<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[MARK ONE]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------ ------------
COMMISSION FILE NUMBER 0-26298
HARBINGER CORPORATION
(Exact name of registrant as specified in its charter)
GEORGIA 58-1817306
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1277 LENOX PARK BOULEVARD 30319
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 467-3000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares of the issuer's class of capital stock outstanding as of
August 4, 1998, the latest practicable date, is as follows: 42,153,610 shares of
Common Stock, $.0001 par value.
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FORM 10-Q
PAGE 1 OF 17
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HARBINGER CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - (unaudited) June 30, 1998
and December 31, 1997...................................................... 3
Consolidated Statements of Operations (unaudited) - Three
Months and Six Months Ended June 30, 1998 and 1997......................... 4
Consolidated Statements of Comprehensive Income (Loss) (unaudited) -
Three Months and Six Months Ended June 30, 1998 and 1997................... 5
Condensed Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended June 30, 1998 and 1997.................................... 6
Notes to Consolidated Financial Statements (unaudited)......................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............................. 16
Item 6. Exhibits and Reports on Form 8-K................................................. 16
SIGNATURES................................................................................ 17
</TABLE>
FORM 10-Q
PAGE 2 OF 17
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
HARBINGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 67,477 $ 69,811
Short-term investments ..................................... 37,647 32,333
Accounts receivable, less allowances for returns and
doubtful accounts of $2,587 at June 30, 1998 and
$2,790 at December 31, 1997 .............................. 29,073 35,017
Royalties receivable ....................................... 7,130 5,364
Deferred income taxes ...................................... 1,892 1,892
Other current assets ....................................... 5,201 3,431
--------- ---------
Total current assets ................................... 148,420 147,848
--------- ---------
Property and equipment, less accumulated depreciation
and amortization ........................................... 21,080 18,167
Intangible assets, less accumulated amortization .............. 17,008 16,464
Deferred income taxes ......................................... 909 909
Other non-current assets ...................................... 232 171
========= =========
$ 187,649 $ 183,559
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $ 4,662 $ 8,734
Accrued expenses ........................................... 24,001 25,835
Deferred revenues .......................................... 19,130 18,349
Current portion of long-term debt .......................... 205 623
--------- ---------
Total current liabilities .............................. 47,998 53,541
--------- ---------
Commitments and contingencies
Redeemable preferred stock:
Zero Coupon, $1.00 redemption value; 4,000,000
shares issued and outstanding at June 30, 1998 and
December 31, 1997 ........................................ -- --
Shareholders' equity:
Common stock, $0.0001 par value; 100,000,000 shares
authorized, 41,979,331 shares and 40,827,856 shares issued
and outstanding at June 30, 1998 and December 31, 1997 ... 4 4
Additional paid-in capital ................................. 199,214 189,841
Accumulated deficit ........................................ (58,194) (58,945)
Accumulated other comprehensive loss ....................... (1,373) (882)
--------- ---------
Total shareholders' equity ............................. 139,651 130,018
--------- ---------
$ 187,649 $ 183,559
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 3 OF 17
<PAGE> 4
HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ---------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Services ................................................ $ 22,619 $ 15,095 $ 43,293 $ 29,845
Software ................................................ 11,650 13,322 22,076 22,892
-------- -------- -------- --------
Total revenues ........................................ 34,269 28,417 65,369 52,737
-------- -------- -------- --------
Direct costs:
Services ................................................ 9,028 5,206 16,688 10,042
Software ................................................ 1,000 2,159 1,979 4,005
-------- -------- -------- --------
Total direct costs .................................... 10,028 7,365 18,667 14,047
-------- -------- -------- --------
Gross margin ....................................... 24,241 21,052 46,702 38,690
-------- -------- -------- --------
Operating costs:
Selling and marketing ................................... 7,769 6,657 14,495 12,475
General and administrative .............................. 6,033 5,267 11,519 10,077
Depreciation and amortization ........................... 2,098 1,622 4,117 3,213
Product development ..................................... 2,628 3,739 5,333 7,833
Charge for purchased in-process product development,
write-off of software development costs, restructuring,
acquisition related and other one-time charges ........ 5,010 -- 13,049 16,236
-------- -------- -------- --------
Total operating costs .............................. 23,538 17,285 48,513 49,834
-------- -------- -------- --------
Operating income (loss) ............................ 703 3,767 (1,811) (11,144)
Interest income, net ........................................ (1,265) (695) (2,578) (1,425)
Equity in losses of joint ventures .......................... -- 35 -- 176
Minority interest (income) loss ............................. -- 3 -- (2)
-------- -------- -------- --------
Income (loss) from continuing operations before
income taxes .......................................... 1,968 4,424 767 (9,893)
Income tax expense .......................................... 9 1,688 145 1,353
-------- -------- -------- --------
Income (loss) from continuing operations ................ 1,959 2,736 622 (11,246)
Loss (income) from discontinued operations .................. -- 12 -- (35)
-------- -------- -------- --------
Income (loss) before extraordinary item ................. 1,959 2,724 622 (11,211)
Extraordinary loss on debt extinguishment ................... -- -- -- 2,419
-------- -------- -------- --------
Net income (loss) applicable to common shareholders ..... $ 1,959 $ 2,724 $ 622 $(13,630)
======== ======== ======== ========
Basic earnings per common share:
Income (loss) from continuing operations ................ $ 0.05 $ 0.07 $ 0.01 $ (0.31)
Loss (income) from discontinued operations .............. -- -- -- --
Extraordinary loss on debt extinguishment ............... -- -- -- (0.06)
-------- -------- -------- --------
Net income (loss) per common share .................... $ 0.05 $ 0.07 $ 0.01 $ (0.37)
======== ======== ======== ========
Weighted average number of common shares outstanding ........ 41,853 36,847 41,451 36,639
======== ======== ======== ========
Earnings per common share assuming dilution:
Income (loss) from continuing operations ................ $ 0.04 $ 0.07 $ 0.01 $ (0.31)
Loss (income) from discontinued operations .............. -- -- -- --
Extraordinary loss on debt extinguishment ............... -- -- -- (0.06)
-------- -------- -------- --------
Net income (loss) per common share .................... $ 0.04 $ 0.07 $ 0.01 $ (0.37)
======== ======== ======== ========
Weighted average number of common shares outstanding assuming
dilution ................................................ 44,480 38,987 44,103 36,639
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 4 OF 17
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HARBINGER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) applicable to common shareholders $ 1,959 $ 2,724 $ 622 $(13,630)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments ...... (286) (93) (491) (198)
-------- -------- -------- --------
Comprehensive income (loss) ................. $ 1,673 $ 2,631 $ 131 $(13,828)
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 5 OF 17
<PAGE> 6
HARBINGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows provided by operating activities ................................ $ 2,665 $ 1,721
-------- --------
Cash flows from investing activities:
Short-term investments ................................................. (5,220) 4,793
Purchases of property and equipment .................................... (6,725) (4,692)
Additions to software development costs ................................ (2,042) (2,485)
Investment in acquisitions ............................................. -- (1,932)
-------- --------
Net cash used in investing activities ................................ (13,987) (4,316)
-------- --------
Cash flows from financing activities:
Exercise of stock options and warrants and issuance of stock under
employee stock purchase plan ......................................... 9,373 2,626
Principal payments under notes payable, long-term debt and capital lease
obligations .......................................................... (418) (461)
Repayments under credit agreement ...................................... -- (1,778)
Purchase of subordinated debenture ..................................... -- (1,500)
-------- --------
Net cash provided by (used in) financing activities .................. 8,955 (1,113)
-------- --------
Net decrease in cash and cash equivalents .................................. (2,367) (3,708)
Cash and cash equivalents at beginning of period ........................... 69,811 35,697
Effect of exchange rates on cash held in foreign currencies ................ (19) (55)
Cash received from acquisitions ............................................ 52 3,322
-------- --------
Cash and cash equivalents at end of period ................................. $ 67,477 $ 35,256
======== ========
Supplemental disclosures:
Cash paid for interest ................................................. $ 50 $ 45
======== ========
Cash paid for income taxes ............................................. $ 463 $ --
======== ========
Supplemental disclosures of noncash investing and financing activities:
Purchase of subordinated debenture in exchange
for common stock ..................................................... $ -- $ 4,200
======== ========
Acquisition of minority interest in exchange for
issuance of options .................................................. $ -- $ 2,216
======== ========
Acquisition of businesses in exchange for assumption of
liabilities and issuance of common stock ............................. $ -- $ 454
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
FORM 10-Q
PAGE 6 OF 17
<PAGE> 7
HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The financial
information included herein is unaudited; however, the information reflects all
adjustments (consisting solely of normal recurring adjustments) that are, in the
opinion of management, necessary to a fair presentation of the financial
position, results of operations, and cash flows for the interim periods.
Operating results for the three months and six months ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in Harbinger Corporation's
("Harbinger" or the "Company") Form 10-K for the year ended December 31, 1997
and the Company's current reports on Form 8-K dated February 24, 1998 and May
26, 1998.
All share, per share and shareholders' equity amounts in the unaudited
consolidated financial statements have been retroactively restated to reflect a
three-for-two stock split in the form of a stock dividend paid on May 15, 1998
(see Note 4).
REVENUE RECOGNITION
On January 1, 1998, the Company adopted Statement of Position 97-2,
Software Revenue Recognition, issued by the Accounting Standards Executive
Committee in October 1997, effective for financial statements for fiscal years
beginning after December 15, 1997. The implementation of this statement did not
have a material impact on the Company's unaudited consolidated financial
statements for the three-month and six-month periods ended June 30, 1998.
COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, issued by the
Financial Accounting Standards Board ("FASB") in June 1997, effective for fiscal
years beginning after December 15, 1997. Comprehensive income includes all
changes in equity during a period except those resulting in investments by
owners and distributions to owners.
OTHER
The Company continues to evaluate the requirements of Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, issued by the FASB in June 1997, effective
for fiscal years beginning after December 15, 1997. The provisions of this
standard do not apply to interim periods in the year of adoption. The Accounting
Standards Executive Committee has issued Statement of Position 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use,
effective for fiscal years beginning after December 15, 1998. The Company
currently anticipates early adoption of this standard, possibly beginning in the
third quarter of 1998.
FORM 10-Q
PAGE 7 OF 17
<PAGE> 8
HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
2. ACQUISITION
Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI
Works!"), a Texas limited liability company, for 194,497 shares of the Company's
common stock in a transaction accounted for using the pooling-of-interests
method of accounting with a per-share value of $23.14. The EDI Works! business
combination is not material, and therefore has been accounted for as an
immaterial pooling with EDI Works! retained earnings of $130,000 at December 31,
1997 being credited directly to the Company's accumulated deficit effective
January 1, 1998. The results of operations of EDI Works! are included in the
Company's consolidated statement of operations for the six months ended June 30,
1998.
In connection with the EDI Works! acquisition, the Company incurred a
charge of $758,000 for acquisition-related expenses, asset write downs and
integration costs in the consolidated statement of operations for the six months
ended June 30, 1998.
3. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF
SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND
OTHER ONE-TIME CHARGES
In connection with the acquisitions made in 1998 and 1997, the Company
incurred charges for purchased in-process product development, write-off of
software development costs, restructuring, acquisition related and other
one-time charges ("acquisition and integration related charges"). A summary of
the components is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
------- -------- ------- -------
<S> <C> <C> <C> <C>
In-process product development .... $ -- $ -- $ -- $ 2,715
Integration costs and non recurring
one-time charges ............... 4,645 -- 11,025 5,993
Transaction charges ............... 250 -- 638 4,904
Intangible asset write downs ...... -- -- -- 2,322
Asset write downs ................. 115 -- 266 302
Restructuring charges ............. -- -- 1,120 --
------- -------- ------- -------
$ 5,010 $ -- $13,049 $16,236
======= ======== ======= =======
</TABLE>
Approximately $1.7 million of the costs and expenses incurred in the
three months ended June 30, 1998 and $3.7 million for the six months ended June
30, 1998 in connection with recent acquisitions included certain internal
expense allocations which may recur in other expense categories in the future,
potentially resulting in an increase in such expense categories as a percentage
of total revenues.
4. SHAREHOLDERS' EQUITY
On March 31, 1998, the Company issued 194,497 shares of the Company's
common stock as consideration related to the Company's acquisition of EDI Works!
(See Note 2).
On April 24, 1998, the Board of Directors declared a three-for-two
stock split in the form of a stock dividend on the Company's common stock
payable on May 15, 1998, to shareholders of record on May 1, 1998. All share,
per share and shareholders' equity amounts included in the Company's
consolidated financial statements have been retroactively restated to reflect
the split for all periods presented.
FORM 10-Q
PAGE 8 OF 17
<PAGE> 9
HARBINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
5. COMMITMENTS
During the first quarter ended March 31, 1998, the Company entered into
agreements with certain vendors to supply services to the Company related to the
integration of its recent acquisitions. The remaining commitment for such
agreements at June 30, 1998 is approximately $2.9 million.
6. SUBSEQUENT EVENT
Effective July 9, 1998, the Company acquired substantially all of the
assets of the Materials Management Division of MACTEC, Inc., located in Tulsa,
Oklahoma., for approximately $3.5 million in cash, subject to certain
post-closing adjustments. The Company will record the acquisition using the
purchase method of accounting, with approximately $3.5 million expected to be
recorded to goodwill and amortized ratably over 10 years.
FORM 10-Q
PAGE 9 OF 17
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto included elsewhere
herein and the Company's Form 10-K for the year ended December 31, 1997 and the
Company's current reports on Form 8-K dated February 24, 1998 and May 26, 1998.
OVERVIEW
Harbinger Corporation (the "Company") generates revenues from various
sources, including revenues for services and license fees for software. Revenues
for services principally include subscription fees for transactions on the
Company's Value Added Network ("VAN"), software maintenance and implementation
charges and charges for consulting and training services. Subscription fees are
based on a combination of monthly access charges and transaction-based usage
charges and are recognized based on actual charges incurred each month. Software
maintenance and implementation revenues represent recurring charges to customers
and are deferred and recognized ratably over the service period. Revenues for
consulting and training services are based on actual services rendered and are
recognized as services are performed. License fees for software are generally
recognized upon shipment, net of estimated returns. Software revenues include
royalty revenues under distribution agreements with third parties which are
recognized either on shipment of software to a distributor or upon sales to end
users by a distributor depending on the terms of the distribution agreement. In
1998 the Company adopted Statement of Position 97-2, Software Revenue
Recognition, issued by the Accounting Standards Executive Committee. The
implementation of this statement did not have a material impact on the Company's
consolidated financial statements for the period ended June 30, 1998.
During the first half of 1998, the Company continued to work through
integration issues associated with its three acquisitions made between October
1997 and March 1998. In the three months ended June 30, 1998 the Company
incurred $5.0 million in acquisition and integration related and other one-time
charges associated with these recent acquisitions. These costs related to
business combinations include activities such as cross training, planning,
product integration and marketing ("Integration Activities"). Due to Integration
Activities in the six months ended June 30, 1998, certain internal expense
allocations ("Integration Activity Costs") included in the acquisition and
integration related charges may recur in other expense categories in the future
and may result in an increase in some expense categories as a percentage of
total revenues. The total acquisition and integration related charges for the
six months ended June 30, 1998 and 1997 was $13.0 million and $16.2 million,
respectively. The Company expects to incur additional merger related charges
from the completed acquisitions totaling $2.9 million in subsequent quarters
of 1998.
1998 ACQUISITION
Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI
Works!"), a Texas limited liability company, for 194,497 shares of the Company's
common stock in a transaction accounted for using the pooling-of-interests
method of accounting. The EDI Works! business combination is not material, and
therefore has been accounted for as an immaterial pooling. The results of
operations of EDI Works! are included in the Company's consolidated statement of
operations for the six months ended June 30, 1998.
In connection with the EDI Works! acquisition, the Company incurred a
charge of $323,000 for acquisition related expenses, asset write downs and
integration costs in the consolidated statement of operations for the three
months ended March 31, 1998 and $435,000 for the three months ended June 30,
1998.
FORM 10-Q
PAGE 10 OF 17
<PAGE> 11
RESULTS OF OPERATIONS
REVENUES
Total revenues increased 24% from $52.7 million in the six months ended
June 30, 1997 to $65.4 million in the same period in 1998. Revenues for services
increased 45% from $29.8 million in the six months ended June 30, 1997 to $43.3
million in the same period in 1998. This increase is attributable to growth in
VAN fees, increased professional services, increased maintenance and
installation revenues as well as three acquisitions made in the last 12 months,
of which two were treated as immaterial poolings for accounting purposes and one
was a purchase. Revenue from software sales decreased 4% from $22.9 million in
the six months ended June 30, 1997 to $22.1 million in the same period in 1998.
The overall decrease in software sales for the six months ended June 30, 1998
compared to the same period in 1997 was heavily impacted by a decline in
software sales in the second quarter 1998. Several factors contributed to the
decline, including the Company's inability to ship $1.1 million in software
orders placed in the second quarter. The decline for the six months of 1998 was
partially offset by a first quarter 1998 increase in software sales of 9%
compared to the first quarter of 1997.
Total revenues increased 21% from $28.4 million in the three months
ended June 30, 1997 to $34.3 million in the same period in 1998. Revenues for
services increased 50% from $15.1 million in the three months ended June 30,
1997 to $22.6 million in the same period in 1998. This increase is attributable
to growth in VAN fees, increased professional services, increased maintenance
and installation revenues as well as three acquisitions made in the last 12
months, of which two were treated as immaterial poolings for accounting purposes
and one was a purchase. Revenues from software license fees decreased 13% from
$13.3 million in the three months ended June 30, 1997 to $11.6 million in the
same period in 1998 primarily as a result of missed shipments, as discussed
above, plus a modest decline in sales of the Company's PC product lines.
DIRECT COSTS
Direct costs for services increased from $10 million, or 33.6% of
services revenues, in the six months ended June 30, 1997, to $16.7 million, or
38.5% of services revenues, in the six months ended June 30, 1998. The increase
in direct costs for services as a percentage of services revenues reflects a
modest decrease in professional service margins as a result of nonbillable work
performed by the professional services staff for both internal and external
projects and the use of higher cost outside contractors. The Company expects the
use of outside contractors to decrease by the end of 1998. This increase in
direct costs was partially offset by the impact of Integration Activity Costs.
Direct costs for software decreased from $4.0 million, or 17.5% of software
revenues, in the six months ended June 30, 1997, to $2.0 million, or 8.9% of
software revenues, in the six months ended June 30, 1998. The decrease in direct
software costs as a percentage of software revenues from the first six months of
1997 compared to the comparable period of 1998 primarily reflects the effects of
a decrease in software amortization in 1998 as a result of write-offs of
capitalized software development in connection with certain business
combinations in 1997 and a decrease in royalty fees paid by the Company for the
use of third parties' products embedded in the Company's products.
Direct costs for services increased from $5.2 million, or 34.5% of
services revenue, in the three months ended June 30, 1997, to $9.0 million, or
39.9% of services revenue, in the three months ended June 30, 1998. The increase
in direct costs for services as a percentage of services revenues reflects a
modest decrease in professional service margins as a result of nonbillable work
performed by the professional services staff for both internal and external
projects and the use of higher cost outside contractors. This increase in direct
costs was partially offset by the impact of Integration Activity Costs. Direct
costs for software decreased from $2.2 million, or 16.2% of software revenues,
in the three months ended June 30, 1997, to $1.0 million, or 8.6% of software
revenues, in the three months ended June 30, 1998, primarily as a result of a
decrease in software amortization in 1998 as a result of write-offs of
capitalized software development in connection with certain business
combinations in 1997 and a decrease in royalty fees paid by the Company for the
use of third parties' products embedded in the Company's products.
FORM 10-Q
PAGE 11 OF 17
<PAGE> 12
SELLING AND MARKETING
Selling and marketing expenses increased 16% from $12.5 million, or
23.7% of revenues, in the six months ended June 30, 1997 to $14.5 million, or
22.2% of revenues, in the six months ended June 30, 1998. For the second
quarters, selling and marketing expenses increased 17% from $6.7 million, or
23.4% of revenues, in the three months ended June 30, 1997 to $7.8 million, or
22.7% of revenues, in the three months ended June 30, 1998. For both the
six-month and three-month period comparisons, the increase in expenses is
primarily due to increased sales and marketing personnel. The decrease in
selling and marketing expenses as a percentage of revenues is primarily due to
the effect of increased revenues, efficiencies gained through recent mergers and
the effect of Integration Activity Costs.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 14% from $10.1 million in
the six months ended June 30, 1997 to $11.5 million in the six months ended June
30, 1998. As a percentage of revenues, these expenses decreased from 19.1% of
revenues in the six months ended June 30, 1997 to 17.6% of revenues in the six
months ended June 30, 1998. For the second quarters, general and administrative
expenses increased 15% from $5.3 million in the three months ended June 30, 1997
to $6.0 million in the three months ended June 30, 1998. As a percentage of
revenues, these expenses decreased from 18.5% of revenues in the three months
ended June 30, 1997 to 17.6% of revenues in the three months ended June 30,
1998. For both the six-month and three-month period comparisons, the decrease in
general and administrative expenses as a percentage of revenues reflects
efficiencies gained in consolidation of merged companies over the past year and
the effect of Integration Activity Costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased 28% from $3.2 million in the
six months ended June 30, 1997 to $4.1 million in the six months ended June 30,
1998. As a percentage of revenues, these expenses increased from 6.1% of
revenues in the six months ended June 30, 1997 to 6.3% of revenues in the six
months ended June 30, 1998. For the second quarters, depreciation and
amortization increased 29% from $1.6 million in the three months ended June 30,
1997 to $2.1 million in the three months ended June 30, 1998. As a percentage of
revenues, these expenses were 5.7% and 6.1% for the three months ended June 30,
1997 and June 30, 1998, respectively. The increase in depreciation and
amortization for the six-month and three-month periods of 1998 compared to 1997,
respectively, is a result of additions to property, plant and equipment,
primarily in computer hardware and software.
PRODUCT DEVELOPMENT
Total expenditures for product development, including capitalized
software development costs, decreased from $10.3 million in the six months ended
June 30, 1997 to $7.3 million in the same period in 1998. The Company
capitalized product development costs of $2.5 million and $2.0 million in the
six months ended June 30, 1997 and 1998, respectively, which represented 24.1%
and 27.7% of total expenditures for product development in these respective
periods. As a percentage of total revenues, product development expenses
decreased from $7.8 million, or 14.8% of revenues, in the six months ended June
30, 1997, to $5.3 million, or 8.2% of revenues, in the six months ended June 30,
1998, reflecting efficiencies from rationalizing product lines for the merged
companies and the effect of Integration Activity Costs. Amortization of
capitalized software development costs is charged to direct costs of software
revenues and totaled $1.8 million and $575,000, in the six months ended June 30,
1997 and 1998, respectively.
FORM 10-Q
PAGE 12 OF 17
<PAGE> 13
Total expenditures for product development, including capitalized
software development costs, decreased from $5.0 million in the three months
ended June 30, 1997 to $3.7 million in the same period in 1998. The Company
capitalized software development costs of $1.3 million and $1.1 million in the
three months ended June 30, 1997 and 1998, respectively, which represented 26.1%
and 29.9% of total expenditures for product development in these respective
periods. As a percentage of total revenues, product development expenses were
$3.7 million, or 13.2% of revenues, in the three months ended June 30, 1997, and
$2.6 million, or 7.7% of revenues in the three months ended June 30, 1998,
reflecting efficiencies from rationalizing product lines for the merged
companies and the effect of Integration Activity Costs. Amortization of
capitalized software development costs is charged to direct cost of software
revenues and totaled $899,000 and $307,000 in the three months ended June 30,
1997 and 1998, respectively.
CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE
DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES
Charges for purchased in-process product development, write-off of
software development costs, restructuring, acquisition related and other
one-time charges ("acquisition and integration related charges") decreased 20%
from $16.2 million for the six months ended June 30, 1997 to $13.0 million for
the comparable period in 1998. The charges in 1998 were incurred as a result of
continued efforts to integrate recent acquisitions: 1) $11 million attributable
to Premenos Technology Corp. ("Premenos") acquired on December 19, 1997, 2) $1.2
million to Atlas Products International, Limited ("Atlas") acquired on October
23, 1997, and 3) $758,000 to EDI Works!. The Company expects to incur additional
acquisition and integration related charges of $2.9 million in subsequent
periods in 1998. For the six months ended June 30, 1997 the acquisition and
integration related charges of $16.2 million were attributable to: 1) $11.9
million for Supply Tech, Inc., and 2) $4.3 million to Harbinger NET Services.
(See Note 3 to the unaudited consolidated financial statements.)
There were no acquisition and integration related charges in the
quarter ended June 30, 1997 compared to $5 million in the quarter ended June 30,
1998. The three-month 1998 charges were attributable to: 1) $ 3.9 million to
Premenos, 2) $677,000 to Atlas, and 3) $435,000 to EDI Works!
INTEREST INCOME, NET
Interest income, net, increased 81% from $1.4 million for the six
months ended June 30, 1997 to $2.6 million for the six months ended June 30,
1998. On a quarter-to-quarter comparison, interest income, net, increased 82%
from $695,000 in the second quarter of 1997 to $1.3 million in the second
quarter of 1998. The increase in all periods is due to an increase in combined
cash and cash equivalents and short-term investments from $60.0 million at June
30, 1997 to $105.1 million at June 30, 1998, primarily as a result of a
secondary stock offering in July 1997, exercises of stock options and warrants
and issuance of stock under the employee stock purchase plan in the last 12
months.
INCOME TAXES
Income tax expense decreased 89% from $1.4 million for the six months
ended June 30, 1997 to $145,000 for the six months ended June 30, 1998. For the
quarters ended June 30, 1997 and 1998 income tax expense decreased from $1.7
million to $9,000, respectively. All decreases in income tax expense are
attributable to the nondeductibility of certain expenses for tax purposes
incurred in 1997, particularly acquisition and integration related charges.
NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE
Net income (loss) applicable to common shareholders increased from a
loss of $13.6 million, or $0.37 per share, for the six months ended June 30,
1997 to net income of $622,000, or $0.01 per share, for the six months ended
June 30, 1998. Net income, adjusted to exclude acquisition and integration
related charges, and an extraordinary loss on debt extinguishment in 1997, net
of the effect of income taxes, would have been $4.0 million,
FORM 10-Q
PAGE 13 OF 17
<PAGE> 14
or $0.10 per share, for the six months ended June 30, 1997, compared to $8.6
million, or $0.19 per share, for the six months ended June 30, 1998,
representing a 115% increase from 1997 to 1998.
Net income applicable to common shareholders decreased from $2.7
million, or $0.07 per share, for the quarter ended June 30, 1997 to $1.9
million, or $0.04 per share, for the quarter ended June 30, 1998. Net income,
adjusted to exclude acquisition and integration related charges, net of the
effect of income taxes, would have been $2.7 million, or $0.07 per share, for
the quarter ended June 30, 1997, compared to $4.3 million, or $0.10 per share,
for the quarter ended June 30, 1998, representing a 57% increase from 1997 to
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased $6.1 million from $94.3 million
as of December 31, 1997 to $100.4 million as of June 30, 1998. Net cash provided
by operating activities increased 55% from $1.7 million for the six months ended
June 30, 1997 to $2.7 million for the comparable period in 1998, primarily as a
result of increased interest earnings in 1998 compared to 1997.
Net cash used in investing activities increased $9.7 million from $4.3
million for the six months ended June 30, 1997 to $14 million for the six months
ended June 30, 1998 as the Company expanded its investment in property, plant
and equipment and continued to reinvest excess cash in short-term investments.
Net cash provided by financing activities increased $10.1 million from
net cash used of $1.1 million for the six months ended June 30, 1997 to net cash
provided of $9.0 million for the six months ended June 30, 1998 as the Company
has substantially eliminated borrowings and reliance on lines of credit in 1998
compared to 1997. Additionally, in 1998, the Company continued to experience a
significant influx of cash from exercises of stock options and warrants and
issuance of stock under its employee stock purchase plan.
Management expects that the Company will continue to be able to fund
its operations, investment needs and capital expenditures through cash flows
generated from operations, cash on hand, borrowings under the Company's credit
facilities and additional equity and debt capital. Management believes that
outside sources for debt and additional equity capital, if needed, will be
available to finance expansion projects and any potential future acquisitions.
The form of any financing will vary depending upon prevailing market and other
conditions and may include short or long term borrowings from financial
institutions, or the issuance of additional equity or debt securities. However,
there can be no assurances that funds will be available on terms acceptable to
the Company. The Company does not believe that inflation has had a material
impact on its business. However, there can be no assurance that Harbinger's
business will not be affected by inflation in the future.
YEAR 2000 COMPLIANCE
The latest versions of the Company's products are designed to be Year
2000 compliant. The Company is in the process of determining the extent to which
its earlier software products as implemented in the Company's installed customer
base are Year 2000 compliant, as well as the impact of any non-compliance on the
Company and its customers. The Company currently anticipates that any problems
resulting from non-compliant products will be addressed through a combination of
product modifications as part of planned product enhancements and migration of
customers to functionally similar products which are Year 2000 compliant.
Additional efforts are being made to modify or replace other non-compliant
software, systems and equipment used by the Company internally, including third
party software, before the year 1999. In addition, the Company is in the process
of evaluating its Year 2000 readiness with respect to both information
technology ("IT") and non-IT systems on which the Company's operations rely.
Further, the Company is aware of the risk that third parties, including vendors
and customers of the Company, will not adequately address the Year 2000 problem
and the resultant potential adverse impact on the Company. The Company projects
that the majority of the remaining compliance effort will be absorbed with the
product enhancements planned for 1998, and thus management believes that the
Year 2000 problem will not have a material adverse impact on the Company's
business, operating results and financial condition, although there can be no
assurance to that effect. Regardess of whether the Company's products are Year
2000 compliant, there can be no assurance that customers will not assert Year
2000 related claims against the Company.
FORM 10-Q
PAGE 14 OF 17
<PAGE> 15
The Company believes that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company. Potential customers may also choose to defer purchasing Year
2000 compliant products until they believe it is absolutely necessary, thus
resulting in potentially stalled market sales within the industry. Conversely,
Year 2000 issues may cause other companies to accelerate purchases, thereby
causing an increase in short-term demand and a consequent decrease in long-term
demand for software products. Additionally, Year 2000 issues could cause a
significant number of companies, including current Company customers, to
reevaluate their current software needs, and as a result switch to other systems
or suppliers. Any of the foregoing could result in a material adverse effect on
the Company's business, operating results and financial condition.
FORWARD LOOKING STATEMENTS
Other than historical information contained herein, certain statements
included in this report may constitute "forward looking" statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934
related to the Company that involve risks and uncertainties including, but not
limited to, quarterly fluctuations in results, the management of growth, market
acceptance of certain products, impact of Year 2000 compliance and other risks.
For further information about these and other factors that could affect the
Company's future results, please see the Company's most recent Form 10-K filed
with the Securities and Exchange Commission. Investors are cautioned that any
forward looking statements are not guarantees of future performance and involve
risks and uncertainties and that actual results may differ materially from those
contemplated by such forward looking statements. The Company undertakes no
obligation to update or revise forward looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998 the Company adopted Statement of Position 97-2, Software
Revenue Recognition, issued by the Accounting Standards Executive Committee, and
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, issued by the Financial Accounting Standards Board. The Company
continues to evaluate the requirements of Statement of Financial Accounting
Standard No. 131, Disclosures about Segments of an Enterprise and Related
Information, which is effective for the year ending December 31, 1998 but does
not apply to interim periods in the year of adoption.
The Company currently anticipates early adoption of Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, issued by the Accounting Standards Executive
Committee effective for fiscal years beginning after December 15, 1998. The
potential impact of adopting this standard is presently not known.
FORM 10-Q
PAGE 15 OF 17
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Harbinger Corporation was held on
April 24, 1998. The results of such meeting were included in Item 4 of Company's
Form 10-Q for the quarterly period ended March 31, 1998 and are hereby
incorporated by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.1 Form of Amendment to Employment Agreement of
James Travers and Joel Katz
Exhibit 10.2 Form of Indemnification Agreement for
certain Directors and Officers of the
Company
Exhibit 10.3 Form of Indemnification Agreement for
certain Directors of the Company
Exhibit 11.1 Computation of Earnings Per Share
Exhibit 27.1 Financial Data Schedule
Exhibit 27.2 Restated Financial Data Schedule
Exhibit 99.1 Third Amendment to the Harbinger Corporation
1996 Stock Option Plan
Exhibit 99.2 Second Amendment to the Amended and Restated
Harbinger Corporation Employee Stock
Purchase Plan
Exhibit 99.3 Fourth Amendment to the Harbinger
Corporation Amended and Restated 1993 Stock
Option Plan for NonEmployee Directors
(b) Reports on Form 8-K
Form 8-K dated May 26, 1998 reporting under Item 5 the
financial information of revenues and net losses for Harbinger
Corporation for the one month ended April 30, 1998 for the
purpose of ending the "risk-sharing" period with respect to
the merger with EDI Works! L.L.C.
FORM 10-Q
PAGE 16 OF 17
<PAGE> 17
S I G N A T U R E S
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 thereunto duly authorized.
HARBINGER CORPORATION
Date: August 14, 1998 /s/ David T. Leach
------------------------------------- ---------------------------
David T. Leach
Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 /s/ Joel G. Katz
------------------------------------- ---------------------------
Joel G. Katz
Chief Financial Officer
(Principal Financial Officer;
Principal Accounting Officer)
FORM 10-Q
PAGE 17 OF 17
<PAGE> 1
EXHIBIT 10.1
AMENDMENT TO THE
EMPLOYMENT AGREEMENT
OF
----------------------------
DATED _____________ _____, 19___
THIS AMENDMENT is made this _____ day of _______, 1998, by and between
HARBINGER CORPORATION, a Georgia corporation (the "Company"), and
__________________ (the "Executive").
A. Purpose. The Executive is now employed by the Company pursuant
to an Employment Agreement dated _______________ ____, 19___
(the "Agreement") and the Company desires to provide an
incentive to the Executive to continue to devote his
disinterested attention and undistracted dedication to the
performance of his duties in the potentially disturbing
circumstances of a Change of Control of the Company.
B. Severance Benefits and Limitations on Payment. If the
Executive's employment with the Company is terminated by the
Company other than for Cause or by the Executive for Good
Reason within the period beginning ninety (90) days before and
ending one hundred and eighty (180) days after a Change of
Control, any stock options awarded the Executive which remain
outstanding and not vested as of the Date of Termination shall
be deemed vested and exercisable; provided, that acceleration
in vesting does not adversely impact the availability of
pooling of interests accounting treatment, as such
determination is made by the Board in its reasonable
discretion.
(C) Definitions. For purposes of this Amendment, the following
definitions shall apply:
1. Change of Control. A "Change of Control" shall be
conclusively deemed to have occurred if (and only if)
any of the following shall have taken place: (i) a
Change of 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
<PAGE> 2
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.
2. Date of Termination. "Date of Termination" means the
date on which a notice of termination is given either
by the Company or by the Executive.
3. Good Reason. "Good Reason" means the Executive's
termination of employment for any of the following
events, unless such event occurs with the Executive's
express prior written consent:
(a) The assignment to the Executive of any
duties materially inconsistent with, or a
diminution of, his position, duties, titles,
offices, responsibilities and status with
the Company as in effect immediately prior
to the Change of Control of the Company,
except in connection with the termination of
the Executive's employment for disability,
retirement, or Cause or as a result of the
Executive's death or termination of
employment other than for Good Reason;
(b) A reduction in the Executive's base salary
as in effect on the date of this Amendment
or as the same may be increased from time to
time;
(c) A change in the location of the Executive's
principal place of employment by more than
thirty five (75) miles from the location
where he was principally employed
immediately prior to the Change of Control;
(d) Any material breach by the Company of any
provision of this Amendment or the
Agreement; or
(e) Any failure by the Company to obtain the
assumption of the Agreement by any successor
or assign of the Company.
4. Cause. "Cause" means termination of the Executive's
employment under any one or more of the following
events:
(a) Executive's knowing and wilful misconduct
with respect to the business and affairs of
the Company;
-2-
<PAGE> 3
(b) Any material violation by Executive of any
policy of the Company relating to ethical
conduct or practices or fiduciary duties of
a similarly situated executive;
(c) Knowing and wilful material breach of any
provision of this Agreement which is not
remedied within thirty (30) days after
Executive's receipt of notice thereof;
(d) Executive's commission of a felony or any
illegal act involving moral turpitude or
fraud or Executive's dishonesty which may
reasonably be expected to have a material
adverse effect on the Company; and/or
(e) Failure to comply with reasonable directives
of the Board which are consistent with the
Executive's duties, if not remedied within
thirty (30) days after the Executive's
receipt of notice thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the ______ day of ____________, 1998.
HARBINGER CORPORATION
By:
---------------------------------------
Its:
--------------------------------------
------------------------------------------
Executive
-3-
<PAGE> 1
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made on this _____ day of ______, 19___,
between HARBINGER CORPORATION, a Georgia corporation ("HC") and ("Indemnitee").
W I T N E S S E T H:
WHEREAS, Indemnitee is a member of the Board of Directors of HC and in
such capacity performs a valuable service for HC;
WHEREAS, HC's Bylaws (the "Bylaws") authorize HC to indemnify its officers
and directors in accordance with the Official Code of Georgia Annotated (the
"Statute");
WHEREAS, Section 14-2-856 of the Statute specifically provides that the
indemnification provided under the other sections of the Statute is not
exclusive of any other rights in respect to indemnification or otherwise to
which those seeking indemnification may be entitled under any resolution
approved or ratified by the Shareholders by a majority of the votes entitled to
be cast;
WHEREAS, the shareholders of HC have authorized HC to enter into contracts
with the members of the Board of Directors of HC with respect to the
indemnification of such directors; and
WHEREAS, in order to encourage Indemnitee to continue to serve as a member
of the Board of Directors of HC and to perform other designated services for HC
at its request, HC has determined and agreed to enter into this Agreement with
Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
director of HC and the performance of such other services as requested by HC,
the parties hereby agree as follows:
1. INDEMNITY OF INDEMNITEE. HC shall defend, hold harmless and indemnify
Indemnitee to the full extent permitted by the provisions of the Statute, as
currently in effect or as it may hereafter be amended, or by the provisions of
any other statute authorizing or permitting such indemnification, whether
currently in effect or hereafter adopted.
2. ADDITIONAL INDEMNITY. Subject to the provisions of Section 3 hereof, HC
shall defend, hold harmless and indemnify Indemnitee in the event Indemnitee
was, is, or is threatened to be made a named defendant or respondent, in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (including any such action, suit or
proceeding brought by or in the right of HC), by reason of the fact that he is
or was a director of HC, or is or was serving at the request of HC as a director
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against any obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employment
benefit plan), expenses (including attorneys' fees), and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding. For purposes of this Section 2, Indemnitee shall be
considered to be serving an employee benefit plan at the request of HC if his
duties to HC also impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section 2
hereof shall be paid by HC to the extent of any liabilities incurred in a
proceeding in which Indemnitee is adjudged liable to HC or is subjected to
injunctive relief in favor of HC:
(1) for any appropriation in violation of his duties, of any business
opportunity of HC;
<PAGE> 2
(2) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(3) for the types of liability set forth in O.C.G.A. ss.14-2-832; or
(4) for any transaction from which Indemnitee received any improper
personal benefit.
4. NOTIFICATION AND DEFENSE OF CLAIM.
(a) Promptly after receipt by Indemnitee of notice of the commencement
of any action, suit or proceeding, Indemnitee will, if a claim in respect
thereto is to be made against HC under this Agreement, notify HC of the
commencement thereof, but the failure to so notify HC will not relieve it from
any liability which it may have to Indemnitee otherwise under this Agreement.
With respect to any such action, suit or proceeding as to which Indemnitee so
notifies HC:
(i) HC will be entitled to participate therein at its own expense;
and
(ii) except as otherwise provided below, to the extent that it may
desire, HC may assume the defense thereof.
(b) After notice from HC to Indemnitee of its election to assume the
defense thereof, HC will not be liable to Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by Indemnitee in connection
with the defense thereof other than reasonable costs of investigation or as
otherwise provided below. Indemnitee shall have the right to employ counsel of
his choosing in such action, suit or proceeding but the fees and expenses of
such counsel incurred after notice from HC of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment of
counsel by Indemnitee has been authorized in writing by HC, (ii) HC and
Indemnitee shall reasonably conclude that there may be a conflict of interest
between HC and Indemnitee in the conduct of the defense of such action, or (iii)
HC shall not in fact have employed counsel to assume the defense of such action,
in each of which cases the reasonable fees and expenses of Indemnitee's counsel
shall be paid by HC.
(c) HC shall not be liable to Indemnitee under this Agreement for any
amounts paid in settlement of any threatened or pending action, suit or
proceeding without its prior written consent. HC shall not settle any such
action, suit or proceeding in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's prior written consent. Neither HC
nor Indemnitee will unreasonably withhold his or its consent to any proposed
settlement.
5. PREPAYMENT OF EXPENSES. Unless Indemnitee otherwise elects, expenses
incurred in defending any civil or criminal action, suit or proceeding shall be
paid by HC in advance of the final disposition of such action, suit or
proceeding upon receipt by HC of a written affirmation of Indemnitee's good
faith belief that his conduct does not constitute behavior of the kind described
in Section 3 of this Agreement and Indemnitee furnishes HC a written
undertaking, executed personally or on his behalf, to repay any advances if it
is ultimately determined that he is not entitled to be indemnified by HC under
this Agreement.
6. CONTINUATION OF INDEMNITY. All agreements and obligations of HC
contained in this Agreement shall continue during the period Indemnitee is a
member of the Board of Directors of HC and shall continue thereafter so long as
Indemnitee shall be subject to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that Indemnitee was an officer of HC, or is or was serving at
the request of HC as a director of another corporation, partnership, joint
venture, trust or other enterprise.
<PAGE> 3
7. RELIANCE. HC has entered into this Agreement in order to induce
Indemnitee to continue as a member of the Board of Directors of HC and
acknowledges that Indemnitee is relying upon this Agreement in continuing in
such capacity.
8. SEVERABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
9. GENERAL.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia.
(b) Neither this Agreement nor any rights or obligations hereunder
shall be assigned or transferred by Indemnitee.
(c) This Agreement shall be binding upon Indemnitee and upon HC, its
successors and assigns, including successors by merger or consolidation, and
shall inure to the benefit of Indemnitee, his heirs, personal representatives
and permitted assigns and to the benefit of HC, its successors and assigns.
(d) No amendment, modification or termination of this Agreement shall
be effective unless in writing signed by both parties hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
INDEMNITEE: HARBINGER CORPORATION
By: By:
----------------------------------- -------------------------------------
Name (Print): Title:
------------------------- ----------------------------------
Date: Date:
--------------------------------- -----------------------------------
<PAGE> 1
EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made on this ____ day of
________, 19___, between HARBINGER CORPORATION, a Georgia corporation ("HC") and
("Indemnitee").
W I T N E S S E T H:
WHEREAS, Indemnitee is a member of the Board of Directors of HC and in
such capacity performs a valuable service for HC;
WHEREAS, HC's Bylaws (the "Bylaws") authorize HC to indemnify its officers
and directors in accordance with the Official Code of Georgia Annotated (the
"Statute"); and
WHEREAS, in order to encourage Indemnitee to continue to serve as a member
of the Board of Directors of HC and to perform other designated services for HC
at its request, HC has determined and agreed to enter into this Agreement with
Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
director of HC and the performance of such other services as requested by HC,
the parties hereby agree as follows:
1. INDEMNITY OF INDEMNITEE. HC shall defend, hold harmless and indemnify
Indemnitee to the full extent permitted by the provisions of the Statute, as
currently in effect or as it may hereafter be amended, or by the provisions of
any other statute authorizing or permitting such indemnification, whether
currently in effect or hereafter adopted.
2. ADDITIONAL INDEMNITY.
(a) Except as provided in subsections (d) and (e) of this Section 2
below, HC shall indemnify Indemnitee to the fullest extent permitted by the
Statute, and to the extent that applicable law from time to time in effect shall
permit indemnification that is broader than provided in this Agreement, then to
the maximum extent authorized by law, should Indemnitee be made a party to a
proceeding because he is or was a member of the Board of Directors against
liability incurred by him in the proceeding if Indemnitee acted in a manner he
believed in good faith to be in or not opposed to the best interests of HC and,
in the case of any criminal proceeding, he had no reasonable cause to be believe
his conduct was unlawful.
(b) Indemnitee's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a) of this Section 2 above.
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, be determinative that Indemnitee did not meet the standard of conduct
set forth in subsection (a) of this Section 2 above.
(d) HC shall not indemnify Indemnitee under this Agreement:
(1) In connection with a proceeding by or in the right of HC in
which Indemnitee was adjudged liable to HC; or
(2) In connection with any other proceeding in which Indemnitee was
adjudged liable on the basis that personal benefit was improperly received by
him unless, and then only to the extent that, a
<PAGE> 2
court of competent jurisdiction determines pursuant to Section 14-2-854 of the
Statute that in view of the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnification.
(e) Indemnification permitted under this Agreement in connection with a
proceeding by or in the right of HC is limited to reasonable expenses incurred
in connection with the proceeding.
3. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION.
(a) HC shall not indemnify Indemnitee under Section 2 of this Agreement
above unless a determination has been made in the specific case that
indemnification of Indemnitee is permissible in the circumstances because he has
met the standard of conduct set forth in subsection (a) of Section 2 of this
Agreement above; provided, however, that regardless of the result or absence of
any such determination, and unless limited by the Articles of Incorporation of
HC, to the extent that Indemnitee has been successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party, or in
defense of any claim, issue or matter therein, because he is or was a member of
the Board of Directors, HC shall indemnify Indemnitee against reasonable
expenses incurred by him in connection therewith.
(b) The determination specified in subsection (a) of this Section 3
shall be made:
(1) By the Board of Directors of HC by majority vote of a quorum
consisting of Directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under paragraph (1) of this
subsection (b) of this Section 3, by majority vote of a committee duly
designated by the Board of Directors (in which designation Directors who are
parties may participate), consisting solely of two or more Directors not at the
time parties to the proceeding;
(3) By special legal counsel:
(A) Selected by the Board of Directors or its committee in the
manner prescribed in paragraphs (1) and (2) of this subsection (b) of this
Section 3; or
(B) If a quorum of the Board of Directors cannot be obtained
under paragraph (1) of this subsection (b) of this Section 3 and a committee
cannot be designated under paragraph (2) of this subsection (b) of this Section
3, selected by a majority vote of the full Board of Directors (in which
selection Directors who are parties may participate); or
(4) By the shareholders of HC, but shares owned by or voted under
the control of Directors who are at the time parties to the proceeding may not
be voted on the determination.
(c) Evaluation as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is permissible, except
that if the determination is made by special legal counsel, evaluation as to
reasonableness of expenses shall be made by those entitled under paragraph (3)
of subsection (b) of this Section 3 to select counsel.
(d) If the determination to be made pursuant to Section 3(a) above has
not been made within thirty (30) days following Indemnitee's written request for
indemnification, then Indemnitee shall be deemed to have met the standard of
conduct set forth in subsection (a) of Section 3 of this Agreement. If the
determination to be made pursuant to Section 3(c) above has not been made within
thirty (30) days following Indemnitee's written request for indemnification for,
or advancement of, expenses, then the expenses claimed shall be deemed
reasonable.
<PAGE> 3
4. NOTIFICATION AND DEFENSE OF CLAIM.
(a) Promptly after receipt by Indemnitee of notice of the commencement
of any action, suit or proceeding, Indemnitee will, if a claim in respect
thereto is to be made against HC under this Agreement, notify HC of the
commencement thereof, but the failure to so notify HC will not relieve it from
any liability which it may have to Indemnitee otherwise under this Agreement.
With respect to any such action, suit or proceeding as to which Indemnitee so
notifies HC:
(1) HC will be entitled to participate therein at its own expense;
and
(2) except as otherwise provided below, to the extent that it may
desire, HC may assume the defense thereof.
(b) After notice from HC to Indemnitee of its election to assume the
defense thereof, HC will not be liable to Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by Indemnitee in connection
with the defense thereof other than reasonable costs of investigation or as
otherwise provided below. Indemnitee shall have the right to employ counsel of
his choosing in such action, suit or proceeding but the fees and expenses of
such counsel incurred after notice from HC of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment of
counsel by Indemnitee has been authorized in writing by HC, (ii) HC and
Indemnitee shall reasonably conclude that there may be a conflict of interest
between HC and Indemnitee in the conduct of the defense of such action, or (iii)
HC shall not in fact have employed counsel to assume the defense of such action,
in each of which cases the reasonable fees and expenses of Indemnitee's counsel
shall be paid by HC.
(c) HC shall not be liable to Indemnitee under this Agreement for any
amounts paid in settlement of any threatened or pending action, suit or
proceeding without its prior written consent. HC shall not settle any such
action, suit or proceeding in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's prior written consent. Neither HC
nor Indemnitee will unreasonably withhold his or its consent to any proposed
settlement.
5. PREPAYMENT OF EXPENSES.
(a) HC shall pay for or reimburse the reasonable expenses incurred by
Indemnitee resulting from Indemnitee having been a party to a proceeding in
advance of final disposition of the proceeding if:
(1) Indemnitee furnishes HC with a written affirmation of his good
faith belief that he has met the standard of conduct set forth in subsection (a)
of Section 2 above; and
(2) Indemnitee furnishes HC with a written undertaking, executed
personally or on his behalf, to repay any advances if it is ultimately
determined that he is not entitled to indemnification under this Agreement.
(b) The undertaking required by paragraph (2) of subsection (a) of this
Section 5 must be an unlimited general obligation of Indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
6. CONTINUATION OF INDEMNITY. All agreements and obligations of HC
contained in this Agreement shall continue during the period Indemnitee is a
member of the Board of Directors of HC and shall continue thereafter so long as
Indemnitee shall be subject to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that Indemnitee was an officer of HC, or is or was serving at
the request of HC as a director of another corporation, partnership, joint
venture, trust or other enterprise.
<PAGE> 4
7. RELIANCE. HC has entered into this Agreement in order to induce
Indemnitee to continue as a member of the Board of Directors of HC and
acknowledges that Indemnitee is relying upon this Agreement in continuing in
such capacity.
8. SEVERABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
9. GENERAL.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia.
(b) Neither this Agreement nor any rights or obligations hereunder
shall be assigned or transferred by Indemnitee.
(c) This Agreement shall be binding upon Indemnitee and upon HC, its
successors and assigns, including successors by merger or consolidation, and
shall inure to the benefit of Indemnitee, his heirs, personal representatives
and permitted assigns and to the benefit of HC, its successors and assigns.
(d) No amendment, modification or termination of this Agreement shall
be effective unless in writing signed by both parties hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
INDEMNITEE: HARBINGER CORPORATION
By: By:
----------------------------------- -------------------------------------
Name (Print): Title:
------------------------- ----------------------------------
Date: Date:
--------------------------------- -----------------------------------
<PAGE> 1
EXHIBIT 11.1
HARBINGER CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic:
Net income (loss) available to common
shareholders ............................. $ 1,959 $ 2,724 $ 622 $(13,630)
======== ======== ======== ========
Weighted average number of common
shares outstanding ....................... 41,853 36,847 41,451 36,639
======== ======== ======== ========
Basic earnings (loss) per share ............ $ 0.05 $ 0.07 $ 0.01 $ (0.37)
======== ======== ======== ========
Diluted :
Net income (loss) available to common
shareholders ............................. $ 1,959 $ 2,724 $ 622 $(13,630)
======== ======== ======== ========
Weighted average number of common
shares outstanding ....................... 41,853 36,847 41,451 36,639
Effect of potentially dilutive stock options 2,522 2,070 2,552 --
Effect of potentially dilative warrants .... 105 70 100 --
-------- -------- -------- --------
Weighted average number of common
shares outstanding assuming dilution ..... 44,480 38,987 44,103 36,639
======== ======== ======== ========
Diluted earnings (loss) per share .......... $ 0.04 $ 0.07 $ 0.01 $ (0.37)
======== ======== ======== ========
</TABLE>
Computational Note:
In connection with the computation of diluted earnings per share for the six
months ended June 30, 1997 all common share equivalents have been excluded
because their impact on the Company's net loss per share is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE SIX MONTHS
ENDED JUN-30-1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998<F1>
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 67,477
<SECURITIES> 37,647
<RECEIVABLES> 31,660
<ALLOWANCES> 2,587
<INVENTORY> 0
<CURRENT-ASSETS> 148,420
<PP&E> 39,309
<DEPRECIATION> 18,229
<TOTAL-ASSETS> 187,649
<CURRENT-LIABILITIES> 47,998
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 139,647
<TOTAL-LIABILITY-AND-EQUITY> 187,649
<SALES> 22,076
<TOTAL-REVENUES> 65,369
<CGS> 1,979
<TOTAL-COSTS> 18,667
<OTHER-EXPENSES> 48,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41
<INCOME-PRETAX> 767
<INCOME-TAX> 145
<INCOME-CONTINUING> 622
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 622
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
<FN>
<F1>ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A THREE-FOR-TWO
STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAID ON MAY 15, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE SIX MONTHS
ENDED JUN-30-1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997<F1>
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 35,256
<SECURITIES> 24,705
<RECEIVABLES> 30,440
<ALLOWANCES> 2,225
<INVENTORY> 0
<CURRENT-ASSETS> 93,364
<PP&E> 31,237
<DEPRECIATION> 13,766
<TOTAL-ASSETS> 130,439
<CURRENT-LIABILITIES> 34,766
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 92,758
<TOTAL-LIABILITY-AND-EQUITY> 130,439
<SALES> 22,892
<TOTAL-REVENUES> 52,737
<CGS> 4,005
<TOTAL-COSTS> 14,047
<OTHER-EXPENSES> 49,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> (9,893)
<INCOME-TAX> 1,353
<INCOME-CONTINUING> (11,246)
<DISCONTINUED> 35
<EXTRAORDINARY> (2,419)
<CHANGES> 0
<NET-INCOME> (13,630)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
<FN>
<F1>ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT THE POOLING WITH
PREMENOS TECHNOLOGY CORP. AND A THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A
STOCK DIVIDEND PAID ON MAY 15, 1998.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
THIRD AMENDMENT TO THE HARBINGER CORPORATION
1996 STOCK OPTION PLAN
THIS THIRD AMENDMENT TO THE HARBINGER CORPORATION 1996 STOCK OPTION
PLAN (the "Amendment") is made effective as of the 24th day of April, 1998 (the
"Effective Date"), by HARBINGER CORPORATION, a corporation organized and doing
business under the laws of the State of Georgia (the "Company"). All capitalized
terms in this Amendment have the meaning ascribed to such term as in the
Harbinger Corporation 1996 Stock Option Plan (the "Plan"), unless otherwise
stated herein.
WITNESSETH:
WHEREAS, First Amendment to the Plan was approved by the shareholders
of the Company at the 1997 Annual Meeting of Shareholders;
WHEREAS, Second Amendment to the Plan was approved by the shareholders
of the Company at the Special Meeting of Shareholders held on December 18, 1997;
and
WHEREAS, the Board of Directors of the Company desires to amend the
Plan to increase the number of shares that may be granted under the Plan;
NOW THEREFORE, in consideration of the premises and mutual promises
contained herein, the Plan is hereby amended as follows:
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 5,825,000,
plus the number of Prior Plan Shares."
SECTION 2. Except as specifically amended by this Third
Amendment, the Plan shall remain in full force and effect as prior to this Third
Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this THIRD AMENDMENT TO THE
HARBINGER CORPORATION 1996 STOCK OPTION PLAN to be executed on the Effective
Date.
HARBINGER CORPORATION
By: /s/ David T. Leach
-------------------------------
David T. Leach, CEO
ATTEST:
By: /s/ Joel G. Katz
--------------------------------------
Joel G. Katz, Secretary
<PAGE> 1
EXHIBIT 99.2
SECOND AMENDMENT TO THE AMENDED AND RESTATED
HARBINGER CORPORATION EMPLOYEE STOCK PURCHASE PLAN
THIS SECOND AMENDMENT TO THE AMENDED AND RESTATED HARBINGER CORPORATION
EMPLOYEE STOCK PURCHASE PLAN (the "Amendment") is made effective as of the 24th
day of April, 1998 (the "Effective Date"), by HARBINGER CORPORATION, a
corporation organized and doing business under the laws of the State of Georgia
(the "Company"). All capitalized terms in this Amendment have the meaning
ascribed to such term as in the Harbinger Corporation 1996 Stock Option Plan
(the "Plan"), unless otherwise stated herein.
WITNESSETH:
WHEREAS, First Amendment to the Plan was approved by the Board of
Directors as of January 1, 1997; and
WHEREAS, the Board of Directors of the Company desires to amend the
Plan to increase the number of shares that may be granted under the Plan;
NOW THEREFORE, in consideration of the premises and mutual promises
contained herein, the Plan is hereby amended as follows:
SECTION 1. Section 4(a) of the Plan is hereby amended by deleting the
first sentence of Section 4(a) of the Plan in its entirety and substituting in
lieu thereof the following:
"(a) The maximum number of shares which may be granted and
purchased under the Plan may not exceed 325,000 shares of Common Stock
(subject to adjustment as provided in Section 15), which may be
authorized but unissued shares, re-acquired shares or shares bought on
the open market."
SECTION 2. Except as specifically amended by this Second
Amendment, the Plan shall remain in full force and effect as prior to this
Second Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this SECOND AMENDMENT TO THE
AMENDED AND RESTATED HARBINGER CORPORATION EMPLOYEE STOCK PURCHASE PLAN to be
executed on the Effective Date.
HARBINGER CORPORATION
By: /s/ David T. Leach
-------------------------------
David T. Leach, CEO
ATTEST:
By: /s/ Joel G. Katz
-------------------------------------
Joel G. Katz, Secretary
<PAGE> 1
EXHIBIT 99.3
FOURTH AMENDMENT TO THE HARBINGER CORPORATION
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
THIS FOURTH AMENDMENT TO THE HARBINGER CORPORATION AMENDED AND RESTATED
1993 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS (the "Amendment") is made
effective as of the 24th day of April, 1998 (the "Effective Date"), by HARBINGER
CORPORATION, a corporation organized and doing business under the laws of the
State of Georgia (the "Company"). All capitalized terms in this Amendment have
the meaning ascribed to such term as in the Harbinger Corporation Amended and
Restated 1993 Stock Option Plan for Non-Employee Directors (the "Plan"), unless
otherwise stated herein.
WITNESSETH:
WHEREAS, the Board of Directors of the Company desires to amend the
Plan to increase the number of shares that may be granted under the Plan.
NOW THEREFORE, in consideration of the premises and mutual promises
contained herein, the Plan is hereby amended as follows:
SECTION 1. Section 2 of the Plan is hereby amended by deleting the
first sentence of Section 2 of the Plan in its entirety and substituting in lieu
thereof the following:
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment
as provided in Section 6, the total number of shares of $.0001 par
value common stock (the "Common Stock") of the Company for which
options may be granted under the Plan (the "Shares") shall be 350,000
less the number of Shares of Common Stock issuable pursuant to options
granted under the Restated 1992 Stock Option Plan for Non-employee
Directors."
SECTION 2. The form of agreement currently used to evidence options
granted under the Plan shall be replaced with the form of agreement attached
hereto as Exhibit A for Non-employee Directors from The Netherlands and as
Exhibit B for all other Non-employee Directors.
SECTION 3. Except as specifically amended by this Fourth Amendment, the
Plan shall remain in full force and effect as prior to this Fourth Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this Fourth Amendment to the
Harbinger Corporation Amended and Restated 1993 Stock Option Plan for
NonEmployee Directors to be executed on the Effective Date.
HARBINGER CORPORATION
By: /s/ David T. Leach
---------------------------------
David T. Leach, CEO
ATTEST:
By: /s/ Joel G. Katz
------------------------------------
Joel G. Katz, Secretary
<PAGE> 3
EXHIBIT A
STOCK OPTION AGREEMENT
AND
OPTION GRANT
HARBINGER CORPORATION
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
FOR (DUTCH) NONEMPLOYEE DIRECTORS
THIS STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of the date set forth below, by and between HARBINGER
CORPORATION (hereinafter called the "Company"), a corporation organized and
existing under the laws of the State of Georgia, and the undersigned, an
individual resident of the state designated below (hereinafter called
"Optionee").
The Company has adopted the "Harbinger Corporation Amended and
Restated 1993 Stock Option Plan for Nonemployee Directors" (the "Plan"). This
Option Agreement is being made pursuant to the Plan and capitalized terms used
herein shall have the same meanings as those terms have in the Plan unless the
context in which these terms are used herein requires otherwise or the terms are
otherwise defined herein. The date of the grant of the option under this Option
Agreement is as of the date specified below (the "Option Date").
1. GRANT OF OPTION. The Company hereby grants to Optionee an
option to purchase the number of shares of $.0001 par value Common Stock of the
Company (the "Shares") designated below ("Option Shares"), subject to the right
to repurchase . Any portion of the option not exercised by Optionee as provided
herein will expire on the day prior to the fifth anniversary of the Option Date
unless sooner terminated as provided herein. Any option share subject to a
repurchase right as of the Annual Meeting of Shareholders following the date
hereof shall expire on the date of such meeting. The stock issued on the
exercise of this option, when paid for as herein provided, will be fully paid
and nonassessable.
2. EXERCISE OF OPTION. This option is fully vested and may be
exercised only during the period beginning on the Option Date and ending on the
day prior to the fifth anniversary date hereof (the "Term") described below. For
purposes of this Option Agreement, the "Repurchase Period" for an option shall
mean, for an Annual Grant, the approximate twelve (12) month period beginning
upon the date of the Annual Grant and ending on the date of the next Annual
Meeting, and for an Interim Grant, the period beginning upon the date of the
Interim Grant and ending on the date of the next Annual Meeting.
(a) Annual Grants: Options granted as an Annual Grant
(see below) shall no longer be subject to repurchase as follows:
(1) If Optionee attends one regular quarterly meeting of
the Board of Directors ("Board") during the
Repurchase Period, then the option shall no longer be
subject to repurchase immediately thereafter as to
twenty-five percent (25%) of
<PAGE> 4
the Option Shares, minus the number of Shares, if
any, as to which the option has been previously
exercised;
(2) If Optionee attends two regular quarterly meetings
during the Repurchase Period, then the option shall
no longer be subject to repurchase immediately after
the second meeting as to fifty percent (50%) of the
Option Shares, minus the number of Shares, if any, as
to which the option has been previously exercised;
(3) If Optionee attends three regular quarterly meetings
during the Repurchase Period, then the option shall
no longer be subject to repurchase immediately after
the third meeting as to seventy-five percent (75%) of
the Option Shares, minus the number of Shares, if
any, as to which the option has been previously
exercised; and
(4) If Optionee attends four regular quarterly meetings
during the Repurchase Period, then the option shall
no longer be subject to repurchase immediately after
the fourth meeting as to all of the Option Shares,
minus the number of Shares, if any, as to which the
option has been previously exercised.
(b) Interim Grants: Options granted as an Interim Grant (see
below) shall no longer be subject to repurchase as follows:
(1) If the fraction determined in Section 5.2.2 of the
Plan is three fourths (75%), then one third (33.3%)
of the Option Shares shall no longer be subject to
repurchase immediately following the attendance by
Optionee at a regular quarterly meeting of the Board
during the Repurchase Period, and an additional
one-third (33.3%) of the Option Shares shall no
longer be subject to repurchase following attendance
by Optionee at each of two (2) subsequent regular
quarterly meetings during the Repurchase Period, such
that the option shall no longer be subject to
repurchase immediately after attendance by Optionee
at the third regular quarterly meeting during the
Repurchase Period as to all of the Option Shares
subject to the option.
(2) If the fraction determined in Section 5.2.2 of the
Plan is one half (50%), then one half (50%) of the
Option Shares shall no longer be subject to
repurchase immediately following the attendance by
Optionee at a regular quarterly meeting of the Board
during the Repurchase Period, and the remaining one
half (50%) of the Option Shares shall no longer be
subject to repurchase immediately after attendance by
Optionee at a second regular quarterly meeting during
the Repurchase Period, as to all of the Option Shares
subject to the option.
(3) If the fraction determined in Section 5.2.2 of the
Plan is one quarter (25%), then all (100%) of the
Option Shares shall no longer be subject to
repurchase immediately following the attendance by
Optionee at a regular quarterly meeting of the Board
during the Repurchase Period.
The terms contained in the Plan are incorporated into and made
a part of this Option Agreement, and this Option Agreement shall be governed by
and construed in accordance with the Plan.
<PAGE> 5
A "regular quarterly meeting" shall refer to a regular meeting (including an
Annual Meeting or a special meeting held in lieu of a regular meeting) of the
Board held on a quarterly basis, as determined by the Chief Executive Officer of
the Company. In order to "attend" a meeting Optionee must be present as a
Director at the meeting in person or by telephone connection for the entire
period of the meeting and any adjournments thereof.
Each exercise of the option shall be by written notice in the
form of an exercise agreement provided by the Board to the President or
principal financial officer of the Company at its principal place of business,
accompanied by payment in cash, by bank-certified, cashier's or personal check
in the amount of the purchase price for the number of the Shares purchased. The
date of each exercise of this option shall be the date upon which the notice is
received by the appropriate officer.
The Company shall not be obligated to sell or issue any Shares
pursuant to the option unless the issuance of such Shares is at that time
effectively registered or exempt from registration under the Securities Act of
1933, as amended, and any other applicable securities laws. In connection
therewith, the Company may require from Optionee at the time of exercise
reasonable representations and warranties with respect to the investment intent
of Optionee and Optionee's status as an investor in the Shares in order to
qualify for exemptions from registration under state or federal securities laws.
Within a reasonable time after receipt of the notice of
exercise, the Company will take steps to ascertain compliance with this Option
Agreement. The Company shall then cause certificates representing the Shares for
the option exercised to be delivered as soon as reasonably possible, provided,
however, that if any law, regulation, or agreement requires the Company to take
action with respect to the Shares purchased prior to issuance, the date of
issuance of the Shares shall be extended for the period necessary to take such
action and comply with such law, regulation or agreement.
3. ADMINISTRATION. This Agreement shall be administered,
construed and interpreted by the Board with reference to the terms, conditions,
and interpretive provisions of the Plan.
4. PURCHASE PRICE. The purchase price per Option Share shall be
as designated below ("Exercise Price"), which is equal to or greater than 100%
of the fair market value of a share of Common Stock as of the Option Date.
5. TERMINATION OF SERVICE OR DEATH. In the event Optionee, during
his or her life, ceases to be an Eligible Director for any reason, any
unexercised portion of the option shall terminate one (1) year after termination
of Optionee's status as an Eligible Director due to disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended)
and thirty (30) days after the termination of Optionee's status as an Eligible
Director for any other reason, but in no event after the expiration of the term
of the option; provided further, however, that (a) with respect to any
installment of the option that is subject to a right of repurchase at the time
of termination of Optionee's status as an Eligible Director, the applicable
extension period shall not, unless otherwise provided by the Board, operate to
permit such installment to become no longer subject to a right of repurchase
within such period; (b) with respect to any installment of the option that was
no longer subject to a right of repurchase at the time of termination of
service, the applicable extension period shall not operate to permit the
exercise of such installment after the expiration of the period within which
such installment may otherwise be exercised; and (c) the applicable extension
period shall not operate to permit the exercise of an option if the service of
Optionee is terminated prior to the term during which the option would otherwise
have become no longer subject to a right of repurchase.
<PAGE> 6
In the event of the death of Optionee while Optionee is an
Eligible Director, but before the expiration of this option, the personal
representatives, heirs or legatees of Optionee may exercise the option held by
Optionee which was no longer subject to a right of repurchase on the date of
Optionee's death. The personal representatives, heirs or legatees must exercise
any such option within thirty (30) days after the date of the death of Optionee
and in any event prior to the date of expiration of the option, and such
exercise otherwise shall be subject to the terms and conditions of this Option
Agreement and the Plan; provided, however, that with respect to any installment
of the option that was subject to a right of repurchase on the date of
Optionee's death, the extension period shall not, unless otherwise provided by
the Board, operate to permit such installment to become no longer subject to a
right of repurchase within such period.
6. NO RIGHTS IN OPTION SHARES. Optionee shall have no rights as a
shareholder in respect of Shares covered by this Option Agreement until the date
of issuance of the Shares to him or her and only after the Shares are fully
paid. Optionee shall have no rights with respect to such Shares not expressly
conferred by this Option Agreement.
7. COMPANY'S REPURCHASE OPTION. If Optionee should cease to be an
Eligible Director, the Company or its assignee shall have the option to
repurchase that number of Shares which then remains subject to a right of
repurchase at a price equal to the exercise price per share indicated below as
the Exercise Price during the term of this Option (the "Repurchase Option").
Each Share shall be deemed to be an unvested Share until the date that such
Share is no longer subject to the Repurchase Option and shall thereafter be
deemed to be a vested Share. At any time within three months after the
expiration or termination of this Option, the Company or its assignee may elect
to repurchase any or all unvested Shares at the Optionee's exercise price by
giving Optionee or his representative written notice of exercise of the
Repurchase Option. The repurchase price per Share may be paid by check or by
cancellation of indebtedness, if any.
8. NONASSIGNABILITY. This option shall not be encumbered or
transferred in whole or in part except by will or the laws of descent and
distribution, and is exercisable during the lifetime of Optionee only by him or
her, except as expressly permitted by the Board.
In consideration for the grant of this option, Optionee
promises to use his or her best efforts in furtherance of the Company's business
and prospects and in the exercise of his or her duties as a member of the Board
of Directors of the Company.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereunto have set their hands and seals
as of the Option Date set forth below.
Option Date: HARBINGER CORPORATION
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Option Shares:
----------------------
By:
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Exercise Price:
----------------------
Title:
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Check One: Annual Grant
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Interim Grant
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OPTIONEE
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Address:
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State of Residence:
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<PAGE> 8
EXHIBIT B
STOCK OPTION AGREEMENT
AND
OPTION GRANT
HARBINGER CORPORATION
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
FOR NONEMPLOYEE DIRECTORS
THIS STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of the date set forth below, by and between HARBINGER
CORPORATION (hereinafter called the "Company"), a corporation organized and
existing under the laws of the State of Georgia, and the undersigned, an
individual resident of the state designated below (hereinafter called
"Optionee").
The Company has adopted the "Harbinger Corporation Amended and
Restated 1993 Stock Option Plan for Nonemployee Directors" (the "Plan"). This
Option Agreement is being made pursuant to the Plan and capitalized terms used
herein shall have the same meanings as those terms have in the Plan unless the
context in which these terms are used herein requires otherwise or the terms are
otherwise defined herein. The date of the grant of the option under this Option
Agreement is as of the date specified below (the "Option Date").
1. GRANT OF OPTION. The Company hereby grants to Optionee an
option to purchase the number of shares of $.0001 par value Common Stock of the
Company (the "Shares") designated below ("Option Shares"). Any portion of the
option not exercised by Optionee as provided herein will expire on the seventh
anniversary of the Option Date unless sooner terminated as provided herein. The
stock issued on the exercise of this option, when paid for as herein provided,
will be fully paid and nonassessable.
2. EXERCISE OF OPTION. This option shall become vested and may be
exercised only during the period beginning on the Option Date and ending on the
seventh anniversary date hereof (the "Term") described below. For purposes of
this Option Agreement, the "Vesting Period" for an option shall mean, for an
Annual Grant, the approximate twelve (12) month period beginning upon the date
of the Annual Grant and ending on the date of the next Annual Meeting, and for
an Interim Grant, the period beginning upon the date of the Interim Grant and
ending on the date of the next Annual Meeting.
(a) Annual Grants: Options granted as an Annual Grant
(see below) shall become vested as follows:
(1) If Optionee attends one regular quarterly meeting of
the Board of Directors ("Board") during the Vesting
Period, then the option shall be exercisable
immediately thereafter as to twenty-five percent
(25%) of the Option Shares, minus the number of
Shares, if any, as to which the option has been
previously exercised;
<PAGE> 9
(2) If Optionee attends two regular quarterly meetings
during the Vesting Period, then the option shall be
exercisable immediately after the second meeting as
to fifty percent (50%) of the Option Shares, minus
the number of Shares, if any, as to which the option
has been previously exercised;
(3) If Optionee attends three regular quarterly meetings
during the Vesting Period, then the option shall be
exercisable immediately after the third meeting as to
seventy-five percent (75%) of the Option Shares,
minus the number of Shares, if any, as to which the
option has been previously exercised; and
(4) If Optionee attends four regular quarterly meetings
during the Vesting Period, then the option shall be
exercisable immediately after the fourth meeting as
to all of the Option Shares, minus the number of
Shares, if any, as to which the option has been
previously exercised.
(b) Interim Grants: Options granted as an Interim Grant
(see below) shall become vested as follows:
(1) If the fraction determined in Section 5.2.2 of the
Plan is three fourths (75%), then one third (33.3%)
of the Option Shares shall become exercisable
immediately following the attendance by Optionee at a
regular quarterly meeting of the Board during the
Vesting Period, and an additional one-third (33.3%)
of the Option Shares shall become exercisable
following attendance by Optionee at each of two (2)
subsequent regular quarterly meetings during the
Vesting Period, such that the option shall be
exercisable immediately after attendance by Optionee
at the third regular quarterly meeting during the
Vesting Period as to all of the Option Shares subject
to the option.
(2) If the fraction determined in Section 5.2.2 of the
Plan is one half (50%), then one half (50%) of the
Option Shares shall be exercisable immediately
following the attendance by Optionee at a regular
quarterly meeting of the Board during the Vesting
Period, and the remaining one half (50%) of the
Option Shares shall be exercisable immediately after
attendance by Optionee at a second regular quarterly
meeting during the Vesting Period, as to all of the
Option Shares subject to the option.
(3) If the fraction determined in Section 5.2.2 of the
Plan is one quarter (25%), then all (100%) of the
Option Shares shall be exercisable immediately
following the attendance by Optionee at a regular
quarterly meeting of the Board during the Vesting
Period.
The terms contained in the Plan are incorporated into and made
a part of this Option Agreement, and this Option Agreement shall be governed by
and construed in accordance with the Plan. A "regular quarterly meeting" shall
refer to a regular meeting (including an Annual Meeting or a special meeting
held in lieu of a regular meeting) of the Board held on a quarterly basis, as
determined by the Chief Executive Officer of the Company. In order to "attend" a
meeting Optionee must be present as a Director at the meeting in person or by
telephone connection for the entire period of the meeting and any adjournments
thereof.
<PAGE> 10
Each exercise of the option shall be by written notice in the
form of an exercise agreement provided by the Board to the President or
principal financial officer of the Company at its principal place of business,
accompanied by payment in cash, by bank-certified, cashier's or personal check
in the amount of the purchase price for the number of the Shares purchased. The
date of each exercise of this option shall be the date upon which the notice is
received by the appropriate officer.
The Company shall not be obligated to sell or issue any Shares
pursuant to the option unless the issuance of such Shares is at that time
effectively registered or exempt from registration under the Securities Act of
1933, as amended, and any other applicable securities laws. In connection
therewith, the Company may require from Optionee at the time of exercise
reasonable representations and warranties with respect to the investment intent
of Optionee and Optionee's status as an investor in the Shares in order to
qualify for exemptions from registration under state or federal securities laws.
Within a reasonable time after receipt of the notice of
exercise, the Company will take steps to ascertain compliance with this Option
Agreement. The Company shall then cause certificates representing the Shares for
the option exercised to be delivered as soon as reasonably possible, provided,
however, that if any law, regulation, or agreement requires the Company to take
action with respect to the Shares purchased prior to issuance, the date of
issuance of the Shares shall be extended for the period necessary to take such
action and comply with such law, regulation or agreement.
3. ADMINISTRATION. This Agreement shall be administered,
construed and interpreted by the Board with reference to the terms, conditions,
and interpretive provisions of the Plan.
4. PURCHASE PRICE. The purchase price per Option Share shall be
as designated below ("Exercise Price"), which is equal to or greater than 100%
of the fair market value of a share of Common Stock as of the Option Date.
5. TERMINATION OF SERVICE OR DEATH. In the event Optionee, during
his or her life, ceases to be an Eligible Director for any reason, any
unexercised portion of the option shall terminate one (1) year after termination
of Optionee's status as an Eligible Director due to disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended)
and thirty (30) days after the termination of Optionee's status as an Eligible
Director for any other reason, but in no event after the expiration of the term
of the option; provided further, however, that (a) with respect to any
installment of the option that had not become exercisable at the time of
termination of Optionee's status as an Eligible Director, the applicable
extension period shall not, unless otherwise provided by the Board, operate to
permit such installment to become exercisable within such period; (b) with
respect to any installment of the option that had become exercisable at the time
of termination of service, the applicable extension period shall not operate to
permit the exercise of such installment after the expiration of the period
within which such installment may otherwise be exercised; and (c) the applicable
extension period shall not operate to permit the exercise of an option if the
service of Optionee is terminated prior to the term during which the option
would otherwise have been exercisable.
In the event of the death of Optionee while Optionee is an
Eligible Director, but before the expiration of this option, the personal
representatives, heirs or legatees of Optionee may exercise the option held by
Optionee on the date of Optionee's death. The personal representatives, heirs or
legatees must exercise any such option within thirty (30) days after the date of
the death of Optionee and in any event prior to the date of expiration of the
option, and such exercise otherwise shall be subject to the terms and conditions
of this Option Agreement and the Plan; provided, however, that with respect to
any installment of the option that had not become vested and exercisable on the
date of Optionee's death, the
<PAGE> 11
extension period shall not, unless otherwise provided by the Board, operate to
permit such installment to become vested and exercisable within such period.
6. NO RIGHTS IN OPTION SHARES. Optionee shall have no rights as a
shareholder in respect of Shares covered by this Option Agreement until the date
of issuance of the Shares to him or her and only after the Shares are fully
paid. Optionee shall have no rights with respect to such Shares not expressly
conferred by this Option Agreement.
7. NONASSIGNABILITY. This option shall not be encumbered or
transferred in whole or in part except by will or the laws of descent and
distribution, and is exercisable during the lifetime of Optionee only by him or
her, except as expressly permitted by the Board.
In consideration for the grant of this option, Optionee
promises to use his or her best efforts in furtherance of the Company's business
and prospects and in the exercise of his or her duties as a member of the Board
of Directors of the Company.
IN WITNESS WHEREOF, the parties hereunto have set their hands
and seals as of the Option Date set forth below.
Option Date: HARBINGER CORPORATION
----------------------
Option Shares:
----------------------
By:
-----------------------
Exercise Price:
----------------------
Title:
-----------------------
Check One: Annual Grant
-------------
Interim Grant
-------------
OPTIONEE
----------------------------
Address:
------------------
------------------
------------------
State of Residence:
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