's shareholders on the Board of Directors and to
enhance the Company's access to talented managerial advisors, that no
nonemployee director of the Company shall serve as a director for more than
eight consecutive years and that each nonemployee director when first elected
to the Board of Directors (including after a period of non-service) shall serve
for only a one year term unless renominated by the Board of Directors at that
time, in which case he or she shall be included in the Company's staggered
board in a manner determined by the Board of Directors."
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the six nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as the Board of Directors may select. Each person nominated
for election has agreed to serve if elected, and management has no reason to
believe that any nominee will be unable to serve.
The Board of Directors recommends a vote FOR each named nominee.
NOMINEES
The name and age, principal occupation or employment, and other data
regarding each nominee, based on information received from the respective
nominees, are set forth below:
NOMINEES TO SERVE UNTIL THE 2000 ANNUAL MEETING (CLASS I)
WILLIAM B. KING
Mr. King, age 52, has been a director of the Company since January 1993.
Under the Company's policy statement regarding term limits for nonemployee
directors, Mr. King will be eligible to serve as a director through the
Company's Annual Meeting to be held in 2001. Mr. King has served as Chairman
of Private Business, Inc., a banking software provider, since 1991. From 1986
until February 1995, Mr. King served as Chairman of FISI-Madison Financial
Corporation, Chairman of CUC Europe, and served on the Board of Directors of
CUC International.
4
<PAGE> 7
STUART L. BELL
Mr. Bell, age 43, has been a director of the Company since April 1995.
Under the Company's policy statement regarding term limits for nonemployee
directors, Mr. Bell will be eligible to serve as a director through the date of
the Company's Annual Meeting to be held in 2003. Mr. Bell served as Executive
Vice President and Chief Financial Officer of CUC International from 1983 to
January 1995, and has served as Assistant to the Chief Executive Officer of CUC
International since February 1995. Mr. Bell is also a director of
International Telephone Data Services.
JAMES C. DAVIS
Mr. Davis, age 44, has served as President and Chief Operating Officer
of the Company since March 1997. He served as President of Harbinger
Group Operations from January 1995 until March 1997. He served as President of
the Company from January 1989 until December 1993, when he resigned as an
officer and director of the Company. He was Vice President and Senior Vice
President of Harbinger Computer Services, Inc. ("HCS") from May 1984 until
December 1988.
NOMINEE TO SERVE UNTIL THE 1999 ANNUAL MEETING (CLASS III)
BENN R. KONSYNSKI
Dr. Konsynski, age 46, has been a director of the Company since December
1996. Under the Company's policy statement regarding term limits for
nonemployee directors, Dr. Konsynski will be eligible to serve as a director
through the date of the Company's Annual Meeting to be held in 2004. Since
1993, Dr. Konsynski has been the George S. Craft Professor of Business
Administration at the Goizueta Business School at Emory University. From 1987
to 1993, he was on the faculty at Harvard Business School. Prior to the
dissolution of HNS, Dr. Konsynski was a member of the Board of Managers of HNS.
Dr. Konsynski also serves as a director of Tessco Technologies, Inc.
NOMINEES TO SERVE UNTIL THE 1998 ANNUAL MEETING (CLASS II)
KLAUS NEUGEBAUER
Dr. Neugebauer, age 58, was a co-founder of Softlab GmbH, an
international software development company which was sold to BMW AG in
1991. Under the Company's policy statement regarding term limits for
nonemployee directors, Dr. Neugebauer will be eligible to serve as a director
through the date of the Company's Annual Meeting to be held in 2005. Dr.
Neugebauer is a member of a number of German industrial boards and acts as a
strategic information technology advisor to the State of Bavaria and the German
Federal Government, and since 1991, has been a partner in NSE Inc., an
investment firm that specializes in the software industry.
AD NEDERLOF
Mr. Nederlof, age 51, currently serves as an independent software
consultant. Under the Company's policy statement regarding term limits for
nonemployee directors, Mr. Nederlof will be eligible to serve as a director
through the date of the Company's Annual Meeting to be held in 2005. Mr.
Nederlof served as Vice President of Oracle Northern Europe form 1994 to 1996,
with responsibility for all Northern European subsidiaries. From 1991 to 1994,
he served as Managing Director of Oracle Nederland BV, Oracle's Dutch
subsidiary.
5
<PAGE> 8
CURRENT DIRECTORS
The current Directors of the Company are Class II directors, elected to
serve until the 1998 Annual Meeting, and Class III directors, elected to serve
until the 1999 Annual Meeting, and are as follows:
C. TYCHO HOWLE
Mr. Howle, age 47, currently serves as a Class III director. He has
served as Chairman of the Board of Directors of the Company and its
predecessors since 1983, and served as Chief Executive Officer until March
1997. From 1981 to 1983, Mr. Howle was a consultant with McKinsey & Company,
Inc., a management consulting firm. From 1979 to 1981, Mr. Howle was a Product
Line Manager with the Hewlett-Packard Company. From 1973 to 1977, he was a
project manager with Booz, Allen & Hamilton's Applied Research Unit.
WILLIAM D. SAVOY
Mr. Savoy, age 32, currently serves as a Class III director and has
been a director of the Company since May 1993. Under the Company's
policy statement regarding term limits for nonemployee directors, Mr. Savoy will
be eligible to serve as a director through the date of the Company's Annual
Meeting to be held in 2001. Mr. Savoy has served as President of Vulcan
Northwest, Inc. since 1988. Mr. Savoy is also a director of Telescan, Inc.,
C/Net, Inc., U.S. Satellite Broadcasting Co., Inc. and Ticketmaster Corporation.
DAVID T. LEACH
Mr. Leach, age 46, currently serves as a Class II director and has
served as Chief Executive Officer of the Company since March 1997 and a
Director since February 1994. From February 1994 until March 1997, he served as
President and Chief Operating Officer of the Company. From June 1992 until
February 1994, he was Group Executive Vice President, Sales and Operations. He
served as Senior Vice President of HCS from 1988 until 1990 and was President of
HCS from 1990 until its reorganization into Harbinger Corporation in 1992. Prior
to joining HCS, Mr. Leach was a consultant with McKinsey & Company, Inc.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During 1996, the Board of Directors held five meetings. All of the
incumbent directors attended at least 75% of the aggregate total number of
meetings of the Board of Directors and meetings of committees of the Board of
Directors on which they served.
The Company's Board of Directors has established an Audit Committee and
Compensation Committee. William B. King and Stuart L. Bell presently serve on
the Audit Committee. The Audit Committee met one time in 1996. The primary
functions of the Audit Committee are to (i) review the scope and timing of the
audit and non-audit services to be rendered by the Company's independent
accountants, to review audit plans of the independent accountants and internal
auditors and to review the reports upon completion of their audits, (ii) to
review the appropriateness of the Company's accounting policies, the adequacy
of its financial controls and the reliability of the financial information
reported to the public, and (iii) to report to the Board of Directors on its
activities. William D. Savoy, William B. King and Stuart L. Bell presently
serve on the Compensation Committee. The Compensation Committee met three
times in 1996. The primary functions of the Compensation Committee are to
review and approve, subject to ratification of the Board of Directors, the
Chief Executive Officer's compensation, to consult with the Chief Executive
Officer and approve compensation for executive officers and other key
employees, to administer the Company's stock option plans and employee stock
purchase plans including approval of all awards thereunder, to approve
management incentive plans for senior management, and to report to the Board of
Directors on these activities.
6
<PAGE> 9
As compensation for serving on the Board of Directors, directors who are
not also employees of the Company ("Nonemployee Directors") receive $900 for
each meeting of the full Board and $250 for teleconference Board meetings of 90
minutes or less in which they participate. In the Company's discretion,
Nonemployee Directors may also be reimbursed for reasonable expenses incurred
by them in connection with their attendance at Board Meetings. Nonemployee
Directors are also eligible to receive options under the Company's Amended and
Restated 1993 Stock Option Plan for Nonemployee Directors. Under this plan,
Nonemployee Directors receive options to purchase 6,000 shares of the Company's
common stock upon becoming a director and then each year immediately following
the Annual Shareholders meeting.
EXECUTIVE OFFICERS
In addition to the individuals nominated for director above who are also
executive officers of the Company, the following individuals presently serve as
executive officers of the Company:
THEODORE C. ANNIS
Mr. Annis, age 54, has served as President of Harbinger SupplyTech since
January 1997. He served as Chief Executive Officer and Treasurer of Supply
Tech, Inc. from its inception in August 1984 until its merger with the Company
in January 1997.
JAMES M. TRAVERS
Mr. Travers, age 45, has served as President of Harbinger Enterprise
Solutions since January 1995. In this capacity, Mr. Travers manages the
business operations acquired from Texas Instruments, Inc. ("TI"). From 1978
through 1994, Mr. Travers served in various managerial positions with TI,
including the position as Director of Business Development for TI's Worldwide
Applications Software Business and General Manager of TI's EDI business unit
from June 1992 through December 1994.
GEORGE S. HART
Mr. Hart, age 55, has served as Senior Vice President, Licensee
Relationships of Harbinger since April 1994. He served as Senior Vice
President, Business Development and Sales of the Company from the
Reorganization in May 1992 until April 1994. From April 1984 to May 1992, Mr.
Hart served as Senior Vice President, Business Development and Sales of HCS.
DAVID A. MEEKER
Mr. Meeker, age 54, has served as Senior Vice President, North American
Sales since January 1997. From January 1995 through January 1997, he served as
Vice President, Sales. From September 1992 through December 1994, Mr. Meeker
served as Vice President, Sales for National Data Corp., a credit card
processing company. From January 1992 through August 1992 Mr. Meeker served as
Vice President, Sales and Marketing for Software Alternatives, a computer
software and systems vendor. From January 1990 to January 1992, Mr. Meeker
served as Manager, U.S. Channel Operations for IBM.
A. GAIL JACKSON
Ms. Jackson, age 48, has served as Senior Vice President of Harbinger
SupplyTech since March 1997. She served as President of Supply Tech, Inc. from
its inception in August 1984 until its merger with the Company in January 1997.
7
<PAGE> 10
JOEL G. KATZ
Mr. Katz, age 33, has served as Chief Financial Officer and Secretary of
Harbinger since January 1997. He served as Vice President, Finance and
Secretary from January 1995 to January 1997 and Senior Director of Finance of
the Company from February 1994 to January 1995. He joined Harbinger in 1990 as
Controller and became Director of Finance in December 1991. From 1985 to 1990,
he was a certified public accountant in the audit division of Arthur Andersen
LLP.
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation earned for services rendered to the Company by the Company's Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company during 1996 (collectively the "Named Executive
Officers") for the fiscal years ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
------------
Securities All
Underlying Other
Name and Principal Position Salary Bonus Options (#) Compensation
- --------------------------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
C. Tycho Howle 1996 $187,555 $110,500 $ 800
Chairman, Chief Executive 1995 157,134 65,920 150,000 800
Officer and Director 1994 149,375 23,721 - 662
David T. Leach 1996 $151,569 $ 83,520 120,000 $ 800
President, Chief Operating 1995 127,634 52,602 - 800
Officer and Director 1994 116,125 28,028 45,000 495
James C. Davis 1996 $141,758 $105,465 157,500 $ 771
President, Harbinger 1995 106,727 29,094 60,000 800
Group Operations 1994 77,239 - - -
James M. Travers 1996 $126,675 $ 79,300 - $ 745
President, Harbinger 1995 106,673 89,200 75,000 4,238
Enterprise Solutions 1994 - - - -
1996 $140,922 $ 58,279 - $ 704
David A. Meeker 1995 95,740 50,000 67,500 500
Vice President, Sales 1994 - - - -
</TABLE>
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options granted during
the year ended December 31, 1996 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> Potential Realizable
Value at Assumed
Number of Annual Rates of Stock
Securities % of Total Price Appreciation for
Underlying Options Granted Exercise Option Term (2)
Options to Employees Price Expiration ---------------------
Granted (1) Fiscal Year ($/sh) Date 5% 10%
----------- -------------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
C. Tycho Howle 150,000 13.3% $11.67 04/1/03 $712,629 $1,660,729
David T. Leach 120,000 10.6% $11.67 04/1/03 $570,103 $1,328,583
James C. Davis 157,500 13.9% $11.67 04/1/03 $748,261 $1,743,766
James M. Travers - - - - - -
David A. Meeker - - - - - -
</TABLE>
- ---------------
(1) The options granted to the named executive officers were awarded under
the Company's 1996 Stock Option Plan (the "1996 Plan"). The options
granted under the Plan are exercisable for a period not to exceed seven
years from the date of grant. Options generally vest over four years of
continuous employment with the Company. The exercise price of each option
granted was not less than 100% of the fair market value of a share of
Common Stock on the date of grant.
(2) Amounts represent the hypothetical gains that could be achieved for the
respective options at the end of the seven year option term. The assumed
5% and 10% rates of stock appreciation are mandated by the rules of the
Securities and Exchange Commission and may not accurately reflect the
appreciation of the price of the Common Stock from the grant date until
the expiration of the option term. These assumptions are not intended to
represent a forecast of future stock appreciation of the Company's Common
Stock. No assurance can be given that the Company's Common Stock will
appreciate at all.
OPTIONS EXERCISED AND YEAR-END VALUES OF AN EXERCISED OPTION
The following table sets forth information, as of December 31, 1996,
regarding the number of shares received and the value realized upon exercise of
the stock options, and the number and value of exercisable and unexercisable
options to purchase Common Stock of the Company held by the Company's Named
Executive Officers.
9
<PAGE> 12
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised In-the-
Unexercised Options at Money Options
Shares December 31, 1996 at December 31, 1996 (2)
Acquired On Value -------------------------- ---------------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Tycho Howle - - - 150,000 - $ 874,500
David T. Leach - - 135,000 168,750 $1,962,375 $1,345,538
James C. Davis - - 15,000 202,500 $198,750 $1,514,475
James M. Travers 10,500 $133,875 8,250 56,250 $109,285 $ 745,127
David A. Meeker 6,000 $ 78,020 10,875 50,625 $144,050 $ 670,614
</TABLE>
- ----------------
(1) Calculated by multiplying the number of shares underlying options by the
difference between the closing sale price of the Common Stock as reported
by The Nasdaq Stock Market on the date of exercise and the exercise price
of the options.
(2) Calculated by multiplying the number of shares underlying options by the
difference between the closing sale price for the Common Stock of $17.50
as reported by The Nasdaq Stock Market on December 31, 1996 and the
exercise price of the options.
AGREEMENTS WITH EMPLOYEES
Employees of the Company, including executive officers, are required to
sign an agreement with the Company defining the employee's responsibilities,
restricting the ability of the employee to compete with the Company during his
or her employment and for a designated period thereafter, restricting
solicitation of customers and employees following employment with the Company,
and providing for ownership and assignment of intellectual property rights to
the Company. The agreements have an indefinite term, but the employee may
terminate employment with the Company at any time. In connection with the
Company's merger with SupplyTech, Inc. on January 3, 1997, the Company entered
into employment, non-competition and non-disclosure agreements with Theodore C.
Annis and A. Gail Jackson. In addition to the terms of the Company's standard
employment agreements described in the preceding paragraph, the agreements with
Mr. Annis and Ms. Jackson generally provide for a minimum term of employment of
two years. Under the terms of these agreements, the Company has the right to
terminate each of the employees' employment by notice for "cause" or due to
"disability" of such employee. "Cause" means any of the following reasons:
(a) the Company reasonably determines that such employee's job performance is
unsatisfactory; (b) such employee violates any provision of the employment
agreement; (c) such employee is convicted of a felony or misdemeanor involving
moral turpitude; or (d) such employee engages in misconduct in the course and
scope of his or her employment with the Company. "Disability" means the illness
or disability of such employee that prevents the performance of the employee's
material obligations under the employment agreement, and which continues for
consecutive period of 120 days or longer or an average of 180 days or longer in
any one year period.
On March 4, 1997, the Company entered into an employment agreement with C.
Tycho Howle effective as of January 4, 1997 in order to insure Mr. Howle's
continued services as Chairman of the Board of the Company. The employment
agreement provides for a four year term at an initial base salary of $220,000,
with bonus opportunity of 50% of base salary if certain performance criteria
are met. In addition to the terms of the Company's standard employment
agreement described above, Mr. Howle's employment agreement provides for: (i)
an option grant under the 1996 Plan to purchase 150,000 shares of Common Stock
at a price equal to the Fair Market Value of the Company's stock on the date of
the grant (the "Option"), (ii) termination for cause by the Company without
payment of severance, (iii) voluntary departure by Mr. Howle without severance,
and (iv) termination without cause by the Company with payment of severance.
10
<PAGE> 13
The Company may terminate Mr. Howle for cause if Mr. Howle: (i) knowingly
and willfully engages in misconduct with respect to the business and affairs of
the Company, (ii) violates any policy of the Company in a material way relating
to ethical business conduct, practices, or fiduciary duties of a senior
executive, (iii) knowingly and willfully breaches any material provision of his
employment agreement which is not remedied within thirty (30) days after
receipt of notice, (iv) commits a felony or an illegal act involving moral
turpitude or fraud or dishonesty which may reasonably be expected to have a
material adverse effect on the Company, or (v) fails to comply with reasonable
directives of the Board, if not remedied within thirty (30) days after receipt
of notice. If the Company terminates Mr. Howle without cause, then the Company
will be obligated to pay Mr. Howle the net present value of the compensation
that would be payable to Mr. Howle during the remaining term of his employment
agreement.
Mr. Howle's Option vests ratably over four years. In the event Company
terminates Mr. Howle without cause, the Option will continue to vest as if he
were still employed by the Company. Further, in the event of a "Change in
Control" of the Company, Mr. Howle's Option shall immediately vest in its
entirety. A "Change in Control" shall be deemed to have occurred if (and only
if) any of the following shall have taken place: (i) a change in control is
reported by the Company in response to either Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), or Item 1 of Form 8-K promulgated under the Exchange
Act; (ii) any person (as such term is used in Section 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the combined voting power of the
Company's then outstanding securities; or (iii) following the election or
removal of directors, a majority of the Board consists of individuals who were
not members of the Board two years before such election or removal, unless the
election of each director who was not a director at the beginning of such
two-year period has been approved in advance by directors representing at least
a majority of the directors then in office who were directors at the beginning
of the two-year period.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than ten percent of the Common Stock to file initial statements of
beneficial ownership (Form 3) and statements of changes in beneficial
ownership (Forms 4 and 5) of Common Stock and any other equity securities of
the Company with the Securities and Exchange Commission and The Nasdaq Stock
Market. Officers, directors and greater than ten percent shareholders are
required by Securities Exchange Commission regulations to furnish the Company
with copies of all such forms they file.
Based solely on a review of the copies of the forms that it has received,
and on written representations from certain reporting persons that no
additional forms were required, the Company believes that its officers,
directors and greater than ten percent beneficial owners complied with all of
these filing requirements in 1996, except that Mr. Howle filed a late Form 4 on
one occasion.
401(K) PROFIT SHARING PLAN
The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan")
which is intended to be a tax-qualified defined contribution plan under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, all employees of the Company who have completed one year of service
and have attained age 21 are eligible to participate. The 401(k) Plan includes
a salary deferral arrangement pursuant to which participants may contribute,
subject to certain Code limitations, a minimum of 3% and a maximum of 15% of
their salary on a pre-tax basis. Subject to certain Code limitations, the
Company may make a matching contribution of up to $300 of the salary deferral
contributions of participants at a rate determined by the Board of Directors of
the Company each year. The Company may also make an additional contribution to
the 401(k) Plan each year at the discretion of the Board of Directors. The
Board of Directors approved the contribution by the Company of $35,000 to the
401(k) Plan for 1996. A separate account is maintained for each participant in
the 401(k) Plan. The portion of a participant's account attributable to his or
her own contributions is always 100% vested. The portion of the account
attributable to Company contributions (including matching contributions) vests
at a rate of 20% per year commencing after the first year of service.
Distributions from the 401(k) Plan may be made in the form of a lump-
11
<PAGE> 14
sum cash payment or in installment payments. In connection with the Company's
merger with SupplyTech, Inc. on January 3, 1997, the Company assumed the
obligations under the SupplyTech 401(k) Profit Sharing and Retirement and
Savings Plan and Trust (the "SupplyTech Plan"). The SupplyTech Plan operates
in a manner substantially similar to the Plan, except for the following: (i)
participants in the SupplyTech Plan may contribute, subject to certain Code
limitations, a minimum of 1% of the participants salary on a pre-tax basis;
(ii) subject to certain Code limitations, the Company may make a matching
contribution of 25% up to 6% of each participants contribution; and (iii) all
portions attributable to Company contributions vest only after the participant
completes five years of service.
STOCK OPTION PLANS
Employee Stock Option Plans. The Company's 1996 Stock Option Plan (the
"1996 Plan") was approved by the Company's shareholders and became effective
on May 8, 1996. The 1996 Plan replaced the Company's Amended and Restated 1989
Stock Option Plan (the "1989 Plan"). Following approval of the 1996 Plan at
the Annual Shareholders Meeting in 1996, no further stock options were granted
under the 1989 Plan. The 1989 Plan continues in effect only with respect to
outstanding stock options which were granted under that plan and will terminate
and cease to exist as of the date on which all outstanding stock options which
were granted under the 1989 Plan are exercised in full, expired or canceled.
The purpose of the 1996 Plan is to provide incentives for officers, directors,
consultants and key employees to promote the success of the Company, and to
enhance the Company's ability to attract and retain the services of such
persons. The aggregate number of shares of Common Stock reserved for issuance
under the 1996 Plan is 2,625,000 shares, plus an amount equal to the number of
all shares that are either not subject to options granted under the 1989 Plan
or were subject to options granted under the 1989 Plan or were subject to
Options granted thereunder that expire without exercise to officers consultants
and key employees. If Proposal 2 below is approved, the number of shares
reserved for issuance under the 1996 Plan will be increased by 1,500,000
shares. Options granted under the 1996 Plan may be either (i) options intended
to qualify as "incentive stock options" under Section 422 of the Code, or
(ii) non-qualified stock options. The 1996 Plan permits the grant of stock
appreciation rights in connection with the grant of stock options. Stock
options may be granted under the 1996 Plan for all employees and consultants of
the Company, or of any present or future subsidiary or parent of the Company,
who are considered "key employees" or "key consultants." The 1996 Plan is
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee has the authority to determine exercise prices
applicable to the options, the eligible officers, directors, consultants or
employees to whom options may be granted, the number of shares of the Company's
Common Stock subject to each option, and the extent to which options may be
exercisable. The Compensation Committee is empowered to interpret the 1996 Plan
and to prescribe, amend and rescind the rules and regulations pertaining to the
1996 Plan. Options granted under the 1996 Plan generally vest ratably over four
years. No option is transferable by the optionee other than by will or the laws
of descent and distribution, and each option is exercisable, during the
lifetime of the optionee, only by such optionee, unless otherwise approved by
the Compensation Committee.
Any incentive stock option that is granted under the 1996 Plan may not be
granted at a price less than the fair market value of the Company's Common
Stock on the date of grant (or less than 110% of fair market value in the case
of holders of 10% or more of the total combined voting power of all classes of
stock of the Company or a subsidiary or parent of the Company). Non-qualified
stock options may be granted at the exercise price established by the
Compensation Committee, which may be less than the fair market value of the
Company's Common Stock on the date of grant.
Each option granted under the 1996 Plan is exercisable for a period
determined by the Compensation Committee, which period may not exceed ten years
from the date of grant (or five years in the case of a holder of more than 10%
of the total combined power of all classes of stock of the Company or of a
subsidiary or parent of the Company). Options terminate upon expiration of
such period, or earlier upon termination of the recipient's employment with the
Company, or as determined by the Compensation Committee.
The terms of the 1989 Plan are substantially similar to the terms of the
1996 Plan. The material difference between the plans is the manner of exercise
permitted by the 1996 Plan. Under the 1996 Plan, payment of the purchase
price for shares of Common Stock purchased upon exercise of an option may be
made in any of the following terms: (i) In cash; (ii) By delivery to the
Company of a number of shares of Common Stock which have been
12
<PAGE> 15
owned by the optionee for at least six months prior to the date of exercise of
the option having an aggregate fair market value on the date of delivery of not
less than the total purchase price for the shares being purchased upon exercise
of the option; (iii) By delivery of a promissory note executed by the optionee
to the Company which shall include such terms and conditions as approved by the
Board of Directors, including without limitation, that: (a) The balance equal
to the aggregate purchase price for the shares being purchased shall be payable
in equal installments over such a period as approved by the Board of Directors;
(b) Interest shall accrued at a per annum rate equal to the prime rate as
announced by the Wall Street Journal as the prevailing "prime rate" of interest
per annum; and (c) The optionee shall be personally liable for the repayment of
the unpaid principal balance of the loan and any and all accrued but unpaid
interest on the loan; (iv) By surrender of a number of shares of Common Stock
otherwise issuable upon exercise of the option having an aggregate fair market
value on the date of exercise of not less than the total purchase price for all
shares being purchased upon exercise of the option, including the shares being
surrendered; and (v) In any combination of the forms described above as
approved by the Board of Directors.
As of March 18, 1997, options to purchase 1,216,983 shares of Common Stock
were outstanding under the 1989 Stock Option Plan and 959,974 shares of Common
Stock had been issued upon exercise of options granted under such plan. As of
March 18, 1997, options to purchase 1,992,490 shares of Common Stock were
outstanding under the 1996 Stock Option Plan and 6,003 shares of Common Stock
had been issued upon exercise of options granted under such plan.
Nonemployee Directors Stock Option Plan. The Amended and Restated 1993
Stock Option Plan for Nonemployee Directors (the "Nonemployee Directors
Plan") became effective on April 30, 1993. A total of 225,000 shares of the
Company's Common Stock have been reserved for issuance under the Nonemployee
Directors Plan.
The terms of the options granted under the Nonemployee Directors Plan,
including the exercise price, dates and number of shares subject to the options
are specified in the Nonemployee Directors Plan. The Nonemployee Directors Plan
provides for the automatic granting of non-qualified stock options to
Nonemployee Directors. Each Nonemployee Director receives an option to purchase
6,000 shares of Common Stock on the date of, and at a time immediately
following every, annual meeting of the shareholders ("Annual Grant"). Each
Nonemployee Director who is first appointed or elected to the Board and attends
a regular quarterly meeting of the Board which occurs at any time other than at
an annual meeting of the shareholders is granted an option to purchase a number
of shares of Common Stock equal to the product of (i) 6,000 multiplied by (ii)
a fraction, the numerator of which is the number of regular quarterly directors
meetings expected by the Chief Executive Officer of the Company to occur
between the date that such Nonemployee Director is appointed or elected to the
Board and the first annual meeting of shareholders following such appointment
or election, and the denominator of which is four (the "Interim Grant").
Annual Grants and Interim Grants vest during the year based on the attendance
by the Nonemployee Director at the regular quarterly meetings of the Board. No
option is transferable by the optionee other than by will or laws of descent
and distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee. The exercise price of all options must be at
least equal to the fair market value of the shares on the date of grant, and
the term of each option may not exceed seven years. The Nonemployee Directors
Plan will continue in effect for a period of ten years unless sooner terminated
by the Board of Directors.
As of March 18, 1997, options to purchase an aggregate of 88,500 shares of
Common Stock were outstanding under the Nonemployee Directors Plan and
approximately 46,875 shares had been issued pursuant to the exercise of options
granted under the plan.
13
<PAGE> 16
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Company's Board of Directors has
furnished the following report on Executive Compensation in accordance with the
rules and regulations of the Securities and Exchange Commission. This report
outlines the duties of the Committee with respect to executive compensation,
the various components of the Company's compensation program for executive
officers and other key employees, and the basis on which the 1996 compensation
was determined for the executive officers of the Company, with particular
detail given to the 1996 compensation for the Company's Chief Executive
Officer.
During 1996, the Compensation Committee was comprised of William D. Savoy,
Stuart Bell and William B. King.
Duties of the Committee include establishing and approving compensation of
the Chief Executive Officer, consulting with the Chief Executive Officer for
the purpose of reviewing and approving compensation for other executive
officers and key employees, administering the Company's stock option plans for
employees, and approving management incentive bonuses. In performing the
duties described above, the Compensation Committee seeks to achieve the
following:
(i) to provide compensation opportunities that are based on the
performance of the Company,
(ii) to provide competitive compensation programs that enable the
Company to attract and retain highly qualified executive managers
who are focused on enhancing shareholder value, and
(iii) to coordinate compensation programs and practices so that
they promote the Company's annual and long-term business objectives
and strategies.
The Compensation Committee in all instances seeks to link compensation to
the value and level of the performance of the executive. The Compensation
Committee seeks to achieve this objective by implementing, as the principal
components of compensation, a program of base salary, incentive compensation
and equity-based incentives. The compensation decisions of the Committee
relative to the Company's executive officers and key employees are described
below as to each of the foregoing components.
COMPENSATION OF EXECUTIVE OFFICERS GENERALLY
Salary. The salary levels of the Company's executive officers and other
key employees are reviewed by the Committee annually. In determining
appropriate base-salary levels, the Committee considers factors such as duties
and responsibilities inherent in the position held, initiative, performance,
tenure and pay practices for other companies of similar size in the electronics
industry, as well as business conditions generally prevailing in the software
and technology industries on whole.
The Company refers to external information to determine base salaries paid
by other companies for comparable positions. For example, the Company refers
to a survey by organizations such as the American Electronics Association and
Culpepper and Associates for both executives and non-executives to determine
market salaries for comparable positions paid by other software and electronic
companies of similar size, and awards salary increases based on the number of
years experience and performance, giving consideration to the market salaries
reflected by these surveys.
Cash Bonuses. Annual cash bonuses are determined and paid to executives
and key employees pursuant to the Company's compensation plan for executive
officers and other key employees. For each executive and key employee, the
cash bonus is based upon the attainment of financial objectives, either for the
Company as a whole, or for the employee's area of responsibility. For 1995,
these objectives were weighted 60% to the attainment of targeted operating
income and 40% to the attainment of targeted revenue. For 1996, these
objectives were weighted
14
<PAGE> 17
to 50% to the attainment of targeted operating income and 50% to the attainment
of targeted revenue. The Compensation Committee believes that the change
towards an equal weighting of revenue and operating income emphasizes the
Company's perception of the importance of increasing the Company's market share
in the rapidly growing market for electronic commerce software and services.
Cash bonuses for executive officers and other key employees are targeted at
ranges from 25% of base salary to 50% of base salary. The amount of the bonus
payable to any executive officer or other key employee ranges from zero percent
of targeted bonus to a maximum of 225% of targeted bonus depending on the level
of financial performance goals achieved. Since bonus payments are based on the
degree in which the company achieves its overall operating income and revenue
goals, the compensation of executive officers and key employees is higher
during years in which the Company meets or exceeds its specified financial
performance goals. Operating income (excluding acquisition related charges)
and revenues for the year ended December 31, 1996 were $7.6 million and $41.7
million, respectively, as compared to an operating income and revenues of $3.1
million and $23.1 million, respectively, for the year ended December 31, 1995.
Total cash bonuses of $778,000 were paid to 20 members of senior management
participating in the incentive plan during 1996. Total cash bonuses of
approximately $460,000 were paid to 16 members of senior management
participating in the plan during 1995.
Equity-based Incentives. The Company maintains stock option plans to
provide executive officers and other key employees and consultants with
additional incentive to promote the financial success of the Company which, in
turn, is intended to positively impact the value of the Company's Common Stock.
Options granted under the Company's Stock Option Plans have generally been
long-term (seven years) and options granted since July 1994 generally vest
ratably over the four years following the date of grant. All such options are
exercisable at fair market value on the date of grant. With such features, the
Company considers stock options as a way of aligning the interest of management
with the interest of the Company's shareholders to promote growth in the
Company's stock price and inducing executive officers and other key employees
to remain with the Company on a long-term basis. The Compensation Committee
believes that the Company's long-term goals will best be achieved by
maintaining in place the core management team of executive officers and other
key employees. During 1996, options to purchase 465,000 shares of the
Company's Common Stock were awarded to executive officers Company. As of
December 31, 1996, options to purchase an aggregate 2,229,234 shares of the
Company's Common Stock were held by 223 employees under the Company's Stock
Option Plans. Included in this amount as of December 31, 1996 are options to
purchase approximately 797,250 shares of the Company's Common Stock at an
average exercise price of $9.49 held by executive officers named in the Summary
Compensation Table.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In establishing the 1996 cash bonus compensation for Mr. Howle, the
Company observed similar guidelines as set forth for executive officers
generally. The Company does not assign specific weighting to the various
guidelines, or factors, other than the weighting that is applied to the
achievement of operating income goals and the achievement of revenue goals.
During 1996, Mr. Howle's base salary was increased to $200,000, effective April
1, 1996, as compared to $160,000 for the immediately preceding year. The
Compensation Committee approved a bonus of $110,500 to Mr. Howle for 1996,
reflecting the fact that the Company had exceeded its targeted goals for
operating income and revenue for 1996. Mr. Howle's bonus was targeted at 50%
of base salary if the Company achieved targeted operating income and revenue
goals. In 1995, Mr. Howle received a bonus of $65,920. In addition, the
Compensation Committee awarded Mr. Howle an option to purchase 150,000 shares
of Common Stock at an exercise price of $11.67 in order to provide long-term
incentive for Mr. Howle to remain employed by the Company.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits
the deduction allowable to the Company for compensation paid to the Chief
Executive Officer and each of the four other most highly compensated executive
officers to $1.0 million. Qualified performance-based compensation is excluded
from this limitation if certain requirements are met. The Company's policy is
generally to preserve the federal income tax deductibility of compensation
paid, to the extent feasible. The Compensation Committee believes that awards
under the Company's management incentive plan and its award of options made
under stock option plans for employees will qualify as
15
<PAGE> 18
performance-based compensation and thereby be excluded from the $1.0 million
limitation. Notwithstanding the Company's policy to preserve the federal
income tax deductibility of compensation payments, under certain circumstances,
the Compensation Committee, in its discretion, may authorize payment, such as
salary, bonuses or otherwise, that may cause an executive officer's income to
exceed the deductible limits.
Compensation Committee
William D. Savoy
William B. King
Stuart L. Bell
16
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following line-graph provides a comparison of the cumulative total
shareholder return on the Company's Common Stock for the period from the date
of the Company's initial public offering on August 22, 1995 through December
31, 1996, against the cumulative shareholder return during such period achieved
by the Nasdaq Stock Market (U.S. Companies) and the Index for Nasdaq Computer
and Data Processing Stocks (the "Nasdaq Computer Index"). All amounts have
been calculated as if all dividends were reinvested.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
HARBINGER CORPORATION
Prepared by the Center for Research in Security Prices
Produced on 2/25/97 including data to 12/31/96
[GRAPH]
LEGEND
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 12/31/91 12/31/92 12/31/93 12/31/94 12/29/95 12/31/96
- ------ ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
______ [] HARBINGER CORPORATION 152.1 173.6
...__. * Nasdaq Stock Market (US Companies) 55.8 64.9 74.5 72.8 103.0 126.7
- ------ /> Nasdaq Computer and Data Processing Stocks 48.9 52.7 55.7 67.7 103.0 127.2
SIC 7370-7379 US & Foreign
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 8/22/95.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Pursuant to its Alliance Agreement with System Software Associates, Inc.
("SSA"), the Company agreed to nominate a designee of SSA to the Board of
Directors. At the 1996 Annual Meeting of shareholders, Roger E. Covey, as
SSA's designee, was elected to the Company's Board of Directors. Mr. Covey
resigned from the Board in October 1996. See "Certain Transactions."
William Savoy is a member of the Compensation Committee and is President
of Vulcan Northwest. Vulcan Ventures was a shareholder in Harbinger NV, the
equity interest of which were acquired by the Company in March 1996. See
"Certain Transactions."
17
<PAGE> 20
CERTAIN TRANSACTIONS
HARBINGER NV
In November 1993, the Company assisted in the founding of Harbinger NV, a
Dutch corporation which markets electronic commerce products and services in
the European market. The initial capitalization of Harbinger NV consisted of
an investment of $500,000 from the Company, $1,500,000 from Vulcan Ventures and
$500,000 from AXA Equity & Law Life Assurance Society Plc ("Equity & Law").
Vulcan Ventures and Equity & Law each beneficially own more than 5% of the
Company's voting securities. In December 1995, the Company and these investors
contributed an additional $150,000 and $600,000, respectively, to Harbinger NV.
Messrs. Howle, Davis and Savoy serve as members of the Supervisory Board of
Harbinger NV. Mr. Howle is an executive officer and director, and Mr. Davis is
an executive officer and a nominee for director of the Company, and Mr. Savoy
is a director of the Company and a Vice President of Vulcan Ventures. In
connection with the December 1995 investment and as additional inducement, the
Company agreed to issue warrants to Vulcan Ventures and Equity & Law to
purchase shares of the Company's Common Stock in the event Harbinger NV did not
achieve certain performance targets at June 30, 1996. The Company
subsequently issued warrants to purchase 56,250 shares of Common Stock to
Vulcan Ventures and warrants to purchase 18,750 shares of Common Stock to
Equity & Law. These warrants have an exercise price of $18.50, the closing
price of the Common Stock on the Nasdaq National Market on June 28, 1996, and
expire two years from the date of grant. Effective March 29, 1996, Harbinger
acquired all of the shares of capital stock in Harbinger NV held by Vulcan
Ventures and Equity & Law and terminated all of the operating and shareholder
agreements between the parties relating to Harbinger NV. In exchange for their
interests in Harbinger NV, Vulcan Ventures received 43,549 shares of Common
Stock and Equity & Law received 14,516 shares of Common Stock. In addition,
Mr. Savoy received options as a non-employee director of Harbinger NV to
purchase 23,000 shares of Harbinger NV stock which were converted into an
option to purchase 3,000 shares of Common Stock. During the three year period
ended December 31, 1996, Harbinger NV paid approximately $615,000 to the
Company for services rendered. Additionally, the Company paid expenses of
$18,000, $95,000 and $95,000, for the years ended December 31, 1996, 1995 and
1994, respectively, that were reimbursed by Harbinger NV.
HARBINGER NET SERVICES, LLC
The Company organized Harbinger NET Services, LLC ("HNS") in December 1994
to address opportunities to use the Internet to perform electronic commerce
transactions and related services. In March 1995, the Company invested
approximately $360,000, and other individuals (including existing Harbinger
shareholders, officers and directors) invested approximately $300,000 to
provide initial funding. In June 1995, the Company purchased additional HNS
common shares for an aggregate consideration of $8.0 million, of which $2.0
million was paid in June 1995 and $6.0 million was paid in September 1995 from
the proceeds of the Company's initial public offering. Also in June 1995,
BellSouth Telecommunications, Inc. ("BellSouth") invested $3.0 million in HNS
in exchange for a $3,000,000 Subordinated Convertible Debenture (the "HNS
Debenture") of HNS, due five years from its issue date and bearing interest at
6% per annum. Assuming immediate conversion of the HNS Debenture and exercise
of outstanding HNS options, BellSouth would have acquired 2.2 million HNS
common shares, and the Company and BellSouth would own 70% and 24%, and Company
shareholders, officers and directors would own 6%, respectively, of the HNS
common shares outstanding following such conversion.
On January 1, 1997, because of the expiration of restrictions of the
Company's ability to appoint a majority of the HNS Board of Managers, the
Company exercised its rights as majority shareholder of HNS by appointing a
majority of the members of the HNS Board of Managers. As a result, effective
January 1, 1997, the Company will account for its investment in HNS by
consolidating the statements of financial position and result of operations of
HNS with those of the Company. Also on January 1, 1997, the Company purchased
the HNS Debenture pursuant to a Debenture Purchase Agreement dated January 1,
1997 between the Company and BellSouth. The Company acquired the HNS Debenture
for an aggregate purchase price of $1.5 million in cash and 242,288 shares of
Common Stock valued at $4.2 million (the "BellSouth Shares"). The Company has
agreed to register the BellSouth Shares on one occasion at BellSouth's request,
subject to certain terms and conditions. Further, BellSouth may elect
18
<PAGE> 21
to offer the BellSouth Shares for sale during certain other offerings of
Company securities. After completing the purchase and conversion of the HNS
Debenture, the Company owned approximately 93% of HNS.
Immediately thereafter, the Company acquired the minority interest in HNS
by exercising an option under the HNS operating agreement to call (the "Call")
the remaining 585,335 shares of HNS held by minority shareholders (which
included directors and officers of the Company) and exchanged the HNS shares
for cash of approximately $1.6 million or $2.66 per share, an identical amount
paid to BellSouth. The following executive officers, directors and owners of 5%
or more of the voting securities of the Company also owned the number of HNS
common shares opposite their names, which shares were converted into cash: Mr.
Howle (50,000 shares), Mr. Leach (35,714 shares), Mr. Davis (35,714 shares),
Mr. Hart (8,349 shares), Mr. Katz (2,500 shares), Mr. King (4,286 shares), Dr.
Konsynski (4,000 shares) and Vulcan Ventures (76,429 shares). As a result of
these transactions, the Company became the sole shareholder of HNS. The
Company also exchanged the outstanding options granted under the Amended and
Restated HNS Stock Option Plan (the "HNS Plan") for options to purchase shares
of Common Stock under the 1996 Plan. The following executive officers and
directors also held options to purchase HNS shares under the HNS Plan, which
options were converted into options for the number of shares of Common Stock
and at the exercise price set forth opposite their names: Mr. Leach (option for
56,250 shares at $17.67 per share), Mr. Davis (option for 56,250 shares at
$16.49 per share), Dr. Konsynski (option for 4,219 shares at $16.15 per share
and option for 5,625 shares at $16.49 per share).
The purchase price of the HNS Debenture was determined in arms-length
negotiations between the parties. A member of the Board of Directors of
Harbinger ("Harbinger Director") and certain employees or affiliates of
BellSouth were members of the HNS Board of Managers. The Harbinger Director
abstained from voting on the acquisition of the Debenture at the Company's
Board meeting and from approving the Call at the HNS meeting of Managers.
The Company and HNS entered into several agreements effective May 1995 for
the Company to receive certain rights and provide products and services to HNS.
Under a Software License Agreement, HNS granted the Company the non-exclusive
right to license and distribute HNS products, if any, which may have been
derived from the Company's products, for a royalty determined by the Company
and HNS in connection with such software products released by HNS. Also under
the Software License Agreement, the Company provided HNS a right to license and
distribute certain Company software programs and HNS paid the Company a royalty
based on HNS's software revenues derived from Company products. Under a
Management Agreement and a Development Agreement, the Company provided various
management and development services to HNS in connection with its general
management, the planning and execution of marketing and sales activities, and
the development of software products in exchange for payment by HNS of
specified costs of the Company's personnel performing such services and
reimbursement of associated expenses. In accordance with a System Operation
Agreement, the Company's value-added network was available to HNS under certain
conditions at a flat monthly fee and a monthly royalty based on a percentage of
network fees generated by HNS customers. Amounts charged to HNS by the Company
for services provided during the periods ending December 31, 1996 and 1995 were
$1,785,000 and $324,000, respectively. Additionally, the Company paid expenses
of $505,000 and $413,000 during such periods on behalf of HNS. These amounts
subsequently were reimbursed by HNS. The Company recognized royalty revenue
from HNS of $1,199,000 for the year ended December 31, 1996 related to HNS's
licensing of products which include the Company's technology and for referral
fees. These royalty revenues and referral fees from HNS were determined based
on a royalty agreement between the Company and HNS. At December 31, 1996, the
Company had an amount due from HNS of approximately $1,760,000 for services
provided and expenses incurred by the Company, and for certain direct expenses
incurred by the Company on behalf of HNS and for the royalty revenue earned
from HNS.
19
<PAGE> 22
SSA ALLIANCE
In July 1995, the Company entered into an Alliance Agreement to form a
strategic alliance relationship with SSA (the "SSA Alliance") pursuant to which
the Company acquired from SSA computer software that performs EDI functions on
IBM AS/400 workstations (the "AS/400 Software") and related computing
equipment and licensed to SSA the AS/400 Software, the Company's UNIX and
PC-based EDI software products, and related tools and utilities (the
"Licensed Software"). Roger E. Covey, Chief Executive Officer and Chairman
of the Board of Directors of SSA, resigned from the Board of Directors of the
Company in October 1996. SSA agreed to exercise its best efforts to market the
Licensed Software to clients who use SSA's BPCS software and to pay the Company
royalties based upon net fees earned by SSA from the sale of the Licensed
Software. Royalties are payable when net fees are collected. Net fees include
software license fees, software maintenance and support fees and platform
migration fees earned by SSA, net of taxes and net of commissions payable to
SSA's subsidiaries and affiliated distributors. SSA also agreed to pay minimum
royalties of $1.4 million in 1995 and $5.7 million in 1996. Payments in excess
of the royalties actually earned to satisfy minimum royalties will serve as a
credit against SSA's royalty obligations after 1996. The Company will pay SSA
a 15% referral fee for revenue derived from the sale of Licensed Software by
the Company to non-BPCS customers referred by SSA during the period from
January 1, 1997 through December 31, 2000.
As consideration for these agreements, Harbinger issued to SSA (i) 825,000
shares of Common Stock and (ii) 4.0 million shares of Harbinger's Zero Coupon
Preferred Stock. Holders of shares of the Zero Coupon Preferred Stock have no
voting rights, are not entitled to dividends and holders of vested shares of
Zero Coupon Preferred Stock have preference over holders of shares of Common
Stock upon the Company's dissolution. SSA advised the Company that it has sold
all such shares of Common Stock. The Company and SSA have defined targeted
royalties for 1997, 1998, 1999 and 2000 (each a "Vesting Year"). Following
each Vesting Year, (i) up to 1,000,000 shares of Zero Coupon Preferred Stock
will be eligible to vest; (ii) the number of shares that actually vest will be
an amount (not to exceed 1,000,000) determined by multiplying 1,000,000 times a
fraction, (1) the numerator of which shall be the amount determined by
subtracting 80% from the percentage (up to 100%) of targeted royalties actually
earned, and (2) the denominator of which shall be 20%; (iii) the Company will
redeem the vested shares; and (iv) the eligible shares that do not vest will be
forfeited. The redemption price, at SSA's discretion, either will be cash in
the amount of $1.00 per share for each vested share of Zero Coupon Preferred
Stock redeemed, or issuance to SSA of a number of shares of Harbinger's Common
Stock equal to the Zero Coupon Preferred Stock issue price of $1.00 per share
for all vested shares, divided by the then current fair market value of
Harbinger's Common Stock (determined as the closing bid price for shares of
Common Stock at the close of business on December 31 of such Vesting Year).
The Alliance Agreement will continue through December 31, 2000 and
thereafter on an annual basis until either party terminates the agreement. The
Alliance Agreement also will continue for one year following expiration of its
term without renewal for the purpose of giving the parties adequate time to
transfer then existing license and support arrangements. During the term of the
Alliance Agreement, Harbinger has agreed that, at its option, it will provide
SSA with future product modifications and upgrades, architect the Licensed
Software to facilitate foreign language translations, provide training and
telephone support to SSA personnel, revise the Licensed Software in the manner
requested by SSA to maintain product competitiveness (or allow SSA to make such
revisions), and modify the products to interface with specified database
programs, perform designated client/server functions, offer enhanced graphical
user interfaces, and conform to specified industry data communication
standards.
During the term of the Alliance Agreement, SSA will have registration
rights with respect to any shares of Common Stock issuable upon redemption of
the Zero Coupon Preferred Stock. SSA also will have the right during the term
of the Alliance Agreement to designate one member of Harbinger's Board of
Directors.
OTHER TRANSACTION
The Company has purchased insurance on the lives of Messrs. Howle and
Leach and one other officer. A portion of the proceeds payable on the death of
Messrs. Howle and Leach will be used, at the discretion of the deceased's
estate, to purchase shares of Common Stock owned by the deceased at the time of
his death.
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<PAGE> 23
PROPOSAL 2
AMENDMENT TO THE 1996 STOCK OPTION PLAN
The Board has approved and recommends to the Shareholders that they
approve a proposal to amend the Company's 1996 Stock Option Plan to increase
the number of shares of Common Stock available for grant under such plan from
2,625,000 to 4,125,000, an increase of 1,500,000 shares of Common Stock. As of
March 18, 1997, there were approximately 1,992,000 outstanding options to
purchase shares of Common Stock under the 1996 Plan. Therefore, in the event
that the proposed amendment is approved, approximately 2,133,000 options would
remain available for grant under the 1996 Plan. The text of the proposed
amendment to the 1996 Plan is set forth in Annex A to this Proxy Statement. The
1996 Plan is described above under "Proposal 1--Stock Option Plans--Employee
Stock Option Plans" and is qualified in its entirety by reference to the text
of the 1996 Plan.
The proposed amendment to the 1996 Plan will be adopted upon receiving the
affirmative vote of holders of a majority of the shares present or represented
by proxy at the Annual Meeting. Proxies will be voted in accordance with the
specifications marked thereon, and if no specifications is made, will be voted
"FOR" adoption of the proposed amendment to the 1996 Plan. The Board has
determined that the amendment to the 1996 Plan is in the best interest of the
Company and its shareholders. The proposed amendment would provide additional
shares for grant to officers, directors, consultants and key employees of the
Company. The Board believes that grants of stock options are an effective
method to attract and retain officers, directors, consultants and key employees
and that the availability of shares for future grants under the plan is
important to the Company's business prospects and operations.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
In January 1997, the Board of Directors appointed the accounting firm of
KPMG Peat Marwick LLP to serve as its independent auditor. The appointment of
this firm was recommended to the Board by its Audit Committee. A proposal to
ratify that appointment will be presented at the Meeting. Representatives of
KPMG Peat Marwick LLP are expected to be present at the meeting. They will
have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from shareholders.
The Board of Directors recommends that the shareholders vote FOR
ratification of selection of independent auditors.
SHAREHOLDER PROPOSALS
Rules of the Securities and Exchange Commission require that any proposal
by a shareholder of the Company for consideration at the 1998 Annual Meeting of
Shareholders must be received by the Company no later than December 4, 1997, if
any such proposal is to be eligible for inclusion in the Company's proxy
materials for its 1998 Annual Meeting. Under such rules, the Company is not
required to include shareholder proposals in its proxy materials unless certain
other conditions specified in such rules are met.
In order for a shareholder to bring any business or nominations before the
1997 Annual Meeting of Shareholders, certain conditions set forth in Sections
16 and 17 of the Company's Bylaws must be complied with, including, but not
limited to, delivery of notice to the Company not less than 30 days prior to
the meeting as originally scheduled; provided, however, that in the event that
less than 30 days notice of the date of the meeting is given or made to the
shareholders, notice by the shareholders to be timely must be received not
later than the close of business on the 10th day following the date on which
such notice of the date of meeting was mailed.
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<PAGE> 24
OTHER MATTERS
Management of the Company is not aware of any other matter to be presented
for action at the Annual Meeting other than those mentioned in the Notice of
Annual Meeting of Shareholders and referred to in this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ C. Tycho Howle
-------------------------
C. Tycho Howle,
Chairman
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<PAGE> 25
ANNEX A
TEXT OF PROPOSED AMENDMENT TO THE
1996 STOCK OPTION PLAN
SECTION 1. Section 3.1 of the Plan is hereby amended by deleting the
first sentence of Section 3.1 of the Plan in its entirety and substituting in
lieu thereof the following:
"3.1 SHARES RESERVED FOR ISSUANCE. Subject to any
antidilution adjustment pursuant to Section 3.2, the maximum
number of Shares that may be subject to Options granted hereunder
shall not exceed 4,125,000, plus the number of Prior Plan Shares."
A-1
<PAGE> 26
APPENDIX
HARBINGER CORPORATION
1055 LENOX PARK BLVD.
ATLANTA, GA 30319
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Tycho Howle, David T. Leach and Joel G.
Katz, and each of them, with full power of substitution, as Proxy, to represent
and vote all the shares of Common Stock of Harbinger Corporation held of record
by the undersigned on March 14, 1997, at the annual meeting of shareholders to
be held on April 25, 1997 or any adjournment thereof, as designated on the
reverse side hereof and in their discretion as to other matters.
Please sign exactly as name appears on the reverse side. When shares are held
by joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
The shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" all nominees in Proposal 1 and "FOR" Proposals 2
and 3.
[ ] I PLAN TO ATTEND MEETING
THE BOARD OR DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN PROPOSAL 1 AND
"FOR" PROPOSALS 2 AND 3.
1. Election of the following Nominees as Directors:
King, Bell, Davis, Konsynski, Neugebauer, Nederlof
<TABLE>
<S> <C> <C>
[ ] FOR all Nominees [ ] WITHHELD for all
Nominees
</TABLE>
INSTRUCTIONS: Withhold for the following only (Write the name of the
nominee(s) in the space below)
- --------------------------------------------------------------------------------
(continued on other side)
2. Approval of modification to the Company's 1996 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of Selection of KPMG Peat Marwick LLP as Independent Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE MARK YOUR CHOICE LIKE
THIS IN [X] BLUE OR BLACK INK,
Date
---------------------------
Signature
----------------------
-------------------------------
Signature if held jointly
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ABOVE AND RETURN IN THE ENCLOSED
ENVELOPE.
