-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RuRmhbpw60VQIRjl0nTTaVf7dbwLE2s1tjkd2AmZxflt/j110MEV3fT8/GLJ0Ho+ iuBYpvanFD8ArlQp7m02VA== 0000950144-96-001459.txt : 19960613 0000950144-96-001459.hdr.sgml : 19960613 ACCESSION NUMBER: 0000950144-96-001459 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARBINGER CORP CENTRAL INDEX KEY: 0000947116 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 581817306 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-93804 FILM NUMBER: 96542585 BUSINESS ADDRESS: STREET 1: 1055 LENOX PARK BLVD CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048414334 10-K 1 HARBINGER CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- -------------- COMMISSION FILE NUMBER: 0-26298 HARBINGER CORPORATION (exact name of registrant specified in its charter) GEORGIA 58-1817306 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1055 LENOX PARK BOULEVARD 30319 ATLANTA, GEORGIA (zip code) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 841-4334 ------------------------ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of exchange on which registered ---------------------------------------- ------------------------------------ Common Stock, par value $.0001 per share The Nasdaq National Market ------------------------ Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the average of the closing bid and ask quotations for the Common Stock on March 21, 1996 as reported by The Nasdaq Stock Market, was approximately $85,018,938. The shares of Common Stock held by each officer and director and by each person known to the company who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 21, 1996, Registrant had outstanding 10,475,335 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1995 are incorporated by reference in Parts II and IV of this Form 10-K to the extent stated herein. The Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1996 is incorporated by reference in Part III of this Form 10-K to the extent stated herein. 2 PART I ITEM 1. BUSINESS. Harbinger Corporation ("Harbinger" or the "Company") develops, markets and supports software products and provides computer communications network and consulting services which enable businesses to engage in electronic commerce. The Company's objective is to be a leading worldwide provider of electronic commerce products and services to businesses by offering comprehensive, customizable, standards-based electronic commerce solutions. Harbinger offers software products that operate on multiple computer platforms, a secure and reliable computer network to facilitate the transmission of business information and transactions, and value-added products and services to enable businesses of all sizes to maximize the number and value of their electronic trading relationships. The Company's products and services facilitate EDI by businesses and financial institutions by providing the ability to electronically transmit and receive routine business information and documents in a standard format. The Harbinger VAN serves as an electronic communications link for computer systems by receiving, storing and forwarding electronically transmitted business documents and data for re-transmission in a form that can be received and interpreted by the computer of another commercial business. Harbinger facilitates the electronic link to its computer communications network through the sale of electronic commerce software packages for use in a broad range of computing environments, including DOS, Windows, UNIX, IBM AS/400 mid range and IBM MVS mainframe platforms. ELECTRONIC COMMERCE AND EDI Electronic commerce involves the automation of business transactions through the use of telecommunications and computers to exchange and process electronically commercial information and transactional documents. Electronic commerce typically involves the use of a third-party or private value-added computer network to perform EDI, email, EFT, electronic forms, and bulletin board and electronic catalogue services. Users of private or third-party VANs may also have access through the VAN to directories or on-line information services. EDI is a cornerstone of electronic commerce. The advantages of EDI include one-time data entry, reduced clerical workload and the elimination of paper records, rapid, accurate and secure exchange of business data, and reduced operating and inventory carrying costs. EDI facilitates uniform communications with different trading partners, including customers, suppliers, common carriers, and banks or other financial institutions. Trading Communities. Groups of companies that regularly trade with each other generate significant repetitive business transactions. These existing trading communities are natural prospects for implementation of EDI. Certain trading communities are defined by trading standards, protocols, rules or procedures adopted through trade organizations, such as the EDI standards adopted by members of the Petroleum Industry Data Exchange. The adoption of EDI as an accepted means of transmitting business documents and data has occurred, in part, because many trade organizations or groups and many large companies within a trading community increasingly recommend or require their member organizations or trading partners to adopt and use EDI as the primary method of communicating business documents. Large companies within a trading community often are described as ''hubs'' and their trading partners as ''spokes.'' A hub company and its trading partners communicate through electronic networks, generally either third party networks or a private network owned and operated by the hub company. Hub companies decide to implement EDI generally for one or more of the following reasons: (i) to enable a reduction in inventories by reducing the time required to notify vendors and replenish stocks; (ii) to reduce the administrative handling costs of documents that they send or receive from their suppliers or customers; or (iii) to improve customer support and service levels by eliminating data entry errors. For these reasons, a hub company often adopts as a stated business objective that all of its trading partners use EDI as the principal means of communicating business documents. Spoke companies, in turn, often expand the electronic commerce community by also requesting or requiring their other trading partners to communicate through EDI. This expanding number of trading partners adopting EDI results in the establishment of distinct trading communities comprising potential software customers and network subscribers for EDI services. - 2 - 3 EDI Transaction Flow. In a typical EDI transaction, a trading partner (the ''sending partner'') first creates with its computer, either manually or electronically, the business data used for the completion of a particular set of documents, described by EDI standards as a transaction set. Transaction sets include requests for quotes, quotes, purchase orders, invoices, shipping notices, and other related documents and messages. Second, a translation software program on the sending partner's computer converts the document or transaction set into a standard EDI format. Third, this information is electronically transmitted through telecommunications links from the sending partner's computer to a central computer system that serves as a value-added network shared by many trading partners. Value-added networks receive documents for subsequent delivery to the intended trading partner (the ''receiving partner''), and connect many types of computer hardware and communications devices, convert multiple transaction sets from one industry standard to another, and maintain security by reducing the possibility of one trading partner accessing another's computer. EDI Industry Standards. EDI has been further promoted through the adoption of EDI standards within various industries. These standards describe the content and format of business documents, such as the data required to be included in purchase orders, invoices, shipping notices, and other business documents. Before these standards were adopted, electronic document transmission was based on proprietary formats agreed to by two trading partners. However, incompatible computer systems and differing proprietary formats limited widespread adoption of EDI. In 1979, the American National Standards Institute (''ANSI''), an organization responsible for coordinating national standards in the United States, formed the Accredited Standards Committee (''ASC'') X12, Electronic Data Interchange, to develop uniform standards for electronic interchange of business transactions. In 1983, ANSI published the first five EDI standards proposed by the ASC. The number of business transactions covered by EDI standards has continued to increase, and by 1995 the ASC X12 Committee had approved the development of over 280 domestic and international standards. Uniform EDI standards for the exchange of business information have now been adopted for many important industries, including:
Aerospace Financial Services Paper and Pulp Air Freight Food Petroleum Automotive Government Rail Freight Banking Grocery Retail Beverage Hardware Goods Textiles Chemical Healthcare Trucking Education Insurance Utilities Electronics Metals Warehousing Financial Ocean Freight
Within these industries, trade and industry organizations often suggest additions and changes to EDI standards. The United Nations Joint EDI Committee has developed international industry standards known as Electronic Data Interchange for Administration, Commerce, Transport (EDIFACT). Harbinger believes the continuing adoption of EDI standards in the U.S. and internationally will promote a significant expansion of electronic commerce and a potential increase in the demand for EDI software products and the number of transactions processed by network operators. STRATEGY The Company's objective is to be a leading worldwide provider of electronic commerce products and services to businesses of all sizes with a focus on solidifying its recurring revenue base by increasing the number of subscribers to its network. The Company's strategy to achieve this objective includes the following key elements. Comprehensive Range of Products and Services. Harbinger's strategy is to offer a broad range of electronic commerce products and services, thereby enabling trading partners to obtain the products and services necessary to - 3 - 4 conduct electronic commerce transactions within their trading communities. The products and services offered by the Company include EDI and electronic commerce software for use on numerous computing platforms, value-added network transaction processing, software programming and customization services, customer support and training, and implementation and consulting services. Trading Communities Marketing Strategy. Harbinger's central strategic objective is to grow by promoting its products and services to identified trading communities. Through this strategy, Harbinger identifies significant trade organizations or ''hub'' companies within various industries, including the utilities, electronics, healthcare, aerospace and petroleum industries, to establish and promote the growth of trading communities. Harbinger seeks to establish new and larger trading communities by (i) developing marketing and technical competence within the industry by learning the needs of major trade organizations or hub companies in the industry, and the trading customs and practices of their trading partners, (ii) working closely with trading partners in these target markets to define software and computer systems requirements, (iii) developing standard and customized software products to meet the needs of trading partners in these markets, and (iv) providing an array of high-quality services to facilitate the adoption and implementation of EDI and other electronic commerce services throughout that industry. Integrated Product Offerings. Harbinger offers, and is further developing and enhancing, numerous software products operating on a broad range of computing platforms, including DOS and Windows-based PCs, UNIX-based workstations, IBM AS/400 midrange computers and IBM MVS mainframe computers. The Company designs its products with significant ease-of-use features and has recently completed development efforts to integrate technologies acquired from Texas Instruments Incorporated ("TI") and System Software Associates, Inc. ("SSA") with its existing software products to enable customers to easily migrate from one computer platform to another. Harbinger seeks to offer a full array of EDI products and services to meet its customer's evolving EDI needs. Customer Satisfaction and Superior Support Services. Harbinger strives to provide dependable, prompt and competent customer service through the Harbinger network and the Company's customer support personnel. Harbinger offers extensive customer service, consulting and support to trading partners to assist in the operation and use of the Company's network services and its software products. These services are designed to attract new customers and to encourage greater utilization of the Company's products and services by existing customers, thereby increasing recurring revenues through greater transaction flow. Electronic Commerce on the Internet. Through its investment in Harbinger Net Services, LLC ("HNS"), the Company seeks to offer products and services to facilitate electronic commerce using the Internet. HNS will seek to develop and market a comprehensive suite of products and services directed at delivering electronic commerce solutions to business customers over the Internet. Through its agreements with HNS, the Company will seek to offer those products and services to its customer base. Strategic Alliances and Acquisitions. The Company actively seeks strategic alliances with leading telecommunications companies, software application developers and computer system suppliers. For example, Sprint resells, distributes and co-markets the Company's electronic commerce software products and network services. The Company also has recently introduced its Marketing Partners Program to establish alliances between the Company and application software developers, systems integrators and value-added resellers of computer products. In furtherance of its strategy to expand its product and service offerings, the Company will seek to acquire assets, technologies and businesses providing services complementary to the Company's existing products and services. Through the 1994 acquisition of the EDI Business Unit from TI (the "TI Acquisition"), the Company expanded its products to include offerings on UNIX and IBM MVS computer platforms. Through the Company's 1995 asset purchase and licensing arrangements with SSA (the "SSA Alliance"), the Company expanded its products to include an offering on IBM's AS/400 midrange computer platform. International Markets. Harbinger believes that a significant component of its strategy is to provide electronic commerce and EDI products and services to markets outside the United States. In addition to its international relationship with Sprint, the Company has an investment in and a distribution relationship with Harbinger NV, a Netherlands-based affiliate of the Company which is actively seeking electronic commerce business in selected international markets. The Company intends to aggressively pursue international electronic commerce opportunities. - 4 - 5 PRODUCTS AND SERVICES The following charts summarize the functions and platforms of the Company's principal electronic commerce software products and includes a description of the services available to software customers and network subscribers:
PRODUCT NAME FUNCTION COMPUTER PLATFORM - - --------------------------------- ----------------------------------- ----------------- TrustedLink Commerce EDI communications, document DOS, Windows management and forms creation, plus import/export of data from software applications TrustedLink Enterprise EDI communications, document UNIX management plus import/export of IBM AS/400 data from software applications IBM MVS EDI map Mapping tool, integrate EDI DOS software with specific applications TrustedLink Banker Small business cash management DOS, Windows activities, EFT, wire transfers, direct deposits and debits EDI communications, document management and forms creation TrustedLink Distributor for specific for the Petroleum Petroleum Industry Windows TrustedLink Shipper Integrated EDI and Barcode solution Windows SERVICES DESCRIPTION - - -------------------- ------------------------------------------------ Fault tolerant, store and forward, retrieval Value-Added Network services, protocol conversion, electronic mail Services box EDI to Fax Services Translation of EDI documents to fax format Trading Partner Information seminars, support materials, Implementation testing and confirmation of EDI communications /Certification with trading partners Customer Support Telephone hotline, support documentation, network transmission support, electronic software updates Consulting and Development of computer programs needed to Programming integrate EDI with a customers other software Services applications Third Party Ticket Translation of EDI documents to facilitate System ownership tracking for Petroleum Companies
- 5 - 6 Software Products The Company's products include a family of software programs and tools operating on DOS, Windows, UNIX, IBM AS/400 and IBM MVS mainframe computing environments and are designed to facilitate and enhance the use of electronic commerce by trading partners. TrustedLink Commerce. Harbinger's principal PC-based products, TrustedLink Commerce for DOS-based personal computers and TrustedLink Commerce for Windows-based computers, perform the critical tasks necessary to create, format and electronically transmit and receive business documents and data among trading partners. The software programs convert a customer's documents and data into EDI format, translate the document to a standard form for use with the designated trading partner, transmit the information to the Harbinger network, and convert EDI documents and data received from their trading partners into a format that may be interpreted by the user's personal computer to display, print, fax the document or automatically update its accounting records to register information received from a trading partner. These products have the following additional features and functions: o Ease-of-Use. Each of these products include features such as pull-down menus, common command structure, context-sensitive ''Help,'' mouse support and color-coding. These features permit use of the products by a broader audience of computer users possessing a less advanced level of technical knowledge in the operation of computers. o Ease-of-Installation. Harbinger's DOS and Windows products facilitate installation on a personal computer by automatically analyzing certain aspects of the user's computer to establish modem specifications, including type and speed, telecommunications parameters, and the user's network link telephone number. Following installation on the user's hard drive, the software includes functions that automatically dial the Harbinger network, establish password security and register the user on the network. o Network Software Integration. TrustedLink Commerce receives and registers trading partner information. When a user first receives documents or data from a trading partner, the software recognizes that it has received information from a new source and automatically re-dials and downloads that Harbinger customer's mailing address and adds it to the recipient's directory of addresses. o Broad Functionality and Flexibility . The products allow a trading partner to transmit and receive documents either through a manual computer request or automatically if a trading partner's computer is unattended. The software sorts documents by date, type and trading partner, prints summaries or the full text of documents, stores incoming documents, and copies outgoing documents for later review. o Support for EDI Standards. The software sends and receives transmissions in compliance with a wide range of electronic data industry standards that dictate the form, content and structure of documents and communications, including ANSI X12 and EDIFACT, as well as TDCC, UCS and WINS, which are electronic data formats specific to certain industries. Harbinger's PC-based customers primarily use the DOS product, and Harbinger has not achieved significant market penetration with the Windows product. As a result of the TI Acquisition, the Company has developed an enhanced version of its TrustedLink Commerce product which incorporates the favorable features of Harbinger's and TI's Windows-based products and utilizes translation software which is common to the UNIX and IBM MVS products and technologies acquired from TI. The enhanced TrustedLink Commerce product is expected to be available in the second quarter of 1996. The Company believes that customer conversions from DOS to Windows-based products will accelerate after the introduction of the Company's enhanced TrustedLink Commerce product. Furthermore, availability of the new Windows-based product, together with other integration and development activities associated with the Company's products, should allow customers to more easily migrate from one computer platform to another. - 6 - 7 TrustedLink Enterprise for Unix. TrustedLink Enterprise for UNIX was acquired in the TI Acquisition. Harbinger is currently in the process of developing significant enhancements to the communications and user interface capabilities of this product. Upon successful completion of these enhancements, TrustedLink Enterprise for UNIX will facilitate the creation and control of business documents, such as order forms and invoices in complex client/server computing environments and provide data linking and messaging functions which act as a gateway to update a trading partner's accounting system. This product also will support several of the most popular UNIX versions, including HP/UX, AIX, and SCO Open Servers, that offer high-throughput features that provide for fast receipt and transmission of EDI documents, and support a comprehensive range of EDI standards. TrustedLink Enterprise for AS/400. TrustedLink Enterprise for AS/400 was acquired in connection with the SSA Alliance and offers a mapping, translation, communication and trading partner management toolset and utilizes up to 21 EDI standard formats. The product's integrated IDK mapper enables customers to integrate documents directly into existing AS/400 database applications. The product's ANK network module enables communications among trading partners and VANs utilizing a broad range of data communication protocols. TrustedLink Enterprise for IBM MVS Mainframe. TrustedLink Enterprise for MVS mainframe systems performs identical features and functions to TrustedLink Enterprise for UNIX, and translates a trading partner's documents and data into electronic data formats that may be interpreted by the IBM MVS operating system. By offering high-throughput features and rapid document analysis, this version of the Company's TrustedLink Enterprise product is intended to minimize telecommunications costs as well as the costs of administrative personnel. TrustedLink Enterprise for IBM MVS mainframe also offers a single-pass test system that analyzes, summarizes and reports transmission faults, thereby facilitating the quick resolution of system delays resulting from transmission errors. The Company's MVS Gateway software product offers a high performance post office system and communications gateway to facilitate the rapid retrieval and storage of massive volumes of EDI documents on an IBM MVS mainframe. EDI map. Harbinger offers EDI map, a software tool designed to assist a trading partner in integrating EDI with other software applications operated by the user on a personal computer. EDI map includes software functions that may be used to create an application program to translate standard EDI documents into designated data records and files. These data records and files can be read by the trading partner's existing application software, including, for example, the general ledger, accounts payable, and accounts receivable programs included within the trading partners back-office accounting system. The program also allows a user to translate data records retrieved from an internal computer system into standard EDI documents. EDI map is distributed by the Company under a license from a third party software developer which permits the Company to obtain access to the source code for this product if the owner discontinues support and related services or ceases its business. Under this license, the Company has nonexclusive worldwide rights to use, reproduce, distribute and exercise other rights with respect to the EDI map software. TrustedLink Banker. TrustedLink Banker is designed to facilitate the use of personal computers to access a customer's bank or other financial institution through the Harbinger network. Businesses use TrustedLink Banker to access balance and transaction histories for various financial accounts, perform electronic funds transfers between financial accounts (within a single bank or among banks), register stop payments, write checks, reconcile accounts, send and receive messages to and from financial institutions, perform budgeting and cash flow analysis, and schedule activities by means of an electronic calendar. TrustedLink Banker includes functions that enable businesses to access information services such as Dow Jones News/Retrieval, and transfer data to other software programs such as Microsoft Excel, Lotus 1-2-3 and dBASE III. TrustedLink Banker is also used to perform direct deposits into payroll accounts, fund tax payments and direct debit transactions, and perform funds transfers. Banks and financial institutions access the Harbinger network to exchange information, electronic mail and messages with their trading partners. TrustedLink Banker translates documents and data through industry standard formats, including the BAI standard for balance and transaction reporting and the National Automated Clearing House Association (''NACHA'') standard for ACH transfers. TrustedLink Distributor for Petroleum. TrustedLink Distributor for Petroleum automates purchase order and buyback processing and makes it easier for lubricant distributors to do business with petroleum suppliers. - 7 - 8 TrustedLink Shipper. TrustedLink Shipper is a Windows-based add-on module to the Company's TrustedLink Commerce Product designed to facilitate the use of EDI at the shipping dock. Users of the product can process purchase orders, send advanced ship notices, and label shipments with barcodes. The product is fully integrated with the Company's VAN. Productivity Tools. The Company also offers a number of additional complementary PC, UNIX and MVS mainframe software products and modules, including productivity tools that facilitate the enabling, management and auditing of EDI trading relationships. Examples include a Windows-based mapping application that enables EDI support personnel to map internal application formats to EDI transactions and a trading partner profile management system that allows trading partner, transaction, and communications definitions and also contains contract, billing, transaction processing, audit and trading information. Other than the EDImap product, the Company's software products do not include any material third party source code, and the Company does not rely in any material respect on technical or source code data owned by third parties that are critical to the Company's intellectual property or its operations. Services The Company provides a range of services to businesses engaged in electronic commerce, including network services, trading partner and electronic commerce implementation services, programming services and customer training and support. Value-Added Network Services. Harbinger operates a value-added network that provides the central point for document and data receipt, translation and transmission and serves as a communication link between the members of a trading community. With more than 17,000 subscribers, Harbinger believes that its VAN is one of the largest EDI networks in the United States as measured by the number of network subscribers. Harbinger offers trading partners a wide range of network services, including batch communication of purchase orders, invoices, and shipping confirmations, and email between trading partners. Additional network services enable a trading partner to transmit into the network a large number of electronic documents intended for various destinations through a single toll-free telephone line, and to acknowledge and reconcile document transmission and receipt. Harbinger provides its network customers with monthly statistical information regarding network usage. Harbinger believes that its value-added network offers several advantages to trading partners: o Protocol Conversion. Through a protocol conversion routine, Harbinger's VAN enables trading partners to exchange documents, notwithstanding that their respective computers generate and transmit data and documents according to different document standards and communications protocols. o Transmission Speed Conversion. Harbinger's VAN provides access ports that allow data transmission speeds at mainframe-to-network rates up to 56,000 bps (bits per second) as well as ports for typical PC-to-network speeds of 2,400 bps to 28,800 bps. o Flexibility in Mail Pick-up and Drop-off Times. Harbinger's VAN enables trading partners to send and receive documents at their convenience through the network. The network stores documents received from a trading partner in its electronic mailbox for transmission and delivery at a subsequent time designated by the recipient. o Security. The network includes precautions to minimize security breaches by outsiders and restrict the ability of one trading partner to gain access to confidential data of another. Harbinger's TrustedLink Commerce and TrustedLink Banker family of software products each utilize data encryption algorithms to ensure that network access is limited to authorized users. - 8 - 9 The Harbinger network operates on a Tandem Himalaya computer system which is maintained by the Company at its headquarters in Atlanta, Georgia. The Company utilizes wide band telephone circuits that enable the computer network to receive and process numerous telephone links simultaneously. Moreover, the Company utilizes a packet switch network which receives and sends data across telephone circuits thereby enhancing the Tandem computer's ability to handle a large number of concurrent users at the most economical transmission cost. The network supports multiple communications protocols, including SNA, X.25, ASYNCH, FTP, and BISYNCH, enabling it to communicate data with most computer systems at transmission speeds ranging from 1,200 bps to 56,000 bps. The network also supports many standards for documents and data content and format, including ANSI X12, EDIFACT, BAI and NACHA. The network is designed for operation 24 hours a day, seven days a week. The Company is party to a disaster recovery agreement that provides an alternative off-site computer system for use in disastrous events. The Company provides network services pursuant to subscriber agreements. Under the subscriber agreement, the customer provides, at its expense, all necessary computing and hardware systems, which must meet technical specifications established by the Company. The subscriber agreement can be terminated by either party without cause at any time with 30 days' written notice. Customers are required to pay for services in accordance with the then applicable service fees, which include set-up fees, monthly mailbox fees, and transaction fees. No minimum revenue commitment or annual fee is required. Trading Partner Implementation and Certification. Harbinger offers several programs to assist its hub customers in maximizing the number of their trading partners utilizing EDI. These programs are designed to communicate the advantages of EDI and electronic commerce to all potential trading partners of a major hub, regardless of size, and provide the following: o Information Seminars. The Company schedules and conducts half-day seminars with potential trading partners of a major hub company highlighting the benefits of EDI and electronic commerce, explaining the hub organization's EDI initiative, and demonstrating the Company's products and services. Representatives of the hub company attend these seminars to present their EDI recommendations and requirements. o Support Materials. Utilizing the hub company's list of trading partners, the Company sends each trading partner an invitation packet including a program description, telephone set-up information, a computer hardware checklist, product literature, a demonstration software diskette, and response forms for registration to seminars conducted by the Company. o Trading Partner Certification. The Company assists trading partners in installing, testing, and confirming the ability to transmit information and documents with hub companies using the Harbinger network. Through this testing process, trading partners can implement and initiate EDI communications with hub companies with a minimum of conflicts and problems. Electronic Commerce Implementation. Harbinger also offers a range of services to assist in the implementation of electronic commerce by developing custom software templates, known as Trading Partner Packs, to conform with guidelines and parameters identified by the major purchasers and suppliers within various trading communities. For example, Harbinger customizes its software to enable businesses in a defined trading community to utilize only a specified subset of the ANSI X12 or EDIFACT standard that the major trading partners have defined for the trading relationship. In this way, each trading partner is assured that only the data elements that the trading partners expect are sent and received. This customization prevents one trading partner from sending unintended or incomplete data that otherwise might be permissible under the standard, but which could cause the receiver's application system to fail. The Company distributes a customized Trading Partner Pack to initiate trading among the partners of an existing Company subscriber and to enable hub companies to expand their base of trading partners. Harbinger's customer service personnel meet with major trading partners to identify and design the formats necessary to develop a Trading Partner Pack for use by trading partners of the customer. Harbinger maintains a library of more than 700 Trading Partner Packs. - 9 - 10 Consulting and Programming Services. Harbinger employees consult with trading partners to create functional specifications to develop computer programs necessary to integrate EDI with the customer's other software applications. This process, known as ''mapping,'' requires the identification of internal data file and record formats, data field descriptions, and equivalent paper document formats. Harbinger's technical consultants then develop functional specifications that are used to develop the interface programs necessary to integrate EDI with the trading partner's applications. Harbinger also provides software programming services to trading partners to create the application interface programs necessary to translate data into and out of EDI standards. Customer Training. Harbinger offers training classes designed for various stages of EDI implementation by trading partners. These classes provide instruction on the use of the Company software products operating either alone or together with the other application software operated by a trading partner. Training classes are conducted in Atlanta and other cities in the U.S. Primary classes are directed at users who utilize the software to input and send EDI documents, or to receive and print such documents. Advanced classes explain the basics of integrating EDI with other application software and provide basic information for creating application interface programs to connect a trading partner with application software of another party. Customer Support Services. Harbinger provides extensive customer service and support to trading partners on the use and operation of its software products and the conduct of business with trading partners utilizing electronic commerce. Harbinger supplies detailed printed documentation instructing on the use and operation of the Company's software products and the scope and availability of the Company's services. Toll-free customer telephone support is available five days a week from 8 a.m. to 8 p.m. E.S.T., responses being provided by employees in the Company's customer support department. Network transmission support is available seven days per week, 24 hours per day. The Company's support of EDI communication standards enables its customer support personnel to perform file transfers to analyze problems on a customer's computer system and to transmit software or EDI standard updates to a customer, where necessary. Third Party Ticket System ("TPTS"). TPTS is a service offered by the Company which permits tank owners, pipeline companies, and other affiliated parties in the petroleum industry to track ownership of petroleum through a pipeline. The product, which was developed in conjunction with the American Petroleum Institute, automates the transfer of documents associated with product requests and shipments between third parties. The service utilizes the ANSI X12 PIPENET standards. Pricing Harbinger markets its software products under license agreements that provide one-time license fee charges which range from $460 to $2,740 for DOS and Windows products, $70,000 to $90,000 for UNIX products, $35,000 to $50,000 for AS/400 products and up to $180,000 for IBM MVS products. License fees are determined according to the number of specified users. Charges for transactions placed through the Harbinger network are based upon the number of messages transmitted and the number of characters in each transmission. Transaction fees vary during peak or off-peak hours. The Company's transaction fees during peak hours are currently $.10 per message and $.02 per 100 characters. Additionally, customers pay a mailbox service fee of $25 per month to maintain access to the network. Harbinger provides a discount to those subscribers who allow their monthly fees to be direct-debited. For customers accessing the Harbinger network through other communications networks, there is a monthly interconnect charge of $25 for access through one or more public networks and $25 for each private network interconnect. A separate fee for Trading Partner Certification is generally paid by hub companies desiring to facilitate communications with new trading partners. Fees for integration services performed for hub companies and trading partners are generally provided based on the number of hours or days required to perform the necessary project. - 10 - 11 SALES AND MARKETING The Company's principal marketing strategy focuses on establishing and expanding the number of trading partners using the Harbinger network and software products. The Company seeks to target trading communities composed of electronic trading partners in common industries or markets conducting recurring business transactions. To achieve this strategy, the Company emphasizes sales to hub companies and their trading partners in a wide range of trading communities. Typically, a hub company will establish an EDI program by selecting the software, documents, formats, standards and value-added network that it intends to employ to exchange documents with its trading partners. After announcing the establishment of an EDI program, a hub company generally allows trading partners a period of time, generally from three months to several years, to comply with the EDI specifications and become EDI-capable. In many instances, hub companies ultimately will require trading partners to execute all transactions through EDI. The Company's marketing and sales activities are centered around the implementation of EDI within these trading communities through hub and spoke programs, particularly within selected vertical markets. The Company has developed a three-tiered sales and marketing program. First, the Company identifies potential hub companies that either seek to formulate an EDI program, or that have made the decision to implement EDI. The Company representatives meet with the hub company and discuss the procedure for establishing EDI relationships with trading partners. Second, the Company contacts the hub company's trading partners through seminars and by telemarketing, informing these parties of the EDI requirements of the hub company and implementation procedures. The Company schedules and conducts half-day information seminars with potential trading partners of a major hub company highlighting the benefits of EDI and electronic commerce, explaining the hub organization's EDI initiative, and demonstrating the Company's products and services. Representatives of the hub company generally attend these seminars to present their EDI recommendations and requirements. Third, Harbinger uses telemarketing, direct mail and advertising activities that are targeted at potential customers who are not trading partners of a specific hub. Harbinger's account executives identify, qualify and market the Company's services to potential hub companies that seek to implement EDI programs. Account executives work closely with these hub companies to design and implement the EDI program and maximize the number of subscribing trading partners. Hub companies are encouraged to produce a list of trading partners for the Company's use in marketing its products and services and endorse the family of TrustedLink software products encouraging those trading partners to become EDI-capable. Through successful EDI implementation programs with hub companies, Harbinger has established a database of existing and prospective trading partners. Harbinger's account executives regularly contact prospective trading partners through advertising, seminars and telemarketing to promote the Company's products and services. The Company's inside sales team establishes contacts and leads from a variety of sources, including industry lists, trade associations, advertising, direct mail campaigns, trade shows and marketing partners. Spoke companies are grouped into various trading communities. By analyzing the common business needs of these trading communities, Harbinger seeks to provide custom solutions to selected trading communities, thereby potentially increasing the usage of the Harbinger network and its software products. Harbinger has introduced its Marketing Partners Program to establish alliances between the Company and application software developers, systems integrators and value-added resellers of computer products (''Marketing Partners''). The Company's objective is to integrate Harbinger's products with those of its Marketing Partners and to promote distribution of Harbinger software along with products and services sold by its Marketing Partners. The current Marketing Partners of the Company include SSA, Westinghouse Canada, Solomon Software, Real World Corporation, and Open Systems. The Company markets and distributes its TrustedLink Banker products and related services through commercial banks and holding companies and bank processors. The Company also markets its family of TrustedLink Banker software products and computer network services directly to the customers of certain banks and financial service organizations. Harbinger's sales personnel identify prospective customers by reviewing the list of - 11 - 12 commercial accounts maintained by the banks and once prospects are identified, the Company conducts sales activities predominantly over the telephone and by direct mailings. As of December 31, 1995, the Company employed approximately 65 sales and marketing personnel who concentrate their efforts in direct sales of the Company software products and services. Sales personnel are compensated through a combination of base salary and commissions. The Company's compensation strategies are designed to reward sales personnel based upon sales to new customers and the sale of additional products and services to existing customers. In addition to the Company's internal sales and marketing personnel, the Company markets its products through several licensees, distributors and co-marketers. CUSTOMERS AND MARKETS The Company's customers include a wide range of hub companies and their trading partners in several markets targeted by the Company. The Company's hub customers (grouped by industry) include the following:
Aerospace: Northrop Metals: Alcoa Reynolds Banking: Bank of America Paper and Pulp: Champion Paper Barnett Banks First of America Electronics: Compaq Computer Petroleum: AMOCO Digital Equipment Chevron Corporation Mobil Hewlett-Packard Siemens General: ASEA Brown Boveri Textiles: James River Square D Milliken & Company 3M Westinghouse Electric Healthcare: Abbott Laboratories Utilities: Consumers Power Baxter Healthcare Pacific Gas & Johnson & Johnson Electric Southern California Edison The Southern Company
The Company has contracts with two customers which account for a significant amount of historical revenue. An agreement with Sprint International Communications Corporation ("Sprint") provides the terms by which Sprint may distribute and co-market the Company's software products. During the years ended December 31, 1994 and 1995, revenues from Sprint represented approximately 5% and 2%, respectively of the Company's total revenues for such periods. Under the SSA Alliance, SSA will pay the Company royalties representing a percentage of annual net fees generated by SSA from the sale of software licensed from the Company. For the year ended December 31, 1995, revenues from SSA represented approximately 7% of the Company's total revenue for the period. STRATEGIC RELATIONSHIPS Harbinger is party to an Alliance Agreement with SSA pursuant to which the Company has licensed to SSA the Company's IBM AS/400, UNIX and PC-based EDI software and related tools and utilities (the ''Licensed - 12 - 13 Software"), under agreements whereby SSA may remarket the Licensed Software to licensees of SSA's BPCS software products. SSA pays Harbinger a royalty based on net fees realized by SSA from the sale of the Licensed Software, related maintenance and support, and migration fees payable when a customer upgrades from one computer platform to another. Harbinger is responsible to train SSA personnel in the use and support of Harbinger products, and SSA provides direct telephone support to SSA's customers who use the Harbinger software products. During the term of the Alliance Agreement, Harbinger, at its option, will provide SSA with future product modifications and upgrades, architect the Licensed Software to facilitate foreign language translations, provide training, telephone and technical support to SSA personnel, modify or enhance the Licensed Software in the manner requested by SSA to correct software errors and maintain product competitiveness (or allow SSA to make such revisions), and modify the products to interface with specified database programs, perform designated client/server functions, offer enhanced graphical user interfaces, and conform to specified industry data communication standards. See ''Certain Transactions--SSA Alliance." Harbinger is a party to licensing and co-marketing agreements with Sprint and another licensee pursuant to which the Company has licensed its TrustedLink EDI software and its network system software to permit the licensees to remarket the PC-based software under private label and to implement their own value-added network. Under the Sprint relationship, the network system software has been licensed for use by various government agencies in the People's Republic of China and Poland. Additionally, Sprint uses Harbinger's existing network for Sprint's own EDI service. Sprint and Harbinger also maintain a co-marketing agreement with respect to several United States government agencies, pursuant to which Harbinger markets its software and services to numerous spoke companies which are suppliers to these agencies. The Sprint agreements grant certain non-exclusive rights to distribute the Company's PC-based software and network services and to license the Company's private network software outside the United States. These licenses and marketing agreements generally provide for payment by the licensee of an initial license fee, recurring transaction and network service and maintenance fees, and license fees based on the distribution of TrustedLink Commerce software programs. PRODUCT DEVELOPMENT The Company continues to assess the needs of trading partners in various trading communities and to develop software programs and network services which facilitate electronic commerce transactions. The Company's product development efforts currently are focused on providing a full range of electronic commerce solutions to Harbinger customers. The Company integrates software products and technologies acquired from TI with the Company's other software products by combining the most favorable features of the products and maintaining common translation software to facilitate the transfer of information and data between operating environments. The Company has completed product integration modifications to UNIX versions for use on HP9000, RS/6000 and SCO/UNIX platforms. Modifications of the Company's enhanced TrustedLink Commerce for Windows version are anticipated to be completed, and the product to be generally available, in the second quarter of 1996. Additional modifications intended to add enhanced graphical user interface features to the UNIX products also will be completed during the second quarter of 1996. Through its investment in HNS, the Company also is seeking to explore the feasibility of conducting electronic commerce over the Internet. HNS is expected to develop software products and provide related services designed to permit increased security for transmitting commercial data over the Internet by using the Company's VAN and supplementing it with additional software encryption measures. HNS may also develop technologies and provide services to allow Internet users to access the Company's VAN in order to provide a greater level of reliability of accurate data transmission than otherwise available by using the Internet alone. See ''Business--Internet Strategy'.' There can be no assurance that the Company or HNS can overcome the substantial technological and product development issues that will be faced in developing acceptable technologies for conducting electronic commerce over the Internet. The Company is in various stages of development for other software applications, including electronic messaging and email, bar code integration to facilitate the shipping and receiving of goods, an enhanced mapping - 13 - 14 product to allow users to customize their EDI data to existing software applications, and foreign translations of the Company's software products for distribution in international markets. INTERNET STRATEGY The Company believes that the Internet may become a vehicle for electronic commerce and communication among businesses. The Internet is an interconnected global network of computer networks linked together through a common protocol. Unlike other public telecommunications networks, the Internet is not managed by a single corporation, government agency or other entity. The market for software to access the Internet and related services is rapidly emerging and there are constantly evolving standards and technologies for communicating information over the Internet. Through the Internet, businesses can exchange documents and electronic mail, access a wide range of commercial information, and establish a presence on the World Wide Web (WWW). The WWW is the part of the Internet where information and documents reside in a standard format enabling them to be easily displayed and linked for access by other Internet users on the WWW. By using a special programming language called hypertext markup language (HTML), a user can establish a presence on the WWW known as a web page or home page and can link with other users of the WWW. To date, the Internet has not been an accepted medium for processing routine business transactions between organizations, in part due to security and reliability issues. The Company organized HNS in December 1994 as an early stage company to address opportunities to use the Internet to perform electronic commerce transactions. During its initial phase of operation, HNS explored the viability of developing products and providing services to facilitate electronic commerce on the Internet. At the conclusion of that effort, HNS concluded that it had developed a strategy for promoting electronic commerce over the Internet and for addressing the primary obstacles to the use of the Internet to exchange routine business documents. As part of its business plan, HNS investigated a strategic relationship with a telecommunications provider. In June 1995, BellSouth invested $3.0 million in HNS in exchange for the BellSouth Debenture. To date, the Company has invested approximately $8.4 million in HNS. The Company organized HNS as a separate company to permit HNS to focus solely on the market for products and services on the Internet, to reduce, to some degree, the risk of the Company's investment in the Internet, and to enable HNS to seek a strategic third-party investor. The Company and HNS have entered into several agreements whereby the Company provides HNS with management and development services, access to the Company's VAN, and a license to use and create derivative works of certain Company software programs. HNS provides the Company a non-exclusive right to license and distribute HNS products, if any, which may be derived from the Company's products. HNS is currently developing and plans to market a comprehensive suite of products and services directed at delivering electronic commerce solutions to business customers over the Internet. In November 1995, HNS announced its plans for TrustedLink, which provides organizations of all sizes with an open, standards-based solution for sending and receiving secure EDI documents over the Internet. The product will complement the Company's existing Windows and UNIX-based products and utilize simple mail transfer protocol ("SMTP") as the underlying Email mechanism to transfer EDI files over the Internet. In addition, the product will support S/MIME, an emerging security standard supported by major software industry leaders, and will also support the authentication mechanisms currently available in the Company's EDI Products. The Company has scheduled a general release of this Product in the third quarter of 1996. As of December 31, 1995, HNS had approximately 25 employees, of whom 15 are technical personnel engaged in maintaining or developing HNS's products or performing related services, approximately five are marketing and sales personnel and approximately five are involved in administration and finance. The Company plans to work with HNS in developing coordinated sales and marketing approaches to maximize electronic commerce both on the Company's VAN and to explore alternatives over the Internet. The Company expects to derive revenues from HNS under several agreements between the parties. - 14 - 15 COMPETITION The electronic commerce and EDI network services and computer software markets are highly competitive. Numerous companies supply electronic commerce network services, and several competitors target specific vertical markets such as the pharmaceutical, agri-business, retail and transportation industries. Additional competitors provide software designed to facilitate electronic commerce and EDI communications. Several of the Company's most significant competitors provide network services and related software products and services. Other competitors provide PC-based computer programs and network services specifically targeted to facilitate electronic banking transactions. These competitors include banks and financial institutions that operate privately-owned computer networks that link directly to their commercial customers. The Company believes that many of its competitors have significantly greater financial and personnel resources than the Company. The Company believes that in the future it may face competition from companies providing electronic commerce solutions over the Internet. Through an investment in and agreements with HNS, the Company is implementing its strategy with regard to the Internet. The market for Internet software and services is emerging and highly competitive, ranging from small companies with limited resources such as HNS to large companies with substantially greater financial, technical and marketing resources than the Company or HNS. The Company believes that existing competitors are likely to expand the range of their electronic commerce services to include Internet access, and that new competitors, which may include telephone companies and media companies, are likely to increasingly offer services which utilize the Internet to provide business-to-business data transmission services. A group of computer companies including some competitors of the Company have formed Commerce Net, a business entity which has announced an intention to explore the use of the Internet for commercial applications. Additionally, several competitive network service providers allow their subscribers access to the Internet, and several major software and telecommunications companies, including Sprint, MCI, AT&T and Microsoft, either have or are expected to have Internet access services. Similarly, the major on-line service companies, such as America Online, Compuserve and Prodigy, also offer Internet services and are expected to enhance the services in the future to include certain aspects of electronic commerce. If the Internet becomes an accepted method of electronic commerce, the Company could lose network customers which would reduce recurring revenue from network services and have a material adverse effect on the Company. The Company's competitive strategy in electronic commerce is to offer a total solution comprised of software products operating on multiple computer platforms, a computer communications network to facilitate reliable and secure transmissions of business information and transactions, and value-added products and services. The Company differentiates itself through its established customers in target industries, computer programs and software tools operating in multiple computing environments, and extensive experience in providing consulting, implementation and training services to facilitate EDI and electronic commerce transactions. There can be no assurance that the Company will be successful in its effort or that it will not be materially adversely affected by competitive factors. INTELLECTUAL PROPERTY RIGHTS In accordance with industry practice, the Company relies primarily on a combination of copyright, patent and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights. The Company seeks to protect its software, documentation and other written materials principally under trade secret and copyright laws, which afford only limited protection. The Company presently has one patent for an electronic document interchange test facility and patent applications pending for an EDI communication system. The Company routinely enters into non-disclosure and confidentiality agreements with principal employees, vendors, contractors, consultants and customers. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's products or to obtain and use information that the Company regards as proprietary. There can be no assurance that the Company's means of protecting its proprietary rights will be adequate or that competitors will not independently develop similar technology. The Company believes that, due to the rapid pace of innovation within the electronic commerce, EDI and related software industries, factors such as the technological and creative skills of its personnel are more important in establishing and maintaining a leadership - 15 - 16 position within the industry than are the various legal protections of its technology. The Company does not believe that any of its products infringe the proprietary rights of third parties. There can be no assurance, however, that third parties will not claim infringement by the Company with respect to current or future products. From time to time, the Company has received notices which allege, directly or indirectly, that the Company's products or other intellectual property rights infringe the rights of others. The Company generally has been able to address these allegations without material cost to the Company. The Company expects that software product developers will increasingly be subject to infringement claims as the number of products and competitors in electronic commerce grows and the functionality of products in different industry segments overlaps. Any such claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be able on terms acceptable to the Company or at all, which could have a material adverse effect on the Company. The Company recently entered into an agreement to cease use of its InTouch mark after May 31, 1996. The Company has adopted a new mark, TrustedLink, to use in lieu of the InTouch mark. EMPLOYEES As of December 31, 1995, the Company had approximately 210 full-time employees, of whom approximately 45 are technical personnel engaged in maintaining or developing the Company's products or performing related services, approximately 70 are marketing and sales personnel, approximately 60 are customer support and operations personnel, and approximately 30 are involved in administration and finance. EXECUTIVE OFFICERS The current executive officers of the Company and their ages as of March 31, 1996, are as follows:
NAME AGE POSITION - - ---------------- --- ----------------------------------------------- C. Tycho Howle 46 Chairman of the Board, Chief Executive Officer and Director David T. Leach 45 President, Chief Operating Officer and Director James C. Davis 43 President, Harbinger Group Operations James M. Travers 44 President, Harbinger Enterprise Solutions George S. Hart 54 Senior Vice President, Licensee Relationships David A. Meeker 53 Vice President, Sales Joel G. Katz 32 Vice President, Finance and Secretary
Mr. C. Tycho Howle has served as Chairman of the Board of Directors and Chief Executive Officer of the Company and its predecessors since 1983. From 1981 to 1983 Mr. Howle was a consultant with McKinsey & Company, Inc., a management consulting firm. From 1979 to 1981, Mr. Howle was a Product Line Manager with the Hewlett-Packard Company. From 1973 to 1977, he was a project manager with Booz, Allen & Hamilton's Applied Research Unit. Mr. David T. Leach has served as President and a director of the Company since February 1994. From June 1992 until February 1994, he was Group Executive Vice President, Sales and Operations of the Company. He served as Senior Vice President of Harbinger Computer Services, Inc. (''HCS'') from 1988 until 1990 and was - 16 - 17 President of HCS from 1990 until its reorganization into Harbinger Corporation in 1992. Prior to joining HCS, Mr. Leach was a consultant with McKinsey & Company, Inc., a management consulting firm. Mr. James C. Davis has served as President of Harbinger Group Operations since January 1995. In this capacity Mr. Davis has responsibility for international operations and corporate mergers and acquisitions. He served as President of the Company from January 1989 until December 1993, when he resigned as an officer and director of the Company. He was Vice President and Senior Vice President of HCS from May 1984 until December 1988. Mr. James M. Travers has served as President of Harbinger Enterprise Solutions since January 1995. In this capacity, Mr. Travers manages the business operations acquired in the TI Acquisition. From 1978 through 1994, Mr. Travers served in various managerial positions with TI, including the position as Director of Business Development for TI's Worldwide Applications Software Business and General Manager of TI's EDI business unit from June 1992 through December of 1994. Mr. George S. Hart, age 54, has served as Senior Vice President, Licensee Relationships of Harbinger since April 1984. He served as Senior Vice President, Business Development and Sales of the Company from the Reorganization in May 1992 until April 1994. From April 1984 to May 1992, Mr. Hart served as Senior Vice President, Business Development and Sales of HCS. Mr. David A. Meeker has served as Vice President, Sales since January, 1995. From September 1992 through December 1994, Mr. Meeker served as Vice President, Sales for National Data Corp., a credit card processing company. From January 1992 through August 1992 Mr. Meeker served as Vice President, Sales and Marketing for Software Alternatives, a computer software and systems vendor. From January 1990 to January 1992, Mr. Meeker served as Manager, U.S. Channel Operations for IBM. Mr. Joel G. Katz has served as Vice President, Finance and Secretary of Harbinger since January 1995. He served as Senior Director of Finance of the Company from February 1994 to January 1995, and he was elected Secretary in February 1994. He joined Harbinger in 1990 as Controller and became Director of Finance in December 1991. From 1985 to 1990, he was a certified public accountant in the audit division of Arthur Andersen LLP. GOVERNMENTAL REGULATIONS AND INDUSTRY STANDARDS The Company's network services are transmitted to its customers over dedicated and public telephone lines. These transmissions are governed by regulatory policies establishing charges and terms for communications. Changes in the legislative and regulatory environment relating to online services, EDI or the Internet access industry, including regulatory or legislative changes which directly or indirectly affect telecommunication costs or increase the likelihood of competition from regional telephone companies or others, could have an adverse effect on the Company's business. Congress has enacted, and President Clinton signed, the Telecommunications Act of 1996 to amend the federal telecommunications laws to lift restrictions on regional telephone companies and others competing with the Company and to impose certain restrictions regarding obscene and indecent content communicated to minors over the Internet or through interactive computer services. The Telecommunications Act of 1996 imposes fines and other criminal liability on any entity that knowingly uses a telecommunications device or interactive computer service to send obscene or indecent material to minors or permits any telecommunications facility under such entity's control to be used for such a purpose. Litigation has been filed in federal court challenging the constitutionality of those provisions of the Act. A temporary restraining order has been issued by a federal court enjoining the U.S. Attorney General from enforcing the Act's "indecency" prohibition. The Company cannot predict the impact, if any, that this Act and future court opinions, legislation, regulations or regulatory changes may have on its business. Management believes that the Company is in compliance with all material applicable regulations. The Company has not adopted a specific intention with respect to compliance with ISO 9000 standards for software development and maintenance services. The Company does not believe that failure to adopt ISO 9000 compliance has had, or in the future will have, a material adverse effect on its business. However, the Company - 17 - 18 will continue to assess whether or not ISO 9000 compliance will be in the best interest of the Company. In the event the Company chooses to comply with ISO 9000 standards, such compliance could have a material cost to the Company. ITEM 2. PROPERTIES. The Company occupies approximately 48,000 square feet in an office building in Atlanta, Georgia under a lease expiring in 1998. The facility serves as the Company's headquarters and data center. The Company also has offices in Texas and California occupying approximately 12,000 square feet and 1,200 square feet, respectively. The Company also reimburses Harbinger NV for the cost of facilities located in Hoorne, The Netherlands representing approximately 4,300 square feet, which Harbinger NV assumed in connection with the SSA Alliance. ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to any material legal proceedings. From time to time, the Company is involved in various routine legal proceedings incidental to the conduct of its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. Harbinger's Common Stock is traded on the Nasdaq National Market under the symbol "HRBC". The price per share reflected in the table below represents the range of low and high closing sale prices for the Company's Common Stock as reported by the Nasdaq Stock Market for the quarters indicated:
FISCAL PERIOD HIGH PRICE LOW PRICE - - -------------------- ---------- --------- Commencing August 22, 1995 and ending September 30, 1995 $17 1/2 $13 December 31, 1995 $29 1/2 $12 1/4
The closing sale price of the Company's Common Stock as reported by the Nasdaq Stock Market on March 21, 1996 was $17-1/8. The number of shareholders of record of the Company's Common Stock as of March 21, 1996, was approximately 180. The Company has never paid cash dividends on its capital stock. The Company currently intends to retain any earnings for use in the business and does not anticipate paying any cash dividends in the foreseeable future. In addition, the Company's bank line of credit prohibits payments of cash dividends without prior bank approval. - 18 - 19 ITEM 6. SELECTED FINANCIAL DATA. The information set forth under the section entitled "Selected Financial Data" on page 1 of the Company's 1995 Annual Report to Shareholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information set forth under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 10 through 13 of the Company's 1995 Annual Report to Shareholders is incorporated herein by reference and filed herewith as a part of Exhibit 13.1. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The quarterly results of operations set forth on page 9 of the Company's 1995 Annual Report to Shareholders and the following financial statements, related notes thereto and report of independent auditors set forth on pages 14 through 27 of the Company's 1995 Annual Report to Shareholders, are incorporated herein by reference and filed herewith as a part of Exhibit 13.1. Balance Sheets as of December 31, 1995 and 1994. Statements of Operations for the years ended December 31, 1995, 1994 and 1993. Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993. Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993. Notes to Financial Statement. Independent Auditors' Report. In addition to the foregoing, the following Financial Statements of Harbinger Net Services, LLC are provided in response to the requirements of Item 309 of Regulation S-K and this Item 8: - 19 - 20 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Harbinger NET Services, LLC: We have audited the accompanying balance sheet of Harbinger NET Services, LLC as of December 31, 1995 and the related statements of operations, shareholders' equity, and cash flows for the period from inception (March 1995) through December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harbinger NET Services, LLC as of December 31, 1995 and the results of its operations and its cash flows for the period from inception (March 1995) through December 31, 1995 in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP /S/ KPMG Peat Marwick LLP Atlanta, Georgia February 9, 1996 - 20 - 21 HARBINGER NET SERVICES, LLC Balance Sheet December 31, 1995 Assets
Cash and cash equivalents $10,645,000 Other current assets 42,000 ----------- Total current assets 10,687,000 Property and equipment, less accumulated depreciation and amortization 219,000 ----------- $10,906,000 =========== Liabilities and Shareholders' Equity Accounts payable $ 13,000 Due to affiliates, net 180,000 Accrued expenses 160,000 ----------- Total current liabilities 353,000 Long-term debt 3,000,000 ----------- Total liabilities 3,353,000 ----------- Shareholders' equity: Common stock, no par value; 10,000,000 shares authorized, 6,718,286 shares issued and outstanding 8,703,000 Accumulated deficit (1,150,000) ----------- Total shareholders' equity 7,553,000 ----------- Commitments and contingencies $10,906,000 ===========
See accompanying notes to financial statements. - 21 - 22 HARBINGER NET SERVICES, LLC Statement of Operations Period from inception (March 1995) through December 31, 1995
Operating costs: Selling and marketing $84,000 General and administrative 133,000 Depreciation and amortization 21,000 Product development 1,077,000 ------------ Total operating costs 1,315,000 ------------ Operating loss (1,315,000) Interest expense (income), net (165,000) ------------ Net loss $(1,150,000) ===========
See accompanying notes to financial statements. - 22 - 23 HARBINGER NET SERVICES, LLC Statement of Shareholders' Equity Period from inception (March 1995) through December 31, 1995
Common stock Total --------------------- Accumulated Shareholder shareholders' Shares Amount deficit note receivable equity --------- ---------- ------------ --------------- ------------- Initial capitalization (March 1995) 1,004,000 $ 703,000 - - $ 703,000 Sale of common stock 5,714,286 8,000,000 - $(6,000,000) 2,000,000 Proceeds from payment of shareholder note receivable - - - 6,000,000 6,000,000 Net loss - - (1,150,000) - (1,150,000) --------- ---------- ------------ ------------ ------------- Balance at December 31, 1995 6,718,286 $8,703,000 $(1,150,000) - $7,553,000 ========= ========== ============ ============ =============
See accompanying notes to financial statements. - 23 - 24 HARBINGER NET SERVICES, LLC Statement of Cash Flows Period from inception (March 1995) through December 31, 1995
Cash flows from operating activities: Net loss $(1,150,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 21,000 Increase in other current assets (49,000) Increase in: Accounts payable 13,000 Due to affiliates, net 180,000 Accrued expenses 160,000 ----------- Net cash used in operating activities (825,000) ----------- Cash flows from investing activities - purchases of property and equipment (233,000) ----------- Cash flows from financing activities: Proceeds from sale of common stock 2,703,000 Proceeds from issuance of long-term debt 3,000,000 Proceeds from payment of shareholder note receivable 6,000,000 ----------- Net cash provided by financing activities 11,703,000 ----------- Net increase in cash and cash equivalents 10,645,000 Cash and cash equivalents at inception - ----------- Cash and cash equivalents at end of the period $10,645,000 =========== Supplemental disclosure of noncash financing activity - sale of common stock for shareholder note receivable $ 6,000,000 ===========
See accompanying notes to financial statements. - 24 - 25 HARBINGER NET SERVICES, LLC Notes to Financial Statements December 31, 1995 (1) Description of Business and Summary of Significant Accounting Policies (a) Business and Presentation Harbinger NET Services, LLC (the "Company") was organized by Harbinger Corporation and certain other shareholders in December 1994 and began operations as a development stage enterprise in March 1995. The Company develops, markets, and supports software products to enable businesses to engage in electronic commerce using the Internet. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (b) Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. (c) Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets as follows:
Furniture and fixtures 10 years Computer software 5 years Computer and office equipment 5-10 years
(d) Product and Software Development Costs Product development costs consist principally of compensation and benefits paid to the Company's employees or Harbinger Corporation. All product development costs not qualifying for capitalization as software development costs are expensed as incurred. The Company's policy is to expense all software development costs associated with establishing technological feasibility. Because none of the Company's products have reached this stage of development, the Company has not capitalized any product development costs in the accompanying financial statements. (e) Income Taxes The Company has elected to incorporate as a Limited Liability Company in accordance with the laws in the State of Georgia. As a result, the Company is taxed as a partnership and has not provided for Federal - 25 - 26 or state income taxes as the operations are passed through to, and the related income taxes become the individual responsibility of, the Company's shareholders. (f) Fair Value of Financial Instruments The Company uses financial instruments in the normal course of its business. The carrying values of cash equivalents, other current assets, accounts payable, due to affiliates, net, and accrued expenses approximate fair value due to the short-term maturities of these assets and liabilities. The Company believes the fair value of its long-term debt is not significantly different than its carrying value. (g) Recent Accounting Pronouncement On October 23, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation ("SFAS No. 123")." SFAS No. 123 allows companies to retain the current approach set forth in APB Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), for recognizing stock-based expense in their financial statements; however, companies are encouraged to adopt the new accounting method proposed under SFAS No. 123 based on the estimated fair value of employee stock options. Companies that do not follow the new fair value based method will be required to provide expanded footnote disclosures. The provisions of SFAS No. 123 are effective for fiscal years beginning after December 15, 1995. However, disclosure of the pro forma net income and earnings per share, as if the fair value method for accounting for stock-based compensation had been elected, is required for all awards granted in fiscal years beginning after December 15, 1994. The Company intends to continue accounting for stock-related compensation using APB Opinion No. 25 and will provide the expanded footnote disclosures required under SFAS No. 123 beginning with its 1996 financial statements. (2) Property and Equipment Property and equipment as of December 31, 1995 consist of the following:
Furniture and fixtures $ 4,000 Computer software 36,000 Computer and office equipment 193,000 -------- 233,000 Less accumulated depreciation and amortization 14,000 -------- $219,000 ========
(3) Long-Term Debt In connection with a June 1995 financing, the Company issued a $3 million subordinated convertible debenture bearing interest at 6% with principal and accrued interest due in full in June 2000. This financing was completed simultaneously with a capital investment made by Harbinger Corporation of $8 million. The Company is party to an Operating Agreement (see note 4(b)) between Harbinger Corporation, the holder of the $3 million subordinated convertible debenture, and the Company's shareholders which provides, among other terms, a right of first refusal to Harbinger Corporation and the holder with respect to future securities sales by the Company and restricts the Company from certain activities including issuing additional debt in excess of $7.5 million. The terms of this agreement also provide for the automatic conversion of the subordinated convertible debenture into the number of shares of the Company's common stock equivalent to the outstanding principal and accrued interest on the subordinated convertible debenture divided by the - 26 - 27 conversion price, as defined, at the time that the debenture holder receives any and all regulatory approvals required to hold equity in the Company. (4) Shareholders' Equity (a) Common Stock The Company's initial capitalization of $703,000 was provided by Harbinger Corporation and certain other shareholders in March 1995 through the issuance of 1,004,000 shares of the Company's common stock at $0.70 per share. In connection with a June 1995 financing, the Company issued 5,714,286 shares of its common stock to Harbinger Corporation at a price equivalent to $1.40 per share in exchange for $2 million in cash and a $6 million note receivable bearing interest at 7% due at the earlier of September 1996 or the completion of an initial public offering, as defined, by Harbinger Corporation. The note receivable was paid in full in August 1995. (b) Operating Agreement The shareholders of the Company, including the holder of the subordinated convertible debenture, are parties to an Operating Agreement (the "Agreement") which grants certain designated shareholders, presently Harbinger Corporation and the holder of the subordinated convertible debenture, the right after December 1, 1996 to initiate a buy-sell procedure with respect to shares owned by such shareholders. The Agreement also provides for the Company to be controlled by a Board of Managers of seven individuals, two of which are designated by Harbinger Corporation, two are designated by the holder of the subordinated convertible debenture, two are jointly designated by these two parties, and the final member is selected by majority vote of shareholders other than these two parties. After December 31, 1996, the members of the Board of Managers are elected by a simple majority vote of all of the Company's shareholders. (c) Stock Options In connection with the initial capitalization of the Company and in order to attract and retain certain key employees, the Company has granted noncompensatory options to acquire the Company's common stock. The following table summarizes option activity for the period from inception (March 1995) through December 31, 1995:
Number Price range ------- ------------- Outstanding at inception - Granted 103,102 $0.70 - $1.40 Exercised - ------- Outstanding at December 31, 1995 103,102 $0.70 - $1.40 ======= Options exercisable at December 31, 1995 - =======
(5) Due to Affiliates, Net The Company has entered into several agreements with Harbinger Corporation governing certain transactions between them, including the use of personnel, the use of technology owned by Harbinger Corporation, the rights of Harbinger Corporation to license and distribute the Company's products, and the payment of royalties by the Company and Harbinger Corporation. - 27 - 28 Amounts paid to Harbinger Corporation by the Company for services provided and for reimbursement of expenses incurred by Harbinger Corporation on behalf of the Company for the period from inception (March 1995) through December 31, 1995 included in the Company's accompanying financial statements are summarized as follows:
Operating costs: Selling and marketing $ 36,000 ======== General and administrative $ 94,000 ======== Product development $449,000 ======== Balance sheet: Reimbursement for property and equipment purchases $158,000 ======== At December 31, 1995, the Company had an amount due to affiliates, net, resulting from these and other affiliated transactions as follows: Due to Harbinger Corporation $ 97,000 Due to holder of the subordinated convertible debenture (accrued interest) 97,000 Due from Harbinger Corporation affiliate (14,000) -------- $180,000 ========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. On December 26, 1995, the Company dismissed its independent public accountants, Arthur Andersen LLP. Prior to December 26, 1995, Arthur Andersen LLP was engaged as the principal accountant to audit the Company's financial statements. The reports by Arthur Andersen LLP on the Company's financial statements for the fiscal years ended December 31, 1994 and December 31, 1993 and subsequent interim periods, did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. The dismissal of the former accountants was recommended by the Company's Audit Committee and approved by the Company's Board of Directors. During the Company's fiscal years ended December 31, 1994 and December 31, 1993, and during the subsequent interim fiscal periods following the Company's fiscal year ended December 31, 1994 through the date of dismissal, there were no disagreements with Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Arthur Andersen LLP, would have caused it to make reference to the subject matter of the disagreement in their reports. Also, there were no reportable events of the nature described in Rule 304(a)(1)(v) during the Company's fiscal years ended December 31, 1994 and December 31, 1993, or during the subsequent interim fiscal periods following the Company's fiscal year ended December 31, 1994 through the date of dismissal. On January 2, 1996, the Company announced the appointment of KPMG Peat Marwick LLP as independent accountants to audit the Company's financial statements for 1995. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Certain information required by this item is incorporated by reference from the information contained in the Company's Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the Commission on - 28 - 29 April 8, 1996 under the captions "Election of Directors" and "Executive Officers." Certain information regarding executive officers of the Company is included in Part I of this report on Form 10-K under the caption "Executive Officers." ITEM 11. EXECUTIVE COMPENSATION. The information required by this item will be included in the Company's Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the Commission on April 8, 1996 under the caption "Executive Compensation" and is incorporated by reference herein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item will be included in the Company's Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the Commission on April 8, 1996 under the caption "Security Ownership of Certain Beneficial Owners and Management" and is incorporated by reference herein. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item will be included in the Company's Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the Commission on April 8, 1996 under the caption "Certain Transactions" and is incorporated by reference herein. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report: 1. Financial Statements The financial statements of Harbinger Corporation and reports of independent auditors as set forth under Item 8 of this report on Form 10-K are incorporated herein by reference. 2. Financial Statement Schedules (i) The following Financial Statement Schedule of Harbinger Corporation for the Years Ended December 31, 1993, 1994 and 1995 is filed as a part of this Report on Form 10-K and should be read in conjunction with the Financial Statements, and related notes thereto, of Harbinger Corporation. - 29 - 30 HARBINGER CORPORATION SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS ---------------------- CHARGED TO BALANCE AT CHARGED TO OTHER BALANCE AT BEGINNING OF COSTS AND ACCOUNTS-- DEDUCTIONS-- END OF DESCRIPTION PERIOD EXPENSES DESCRIBE(B) DESCRIBE(A) PERIOD - - ---------------------------------- ------------ --------- ----------- ------------ --------- December 31, 1993 Allowance for returns and doubtful accounts.......................... $110,000 69,000 1,010,000 (907,000) $282,000 December 31, 1994 Allowance for returns and doubtful accounts.......................... $282,000 86,000 964,000 (1,062,000) $270,000 December 31, 1995 Allowance for returns and doubtful accounts.......................... $270,000 99,000 1,309,000 (1,141,000) $537,000
- - --------------- (A) Deductions represent write offs and sales returns. (B) Charges to revenue for sales returns and allowances. REPORT OF INDEPENDENT AUDITORS The Board of Directors Harbinger Corporation: Under date of February 9, 1996, we reported on the balance sheet of Harbinger Corporation as of December 31, 1995 and the related statements of operations, shareholders' equity, and cash flows for the year ended December 31, 1995, as contained in the Harbinger Corporation 1995 Annual Report to Shareholders. These financial statements and our report thereon are included in the Harbinger Corporation Annual Report on Form 10-K for the year 1995. In connection with our audit of the aforementioned financial statements, we also audited the related financial statement schedule listed in Item 14(a)2. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audit. In our opinion, such financial schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP /s/ KPMG Peat Marwick LLP Atlanta, Georgia February 9, 1996 - 30 - 31 Schedules not listed above have been omitted because they are not applicable or the information required to be set forth herein is included in the Financial Statements or notes thereto. (ii) The following Report of Independent Public Accountants with respect to the Company's Balance Sheet as of December 31, 1994 and its related Statements of Operations, changes in Shareholders' equity and cash flows for the two years in the period ended December 31, 1994 is filed as a part of this Report on Form 10-K and should be read in conjunction with the Financial Statements, and related notes thereto, of Harbinger Corporation. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Harbinger Corporation: We have audited the balance sheet of HARBINGER CORPORATION, a Georgia corporation (formerly known as Harbinger EDI Services, Inc.), as of December 31, 1994 and the related statements of operations, changes in shareholders' equity, and cash flows for the two years in the period ended December 31, 1994. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harbinger Corporation as of December 31, 1994 and the results of its operations and its cash flows for the two years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14(a)2 herein is the responsibility of the Company's management and is presented for purpose of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP /s/ Arthur Andersen LLP Atlanta, Georgia March 14, 1995 - 31 - 32 (b) REPORTS ON FORM 8-K. The Company filed the following report on Form 8-K during the quarter ended December 31, 1995. (i) Report on Form 8-K with respect to the dismissal of Arthur Andersen LLP filed December 28, 1995, (c) EXHIBITS. The following exhibits are filed as part of, or are incorporated by reference into, this report on Form 10-K:
EXHIBIT - - ------- NUMBER DESCRIPTION - - ------- ----------------------------------------------------------------------------------- 3.1* Amended and Restated Articles of Incorporation of the Registrant. 3.2* Amended and Restated Bylaws of the Registrant. 10.1* Amended and Restated Operating Agreement of Harbinger NET Services, LLC dated June 20, 1995 (''HNS'') 10.2* Note and Security Agreement made by Registrant to HNS for $6,000,000, dated June 20, 1995 10.3* HNS Subordinated Convertible Debenture for $3,000,000 due June 20, 2000 10.4* Amended and Restated Software License Agreement between Registrant and HNS made as of June 20, 1995 and effective as of May 31, 1995 10.5* Amended and Restated System Operation Agreement between Registrant and HNS made as of June 20, 1995 and effective as of May 31, 1995 10.6* Amended and Restated Development Agreement between Registrant and HNS made as of June 20, 1995 and effective as of May 31, 1995 10.7* Subscription Documents of Registrant for the acquisition of 1,428,571 shares of HNS dated June 20, 1995 10.8* Subscription Documents of Registrant for 4,285,714 shares of HNS dated June 20, 1995 10.9* Agreement by and among Registrant, HNS, and BellSouth Corporation dated June 20, 1995 10.10* Management Agreement between Registrant and HNS dated as of May 31, 1995 10.11* Westinghouse Communications Order Form between Registrant and Westinghouse Communications dated May 12, 1995 10.12* Promissory Note for $3,000,000 payable by Registrant to NationsBank of Georgia, N.A. (''NationsBank'') dated May 2, 1995
- 32 - 33
10.13* Loan Agreement between Registrant and NationsBank dated as of August 15, 1994 with First Amendment dated as of May 2, 1995 10.14* Employment Agreement between Registrant and Mr. James M. Travers effective as of February 1, 1995 with letter from Registrant to Mr. Travers dated December 27, 1994 10.15* Employment Agreement between Registrant and Mr. James C. Davis effective as of January 18, 1995 10.16* Assignment of Invention and Patents Thereon (Patent No. 5,367,664) by Texas Instruments, Incorporated (''TI'') to Registrant dated January 12, 1995 as recorded with United States Patent and Trademark Office on March 13, 1995 10.17* U.S. Patent No. 5,367,664 issued November 22, 1994 10.18* Assignment of Invention and Patents Thereon (Application No. 07/502,955) by TI to Registrant dated January 12, 1995 as recorded with United States Patent and Trademark Office on March 13, 1995 10.19* Asset Purchase Agreement between Registrant and TI dated as of December 31, 1994** 10.20*+ Business Financial Management System License Agreement between Registrant and Private Business, Inc. dated December 28, 1994 10.21* Employment Agreement between Registrant and Mr. David A. Meeker effective as of December 21, 1994 10.22* Exclusive Licensing Agreement between Registrant and Tools & Techniques, Inc. (''T&T'') dated as of October 31, 1994 10.23* Right-To-Purchase Agreement between Registrant and the Principal Shareholders of T&T dated as of October 31, 1994 10.24* 401(k) Profit Sharing Plan amended and restated effective as of September 1, 1994; original effective date October 1, 1991 10.25* Employment Agreement between Registrant and Mr. C. Tycho Howle effective as of March 7, 1994 10.26* Employment Agreement between Registrant and Mr. Joel G. Katz effective as of March 7, 1994 10.27* Employment Agreement between Registrant and Mr. David T. Leach effective as of March 7, 1994 10.28* Employment Agreement between Registrant and Mr. George S. Hart effective as of March 7, 1994 10.29*+ License and Service Agreement between Registrant and Bank of America National Trust and Savings Association dated as of February 18, 1994
- 33 - 34
10.30* Harbinger NV. (''HNV'') Shareholders Agreement between the Registrant, AXA Equity & Law Life Assurance Society, Ltd. (''Equity & Law'') and Vulcan Ventures, Inc. (''Vulcan'') dated November 5, 1993 with Addendum made as of May 11, 1994 10.31* Management Agreement between Registrant and Harbinger NV dated as of November 5, 1993 10.32* Agreement between Registrant and EDI Solutions, Inc. effective as of September 1, 1993 10.33* Amended and Restated 1993 Stock Option Plan for Nonemployee Directors effective as of August 11, 1993 10.34* Co-Marketing Agreement between Registrant and Sprint Communications Company Limited Partnership of Delaware made as of August 9, 1993 10.35* Series C Preferred Stock Agreement between Registrant and Equity & Law dated March 4, 1993 10.36* Series C Preferred Stock Agreement between Registrant and Vulcan dated March 4, 1993 10.37* Form of Series B Preferred Stock Agreement by and among Registrant and holders of the Series B Preferred Stock of Registrant made as of November 30, 1992 10.38* Lease between Registrant and Lenox Park Development No. 1 L.P. for office located at 1055 Lenox Park Boulevard, Atlanta, Georgia dated July 16, 1992 with First Amendment dated July 22, 1993 and Second Amendment dated December 27, 1993 10.39* Amended and Restated 1989 Stock Option Plan effective as of April 15, 1992 10.40*+ Harbinger Business Financial Management System License Agreement between Registrant as assignee of Harbinger Computer Services, Inc. and Barnett Banks, Inc. dated November 18, 1991 with amendment dated May 21, 1992 10.41* Software License and Distribution Agreement between Registrant and Sprint International Communications Corporation (''Sprint'') effective July 27, 1990 with First Amendment effective as of May 24, 1993 10.42* Reseller Agreement (now known as Service Management Agreement) between Registrant and Sprint effective July 27, 1990 with First Amendment effective as of May 1, 1991, Second Amendment effective as of May 1, 1992, and Third Amendment dated July 1, 1994 10.43* Form of Indemnification Agreement between Registrant and Directors 10.44 Letter Agreement between Registrant and Harbinger NET Services, L.L.C. 10.45 Subscription Agreement between Registrant and Harbinger NV effective December 29, 1995
- 34 - 35
10.46 Subscription Agreement and Investor Suitability Representations (Regulation S) between Registrant and Henk P.M. Kivits effective as of August 22, 1995 10.47 Harbinger NV Amended and Restated Shareholders Agreement between Registrant, AXA Equity & Law Life Assurance Society, Ltd. and Vulcan Ventures dated December 29, 1995 10.48 Harbinger Corporation 1996 Stock Option Plan 10.49 Amended and Restated Harbinger Corporation Employee Stock Purchase Plan 10.50 Amendment to Harbinger Corporation Amended and Restated 1989 Stock Option Plan 10.51 First Amendment to Alliance Agreement between System Software Associates, Inc. and Harbinger Corporation 10.52 Supplemental Agreement by and among Harbinger Corporation, Vulcan Ventures, Inc. and AXA Equity & Law Life Assurance Society, Ltd. effective December 29, 1995. 11.1 Computation of Earnings Per Share 13.1 The following financial information included within the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1995: (i) Selected Financial Data; (ii) Quarterly Results of Operations; (iii) Management's Discussion and Analysis of Financial Condition and Results of Operations; and (iv) Financial Statements, Notes to Financial Statements, and Independent Auditor's Report. 23.1 Consent of Arthur Andersen LLP 23.2 Consent of KPMG Peat Marwick LLP 27 Financial Data Schedule (for SEC use only)
* Incorporated by reference to Exhibits filed in response to Item 16(a), "Exhibits" of the Company's Registration Statement on Form S-1 (File No. 33-93804) declared effective on August 22, 1995. + The Company has received confidential treatment with respect to portions of these Exhibits. - 35 - 36 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HARBINGER CORPORATION /s/ C. Tycho Howle -------------------------------- C. Tycho Howle Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. /s/ C. Tycho Howle - - ------------------------------------- Chief Executive Officer, March 29, 1996 C. Tycho Howle Director (Principal Executive Officer) /s/ David T. Leach - - ------------------------------------- President, Chief Operating Officer March 29, 1996 David T. Leach and Director /s/ Joel G. Katz - - ------------------------------------- Vice-President-Finance and Secretary March 29, 1996 Joel G. Katz (Principal Financial Officer and Principal Accounting Officer) /s/ Donald L. House - - ------------------------------------- Director March 29, 1996 Donald L. House /s/ William D. Savoy - - ------------------------------------- Director March 29, 1996 William D. Savoy /s/ William B. King - - ------------------------------------- Director March 29, 1996 William B. King /s/ Stuart L. Bell - - ------------------------------------- Director March 29, 1996 Stuart L. Bell /s/ Roger E. Covey - - ------------------------------------- Director March 29, 1996 Roger E. Covey
37 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS TO FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 HARBINGER CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN THE CHARTER) EX-10.44 2 LETTER OR AGREEMENT BETWEEN REGISTRANT AND HARBING 1 EXHIBIT 10.44 2 Tycho Howle Harbinger Corporation Re: Harbinger Corporation Employee Stock Purchase Plan Dear Tycho: The purpose of this letter is to formally acknowledge the responsibilities which Harbinger NET Services, L.L.C. ("HNS") will have regarding the participation of HNS employees in the Harbinger Corporation Employee Stock Purchase Plan (the "Plan"). First, HNS will remit to Harbinger Corporation ("Harbinger"), as soon as administratively possible following the end of each quarterly purchase period, the fair market value (as defined in the Plan) for the shares purchased for the purchase period under the Plan for HNS employees. The fair market value will be funded with amounts withheld from HNS employees' salary via payroll deductions, and HNS's fifteen (15%) percent share of the purchase price. Second, HNS agrees to cooperate with whatever practices and procedures are established for the administration of the Plan by the Compensation Committee of Harbinger. Third, HNS will cooperate with Harbinger and take whatever actions may be necessary to ensure that the issuance of Harbinger shares to HNS employees under the Plan complies with applicable securities requirements, as determined by Harbinger. Sincerely, Harbinger NET Services, L.L.C. By: /s/ James C. Davis James Davis, President EX-10.45 3 SUBSRIPTION AGREEMENT 1 EXHIBIT 10.45 2 SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT is made and entered into between HARBINGER NV, a corporation organized under the laws of the Netherlands (herein referred to as the "Company") and HARBINGER CORPORATION, a corporation organized under the laws of the State of Georgia U.S.A. ("Investor"). By executing this Subscription Agreement, Investor acknowledges that Investor understands that the Company is relying upon the accuracy of the representations and warranties of Investor contained herein in complying with its obligations under applicable securities laws. TERMS OF INVESTMENT 1. GENERAL. Investor hereby agrees to acquire and obtain upon the terms and conditions set forth herein 150,000 shares of the Company's Common Shares (the "Securities"). The Purchase Price shall be $U.S. 150,000.00. 2. INVESTOR'S REPRESENTATIONS AND WARRANTIES. a. Investor represents, warrants and covenants to the Company that Investor is domiciled in the country and state or province shown in Investor's address below, and will be the sole party in interest as to the Securities subscribed for and is acquiring the Securities for Investor's own account, for investment only and not with a view toward the resale or distribution thereof for at least a period of one year. b. Investor represents and warrants that Investor is able to bear the economic risk; of losing Investor's entire investment in the Company, that such investment is not disproportionate to Investor's net worth, and that Investor has adequate means of providing for Investor's current needs and contingencies without regard to the investment in the Company. c. Investor represents and warrants that in connection with Investor's purchase of any of the Securities no oral or written representations or warranties have been made to Investor. d. Investor represents and warrants that, to the extent Investor has deemed necessary, Investor has consulted with Investor's attorney, financial advisors and others regarding all financial, securities, and tax aspects of the proposed investment. e. Investor represents, warrants, and agrees that it shall not transfer the Securities to any person or entity except in accordance with the provisions of that certain Amended and Restated Shareholders Agreement dated December 29, 1995 by and between Investor, Vulcan Ventures, Inc., a corporation organized under the laws of the State of Washington, U.S.A. and AXA Equity & Law Life Assurance Society, Ltd., a corporation organized under the laws of England (the "Shareholders Agreement"). f. Investor represents, warrants, and agrees that Investor has read carefully the Shareholders Agreement and that Investor ratifies and confirms the terms and conditions of the Shareholders Agreement. 3. PROCEDURE FOR CLOSING. The closing of the offer and sale of the Securities pursuant to this Agreement shall occur as follows: (i) Investor shall execute a copy of this Agreement (also indicating Investor's address on the signature page of this Agreement) and a copy of the Shareholders Agreement and shall forward such executed documents, together with a wire transfer of funds, in the amount equal to the 3 Purchase Price of the Securities subscribed for, to the Company. The wire transfer should be transmitted to: ABN*AMRO Bank For Credit to the Account of: Harbinger NV USD Account 43.15.42.414 SWIFTCODE: ABNANL2A ABN*AMRO Bank at Nieuweweg 49 Postbus 49 2130 AA Hoofddorp The Netherlands Phone: +31-23-5614041 Contact Person: Ms. A. Kuijper-Woldhuis (ii) Simultaneously with the Company's transmittal of this executed Agreement, Shareholders Agreement, and certificate representing the Securities to Investor, the Company will be authorized to disburse the funds wired by Investor into the Company's account and immediately to make use of such funds in its sole discretion 4. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, U.S.A., without regard to the respect to any laws governing conflict of laws. IN WITNESS WHEREOF, Investor has executed this Subscription Agreement effective the 29th day of December, 1995. HARBINGER CORPORATION
By: /s/ C. Tycho Howle ------------------- Name (Print or Type): C. Tycho Howle ------------------- Title: CEO ------------------- Address of Investor: 1055 Lenox Park Boulevard Atlanta, GA 30319 Country of Residence: U.S.A. Investment Agreement For: 150,000 shares of Common Shares at $U.S. 1.00 per share Total Purchase Price: $U.S.150,000.00
[SIGNATURES CONTINUED ON NEXT PAGE] - 2 - 4 Accepted by Harbinger NV effective the 29th day of December, 1995. HARBINGER NV By: /s/ James C. Davis ------------------------ James C. Davis Name (Print or Type) Title: Managing Director ----------------- - 3 - EX-10.46 4 CONFIDENTIAL SUBSCRIPTION AGREEMENT 1 EXHIBIT 10.46 2 CONFIDENTIAL SUBSCRIPTION AGREEMENT AND INVESTOR SUITABILITY REPRESENTATIONS (REGULATION S) ____________________ HARBINGER CORPORATION THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS. THE SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN. THIS SUBSCRIPTION AGREEMENT is made and entered into between HARBINGER CORPORATION, a corporation organized under the laws of the State of Georgia, U.S.A. (herein referred to as the "Company") and Hendrikus Pieter Marie Kivits, a resident of the Netherlands ("Investor"). By executing this Subscription Agreement, Investor acknowledges that Investor understands that the Company is relying upon the accuracy of the representations and warranties of Investor contained herein in complying with its obligations under applicable securities laws. I. TERMS OF SUBSCRIPTION 1. GENERAL. Investor owns 32,000 shares of the NLG. 1 par value per share Common Shares of Harbinger NV, a corporation organized under the laws of the Netherlands, (the "HNV Shares"). Investor hereby subscribes to acquire, upon the terms and conditions set forth in this Subscription Agreement, such number of shares of the $U.S. .0001 par value per share Common Stock of the Company as shall be determined in accordance with the provisions of Section 2 hereof (the "HC Shares"). The HC Shares subscribed hereby are herein referred to as the "Securities." Execution of this Subscription Agreement by Investor shall constitute an offer by Investor to subscribe for HC Shares. The subscription shall be on the terms and conditions specified herein. 3 2. CONVERSION OF HNV SHARES TO HC SHARES. Investor hereby agrees immediately to tender to the Company, as consideration for the HC Shares, all of the HNV Shares owned by Investor. Upon acceptance of Investor's subscription offer by the Company and in return for and following receipt by the Company of the stock certificate representing the HNV Shares, the Company shall issue to Investor certain HC Shares in the amount specified below (the "Converted HC Share Amount") which is equal to the quotient derived by DIVIDING Thirty-Two Thousand and No/100ths United Stated Dollars ($U.S. 32,000.00), which equals the amount Investor originally paid for the HNV Shares (the "Conversion Price") BY twelve U.S. dollars ($U.S. 12.00) per share which is the price per share to the public of the Company's Common Stock proposed pursuant to the Company's initial public offering completed pursuant to that certain Underwriting Agreement by and among the Company and the Company's Investment Bankers and other named parties therein dated August 21, 1995 (the "Underwriting Agreement"). In the event the calculations of this Section 2 result in any fractional shares of the Company to be issued to Investor, the Company shall remit to Investor payment in cash in an amount equal to the number of fractional shares MULTIPLIED BY the price per share to the public for the Company's Common Stock in its initial public offering (the "Fractional Share Payment"). 3. INVESTOR'S REPRESENTATION AND WARRANTIES. A. Investor represents, warrants and covenants to the Company that Investor (i) will be the sole party in interest as to the Securities subscribed for and is acquiring the Securities for Investor's own account, for investment only and not with a view toward the resale or distribution thereof, (ii) received this Subscription Agreement outside of the United States, and executed and delivered this Subscription Agreement outside of the United States, and (iii) is a resident of a jurisdiction other than the United States. B. Investor understands that Investor must bear the economic risk of this investment for an indefinite period of time because the Securities are not registered under the Securities Act of 1933, as amended (the "1933 Act"), or the securities laws of the Netherlands or any other jurisdiction. Investor has been advised that the Securities are not being registered under the 1933 Act upon the basis that the transactions involving their sale are exempt from such registration requirements as transactions made outside the United States in reliance on Regulation S, as promulgated by the United States Securities and Exchange Commission ("SEC") pursuant to the 1933 Act, and that reliance by the Company on such exemption is predicated in part on Investor's representations set forth in this Subscription Agreement. Investor acknowledges that the Company makes no representations of any kind concerning its intent or ability to offer or sell the Securities in a public offering or otherwise. Investor further understands that the Company makes no representation or warranty regarding its fulfillment in the future of any reporting requirements under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning the Company, as may be required as a condition for the unregistered resale of restricted securities. C. Investor represents and warrants that Investor is able to bear the economic risk of losing Investor's entire investment in the Company, which is not disproportionate to - 2 - 4 Investor's net worth, and that Investor has adequate means of providing for Investor's current needs and personal contingencies without regard to the investment in the Company. D. Investor represents and warrants that in connection with Investor's purchase of any of the Securities no oral or written representations or warranties have been made to Investor. Investor acknowledges receipt of the Company's Prospectus dated August 21, 1995 and further acknowledges that the HC Shares being acquired by Investor hereunder are not covered by such Prospectus and are not registered shares. Investor acknowledges that the Company has not made or delivered any financial projections, and Investor is not relying on any expectations of financial condition or results of operations for any future period. E. Investor represents and warrants that Investor is an accredited investor as defined in the 1933 Act, either by virtue of having a net worth in excess of One Million United States Dollars ($U.S. 1,000,000) or by having, for each of the two most recent years, an individual income in excess of Two Hundred Thousand United States Dollars ($U.S. 200,000) or a joint income in excess of Three Hundred Thousand United States Dollars ($U.S. 300,000) and a reasonable expectation of achieving the same income level in the current year. Investor further represents and warrants that Investor is familiar with the business in which the Company is engaged and, based upon Investor's knowledge and experience in financial and business matters, Investor is familiar with investments of the sort that Investor is undertaking herein, that Investor is fully aware of the problems and risks involved in making an investment of this type, and that Investor is capable of evaluating the merits and risks of this investment. F. Investor represents and warrants that, to the extent Investor has deemed necessary, Investor has consulted with Investor's attorney, financial advisors and others regarding all financial, securities and tax aspects of the proposed investment, and that said advisors have reviewed this Subscription Agreement and all documents relating hereto on Investor's behalf. Investor and Investor's advisors have sufficient knowledge and experience in business and financial matters to evaluate the Company, to evaluate the risks and merits of an investment in the Company, to make an informed investment decision with respect thereto, and to protect Investor's interest in connection with Investor's subscription without need for the additional information which would be required to be included in more complete registration statements effective under the 1933 Act or under the laws of other jurisdictions. G. Investor acknowledges that Investor and Investor's advisors have had an opportunity to ask questions of and to receive answers from the officers of the Company and to obtain additional information in writing to the extent that the Company possesses such information or could acquire it without unreasonable effort or expense: (i) relative to the Company and the subscription for the Securities hereunder; and (ii) necessary to verify the accuracy of any information, documents, books and records furnished. All such materials and information requested by Investor and Investor's advisors (including information requested to verify information previously furnished) have been made available and examined by Investor or Investor's advisors. - 3 - 5 H. Investor agrees that Investor will not attempt to pledge, transfer, convey or otherwise dispose of the Securities in the United States except in a transaction made pursuant to the following offering restrictions: all offers and sales of the Securities to a U.S. person or inside the United States prior to the expiration of a one-year period immediately following the date of this Subscription Agreement shall be made only upon receipt by the Company of an opinion of counsel satisfactory to the Company that such transaction complies with all applicable securities laws and only (i) in accordance with the provisions of Rules 903 or 904 of Regulation S, or (ii) pursuant to the registration requirements under the 1933 Act, or (ii) pursuant to an available exemption from registration under the 1933 Act. Investor consents to the placement of legends on any certificates or documents representing any of the Securities stating that they have not been registered under the 1933 Act or any applicable securities laws of other jurisdictions and setting forth or referring to such offering restrictions. Investor is aware that the Company will make a notation in its appropriate records, and notify its transfer agent, with respect to the restrictions on the transferability of the Securities. I. Investor represents and warrants that Investor is not a citizen or resident of the United Sates and as such Investor is a non-U.S. person within the meaning of Regulation S promulgated by the SEC under the 1933 Act. J. Investor represents and warrants to the Company that the he owns the HNV Shares in his own name, free and clear of all encumbrances, liens, security interests or other assessments of any kind, and that Investor is legally permitted to enter into this Agreement. Investor also agrees to execute the stock power (the "Stock Power"), in the form attached hereto at EXHIBIT 1, assigning the HNV Shares to the Company, and such other documents, instruments, and agreements as may be requested by the Company to effectuate the transfer of the HNV Shares to the Company. Notwithstanding anything herein to the contrary, Investor agrees and acknowledges that the obligations of the Company herein shall be conditioned in all respects upon the receipt by the Company of the Consent Form fully executed by all parties thereto (the "Consent Form"), in the form as attached hereto at EXHIBIT 2. 4. INDEMNIFICATION. Investor shall indemnify and hold harmless the Company, any affiliated corporation or entity, the partners, officers, directors and employees of any of the foregoing and any professional advisors thereto, from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees, to which they may become subject or which they may incur by reason of or in connection with any misrepresentation made by Investor, any breach of any of Investor's representations or warranties, or any failure by Investor to fulfill any of its covenants or agreements under this Subscription Agreement. 5. RELEASE BY INVESTOR. Investor hereby forever releases, dismisses, and discharges, the Company, Harbinger NV and their affiliates, and their respective officers, directors, employees, shareholders, successors, assigns, and transferees (collectively the "Released Persons"), from any and all now or hereafter existing actions, causes of action, suits, damages, debts, claims, counterclaims, obligations and liabilities of any nature whatsoever, known or unknown, suspected or unsuspected (collectively the "Released Claims"), that Investor may have against any of the Released Persons, including, without limitation, any Released Claim which in - 4 - 6 whole or in part is based upon or arises out of the purchase and sale of the HC Shares and HNV Shares pursuant to this Subscription Agreement. 6. EFFECTIVE DATE. This Subscription Agreement shall be effective at 8:00 a.m. Netherlands time on the day immediately following the execution of the Underwriting Agreement by all parties thereto. 7. MISCELLANEOUS. A. This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. B. This Subscription Agreement contains the entire agreement between the parties with respect to the subject matter thereof. The provisions of this Subscription Agreement may not be modified or waived except in writing. C. This Subscription Agreement and the rights, powers and duties set forth herein shall, except as set forth herein, bind and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto. Investor may not assign any of Investor's rights or interests in and under this Subscription Agreement without the prior written consent of the Company, and any attempted assignment without such consent shall be void and without effect. 8. COUNTERPARTS. This Subscription Agreement may be executed in two or more counterparts, each of which shall constitute an original. The Company shall retain one counterpart, and one counterpart shall be returned to Investor upon acceptance thereof by the Company. 9. TITLE TO HC SHARES. Investor shall hold title to the HC Shares purchased hereunder in his individual name and for his individual account. [SIGNATURES ON NEXT PAGE] - 5 - 7 IN WITNESS WHEREOF, Investor has executed this Subscription Agreement in Hoolddoup, Netherlands effective the 22nd day of August, 1995. BY SIGNING BELOW, INVESTOR REPRESENTS THAT HE HAS READ, UNDERSTANDS AND AGREES TO THE WARRANTIES AND REPRESENTATIONS AND OTHER PROVISIONS OF THIS SUBSCRIPTION AGREEMENT. INVESTOR Hendrikus Pieter Marie Kivits /s/ Hendrikus Pieter Marie Kivits - - --------------------------------- Signature of Investor INVESTOR'S PRINCIPAL PLACE OF BUSINESS (THIS IS THE ADDRESS AT WHICH PAYMENTS, IF ANY, WILL BE DELIVERED): Jogersboschlaen 18 5262 L5 Vaght the Netherlands INVESTOR'S TELEPHONE NUMBER: 073-579004 [SIGNATURES CONTINUED ON NEXT PAGE] - 6 - 8 SUBSCRIPTION AGREEMENT AND INVESTOR SUITABILITY REPRESENTATIONS (REGULATION S) HARBINGER CORPORATION SIGNATURE PAGE FOR HARBINGER CORPORATION SUBSCRIPTION OFFER ACCEPTED THIS 22 DAY OF AUGUST, 1995. ------ --------- HARBINGER CORPORATION By: /s/ Joel G. Katz ------------------------------ Name: Joel G. Katz ---------------------------- Title: Vice President, Finance --------------------------- Converted HC Share Amount: 2,666 shares of Common Stock of the Company. Fractional Share Payment: $8.00 U.S. - 7 - 9 EXHIBIT 1 Stock Power [ATTACHED] 10 IRREVOCABLE STOCK POWER For value received, the undersigned hereby transfers unto Harbinger Corporation, Thirty-Two Thousand (32,000) shares of the NLG. 1 par value per share common shares of Harbinger NV (the "Company"), represented by Certificate No. 2,508,001 - 2,540,000, and does hereby irrevocably constitute and appoint any officer of the Company, attorney, to transfer the said shares on the books of the Company with full power of substitution in the premises. Dated effective as of August 22nd, 1995 By: /s/ Hendrikus Pieter Marie Kivits --------------------------------- Hendrikus Pieter Marie Kivits In the presence of: /s/ Witness Signature - - --------------------- Witness 11 EXHIBIT 2 Consent Form [ATTACHED] 12 CONSENT FORM THIS CONSENT FORM (this "Consent") effective as of this 22nd day of August, 1995, by and among HARBINGER CORPORATION, a corporation organized under the laws of the State of Georgia, U.S.A., with its principal office at 1055 Lenox Park Blvd., Atlanta, Georgia 30319 ("HC"); VULCAN VENTURES INC., a corporation organized under the laws of the State of Washington, U.S.A., with its principal office at 13810 SE Eastgateway, Ste 480, Velleview, Washington 98005-4442 ("Vulcan"); AXA EQUITY & LAW LIFE ASSURANCE SOCIETY LTD., a corporation organized under the laws of the England, with its principal office at 20 Lincoln's Inn Fields, London WC2A 3ES ("EQL"); HENDRIKUS PIETER MARIE KIVITS, resident at Geleenbeeklaan 33, 6166 GP GELEEN ("Kivits"); and ADRIANUS JOZEF VAN DIEPEN, resident at Jagersweg 8, 1251 ZR LAREN ("van Diepen"). The above parties may be individually referred to as a "Shareholder" or collectively as the " Shareholders". WHEREAS, the Shareholders own all of the issued and outstanding capital stock of Harbinger NV, a corporation organized under the laws of the Netherlands (the "Company"); WHEREAS, the shareholders agreement of the Company dated as of November 5, 1993 (as amended and in effect as of the date hereof, the "Shareholders Agreement") contains various restrictions on the ability of the Shareholders to transfer, convey, pledge and encumber the stock of the Company; WHEREAS, Kivits and van Diepen desire to be authorized to transfer and convey their shares in the Company (the "Transferred Shares") to HC in exchange for shares of the capital stock of HC; and WHEREAS, the Shareholders desire to authorize Kivits and van Diepen to transfer and convey the Transferred Shares to HC; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual premises and agreements contained herein, and other good and valuable consideration, the shareholders hereby agree as follows: Section 1. The Shareholders hereby jointly and severally consent to Kivits and van Diepen's transfer and conveyance of the Transferred Shares and in all rights attendant thereto to HC and its successors and assigns. Section 2. The Shareholders hereby jointly and severally and irrevocably waive and modify any provisions of the Shareholders Agreement that prohibit, restrict, condition or otherwise affect the transfer and conveyance of the Transferred Shares to HC or any enforcement action which may be taken in respect of such transfer and conveyance including, without limitation, any rights of first refusal or preemptive rights. Section 3. Without the prior written consent of all shareholders, the Shareholders hereby jointly and severally agree not to amend, modify or alter in any way the Shareholders Agreement, except to the extent that is necessary to permit the provisions of this Consent. 13 Section 4. The Company has recorded, or caused to be recorded, on the books and records of the Company, all entries necessary to reflect completely and accurately the transfer and conveyance of the Transferred Shares to HC. A copy of this Consent will be included in the books and records of the Company. Section 5. This Consent may executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, this Consent is entered into as an instrument under seal as of the date first above written. HARBINGER CORPORATION BY: /s/ Joel G. Katz ------------------------ TITLE: Vice President, Finance --------------------- VULCAN VENTURES INC. BY: ------------------------ TITLE: --------------------- AXA EQUITY & LAW LIFE ASSURANCE SOCIETY LTD. BY: ------------------------ TITLE: --------------------- [SIGNATURES CONTINUED ON NEXT PAGE] 14 IN WITNESS WHEREOF, this Consent is entered into as an instrument under seal as of the date first above written. HENDRIKUS PIETER MARIE KIVITS /s/ Hendrikus Pieter Marie Kivits --------------------------------- ADRIANUS JOZEF VAN DIEPEN /s/ Adrianus Jozef van Diepen --------------------------------- COMPANY: HARBINGER NV BY: /s/ James Davis ------------------------------ TITLE: President --------------------------- EX-10.47 5 1996 STOCK OPTION PLAN 1 EXHIBIT 10.47 2 HARBINGER NV AMENDED AND RESTATED SHAREHOLDERS AGREEMENT BETWEEN HARBINGER CORPORATION F/K/A HARBINGER*EDI SERVICES, INC.; AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD.; AND VULCAN VENTURES, INC. EFFECTIVE DATE: DECEMBER 29, 1995 3 INDEX
Article l. - Formation Article 2. - Technology Article 3. - Share Capital Structure Article 4. - Management Board Article 5. - Supervisory Board Article 6. - Meeting of Shareholders Article 7. - Business Plans Article 8. - Financial Reporting Article 9. - Auditors and Accounting Principles Article 10. - Transferability of Shares Article 11. - Shareholders' Put-Call Option Article 12. - HARBINGER's Call Option Article 13. - Termination Article 14. - Confidentiality Article 15. - General
4 THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (this "Agreement") is made as of December 29, 1995 by and between HARBINGER CORPORATION f/k/a HARBINGER EDI SERVICES INC., a corporation organized under the laws of the State of Georgia, U.S.A., with its principal office at 1055 Lenox Park Blvd., Atlanta, Georgia 30319 ("HARBINGER"); VULCAN VENTURES, INC., a corporation organized under the laws of the State of Washington, U.S.A., with its principal office at 13810 S.E. Eastgateway, Ste 480 Belleview, Washington 98005-4442 ("VULCAN"); and AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD., a corporation organized under the laws of England, with its principal office at 20 Lincoln's Inn Fields, London WC2A 3ES, England ("EQL"). The above parties may be individually referred to as a "Shareholder" or collectively as the "Shareholders". WHEREAS, the Shareholders own all of the outstanding capital stock of Harbinger NV, a corporation organized under the laws of The Netherlands (the "Company"); WHEREAS, the Shareholders are parties to that certain Shareholders Agreement dated November 5, 1993 pursuant to which the Shareholders in the Company stipulated the terms and conditions of the Shareholders' participation in the equity and business policies of the Company and their rights and obligations with respect to the disposition or transfer of shares; and WHEREAS, the Shareholders and the Company desire to amend and restate such Shareholders Agreement in its entirety on and pursuant to the terms and conditions set forth in this Agreement. NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter set forth, the parties hereto, intending to be legally bound, agree as follows: ARTICLE 1. - FORMATION 1.1 The Company shall be incorporated under the laws of The Netherlands in the form of a Naamloze Vennootschap ("N.V."). 1.2 The name of the Company shall be Harbinger NV and its registered office shall be in the Netherlands at an address to be determined by the Managing Director. ARTICLE 2. - TECHNOLOGY RIGHTS 2.1 Initially, HARBINGER shall grant to the Company a personal, non-exclusive, non-transferable right to use and exercise certain rights with respect to the technology necessary to enable the company to render services in the area of electronic data interchange. The specific terms and conditions for this technology transfer and the performance by HARBINGER of related development services shall be described in a separate Software License Agreement and Development Services Agreement. 5 2.2 In consideration for the grant of the above license, the Company shall grant to HARBINGER a personal, fully paid, perpetual and non-exclusive right to use any enhancements developed for the technology licensed from HARBINGER. The terms and conditions for these grant-back rights shall likewise be specified in the Software License Agreement. 2.3 Upon termination of this Agreement, or liquidation of the Company, the Shareholders and the Company shall ensure that the license referred to in Article 2.2 shall continue without interruption or diminishment of rights. ARTICLE 3. - SHARE CAPITAL STRUCTURE 3.1 The initial authorized share capital of the Company is ten million Dutch Guilders (NLG. 10.000.000) represented by nine million (9.000.000) common shares with a par value of one Dutch Guilder (NLG. 1) each and one million (1.000.000) preferred shares with a par value of one Dutch Guilder (NLG. 1) each. 3.2 The initial issued capital of the Company was two million five hundred thousand (2.500.000) common shares and was issued to the Shareholders as follows:
Percentage Number of Shares Consideration ---------- ---------------- --------------- HARBINGER 20% 500.000 shares US$ 500,000 VULCAN 60% 1.500.000 shares US$ 1,500,000 EQL 20% 500.000 shares US$ 500,000 TOTAL 100% 2.500.000 shares US$ 2,500,000
3.3 HARBINGER received thirty-two thousand common shares (32.000) from Henrikus Pieter Marie Kivits, eight thousand shares (8.000) from Adrianus Jozef van Diepen and five thousand five hundred shares (5.500) from John D. Lowenberg pursuant to such individuals' conversion of common shares in the Company to common stock of HARBINGER. 3.4 Pursuant to subscription agreements dated as of the date hereof, the Company shall issue seven hundred fifty thousand (750.000) common shares to the Shareholders as follows:
Percentage Number of Shares Consideration ---------- ---------------- --------------- HARBINGER 20% 150.000 shares US$ 150,000 VULCAN 60% 450.000 shares US$ 450,000
-2- 6
Percentage Number of Shares Consideration ---------- ---------------- --------------- EQL 20% 150.000 shares US$ 150,000 TOTAL 100% 750.000 shares US$ 750,000
The total consideration paid by the Shareholders pursuant to this Section 3.4, seven hundred fifty thousand United States Dollars (U.S. $750,000), shall hereinafter be referred to as the "Additional Capital Contribution." ARTICLE 4. - MANAGEMENT BOARD 4.1 The Managing Director(s) of the Company shall be appointed by the General Meeting of Shareholders and shall be entrusted with the day to day business of the Company. The Shareholders shall decide the compensation, including the grant of any stock options in the Company's shares, to be paid to each Managing Director. 4.2 The Management Board shall be composed of one or more Managing Directors. The initial Managing Director shall be C. TYCHO HOWLE. 4.3 The Management Board shall obtain the prior approval of two-thirds of the Shareholders for the following matters: (i) the liquidation, dissolution or other winding up of the affairs of the Company. Any voluntary bankruptcy of the Company or the filing of any proceeding under any bankruptcy, insolvency or similar law now or hereafter in effect or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar official of the Company for any substantial part of the Company's property; (ii) the sale of all or substantially all of the Company's assets; (iii) the merger or consolidation of the Company with any other entity determined by the Management Board to result in consideration being transferred by the Company with a value in excess of the equivalent of US$ 2,500,000; or (iv) the acquisition of the whole or substantially all of the business or property of any other corporation, association, partnership or person if the value of such business or property is determined by the Management Board to exceed the equivalent of US$ 2,500,000. 4.4 The Management Board shall need the prior approval of two-thirds of the Board (consisting of the Supervisory and Managing Directors) for the following matters: -3- 7 (i) the entry into any contract, agreement or other instrument binding and obligating the Company for a liability in excess of the equivalent of US$ 500,000 per annum or for a term in excess of three years; (ii) the purchase of capital stock or an equity interest in another corporation, partnership or any other entity, or the formation of any domestic or foreign subsidiary; (iii) the selection of any bank or other financial institution from which the Company obtains a loan or line of credit, or with which the Company deposits funds, in excess of the equivalent of US$ 1,000,000 or the borrowing of any funds in excess of the equivalent of US$ 1,000,000 in the aggregate; (iv) the election of any officer of the Company including without limitation, the Chief Executive Officer and the chief employees of the Company in the areas of finance, operations and technology; (v) the amendment of the Company's Articles of Association; (vi) the issuance of any equity securities of the Company; (vii) the declaration or payment of any dividends of the Company's shares; (viii) the establishment or material amendment of employee retirement plans, fringe benefit plans, bonus plans, stock option plans and other plans establishing employee benefits or perquisites; or (ix) the amendment or change of any approved Business Plan of the Company. ARTICLE 5. - SUPERVISORY BOARD 5.1 The Supervisory Directors of the Company shall be appointed by the General Meeting of Shareholders and shall exercise supervision over the Management Board's conduct of the day to day business of the Company and the general course of business. Meetings of Supervisory Board shall be held at least four (4) times each financial year. Supervisory Directors may attend meetings by telephone or teleconference with the unanimous agreement of all Supervisory Directors. 5.2 The Supervisory Board shall be composed of five (5) Supervisory Directors. Each Shareholder who is an original signatory to this Agreement and who holds at least fifteen percent (15%) of the issued common shares of the Company at the time of the Annual Meeting of the Shareholders shall be entitled to make a binding nomination for the appointment of one (1) Supervisory Director. The four Supervisory Directors so nominated shall be entitled to make a binding nomination for the appointment of the fifth Supervisory Director. -4- 8 5.3 The Supervisory Directors shall be entitled to the following compensation for attendance at Board meetings: (i) U.S. Dollars seven hundred (US$ 700) per meeting attended; plus (ii) annually, 5.000 non-vested options, each to purchase one share in the Company's stock at the fair market value on the day of the annual general shareholders meeting. One thousand two hundred fifty (l,250) options shall vest after each meeting attended by the Supervisory Director during the year granted. At the end of the year granted, any remaining non-vested options shall expire. ARTICLE 6. - MEETING OF SHAREHOLDERS 6.1 The meetings of Shareholders shall have such powers as are conferred under the laws of The Netherlands and the Company's Articles of Association. All resolutions shall be passed by a simple majority of the votes represented in a meeting where a quorum is present, unless this Agreement or the Articles require a two-thirds or greater majority. A quorum shall consist of the holders of fifty percent or more of the shares entitled to vote at the meeting. 6.2 The Shareholders shall exercise their voting rights with respect to the appointment of the Supervisory and Managing Directors in accordance with the binding nominations specified in Articles 5 and 4 respectively. Each Shareholder shall be authorized to give instructions to the other Shareholders regarding the exercise of their voting rights in the event of the suspension or dismissal of any Director nominated by that Shareholder and such instructions shall be observed by the other Shareholders. ARTICLE 7. - BUSINESS PLANS The Management Board shall submit to the Supervisory Board, not later than forty-five (45) days prior to the end of each financial year, an annual business plan for the succeeding financial year containing projected statements of profit and loss, cash flow and ending balance sheets (the "Business Plan"). The Business Plan will include a statement on the technical progress made by the Company in the preceding year, together with a forecast of the technical progress to be made in the succeeding financial Year. ARTICLE 8. - FINANCIAL REPORTING 8.1 The Management Board shall submit to the Supervisory Board, not later than forty-five (45) days after the end of each financial quarter of the Company a quarterly report for the Company consisting of the unaudited balance sheet as of the end of the quarter and an unaudited statement of operations and statement of cash flows for the quarter. These quarterly reports shall be certified by the Managing Directors to be correct and complete to the best of their knowledge and belief, to fairly present the financial condition of the Company on the date shown, -5- 9 and to have been prepared in accordance with generally accepted accounting principles as practiced in the United States. 8.2 The Management Board shall submit to the Supervisory Board, not later than seventy-five (75) days after the end of each financial year of the Company, an annual report for the Company, including an unaudited balance sheet as of the end of the financial year and an unaudited statement of operations and statement of cash flows for the financial year. 8.3 At the request of any Shareholder or when required by Dutch law, the annual reports specified in this Article 8 shall be audited by an independent public accountant and shall be accompanied by the report of the independent public accountants. In case audited accounts are requested by a Shareholder but are not required under Dutch law, that Shareholder shall reimburse the Company for fifty percent of the cost of the audit. ARTICLE 9. - AUDITORS AND ACCOUNTING PRINCIPLES 9.1 The independent public accountants (auditors) for the Company shall be appointed by the Shareholders. The initial auditors shall be Moret Ernst & Young in Amsterdam. 9.2 The Management Board shall ensure that the Company keeps complete and accurate books of account. All financial reports shall be prepared applying generally accepted accounting principles as practiced in the United States and shall be maintained in the principal office of the Company. The financial year for the Company shall be the calendar year. ARTICLE 10. - TRANSFERABILITY OF SHARES 10.1 No Shareholder shall, directly or indirectly, make or permit to be made, any sale, assignment, gift, pledge, mortgage, hypothecation, transfer or other disposition or encumbrance (hereinafter collectively referred to as a "transfer") of any shares in the Company now or in the future owned by it, except as provided in this Agreement. 10.2 A Shareholder may transfer its shares in the Company to any of the following: (i) the Company; (ii) any person or entity that controls or is controlled by, or is under common control with, such Shareholder; (iii) any entity to which such Shareholder shall have sold all or substantially all of its assets or with which it shall have been merged. -6- 10 As a condition to the effectiveness of any transfer under this Article 10.2, the transferee shall become a party to this Agreement and shall be bound by the terms and conditions of this Agreement. 10.3 Commencing one year after the effective date of this Agreement, a Shareholder may transfer shares in the Company to a third party provided: (i) the Shareholder (hereinafter the "Offeror-Shareholder") shall deliver to all other Shareholders holding at least 100,000 shares (hereinafter the "Offeree-Shareholders") a written notice setting forth the name and address of the proposed third party transferee, the number of shares proposed to be transferred and the price, terms and conditions of the proposed transfer (hereinafter the "Offer to Sell"); (ii) the Offeree-Shareholders shall have sixty (60) days after their receipt of any offer to sell within which to notify the Offeror-Shareholder in writing of their election to purchase that portion of the shares offered which is the ratio of the number of shares held by the Offeree-Shareholder on the date of receipt of the Offer to Sell divided by the total number of issued shares outstanding; (iii) in case the Offeror-Shareholder does not receive acceptances from the Offeree-Shareholders to purchase a total of all the shares offered within the sixty (60) day acceptance period, then the Offeror-Shareholder shall promptly notify all accepting Offeree-Shareholders that they may further elect to purchase that portion of the remaining shares offered in the ratio of the number of shares held by the Offeree-Shareholder on the date of receipt of the second notice divided by the total number of issued shares outstanding; (iv) the Offeree-Shareholder shall have ten (10) days after receipt of the second notice within which to elect to purchase additional shares; (v) the procedures under (iii) and (iv) shall be repeated among the Offeree-Shareholders who elect to purchase the full amounts offered to them until either all of the shares offered have been purchased or none of the Offeree-Shareholders who have elected to purchase their full amounts on a particular offering elect to purchase their full amounts on the following offering; (vi) upon completion of the above procedures, the Offeror-Shareholder shall promptly notify all Shareholders of the results thereof, including the names of the accepting Offeree-Shareholders and the total number of shares they have elected to purchase and shall promptly notify the accepting Offeree-Shareholders of the date, time and place for the closing of the share transfer; (vii) any Offeree-Shareholder's election to purchase shares shall not be binding if the Offeree-Shareholders do not in the aggregate elect to purchase all of the shares offered. In such a case, the Offeror-Shareholder may transfer the shares to -7- 11 the third party named in the original notice, under the terms and conditions stated in that notice, provided that the third party transferee executes and delivers to the Company and the Shareholders a written agreement that it will be bound by the terms and conditions of this Agreement, and that the shares held by it will be subject to all restrictions and other terms of this Agreement, as if the third party transferee were an original party to this Agreement. Notwithstanding the above, the third party transferee shall not be entitled to the rights of first refusal provided under this Article 10.3 unless the original parties to this Agreement unanimously agree to extend such rights to the third party transferee. ARTICLE 11. - SHAREHOLDERS' PUT-CALL OPTION 11.1 At any time one year after the effective date of this Agreement any Shareholder holding at least nine percent (9%) of the issued shares in the Company (a "Put-Call Offeror") may make an offer to sell all of the shares in the Company held by it to the other Shareholders (the "Put-Call Offerees") and an offer to purchase all of the shares in the Company held by the Put-Call Offerees (a "Put-Call Offer"), provided: (i) no other Put-Call Offer is outstanding; (ii) the offer is made in writing, specifies the number of shares to be transferred, the price, terms and conditions of their transfer, and complies with the notice requirements of Article 15.6; (iii) each Put-Call Offeree's election to accept EITHER the offer to sell their shares OR the offer to purchase the shares held by the Put-Call Offeror is made within sixty (60) days after receipt of the Put-Call Offer; (iv) if one or more of the Put-Call Offerees accept the offer to sell in the manner and within the time period specified in Article 11.1 (ii) and (iii) of this Agreement (a "Purchasing Offeree"), then the Put-Call Offeror shall sell to each Purchasing Offeree, and each Purchasing Offeree shall purchase from the Put-Call Offeror, a portion of the shares offered in the ratio of the number of shares held by the Purchasing Offeree divided by the aggregate number of shares held by all Purchasing Offerees, at the purchase price per share and upon the terms set forth in the Put-Call Offer. In this event, the offer to buy by the Put-Call Offeror and any acceptance of such offer by a Put-Call Offeree shall be null and void; (v) if one or more Put-Call Offerees accepts the offer to buy in the manner and within the time period specified in Article 11.1 (ii) and (iii) of this Agreement (a "Selling Offeree"), and if no Put-Call Offeree accepts the offer to sell in the manner and within the time period specified, then the Put-Call Offeror shall buy all of the shares held by the Selling Offerees and the Selling Offerees shall sell to -8- 12 the Put-Call Offeror all of the shares held by them, at the purchase price per share and upon the terms set forth in the Put-Call Offer; (vi) if all of the Put-Call Offerees reject both offers, or fail to accept either offer in the manner and within the time period specified, then the Put-Call Offeror shall have an option, exercisable within fifteen (15) days after the expiration of the Put-Call Offer period, to purchase all of the shares held by each Put-Call Offeree at the purchase price and upon the terms set forth in the Put-Call Offer. If the Put-Call Offeror fails to exercise such option, then any Shareholder may thereafter make a new offer pursuant to this Article; (vii) the closing of any purchase and sale of shares pursuant to this Article shall take place not more than forty-five (45) days after the date on which the Put-Call Offeror exercises the option granted to it under Article 11.1 (vi) of this Agreement, or not more than forty-five (45) days after the date of the last acceptance of an offer made pursuant to Article 11.1 (iv) or (v) of this Agreement. 11.2 In the event HARBINGER makes a Put-Call Offer pursuant to this Article 11, the aggregate purchase price for the shares in the Put-Call Offer shall not be less than the Additional Capital Contribution of VULCAN and EQL (without including the amount of such Additional Capital Contribution paid by HARBINGER). ARTICLE 12. - HARBINGER'S CALL OPTION 12.1 Commencing one year after, and ending four years after the effective date of this Agreement, HARBINGER shall have an option to purchase and the Shareholders shall be required to sell all of the shares held by them for a purchase price to be chosen by each Shareholder from the following alternatives: (i) one share of HARBINGER Common Stock for each seven shares of the Company's Common Stock held by the Shareholder at the time HARBINGER exercises this call option. To the extent that, after the effective date of the Agreement, the number of shares of HARBINGER Common Stock are increased or decreased, or changed into or exchanged for a different number or kind of shares or other securities of HARBINGER or of any other corporation by reason of any merger, sale of stock, consolidation, liquidation, recapitalization, reclassification, stock split up, combination of shares, or stock dividend, the price per share of HARBINGER Common Stock shall be proportionately and appropriately adjusted to reflect these changes; or (ii) the total amount contributed to the Company's capital by the Shareholder plus 30% (thirty percent) compounded annual interest calculated as of the date of the contribution. 12.2 HARBINGER shall exercise this call option by giving notice in writing to all Shareholders who shall have ten (10) days after receipt of the notice to notify -9- 13 HARBINGER of their choice with respect to the method of payment. Closing shall take place within thirty (30) days after the date the original notice was sent by HARBINGER. 12.3 At the time of transfer, the Shareholders will represent and warrant that they have good and marketable title to any Company shares delivered to HARBINGER and that the shares are free and clear from all liens, claims and encumbrances. The Shareholders shall take all action and perform all deeds necessary to transfer the Company's shares under Dutch law. ARTICLE 13. - TERMINATION 13.1 Unless all Shareholders otherwise agree, this Agreement shall continue in full force and effect From the date hereof until terminated upon the occurrence of the earlier of the following: (i) December 31, 1999 or (ii) termination by written agreement of the Company and by the Shareholders holding at least eighty percent (80%) of the aggregate issued shares. 13.2 In case no understanding can be reached by the Shareholders as to the method to terminate this Agreement and assuming HARBINGER has not exercised its option to call the shares held by the other Shareholders, the Company shall be liquidated in accordance with the Articles of Association and the laws of The Netherlands. ARTICLE 14. - CONFIDENTIALITY The Shareholders acknowledge and agree that the information to be disclosed to them by HARBINGER and by the Company, its directors or its officer ("Confidential Information") will be highly confidential and of a sensitive nature and will constitute respectively, HARBINGER's or the Company's valuable confidential property. The Confidential Information will be disclosed to the Shareholders for the sole purpose of monitoring and evaluating their investment in the Company. The Shareholders agree not to use, duplicate or disclose in any form or matter to a third party, any Confidential Information except to the extent that (i) the Company has expressly agreed in writing to such disclosure; (ii) the Confidential Information is or becomes generally available to the public through no fault of any Shareholder; (iii) the Confidential Information is available from a source other than the Company in good faith and without limitation as to its use. ARTICLE 15. - GENERAL 15.1 Further Assurances. From time to time after the date hereof, the parties will, at their expense, and without further consideration, execute and deliver such other documents and instruments and take all such other actions as are reasonably requested to effect the purposes and intent of this Agreement. 15.2 Parties in Interest. All covenants, agreements, representations, warranties and undertakings in this Agreement made by and on behalf of any of the parties hereto -10- 14 shall bind and inure to the benefit of their respective successors and assigns; provided, however, that this Agreement may not be assigned by any party hereto without the prior written consent of each other party. 15.3 Amendments and Waivers. This Agreement cannot be amended or modified except by a written instrument modified by all of the parties hereto. No waiver of compliance with any provision or condition hereof and no consent provided for herein shall be effective unless evidenced by an instrument in writing duly executed by the party hereto sought to be charged with such waiver or consent. No waiver of any term or provision hereof shall be construed as a further or continuing waiver of such term or provision or any other term or provision. 15.4 Governing Law. This Agreement, together with the rights and obligations of the parties hereunder, shall be governed by, construed and enforced in accordance with the laws of The Netherlands without reference to its conflict of laws principles. 15.5 Severability. In the event any provision of this Agreement or the application of any such provision to any party shall be held by a court of competent jurisdiction to be contrary to law, the remaining provisions of this Agreement shall remain in full force and effect. 15.6 Notices. All notices, requests, consents, and demands required or permitted to be given hereunder shall be in writing and shall be deemed to have been sufficiently given if delivered personally to an officer of the party to whom addressed or mailed, first class postage prepaid, by registered or certified mail, return receipt requested, at the address set forth hereinabove (or to such other address as any party shall have last designated by notice to the others). Notices mailed in accordance with the foregoing shall be deemed to have been given and made three days following the date so mailed. 15.7 Counterparts. This Agreement may be executed in counterparts, including by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15.8 Captions. The captions and headings of this Agreement are for convenience only and are not to be construed as defining or limiting the scope or intent of any of the provisions hereof. 15.9 Company Action Regarding Shares. The Company shall not transfer on its books or take any action with respect to any shares contrary to, or in violation of, this Agreement, and any transferee with respect to the Company's shares shall neither be deemed to be the record or beneficial owner of any of such shares nor to be entitled to any of the rights or privileges attached thereto. -11- 15 15.10 Arbitration. Unless the parties shall mutually agree to an alternative method of dispute resolution, any dispute, claim or controversy arising out of or in relation to this Agreement, or the interpretation or breach hereof, shall be referred to arbitration under the rules of The Netherlands Arbitration Institute subject, however, to the following: (i) the arbitration proceedings shall be conducted in the English language; (ii) the arbitrators shall decide in accordance with the rules of the law ("naar de regelen des rechts"); (iii) should any dispute arise with respect to the price for a share transfer or the liquidation of the Company, two of the arbitrators shall be registered accountants and one of the arbitrators shall be an attorney. Judgment upon any arbitration award may be entered in any court with competent jurisdiction. IN WITNESS WHEREOF, this Agreement has been executed on the date set forth above. SHAREHOLDERS: HARBINGER CORPORATION By: /s/ C. Tycho Howle ------------------ Title: CEO --- VULCAN VENTURES, INC. By: /s/ William D. Savoy -------------------- Title: Vice President -------------- AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD. By: /s/ A. Arnold for AXA Equity & Law Investment Managers Ltd ---------------------------------------------------------- Title: Associate Director COMPANY: HARBINGER NV By: /s/ James C. Davis ------------------- Title: Managing Director ----------------- -12- EX-10.48 6 1996 STOCK OPTION PLAN 1 EXHIBIT 10.48 2 HARBINGER CORPORATION 1996 STOCK OPTION PLAN Section 1. PURPOSE The purpose of this stock option plan is to (i) promote the interests of the Company and its stockholders by attracting and retaining the services of experienced and knowledgeable Directors, Key Employees and Consultants who have rendered valuable services to the Company, (ii) provide additional incentives to Key Employees to increase the value of the Company's Shares, and (iii) provide the Key Employees, Consultants and Directors with a stake in the future of the Company which corresponds to the stake of each of the Company's shareholders. Section 2. DEFINITIONS Each term set forth in this Section 2 shall have the meaning set forth opposite such term for purposes of this Plan and, for purposes of such definitions, the singular shall include the plural and the plural shall include the singular, and reference to one gender shall include the other gender. 2.1 BOARD means the Board of Directors of the Company. 2.2 CODE means the Internal Revenue Code of 1986, as amended. 2.3 COMMITTEE means the committee of the Board appointed pursuant to Section 5. 2.4 COMMON STOCK means the common stock, $.0001 par value per share, of the Company, and shall also mean any other stock or securities (including any other share or securities of an entity other than the Company) for or into which the outstanding shares of such stock are hereafter exchanged or changed. 2.5 COMPANY means Harbinger Corporation, a Georgia corporation, and any successor to such organization. 2.6 CONSULTANT means a consultant of the Company who has rendered valuable service to the Company and who is not a Key Employee. 2.7 DIRECTOR means a Member of the Board, or a Member of the Board of Directors of a Parent or Subsidiary, who is not a Key Employee. 3 2.8 EXERCISE PRICE means the price which, under the terms of an Option Agreement, is required to be paid to purchase one (1) Share upon the exercise of an Option granted under this Plan. 2.9 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 2.10 FAIR MARKET VALUE of each Share on any date shall mean the price determined below on the last business day immediately preceding the date of valuation: (a) The closing sales price per Share, regular way, or in the absence thereof, the mean of the last reported bid and asked quotations, on such date on the exchange having the greatest volume of trading in the Shares during the thirty-day period preceding such date (or, if such exchange was not open for trading on such date, the next preceding date on which it was open); or (b) If there is no price as specified in (a), the final reported sales price per Share, or if not reported, the mean of the closing high bid and low asked prices, in the over-the-counter market for the Shares as reported by the National Association of Securities Dealers Automatic Quotation System, or if not so reported, then as reported by the National Quotation Bureau Incorporated, or if such organization is not in existence, by an organization providing similar services, on such date (or, if such date is not a date for which such system or organization generally provides reports, then on the next preceding date for which it does so); or (c) If there also is no price as specified in (b), the price per Share determined by the Committee by reference to bid-and-asked quotations for the Shares provided by members of an association of brokers and dealers registered pursuant to Subsection 15(b) of the Exchange Act, which members make a market in the Shares, for such recent dates as the Committee shall determine to be appropriate for fairly determining current market value; or (d) If there also is no price as specified in (c), an amount per Share determined in good faith by the Committee based on such relevant facts, which may include opinions of independent experts, as may be available to the Committee. 2.11 ISO means an option granted under this Plan to purchase Shares which is intended by the Company to satisfy the requirements of Code Section 422 as an incentive stock option. 2.12 KEY EMPLOYEE means any person, including officers and directors, in the regular employment of the Company, or a Subsidiary or a Parent, who is designated a Key Employee by the Committee and is, or is expected to be, primarily responsible for the management, growth, or supervision of some part or all of the business of the Company, a Subsidiary or a Parent. The power to determine who is a Key Employee is reserved solely for the Committee. 2.13 NQSO means an option granted under this Plan to purchase Shares which is not intended by the Company to be an incentive stock option satisfying the requirements of Code Section 422. -2- 4 2.14 OPTION means an ISO or a NQSO. 2.15 OPTION AGREEMENT means the written agreement or instrument which sets forth the terms of an Option granted to a Consultant, Director or Key Employee under this Plan. 2.16 OPTIONEE means the grantee of an Option. 2.17 PARENT means any corporation (other than the Company), partnership or other entity in an unbroken chain of corporations, partnerships or other entities ending with the Company if, at the relevant time, each of the corporations (other than the Company), partnerships or other entities owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations, partnership or other entities in such chain. 2.18 PLAN means the Harbinger Corporation 1996 Stock Option Plan, as amended from time to time. 2.19 PRIOR PLAN means the Harbinger Corporation Amended and Restated 1989 Stock Option Plan. 2.20 PRIOR PLAN SHARES means the number of Shares reserved under the Prior Plan for issuance upon the exercise of options granted under the Prior Plan, minus (a) the number of Shares actually issued upon exercise of such options, and (b) the number of Shares subject to outstanding options granted under the Prior Plan. The number of Prior Plan Shares shall be increased by the number of Shares subject to options granted under the Prior Plan which terminate, expire or are canceled. Notwithstanding the above, the number of Prior Plan Shares shall not exceed 995,206. 2.21 SHARE means one (1) share of Common Stock. 2.22 STOCK APPRECIATION RIGHT means a stock appreciation right as described in Section 9. 2.23 SUBSIDIARY means any corporation (other than the Company), partnership or other entity in an unbroken chain of corporations, partnerships or other entities beginning with the Company if, at the relevant time, each of the corporations, partnerships or other entities, other than the last corporation in the unbroken chain, owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations, partnerships or other entities in such chain. The term "Subsidiary" shall include Harbinger NET Services, LLC for all purposes under this Plan. 2.24 SURRENDERED SHARES means the Shares described in Section 8 which (in lieu of being purchased) are surrendered for cash or Shares, or for a combination of cash and Shares, in accordance with Section 8. -3- 5 2.25 TEN PERCENT SHAREHOLDER means a person who owns (after taking into account the attribution rules of Code Section 424(d)) more than ten percent (10%) of the total combined voting power of all classes of shares of either the Company, a Subsidiary or a Parent. Section 3. SHARES SUBJECT TO OPTIONS 3.1 SHARES RESERVED FOR ISSUANCE. Subject to any antidilution adjustment pursuant to Section 3.2, the maximum number of Shares that may be subject to Options granted hereunder shall not exceed 1,750,000, plus the number of Prior Plan Shares. Shares issued pursuant to the exercise of an Option may be either authorized and unissued Shares or Shares issued and subsequently acquired by the Company. The Shares covered by any unexercised portion of an Option that has terminated for any reason (except as may be adjusted under Section 3.2 below) may again be optioned or awarded under the Plan, and such Shares shall not be considered as having been optioned or issued in computing the number of Shares remaining available to be subject to Options granted hereunder. 3.2 ANTIDILUTION. (a) In the event that the outstanding Shares are changed into or exchanged for a different number or kind or shares or other securities of the Company by reason of merger, consolidation, reorganization, recapitalization, reclassification, combination or exchange of shares, stock split or stock dividend, or in the event that any spin-off, spin-out or other distribution of assets materially affects the price of the Company's stock: (i) The aggregate number and kind of Shares for which Options may be granted hereunder shall be adjusted proportionately by the Committee; (ii) The number of Shares subject to each outstanding Option, and the Exercise Price of each such outstanding Option, shall be adjusted proportionately by the Committee; and (iii) The number and kind of Stock Appreciation Rights shall be adjusted as the Committee deems appropriate in the circumstances. (b) If the Company shall be a party to any reorganization in which it does not survive, involving a merger, consolidation, or acquisition of the stock or substantially all of the assets of the Company, the Committee, in its discretion, may: (i) Notwithstanding other provisions hereof, declare that all Options and Stock Appreciation Rights granted under the Plan shall become exercisable immediately notwithstanding the provisions of the respective Option Agreements or Stock Appreciation Rights agreements regarding exercisability, and that all such Options shall terminate a specified period of time after the Committee gives written notice of the immediate right to exercise all such Options and of the decision to terminate all Options not exercised within such period; and/or -4- 6 (ii) Notify all Grantees that all Options and Stock Appreciation Rights granted under the Plan shall be assumed by the successor corporation or substituted on an equitable basis with options or restricted stock issued by the successor corporation. (c) If the Company is to be liquidated or dissolved in connection with a reorganization described in Section 3.2(b), the provisions of such Section shall apply. In all other instances, the adoption of a plan of dissolution or liquidation of the Company shall, notwithstanding any other provisions hereof, cause all then remaining unvested Shares subject to Options and all remaining Stock Appreciation Rights under the Plan to vest, and shall cause every outstanding Option and Stock Appreciation Right under the Plan to terminate to the extent not exercised prior to the adoption of the plan of dissolution or liquidation by the stockholders, provided that, notwithstanding other provisions hereof, the Committee may declare all Options granted under the Plan to be exercisable at any time on or before the fifth business day following such adoption, notwithstanding the provisions of the respective Option Agreements or Stock Appreciation Rights agreements regarding exercisability. (d) The adjustments described in Subsections (a) through (c) of this Section 3.2, and the manner of their application, shall be determined solely by the Committee, and any such adjustment may provide for the elimination or redemption of fractional share interests. The adjustments required under this Section 3 shall apply to any successors of the Company and shall be made regardless of the number or type of successive events requiring such adjustments. Section 4. EFFECTIVE DATE AND DURATION OF PLAN The effective date of this Plan shall be the date it is adopted by the Board, provided the shareholders of the Company approve this Plan within twelve (12) months after such effective date. If such effective date comes before such shareholder approval, any Options granted under this Plan before the date of such approval shall automatically be granted subject to such approval. The Plan shall continue in effect until it is terminated by action of the Board or the Company's shareholders, but such termination shall not affect the terms of any outstanding Options. Section 5. COMMITTEE This Plan shall be administered by the Committee, which shall consist of three (3) or more directors appointed by the Board, each of whom is not while a member of the Committee, or was not during the one (1) year prior to serving as a member of the Committee, eligible to receive equity securities of the Company, or any affiliate of the Company, pursuant to this Plan, the Prior Plan, or any other plan of the Company or any affiliate of the Company, except as may be permitted under Section 16(b)(3) of the Exchange Act. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan and, further, the Committee shall have the power to interpret this Plan and (subject to Section 11) to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the Company, on each -5- 7 affected Consultant, Director or Key Employee and on each other person directly or indirectly affected by such action. Notwithstanding anything else to the contrary herein, the Board shall have the authority to assume the powers and responsibilities outlined above with respect to the Committee, in whole or in part. Section 6. ELIGIBILITY Except as provided below, only Consultants, Directors and Key Employees shall be eligible for the grant of Options under this Plan, but no Consultant, Director or Key Employee shall have the right to be granted an Option under this Plan merely as a result of his or her status as a Consultant, Director or Key Employee. Key Employees shall be eligible for the grant of ISO's under this Plan. Consultants and Directors shall not be eligible for the grant of ISO's under this Plan. Section 7. TERMS AND CONDITIONS OF OPTIONS 7.1 GRANTS OF OPTIONS. (a) AWARDS. In accord with the procedure established by the Board, the Committee in its absolute discretion shall grant Options under this Plan from time to time to purchase Shares and, further, shall have the right to grant new Options in exchange for outstanding Options. Such Options shall be granted to Consultants, Directors or Key Employees selected by the Committee acting in its discretion as set forth above, and the Committee shall not be under any obligation whatsoever to grant Options to all Consultants, Directors or Key Employees or to grant all Options subject to the same terms and conditions. Each grant of an Option shall be evidenced by an Option Agreement, and each Option Agreement shall: (i) specify whether the Option is an ISO or NQSO; and (ii) incorporate such other terms and conditions as the Committee acting in its absolute discretion deems consistent with the terms of this Plan, including (without limitation) a restriction on the number of Shares subject to the Option which first become exercisable or subject to surrender during any calendar year. (b) SELECTION OF GRANTEES. In determining the Consultants, Directors or Key Employees to whom Options shall be granted and the number of Shares to be covered by such Options, the Committee may take into account the recommendations of the President of the Company and its other officers, the duties of the Consultants, Directors or Key Employees, the present and potential contributions of the Consultants, Directors or Key Employees to the success of the Company, the anticipated number of years of service remaining before the attainment by the Key Employees of retirement age, and other factors deemed relevant by the Committee, in its sole discretion, in connection with accomplishing the purpose of this Plan. A Consultant, Director or Key Employee who has been granted an Option to purchase Shares of the -6- 8 Company, whether under this Plan or otherwise, may be granted one (1) or more additional Options. (c) DUAL GRANTS. If the Committee grants an ISO and a NQSO to a Key Employee on the same date, the right of the Key Employee to exercise or surrender one such Option shall not be conditioned on his or her failure to exercise or surrender the other such Option. 7.2 EXERCISE PRICE. (a) ISO. If an Option is an ISO, the Exercise Price for each Share subject to such Option shall be no less than the Fair Market Value of a Share on the date such Option is granted or, if such Option is granted to a Ten Percent Shareholder, the Exercise Price for each Share subject to such Option shall be no less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date such Option is granted. (b) NQSO. If an Option is a NQSO, the Exercise Price for each Share shall be no less than the minimum price required by applicable state law or by the Company's governing instrument, or $0.01, whichever price is greater. 7.3 VESTING OF OPTIONS. Each Option granted under the Plan shall be exercisable at such time or times, or upon the occurrence of such event or events, and in such amounts, as the Committee shall specify in the Option Agreement; provided, however, that subsequent to the grant of an Option, the Committee may, at any time before complete termination of such Option, accelerate the time or times at which such Option may be exercised in whole or in part. 7.4 TERM OF OPTION. Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Agreement, but no Option Agreement shall: (a) make an Option exercisable before the date such Option is granted or; (b) make an Option exercisable after the earlier of the: (i) the date such Option is exercised in full, or (ii) the date which is the tenth (10th) anniversary of the date such Option is granted, if such Option is a NQSO or an ISO granted to a non-Ten Percent Shareholder, or the date which is the fifth (5th) anniversary of the date such Option is granted, if such Option is an ISO granted to a Ten Percent Shareholder. An Option Agreement may provide for the exercise of an Option after the employment of a Key Employee has terminated for any reason whatsoever, including death or disability. 7.5 TIME AND MANNER OF OPTION EXERCISE. Any vested and exercisable Option is exercisable in whole or in part (in whole Shares and in lots of not less than one hundred (100) -7- 9 Shares) at any time or from time to time prior to the expiration of an Option by giving written notice, signed by the person exercising the Option, to the Company stating the number of Shares with respect to which the Option is being exercised, accompanied by payment in full of the Exercise Price for the number of Shares to be purchased. The date upon which the Company's Secretary or Treasurer shall have received both such notice and payment shall be the date of exercise of the Option as to the number of Shares described by the Optionee. No Option may be exercised at any time with respect to a fractional share. Any Option of a deceased Optionee may be exercised, to the extent vested on such Optionee's death, by the estate of such Optionee or by a person or persons whom the Optionee has designated in writing filed with the Company, or, if no such designation has been made, by the person or persons to whom the Optionee's rights have passed by will or the laws of descent and distribution. 7.6 PAYMENT OF OPTION PRICE. Payment for all Shares purchased pursuant to the exercise of an Option shall be made in cash or, if the Option Agreement provides, by delivery to the Company of a number of Shares which have been owned by the Optionee for at least six (6) months prior to the date of exercise having an aggregate Fair Market Value on the date of delivery of not less than the product of the Option Price multiplied by the number of Shares the Optionee intends to purchase upon exercise of the Option. In addition, the Option Agreement may provide for cashless exercise through a brokerage transaction following registration of the Company's equity securities under Section 12 of the Securities Exchange Act of 1934. Further, in the sole discretion of the Board, an Option may be exercised as to a portion or all (as determined by the Board) of the number of Shares specified in the Option Agreement by delivery to the Company of a promissory note. Such promissory note shall be executed by the Optionee and shall include, with such other terms and conditions as the Board shall approve, provisions in a form approved by the Board under which: (a) the balance of the aggregate purchase price shall be payable in equal installments over such period as the Board shall approve, and shall bear interest at a per annum rate equal to the prime rate as announced from time to time by the Company's principal bank or, if the Company has no principal bank, that rate announced by the Wall Street Journal as the prevailing "prime rate" of interest per annum, and (b) the Optionee shall be personally liable for payment of the unpaid principal balance and all accrued but unpaid interest. Except as otherwise provided herein, payment shall be made at the time that the Option or any part thereof is exercised, and no Shares shall be issued or delivered upon exercise of an Option until full payment has been made by the Optionee. No Optionee, as such, shall have any of the rights of a shareholder. 7.7 TRANSFERABILITY. The right of any Optionee to exercise an Option granted under the Plan shall, during the lifetime of such Optionee, be exercisable only by such Optionee or by a person who obtained such Option pursuant to a qualified domestic relations order as defined by the Code, or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or the rules thereunder (a "QDRO") and shall not be assignable or transferable by such Optionee other than by will or by the laws of descent and distribution or by a QDRO. -8- 10 7.8 LIMITATION OF RIGHTS. (a) LIMITATION AS TO SHARES. Neither the recipient of an Option under the Plan nor an Optionee's successor or successors in interest shall have any rights as a stockholder of the Company with respect to any Shares subject to an Option granted to such person until the date of issuance of a stock certificate for such Shares. (b) LIMITATION AS TO EMPLOYMENT. Neither the Plan, nor the granting of an Option, nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that a Consultant, Director or Key Employee has a right to continue as an employee of the Company or in the relationship of a consultant or director with the Company, respectively, for any period of time or at any particular rate of compensation. (c) REGULATORY APPROVAL AND COMPLIANCE. The Company shall not be required to issue any certificate or certificates for Shares upon the exercise of an Option granted under the Plan or to record as a holder of record of Shares the name of the individual exercising an Option under the Plan, without obtaining to the complete satisfaction of the Board the approval of all regulatory bodies deemed necessary by the Board and without complying, to the Board's complete satisfaction, with all rules and regulations under federal, state, or local law deemed applicable by the Board. In addition, with respect to persons subject to Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Committee fail to comply, it shall deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Section 8. SURRENDER OF OPTIONS 8.1 GENERAL RULE. The Committee acting in its absolute discretion may incorporate a provision in an Option Agreement to allow an Optionee to surrender his or her Option in whole or in part in lieu of the exercise in whole or in part of that Option on any date that: (a) the Fair Market Value of the Shares subject to such Option exceeds the Exercise Price for such Shares, and (b) the Option to purchase such Shares is otherwise exercisable. 8.2 PROCEDURE. The surrender of an Option in whole or in part shall be effected by the delivery of the Option Agreement to the Committee (or to its delegate) together with a statement signed by the Optionee which specifies the number of Shares ("Surrendered Shares") as to which the Optionee surrenders his or her Option and how he or she desires payment be made for such Surrendered Shares. 8.3 PAYMENT. An Optionee in exchange for his or her Surrendered Shares shall receive a payment in cash or in Shares, or in a combination of cash and Shares, equal in amount -9- 11 on the date such surrender is effected to the excess of the Fair Market Value of the Surrendered Shares on such date over the Exercise Price for the Surrendered Shares. The Committee acting in its absolute discretion can approve or disapprove an Optionee's request for payment in whole or in part in cash and can make that payment in cash or in such combination of cash and Shares as the Committee deems appropriate. A request for payment only in Shares shall be approved and made in Shares to the extent payment can be made in whole shares of Shares and (at the Committee's discretion) in cash in lieu of any fractional Shares. 8.4 RESTRICTIONS. Any Option Agreement which incorporates a provision to allow an Optionee to surrender his or her Option in whole or in part also shall incorporate such additional restrictions on the exercise or surrender of such Option as the Committee deems necessary to satisfy the conditions to the exemption under Rule 16b-3 (or any successor exemption) to Section 16(b) of the Exchange Act. Section 9. STOCK APPRECIATION RIGHTS 9.1 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be, but are not required to be, granted by the Committee in connection with grant of an Option. All Stock Appreciation Rights shall be in such form as the Committee may from time to time determine and shall be subject to the following terms and conditions: (a) TERM AND EXERCISE. A Stock Appreciation Right shall be exercisable only: (i) with the approval of the Committee, (ii) during the Term of the Option to which it relates, (iii) at such times as the Option to which it relates is exercisable, and (iv) if the Fair Market Value of the Shares subject to the Option surrendered (on the date surrendered) minus the aggregate Option Price of the Shares subject to the Option surrendered is a positive amount. (b) PAYMENT. In the event the Committee agrees to permit exercise of the Stock Appreciation Rights, the Optionee shall surrender to the Company the right to exercise the Option with respect to a specified number of Shares as to which the Option is then exercisable. In return, the Optionee shall receive from the Company no more than an amount payable in cash and/or in Shares (as determined by the Committee after considering the request of the Optionee) equal to the difference between the aggregate Fair Market Value of the Shares as to which the Optionee has surrendered the Option and the Option Price with respect thereto. In the event the Committee determines to tender Shares in full or partial payment of the Stock Appreciation Right, the number of Shares to be issued to the Optionee shall be based on the Fair Market Value of the Shares as of the date of exercise of the Stock Appreciation Right. No fractional Shares shall be issued to Optionees upon exercise of a Stock Appreciation Right. Instead, the Company shall pay the Optionee the value of such fractional Share based upon the Fair Market Value of a Share on the date the Stock Appreciation Right is exercised. (c) NONTRANSFERABILITY. A Stock Appreciation Right granted under the Plan shall be transferable only when the Option to which it relates is transferable. -10- 12 9.2 OTHER TERMS AND CONDITIONS. Option Agreements reflecting Stock Appreciation Rights which are granted under the Plan may contain such other terms and as are conditions not inconsistent with the provisions of the Plan as the Committee may deem appropriate from time to time. 9.3 NOTIFICATION OF REQUEST TO EXERCISE. (a) The Optionee shall request the Committee's approval to exercise a Stock Appreciation Right by written notice to the Secretary of the Company at the principal executive offices of the Company. Such written notice shall state the number of Shares subject to the Option for which approval of the exercise of the Stock Appreciation Right is requested and the Optionee's preferred form of payment of the Stock Appreciation Right, as hereinafter provided. The Optionee may indicate his or her preference to receive payment of the Stock Appreciation Right in cash or in a combination thereof. Notwithstanding anything to the contrary contained herein, the Committee shall have absolute discretion in determining whether the request for approval of the exercise of the Stock Appreciation Right shall be approved and, if such approval is given, whether payment shall be made in cash or in a combination thereof. (b) Within thirty (30) days after the delivery to the Secretary of the Optionee's request to exercise the Stock Appreciation Right as provided above, the Committee shall inform the Optionee in writing of its determination to the Optionee. The Optionee must act on any approved exercise of a Stock Appreciation Right within thirty (30) days after the date of such determination by the Committee (or such longer period as may be permitted by the Committee) and in accordance with the terms approved by the Committee. Exercise shall be by written notice actually delivered, or mailed by certified or registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company. 9.4 EFFECT OF EXERCISE. Upon exercise of a Stock Appreciation Right, the Option to which it relates shall lapse with respect to the Shares as to which the Stock Appreciation Right is exercised and such Shares shall not be available for further grant of Options. Section 10. SECURITIES REGISTRATION Each Option Agreement may provide that, upon the receipt of Shares as a result of the surrender or exercise of an Option, the Consultant, Director or Key Employee shall, if so requested by the Company, hold such Shares for investment and not with a view of resale or distribution to the public and, if so requested by the Company, shall deliver to the Company a written statement satisfactory to the Company to that effect. Each Option Agreement also may provide that, if so requested by the Company, the Consultant, Director or Key Employee shall make a written representation to the Company that he or she will not sell or offer to sell any of such Shares unless a registration statement shall be in effect with respect to such Shares under the Securities Act of 1933, as amended ("1933 Act") and any applicable state securities law or unless he or she shall have furnished to the Company an opinion, in form and substance satisfactory to the Company, of legal counsel acceptable to the Company, that such registration is -11 - 13 not required. Certificates representing the Shares transferred upon the exercise or surrender of an Option granted under this Plan may at the discretion of the Company bear a legend to the effect that such Shares have not been registered under the 1933 Act or any applicable state securities law and that such Shares may not be sold or offered for sale in the absence of an effective registration statement as to such Shares under the 1933 Act and any applicable state securities law or an opinion, in form and substance satisfactory to the Company, of legal counsel acceptable to the Company, that such registration is not required. Section 11. SALE OR MERGER OF THE COMPANY If the Company agrees to sell substantially all of its assets for cash or property or for a combination of cash and property or agrees to any merger, consolidation, reorganization, division or other transaction in which Shares are converted into another security or into the right to receive securities or property and such agreement does not provide for the assumption or substitution of the Options granted under this Plan, each Option at the direction and discretion of the Board, or as is otherwise provided in the Option Agreements, may be cancelled unilaterally by the Company in exchange for the whole Shares (or, subject to satisfying the conditions to the exemption under Rule 16b-3 or any successor exemption to Section 16(b) of the Exchange Act, for the whole Shares and the cash in lieu of a fractional Share) which each Optionee otherwise would receive if he or she had the right to surrender his or her outstanding Option in full under Section 11 of this Plan and he or she exercised that right exclusively for Shares on a date fixed by the Board which comes before such sale or other corporate transaction. Section 12. TERMINATION AND AMENDMENT OF PLAN The Board may amend, terminate or suspend the Plan at any time, in its sole and absolute discretion; provided, however, that if required to qualify the Plan under Rule 16b-3 promulgated under Section 16 of the Exchange Act, no amendment shall be made more than once every six months that would change the amount, price or timing of the Annual Grants and Interim Grants, other than to comport with changes in the Code, or the rules and regulations promulgated thereunder; and provided, further, that if required to qualify the Plan under Rule 16b-3, no amendment shall be made without the approval of the Company's stockholders that would (a) materially increase the number of Shares that may be issued under the Plan; (b) materially modify the requirements as to eligibility for participation in the Plan; or (c) otherwise materially increase the benefits accruing to participants under the Plan. Section 13. AMENDMENT OR TERMINATION OF PLAN This Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, no such amendment shall be made absent the approval of the shareholders of the Company (1) to increase the number of Shares reserved under Section 3 except as set forth in Section 3.2, (2) to extend the maximum life of the Plan or - 12 - 14 the maximum exercise period under Section 7.4, (3) to decrease the minimum Exercise Price under Section 7.2, or (4) to change the designation of Consultants, Directors or Key Employees eligible for Options under Section 7.1. The Board also may suspend the granting of Options under this Plan at any time and may terminate this Plan at any time; provided, however, the Company shall not have the right to modify, amend or cancel any Option granted before such suspension or termination unless (1) the Optionee consents in writing to such modification, amendment or cancellation or (2) there is a dissolution or liquidation of the Company or a transaction described in Section 3.2 or Section 11 of this Plan. Section 14. MISCELLANEOUS 14.1 SHAREHOLDER RIGHTS. No Consultant, Director or Key Employee shall have any rights as a shareholder of the Company as a result of the grant of an Option to him or to her under this Plan or his or her exercise or surrender of such Option pending the actual delivery of Shares subject to such Option to such Consultant, Director or Key Employee. 14.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option to a Key Employee under this Plan shall not constitute a contract of employment and shall not confer on a Key Employee any rights upon his or her termination of employment in addition to those rights, if any, expressly set forth in the Option Agreement which evidences his or her Option. 14.3 WITHHOLDING. The exercise or surrender of any Option granted under this Plan shall constitute the Optionee's full and complete consent to whatever action the Committee directs to satisfy the federal and state tax withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise or surrender. In addition to and at the time of payment of the Exercise Price, the Optionee shall pay to the Company in cash the full amount of any federal, state and local income, employment or other taxes required to be withheld from the income of such Optionee as a result of such exercise; provided, however, that in the discretion of the Committee any Option Agreement may provide that all or any portion of such tax obligations, together with additional taxes not exceeding the actual additional taxes to be owed by the Optionee as a result of such exercise, may, upon the irrevocable election of the Optionee, be paid by tendering to the Company whole Shares of Common Stock duly endorsed for transfer and owned by the Optionee, or by authorizing the Company to withhold Shares of Common Stock otherwise issuable upon exercise of the Option, in either case in that number of Shares having a Fair Market Value on the date of exercise equal to the amount of such taxes thereby being paid, in all cases subject to such restrictions as the Committee may from time to time determine, including any such restrictions as may be necessary or appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3 under the Exchange Act. 14.4 TRANSFER. The transfer of a Key Employee between or among the Company, a Subsidiary or a Parent shall not be treated as a termination of his or her employment under this Plan. - 13 - 15 14.5 CONSTRUCTION. This Plan shall be construed under the laws of the State of Georgia. - 14 - EX-10.49 7 EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10.49 2 AMENDED AND RESTATED HARBINGER CORPORATION EMPLOYEE STOCK PURCHASE PLAN 1. PURPOSE. The Amended and Restated Harbinger Corporation Employee Stock Purchase Plan (the "Plan") is intended to encourage employee stock ownership by offering employees of Harbinger Corporation and its subsidiaries Purchase Rights (as such term is defined in Section 2) to purchase shares of Common Stock. The Plan is intended to operate as a bifurcated plan, providing benefits as an "employee stock purchase plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended ("Code"), to those employees eligible to participate in and receive benefits under such a plan, and providing similar benefits through an employee stock purchase plan not intended to satisfy Code Section 423 to eligible employees who may not benefit under a plan satisfying Code Section 423. The provisions of the Plan shall, accordingly, be construed so as to comply with the requirements of Section 423 of the Code, whenever possible. 2. DEFINITIONS. "BASE PAY" means regular straight-time and overtime earnings received from the Company, excluding payments for incentive compensation, bonuses and other special payments. "BOARD" mean the Board of Directors of the Harbinger Corporation. "COMMITTEE" means the Compensation Committee of the Board. "COMMON STOCK" or "STOCK" means the Common Stock, par value $.001 per share, of Harbinger Corporation, and any other stock or securities (including any other share or securities of an entity other than Harbinger Corporation) for or into which the outstanding shares of such stock are hereinafter exchanged or changed. "COMPANY" means Harbinger Corporation. "CUSTODIAN" means Smith Barney, Inc., whose address is 388 Greenwich Street, 28th Floor, New York, New York 10013, or such other person as the Committee shall designate from time to time. "EFFECTIVE DATE" means the date set by the Board for the Plan to become effective, which date shall be the first day of a Purchase Period, and which shall be at least one hundred and eighty (180) days after the effective date of the initial public offering for Harbinger Corporation, or such earlier date as is approved by the underwriter of such initial offering. The Effective Date shall be subject to shareholder approval pursuant to Section 17. 3 "EXERCISE DATE" means the last day of a Purchase Period (as such term is defined in Section 4(b) hereof), on which date all Participants' outstanding Purchase Rights will automatically be exercised. "FAIR MARKET VALUE" means the closing "asked" price of the shares of Stock in the over-the-counter market on the day on which such value is to be determined or, if such "asked" price is not available, the last sales price on such day or, if no shares were traded on such day, on the next preceding day on which the shares were traded, as reported by the National Association of Securities Dealers Automatic Quotation System (NASDAQ) or other national quotation service. If the shares are listed on a National Securities Exchange, "fair market value" means the closing price of the shares on such National Securities Exchange on the day of which such value is to be determined or, if no shares were traded on such day, on the next preceding day on which shares were traded, as reported by National Quotation Bureau, Inc. or other national quotation service. If at any time shares of Common Stock are not traded on an exchange or in the over-the-counter market, Fair Market Value shall be the value determined by the Board of Directors or Committee administering the Plan, taking into consideration those factors affecting or reflecting value which they deem appropriate. "NASDAQ" means the National Association of Securities Dealers Automated Quotation System. "PARTICIPANT" means an employee of the Company or of a parent or subsidiary of the Company who has enrolled in the Plan by completing a Participation Form (as such term is defined in Section 5 hereof) with the Plan Administrator. For purposes of the Plan, a parent means a company which owns a majority interest in the Company and effectively controls the Company, and a subsidiary means a company in which the Company owns a majority interest and which the Company effectively controls. For purposes of employees participating in the portion of the Plan satisfying Code Section 423, the terms parent and subsidiary have the meanings set forth in Code Sections 424(e) and (f), respectively. "PLAN ADMINISTRATOR" means the Director of Human Resources of the Company, or any such other person so designated by the Committee. "PURCHASE PERIOD" means a calendar quarter period as defined in Section 4(b) hereof. "PURCHASE RIGHT" means a Participant's option to purchase shares of Common Stock that is deemed to be granted to a Participant during a Purchase Period pursuant to Section 7. "SECTION 16(B) INSIDER" means those persons subject to the requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended. "TRADING DAY" refers to a day during which the NASDAQ National Market System is available for trading shares of Common Stock. - 2 - 4 3. ELIGIBILITY. (a) Participation in the Plan is voluntary. All full-time employees of the Company, including officers and directors who are full-time employees but who are not members of the Committee, who have completed at least six (6) months of continuous service with the Company are eligible to participate in the Plan. The employee's entry date in the Plan shall be the first day of the Purchase Period immediately following the date the employee has satisfied the eligibility provisions. Full-time employees mean those employees who work at least twenty (20) hours per week and for more than five (5) months in any calendar year. (b) Notwithstanding any provision of the Plan to the contrary, no employee may participate in that part of the Plan which is intended to satisfy Code Section 423 if prior to the grant of Purchase Rights or if following a grant of Purchase Rights under the Plan, the employee would own, directly or by attribution, stock, Purchase Rights or other stock options to purchase stock representing five percent (5%) or more of the total combined voting power or value of all classes of the Company's stock as defined in Code Section 423(b)(3). 4. SECURITIES SUBJECT TO THE PLAN AND PURCHASE PERIODS. (a) The maximum number of shares which may be granted and purchased under the Plan may not exceed One Hundred and Fifty Thousand (150,000) shares of Common Stock (subject to adjustment as provided in Section 15), which may be authorized but unissued shares, re-acquired shares or shares bought on the open market. If any Purchase Right granted shall expire or terminate for any reason without having been exercised in full, the unpurchased shares of Common Stock shall again become available for purposes of the Plan, unless the Plan has been terminated. (b) Purchase Period means each three month calendar quarter period, beginning on January 1, April 1, July 1, and October 1, with the first such Purchase Period beginning concurrently with the Effective Date of the Plan. 5. PARTICIPATION. Eligible employees become Participants in the Plan by authorizing payroll deductions for the purpose through a "Participation Form" filed with the Plan Administrator no later than fifteen (15) days prior to the start date of a Purchase Period. 6. PAYROLL DEDUCTIONS. (a) In order to purchase Common Stock each Participant must elect and indicate on the Participation Form the amount he/she wishes to authorize the Company to deduct at regular payroll intervals during the Purchase period, expressed either as (1) an integral percentage amount ranging from one percent (1%) to fifteen percent (15%) of such Participant's Base Pay for the applicable payroll period, with a minimum deduction of $10.00 per payday during the Purchase Period, or (2) a dollar amount to be deducted pro rata at regular payroll intervals during the Purchase Period, with a minimum deduction of $10 per payday and a maximum dollar - 3 - 5 amount per payday to be set by the Committee. The Committee shall determine from time to time whether method (1) or (2), or both, shall be utilized. The Participation Form will include authorization for the Company to make payroll deductions from the Participant's Base Pay. (b) A Participant may not be granted Purchase Rights under the Plan with respect to more than Fifteen Thousand Dollars ($15,000.00) worth of Common Stock for any calendar year such Purchase Rights to purchase Common Stock are outstanding pursuant to the terms of the Plan. The Fifteen Thousand Dollar ($15,000.00) limit is determined according to the Fair Market Value of the Common Stock on the first day (the grant date) of the Purchase Period. Participants will be notified if these limitations become applicable to them. (c) The amounts deducted from the Participant's Base Pay shall be credited to a bookkeeping account established in the Participant's name under the Plan, but no actual separate account will be established by the Company to hold such amounts. There shall be no interest paid on the balance credited to a Participant's account. Amounts deducted from the participant's Base Pay may be commingled with the general assets of the Company and may be used for its general corporate purposes prior to the purchase of Common Stock for a Purchase Period. (d) Payroll deductions shall begin on the first payday of each Purchase Period, and shall end on the last payday of each Purchase Period. Eligible employees may participate in the Plan and purchase shares only through payroll deductions. Notwithstanding the above, a Participant on an approved leave of absence may continue participating in the Plan by making cash payments to the Company within a normal pay period equal to the amount of the normal payroll deduction had a leave of absence not occurred. The right of a Participant on an approved leave of absence to continue participating in the Plan shall terminate upon the expiration of twelve (12) weeks of leave, unless the Participant's right to re-employment by the Company after a longer leave is guaranteed by statute or contract, in which case termination of the right to participate will occur upon the expiration of such extended period. (e) So long as a Participant remains an employee of the Company, payroll deductions will continue in effect from Purchase Period to Purchase Period, unless at least fifteen (15) calendar days prior to the first day of the next succeeding Purchase Period the Participant: (i) elects a different rate by filing a new Participation Form with the Plan Administrator; or (ii) withdraws from the Plan in accordance with Section 9 hereof. (f) Unless a Participant files with the Plan Administrator a new Participation Form electing to withdraw prior to fifteen (15) calendar days before the beginning of the next Purchase Period as permitted under the Plan, such Participant's payroll deductions will continue throughout the next Purchase Period and his or her Purchase Right to purchase Common Stock will be deemed to be fully and automatically exercised on the last day of such Purchase Period with respect to payroll deductions made during that Purchase Period. -4- 6 7. GRANT OF PURCHASE RIGHT. (a) Subject to the effective date provisions of Section 17, at 5:01 p.m. Eastern Standard Time, on the last day of each Purchase Period (the Exercise Date), each Participant who has not withdrawn from the Plan pursuant to Section 9 shall be deemed to have been granted a Purchase Right as of the first day of the Purchase Period to purchase as many full shares of Common Stock as can be purchased with the balance credited to such Participant's account as of the Exercise Date. (b) The price at which each Purchase Right to purchase Common Stock shall be exercised is the lower of: (i) 85% of the Fair Market Value of the Common Stock on the NASDAQ National Market System on the first Trading Day of a Purchase Period; or (ii) 85% of the Fair Market Value of the Common Stock on the NASDAQ National Market System on the last Trading Day of such Purchase Period. (c) The number of shares purchasable by each Participant per Purchase Period will be the number of whole and fractional shares obtained by dividing the amount credited to the Participant's Account as of the Exercise Date in the Purchase Period by the purchase price in effect for the Purchase Period. (d) A Participant may not purchase shares of Stock with a Fair Market Value exceeding Three Thousand, Seven Hundred and Fifty Dollars ($3,750) for any particular Purchase Period. The Committee has the power, exercisable at any time prior to the start of a Purchase Period, to increase or decrease the dollar value maximum for that Purchase Period, subject to the limitations in Section 6(b). The maximum, as thus adjusted, will continue in effect from Purchase Period to Purchase Period until the Committee once exercises its power to adjust the maximum. 8. EXERCISE OF PURCHASE RIGHT. (a) Subject to the effective date provisions of Section 17, each outstanding Purchase Right shall be deemed automatically exercised as of 5:01 p.m. of the Exercise Date (the last day of the Purchase Period). The exercise of the Purchase Right is accomplished by applying the balance credited to each Participant's account as of the Exercise Date to the purchase on the Exercise Date of whole and fractional shares of Common Stock at the purchase price in effect for the Purchase Period. (b) If a Participant purchases the maximum share amount set forth in Section 7(d), any amount not applied to the purchase of Common Stock for that Purchase Period will be held for the purchase of Stock in the next Purchase Period. (c) If the number of Shares for which Purchase Rights are exercised exceeds the number of Shares available in any Purchase Period under the Plan, the Shares available for - 5 - 7 exercise will be allocated by the Plan Administrator pro rata among the Participants in such Purchase Period in proportion to the relative amounts credited to their accounts. Any amounts not thereby applied to the purchase of Common Stock under the Plan will be refunded to the Participants after the end of the Purchase Period. 9. WITHDRAWAL AND TERMINATION OF PURCHASE RIGHTS. (a) A Participant may withdraw from the Plan during a Purchase Period by providing written notice to the Plan Administrator on or before 5:00 p.m. of the last business day of such Purchase Period. Such withdrawal will become effective upon receipt by the Plan Administrator of such notice, and payroll deductions will cease as soon as is administratively feasible from the date of such notice, and no additional payroll deductions will be made on behalf of such Participant during the Purchase Period. Such notice shall be on a form (the "Withdrawal Form") provided by the Plan Administrator for that purpose. The Withdrawal Form will permit such a Participant to elect to receive all accumulated payroll deductions as a refund without penalty or to exercise such Participant's outstanding Purchase Rights to purchase Stock on the following Exercise Date in the amount of all payroll deductions withheld during the Purchase Period prior to the Participant's withdrawal. (b) Any Participant (other than a Section 16(b) Insider) who withdraws from the Plan pursuant to Section 9(a) will not be eligible to rejoin the Plan until the second (2nd) Purchase Period following the Purchase Period of withdrawal. A Participant wishing to resume participation may re-enroll in the Plan by completing and filing a new Participation Form for a subsequent Purchase Period by following the applicable enrollment procedures. (c) In the event a Participant who is a Section 16(b) Insider ceases participation in the Plan, whether as a result of withdrawal during a Purchase Period or of such Participant's decision to discontinue his or her enrollment for subsequent Purchase Periods, such insider may not re-enroll in the Plan until the Purchase Period beginning coincident with or immediately following the expiration of a six (6) month period beginning upon the effective date of such Section 16(b) Insider's withdrawal from the Plan. (d) If a Participant ceases to be an employee of the Company for any reason during a Purchase Period, his or her outstanding Purchase Right will immediately terminate, and all sums previously collected from such Participant during such Purchase Period under the terminated Purchase Right will be refunded to the Participant. 10. RIGHTS AS SHAREHOLDER. (a) A Participant is not a shareholder in shares to be purchased during a Purchase Period until the Purchase Right is exercised on the Exercise Date. Thus, a Participant will not have a right to any dividend or distribution made prior to the Exercise Date on shares of Common Stock purchased during the Purchase Period. (b) Upon a written request made to the Custodian, the Participant will be entitled to receive, as soon as practicable after the Exercise Date, a stock certificate for the number of - 6 - 8 purchased shares The Custodian may impose upon, or pass through to, the Participant a reasonable fee for the transfer of shares of Common Stock in the form of stock certificates from the Custodian to the Participant. It is the responsibility of each Participant to keep his or her address current with the Company through the Plan Administrator and with the Custodian. 11. SALE OF COMMON STOCK ACQUIRED UNDER THE PLAN. (a) Participants may sell the shares of Common Stock they acquire under the Plan only in compliance with the restrictions set forth below. (i) Section 16(b) Insiders may be subject to certain restrictions in connection with their transactions under the Plan and with respect to the sale of shares of Stock obtained under the Plan, including, but not limited to, the Company's Insider Trading Policy. (ii) Sales of Stock obtained under the Plan by a Participant must comply with the Company's Insider Trading Policy, as the same may exist from time to time. (iii) No Participant purchasing shares of Common Stock under the Plan shall be entitled to sell such shares of Stock until the first day of the second (2nd) Purchase Period immediately following the Purchase Period in which the shares of Stock were obtained. For purposes of this restriction, the Company may, at its option, include the following legend on any certificates representing the Stock so purchased: "The shares represented by this Certificate are subject to certain restrictions on sale and disposition contained in the Amended and Restated Harbinger Corporation Employee Stock Purchase Plan, a copy of which is on file with the Corporation." (b) The Participant understands and agrees that, in order to insure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. (c) A Participant shall immediately inform the Plan Administrator in writing if the Participant transfers any shares purchased through the Plan within two (2) years from the date of grant of the related Purchase Right. Such transfer shall include disposition by sale, gift or other manner. The Participant may be requested to disclose the manner of the transfer, the date of the transfer, the number of shares involved and the transfer price. By executing the Participation Form, each Participant obligates himself or herself to provide such information to the Plan Administrator. (d) The Company is authorized to withhold from any payment to be made to a Participant, including any payroll and other payments not related to the Plan, amounts of withholding and other taxes due in connection with any transaction under the Plan, and a Participant's enrollment in the Plan will be deemed to constitute his or her consent to such withholding. - 7 - 9 12. PLAN ADMINISTRATION. (a) The Plan shall be administered by the Committee. No member of the Board will be eligible to participate in the Plan during his or her period of Committee service. (b) The Committee shall have the plenary power, subject to and within the limited of the express provisions of the Plan: (i) to determine the commencement and termination date of the offering of Common Stock under the Plan; and (ii) to interpret the terms of the Plan, established and revoke rules for the administration of the Plan and correct or reconcile any defect or inconsistency in the Plan. (c) The Committee may delegate all or part of its authority to administer the Plan to the Plan Administrator, who may in turn delegate the day-to-day operations of the Plan to the Custodian. The Custodian will establish and maintain, as agent for the Participants, accounts for the purpose of holding shares of Common Stock and/or cash contributions as may be necessary or desirable for the administration of the Plan. (d) The Board may waive or modify any requirement that a notice or election be made or filed under the Plan a specified period in advance in an individual case or by adoption of a rule or regulation under the Plan, without the necessity of an amendment to the Plan. 13. TRANSFERABILITY. (a) Any account maintained by the Custodian for the benefit of a Participant with respect to shares acquired pursuant to the Plan may only be in the name of the Participant; provided, however, that the Participant may elect to maintain such account with right of joint ownership with such Participant's spouse. Such election may only be made on a form (the "Joint Account Form") provided by the Company. (b) Neither payroll deductions credited to a Participant's account nor any Purchase Rights or other rights to acquire Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of by Participants other than by will or the laws of descent and distribution and, during the lifetime of a Participant, Purchase Rights may be exercised only by the Participant. 14. MERGER OR LIQUIDATION OF THE COMPANY. In the event the Company merges with another corporation and the Company is not the surviving entity, or in the event all or substantially all of the stock or assets of the Company is acquired by another company, or in the event of certain other similar transactions, the Committee may, in its sole discretion and in connection with such transaction, cancel each outstanding Purchase Right and refund all sums previously collected from Participants under the canceled outstanding Purchase Rights, or, in its discretion, cause each Participant with outstanding - 8 - 10 Purchase Rights to have his or her outstanding Purchase Right exercised immediately prior to such transaction and thereby have the balance of his or her account applied to the purchase of whole and fractional shares of Common Stock (subject to the maximum dollar limitation of Section 7(d)) at the purchase price in effect for the Purchase Period, which would be treated as ending with the effective date of such transaction. The balance of the account not so applied with be refunded to the Participant. In the event of a merger in which the Company is the surviving entity, each Participant is entitled to receive, for each share as to which such Participant's Outstanding Purchase Rights are exercised as nearly as reasonably may be determined by the Committee, in its sole discretion, the securities or property that a holder of one share of Common Stock was entitled to receive upon the merger. 15. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. To prevent dilution or enlargement of the rights of Participants under the Plan, appropriate adjustments may be made in the event any change is made to the Company's outstanding Common Stock by reason of any stock dividend, stock split, combination of shares, exchange of shares or other change in the Common Stock effected without the Company's receipt of consideration. Adjustments may be made to the maximum number and class of securities issuable under the Plan, the maximum number and class of securities purchasable per outstanding Purchase Right and the number and class of securities and price per share in effect under each outstanding Purchase Right. Any such adjustments may be made retroactively effective to the beginning of the Purchase Period in which the change in capitalization occurs, and any such adjustment will be made by the Committee in its sole discretion. 16. AMENDMENT AND TERMINATION. The Committee may terminate or amend the Plan at any time, subject to the following restrictions. First, the provisions of Sections 4, 5, 6, 7 and 8 which govern the formula for the automatic grant of Purchase Rights under the Plan may not be amended more than once in any six (6) month period. Second, any termination or amendment made to the Plan may not affect or change Purchase Rights previously granted under the Plan without the consent of the affected Participant, and any amendment that materially increases the benefits or number of shares under the Plan (except for certain allowable adjustments in the event of changes to the Company's capital structure or for changes authorized by the Plan to be made by the Committee or the Plan Administrator) or materially modifies the eligibility requirements of the Plan shall be subject to shareholder approval. If not sooner terminated by the Committee, the Plan shall terminate at the time Purchase Rights have been exercised with respect to all shares of Common Stock reserved for grant under the Plan. 17. SHAREHOLDER APPROVAL AND EFFECTIVE DATE. The Plan is subject to the approval of shareholders of the Company holding a majority of the shares of the Common Stock. The Plan (as amended and restated) shall be deemed to have been adopted as of the Effective Date (January 1, 1996) upon the date of its approval by the shareholders of the - 9 - 11 Company. Until the Plan is approved by the shareholders, no Purchase Rights shall be deemed granted or exercised under Sections 7 and 8. Upon approval of the Plan by the Company's shareholders, Purchase Rights shall be deemed granted and exercised as of the appropriate dates in the Plan as of the Effective Date, and shares of Stock purchased shall be deemed purchased as of the applicable Exercise Date. In the event the Plan is not approved by the shareholders on or before June 30, 1996, the Plan shall be deemed not to have been adopted, and all payroll deduction amounts withheld on behalf of Participants pursuant to Section 6 shall be refunded to such Participants. 18. NO EMPLOYMENT RIGHTS. Participation in the Plan will not impose any obligations upon the Company to continue the employment of the Participant for any specific period and will not affect the right of the Company to terminate such person's employment at any time, with or without cause. 19. COSTS. Except as set forth in Section 10(b), costs and expenses incurred in the administration of the Plan and the maintenance of accounts with the Custodian may be shared by the Participant and the Company, to the extent provided in this Section 19. Any brokerage fees and commissions for the purchase of Common Stock under the Plan (including shares of Common Stock purchased upon reinvestment of dividends and distributions) will be shared equally by the Participant and the Company, but any brokerage fees and commission for the sale of shares of Common Stock under the Plan by a Participant will be borne by such Participant. 20. REPORTS. After the close of each Purchase Period, each Participant in the Plan will receive a report from the Custodian indicating the amount of the Participant's contributions to the Plan during the Purchase Period, the amount of the contributions applied to the purchase of Common Stock for the Purchase Period, the purchase price per share in effect for the Purchase Period and the amount of the contributions (if any) carried over to the next Purchase Period. 21. GOVERNING LAW. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan will be determined in accordance with laws of the State of Georgia, without giving effect to principles of conflicts of laws, and applicable Federal law. 22. COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Plan, the granting and exercising of Purchase Rights hereunder, and the other obligations of the Company, the Plan Administrator and the Custodian under the Plan will be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Company may, in its discretion, postpone the issuance or delivery of shares of Common Stock upon exercise of Purchase Rights - 10 - 12 until completion of such registration or qualification of such shares of Common Stock or other required action under any federal or state law, rule, or regulation, listing or other require action with respect to any automated quotation system or stock exchange upon which the shares of Common Stock or other Company securities are designated or listed, or compliance with any other contractual obligation of the Company, as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or deliver of shares of Common Stock in compliance with applicable laws, rules, and regulations, designation or listing requirements, or other contractual obligations. 23. EFFECT OF PLAN. The provisions of the Plan shall, in accordance with its terms, be binding upon and inure to the benefit of, all successors of each employee participating in the Plan, including, without limitation, such employee's estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy or representative of creditors of such employee. - 11 - EX-10.50 8 AMENDED & RESTATED 1989 STOCK OPTION PLAN 1 EXHIBIT 10.50 2 AMENDMENT TO THE HARBINGER CORPORATION AMENDED AND RESTATED 1989 STOCK OPTION PLAN THIS AMENDMENT TO THE HARBINGER CORPORATION AMENDED AND RESTATED 1989 STOCK OPTION PLAN (the "Amendment") is made effective as of the 24th day of January, 1996 by Harbinger Corporation, a corporation organized and existing under the laws of the State of Georgia (the "Company"); W I T N E S S E T H: WHEREAS, the Company has previously adopted, and currently maintains, the Harbinger Corporation Amended and Restated 1989 Stock Option Plan (the "Plan"), under which optionees may be granted stock options to purchase shares of common stock, $.0001 par value per share, of the Company; and WHEREAS, the Company has determined that it is in its best interests to amend the provisions of the Plan relating to the expiration of non-qualified stock options granted under the Plan; NOW, THEREFORE, the Plan is hereby amended, effective as of January 24, 1996, by substituting the following for the first sentence of Subsection 1.5(c) of the Plan: "An Optionee's Incentive Stock Option shall expire on the earlier of the expiration of: (i) the date specified in the Incentive Stock Option, which, if the Optionee is a Key Employee, shall in no event be later than three (3) months after the termination of the Key Employee's employment by the Company, a Parent or a Subsidiary for any reason other than death or disability (as defined in Section 422(c) of the Code), and if the Optionee is a Director, shall be no later than five (5) years after the date of termination of such Optionee's role as a Director of the Company, a Parent or Subsidiary, as the case may be, and if the Optionee is a Consultant, shall be no later than one (1) year after the date of termination of such Optionee's role as a Consultant of the Company, a Parent or Subsidiary, as the case may be, or (ii) the Term specified in Section 2.1 or 3.1(a), as the case may be. An Optionee's Nonqualified Stock Option shall expire as of the date determined by the Committee, in its sole discretion, and as specified in the Nonqualified Stock Option." Except as specifically amended herein, the Plan shall remain in full force and effect as prior to this Amendment. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed effective as of the day and year first above written. HARBINGER CORPORATION /s/ C. Tycho Howle ------------------------------------------- C. Tycho Howle, Chief Executive Officer - 1 - EX-10.51 9 ALLIANCE AGREEMENT 1 EXHIBIT 10.51 2 FIRST AMENDMENT TO ALLIANCE AGREEMENT BETWEEN SYSTEM SOFTWARE ASSOCIATES, INC. AND HARBINGER CORPORATION This FIRST AMENDMENT ("Amendment") dated the 15th day of February, 1996 and effective as of December 31, 1995, is between HARBINGER CORPORATION (hereinafter "Harbinger") and SYSTEM SOFTWARE ASSOCIATES, INC. (hereinafter "SSA"). This Amendment amends and revises the Alliance Agreement between Harbinger and SSA entered into as of July 21, 1995 (hereinafter "the Agreement"). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Harbinger and SSA agree as follows: 1. Subparagraph (i) of Section 6F shall be deemed deleted in its entirety and replaced with the following: (i) SSA shall remain obligated to make the Minimum Royalty Payments to Harbinger as set forth above irrespective of the date of termination and, notwithstanding anything which may be stated to the contrary, Harbinger's election not to perform any enhancements under Section 3C(xii). 2. Except as set forth in Paragraph 1 above, the terms and conditions of the Agreement remain in full force and effect between Harbinger and SSA. Upon execution by both parties hereto, this First Amendment shall be attached to and form a part of the Agreement. This First Amendment may be executed in duplicates, all of which when taken together shall constitute the full and binding agreement of the parties. This First Amendment shall be effective as of the 31st day of December, 1995. Acceptance By: Acceptance By: SYSTEM SOFTWARE ASSOCIATES, HARBINGER CORPORATION INC. /s/ J. J. Skadra /s/ Joel G. Katz --------------------------------- ----------------------------- Signature Signature Chief Financial Officer Vice President - Finance --------------------------------- ----------------------------- Title Title - 1 - EX-10.52 10 SUPPLEMENTAL AGREEMENT 1 EXHIBIT 10.52 2 SUPPLEMENTAL AGREEMENT THIS AGREEMENT is made and entered effective as of December 29, 1995 (the "Effective Date") by and among Harbinger, N.V. ("HNV"), Harbinger Corporation ("HC"), Vulcan Ventures, Inc. ("VVI"), and AXA Equity & Law Life Assurance Society, Ltd. ("E&L"). 1. BACKGROUND 1.1. E&L has entered into a Subscription Agreement with HNV effective December 29, 1995 whereby E&L purchased 150,000 shares of HNV's common shares for a purchase price of $US150,000.00. VVI has entered into a Subscription Agreement with HNV effective December 29, 1995 whereby VVI purchased 450,000 shares of HNV's common shares for a purchase price of $US450,000.00. HC has entered into a Subscription Agreement with HNV effective December 29, 1995 whereby HC purchased 150,000 shares of HNV's common shares for a purchase price of $US150,000.00. 1.2. As part of the inducement for E&L and VVI to purchase the HNV shares as set forth above, representatives of HC, E&L and VVI discussed the willingness of HC to provide an incentive for E&L and VVI to purchase the HNV shares. E&L and VVI contemplated that HC would take appropriate action to compensate both E&L and VVI for their agreement to purchase additional shares of HNV common shares as noted above. 1.3. In fulfillment of its commitment to E&L and VVI as noted above, HC is entering into this Agreement for the purpose of granting a contractual right to E&L and VVI to receive a warrant to purchase shares of the common stock of HC (the "Warrant") in certain circumstances, as set forth below. The parties agree and acknowledge that this Agreement and the obligations set forth herein are subject to and shall be effective only upon approval or ratification of this Agreement by the Board of Directors of HC. 2. PERFORMANCE CRITERIA 2.1. The parties acknowledge that HNV through its Board of Directors has established a business plan contemplating financial performance of HNV for fiscal year 1996 (the "Business Plan"). Within fifteen (15) calendar days after June 30, 1996, an authorized representative of HNV shall provide a written report (the "HNV Report") to E&L, VVI and HC as to the actual financial performance of HNV or its successor as of June 30, 1996 in comparison with the financial performance set forth in the Business Plan. 2.2. Prior to June 30, 1996, HNV shall upon a request from an authorized representative of HC, E&L or VVI provide the requesting party a written status report as to the financial performance of HNV as of the date of such request, including a comparison of actual financial performance of HNV with the Business Plan. 3 3. GRANT OF WARRANT 3.1. Upon receipt by E&L and VVI of the HNV Report (which shall be delivered to E&L and VVI on or before July 15, 1996 as set forth above), and if the HNV Report discloses that the actual financial performance of HNV does not meet or exceed the Business Plan, then: (i) the Warrant to purchase 37,500 shares of HC Common Stock shall be granted to VVI; and (ii) the Warrant to purchase 12,500 shares of HC Common Stock shall be granted to E&L. 3.2. The terms and conditions of the Warrant shall be substantially the same as those set forth in the form of Warrant attached hereto at Exhibit A, with an exercise price equal to the price per share of HC Common Stock as reported on the Nasdaq National Market System as of the close of trading on Friday, June 28, 1996. 3.3. If the HNV Report discloses that the actual financial results of HNV or its successor meet or exceed the HNV Business Plan, then HC shall have no obligations of any kind to VVI or E&L to grant the Warrants or to provide any other consideration to VVI or E&L. 4. REPRESENTATIONS 4.1. E&L and VVI agree and acknowledge that the grant of the Warrants as set forth above shall be subject to compliance with all applicable securities laws, including but not limited to the U.S. Securities Act of 1933 as amended ("Securities Act") and applicable state and other securities laws. Similarly, the issuance of shares in accordance with the exercise of the Warrants shall be subject to compliance with applicable securities laws and the other terms and conditions at set forth in the Warrants. 4.2. E&L and VVI each severally represent and warrant that: (i) The execution and delivery of this Agreement, and the acquisition of the Warrant and of any Shares to be acquired upon exercise thereof are undertaken for investment purposes only and with no present intention of dividing or allow others to participate in this investment or reselling or otherwise participating, directly or indirectly, in a distribution of any securities obtained, and that each of E&L and VVI shall not make any sale, transfer or other disposition of the any securities without registration under the Securities Act or applicable securities laws of any other jurisdiction or unless an exemption from registration is available under those acts and laws, respectively; and, in the case of an exemption, unless upon request of HC, HC has received an opinion of counsel satisfactory to HC that such transaction is in compliance with the Securities Act and the applicable laws of all other jurisdictions. (ii) Any securities acquired hereunder have not been, and will not be, registered with the United States Securities and Exchange Commission under the Securities Act nor under applicable securities laws of any other jurisdiction in reliance upon exemption(s) -2- 4 contained in the Securities Act and under regulations promulgated under the Securities Act and exemptions contained in applicable securities laws of any other jurisdiction and that E&L's, VVI's and HC's reliance upon such exemptions is based in part upon the representations, warranties and agreements contained in this Agreement. (iii) E&L and VVI are accredited investors as defined in Regulation D promulgated under the Securities Act and are familiar with the business in which HC is engaged and, based upon their respective knowledge and experience in financial and business matters, VVI and E&L are each an accredited investor familiar with investments of the sort that E&L and VVI may be undertaking herein, that E&L and VVI are fully aware of the problems and risks involved in making an investment of this type, and that E&L and VVI are capable of evaluating the merits and risks of this possible investment. (iv) Each of E&L and VVI have made such inquiry into the structure and operations of the HC as each of VVI and E&L and their respective advisors have thought necessary and prudent in connection with the execution of this Agreement. Each of E&L and VVI are existing shareholders of HC and have knowledge of the current status of the business affairs and operation of HC and HNV. 4.3. Each of the undersigned represent the accuracy of the statements contained herein. 5. GENERAL 5.1. Except as expressly set forth in this Agreement, neither HC nor HNV shall have any other obligations or liability of any kind to E&L or VVI with respect to the purchase by E&L and VVI of the HNV Common Shares as specified above. 5.2. This Agreement will be construed, governed and interpreted in accordance with the laws of the State of Georgia, USA, without giving effect to its conflict of law principles. 5.3. This Agreement may not be amended, modified or altered in any way without the written consent of all the parties hereto. 5.4. Any dispute with regard to the terms, conditions or interpretation of this Agreement shall be subject to arbitration to be conducted in Atlanta, Georgia by the American Arbitration Association in accordance with its then current rules and procedures. -3- 5 IN WITNESS WHEREOF, the parties have executed this Agreement this 29th day of March, 1996. HARBINGER CORPORATION By: /s/ C. Tycho Howle -------------------------- Title: Chief Executive Officer ----------------------- Date: March 29, 1996 ------------------------ HARBINGER, N.V. By: /s/ James C. Davis -------------------------- Title: Managing Director ----------------------- Date: March 29, 1996 VULCAN VENTURES, INC. By: --------------------------- Title: ------------------------ Date: ------------------------ AXA EQUITY & LAW LIFE ASSURANCE SOCIETY, LTD. By: ---------------------------- Title: ------------------------- Date: ------------------------- -4- 6 EXHIBIT A THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT (COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") BUT HAVE BEEN OFFERED AND SOLD IN RELIANCE ON THE EXEMPTIONS FROM REGISTRATION PROVIDED BY REGULATION D AND REGULATION S PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT OR THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND ITS COUNSEL STATING THAT SUCH DISPOSITION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND THAT SUCH DISPOSITION IS IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. HARBINGER CORPORATION WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK WARRANT NO: ____________________ DATE OF GRANT: , 1996 HOLDER: ________________________ NUMBER OF SHARES: _______________ PURCHASE PRICE PER SHARE: $_____ FOR VALUE RECEIVED, HARBINGER CORPORATION, a Georgia corporation (the "Company"), hereby certifies that ______________________________________ (the "Holder"), is entitled, subject to the provisions of this Warrant, to purchase from the Company, during the period commencing on the date hereof and ending on the Expiration Date (as defined in Section 1 below), up to _________________ fully paid and non-assessable shares of Common Stock at the Purchase Price Per Share set forth above (the "Exercise Price"). The term "Common Stock" means the Common Stock, par value $.0001 per share, of the Company as constituted on , 1996 (the "Issue Date"). The number of shares of Common Stock to be received upon the exercise of this Warrant may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter referred to as "Warrant Stock." The term "Other Securities" means any other equity or debt securities that may be issued by the Company in addition thereto or in substitution for the Warrant Stock. The term "Company" means and includes the corporation named above as well as (i) any immediate or more remote successor corporation resulting from the merger or consolidation of such corporation (or any immediate or more remote successor corporation of such corporation) with another corporation, or (ii) any corporation to which such corporation (or any immediate or more remote successor corporation of such corporation) has transferred its property or assets as an entirety or substantially as an entirety. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone. The Holder agrees with the Company that this Warrant is issued, and all the rights hereunder shall be held, subject to all of the conditions, limitations and provisions set forth herein. 7 1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time, or from time to time, during the period commencing on the date hereof and expiring 5:00 p.m. Eastern Time on the second anniversary of the date hereof (the "Expiration Date") or, if such day is a day on which banking institutions in New York are authorized by law to close, then on the next succeeding day that shall not be such a day (provided, however, that in no event may this warrant be exercised after , 199__), by presentation and surrender of this Warrant to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Warrant Exercise Form attached hereto duly executed and accompanied by payment (either in cash or by certified or official bank check, payable to the order of the Company) of the Exercise Price for the number of shares specified in such form and instruments of transfer, if appropriate, duly executed by the Holder or his or her duly authorized attorney. If this Warrant should be exercised in part only, the Holder shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this Warrant, together with the Exercise Price, at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on exercise of this Warrant. 2. RESERVATION OF SHARES. The Company shall at all times reserve for issuance and delivery upon exercise of this Warrant all shares of Common Stock or other shares of capital stock of the Company (and Other Securities) from time to time receivable upon exercise of this Warrant. All such shares (and Other Securities) shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and non-assessable and free of all preemptive rights. 3. FRACTIONAL SHARES. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but the Company shall pay the Holder an amount equal to the fair market value of such fractional share of Common Stock in lieu of each fraction of a share otherwise called for upon any exercise of this Warrant. For purposes of this Warrant, the fair market value of a share of Common Stock shall be determined as follows: (a) If the Common Stock is listed on a national securities exchange within the United States or admitted to unlisted trading privileges on such exchange or listed for trading on The Nasdaq Stock Market, the current market value shall be the average of the last reported sale price of the Common Stock on such exchange or system for the ten trading days immediately preceding the date of exercise of this Warrant or if no such last sale is made or reported on any of such trading days, the average of the closing bid and closing asked prices for such day on such exchange or system; or (b) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (c) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. 4. HOLDER DOES NOT HAVE THE RIGHTS OF A SHAREHOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant. 5. ANTI-DILUTION PROVISIONS. 5.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time subdivide its outstanding shares of Common Stock (or other securities at the time receivable upon the exercise of the Warrant) -2- 8 by recapitalization, reclassification or split-up thereof, or if the Company shall declare a stock dividend or distribute shares of Common Stock to its stockholders, the number of shares of Common Stock subject to this Warrant immediately prior to such subdivision shall be proportionately increased, and if the Company shall at any time combine the outstanding shares of Common Stock by recapitalization, reclassification or combination thereof, the number of shares of Common Stock subject to this Warrant immediately prior to such combination shall be proportionately decreased. Any such adjustment, and any adjustment to the Exercise Price pursuant to this Section 5.1; shall be effective at the close of business on the effective date of such subdivision or combination or if any adjustment is the result of a stock dividend or distribution then the effective date for such adjustment based thereon shall be the record date therefor. Whenever the number of shares of Common Stock purchasable upon the exercise of this Warrant is adjusted, as provided in this Section 5.1, the Exercise Price shall be adjusted to the nearest cent by multiplying such Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. 5.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case of any reorganization of the Company (or any other corporation, the securities of which are at the time receivable on the exercise of this Warrant) after the Issue Date or in case after such date the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then, and in each such case, the Holder of this Warrant upon the exercise thereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the securities and property receivable upon the exercise of this Warrant prior to such consummation, the securities or property to which such Holder would have been entitled upon such consummation if such Holder had exercised this Warrant immediately prior thereto; in each such case, the terms of this Warrant shall be applicable to the securities or property receivable upon the exercise of this Warrant after such consummation. 5.3 RESTRICTIONS ON CERTAIN ACTIONS. The Company shall not, by amendment of its Articles of Incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrant. Without limiting the generality of the foregoing, while any Warrant is outstanding, the Company (a) shall not permit the par value, if any, of the shares of stock receivable upon the exercise of this Warrant to be above the amount payable therefor upon such exercise and (b) shall take all such action as may be necessary or appropriate in order that the Company may validly and legally issue or sell fully paid and non-assessable stock upon the exercise of all Warrants at the time outstanding. 5.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in the number of shares of Common Stock receivable on the exercise of the Warrant, the Company at its expense shall promptly compute such adjustment in accordance with the terms of the Warrant and prepare a certificate executed by an executive officer of the Company setting forth such adjustment and showing in detail the facts upon which such adjustment is based. The Company shall forthwith mail a copy of each such certificate to the Holder. 6. TRANSFER TO COMPLY WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS. This Warrant and any Warrant Stock or Other Securities may not be sold, transferred, pledged, hypothecated or otherwise disposed of except as follows: (a) to a person who, in the opinion of counsel to the Company, is a person to whom this Warrant or the Warrant Stock or Other Securities may legally be transferred without registration and without the delivery of a current prospectus under the Securities Act with respect thereto, and in compliance with all other laws, rules, regulations, and ordinances, and then only against receipt of an agreement of such person to comply with the provisions of this Section 6 with respect to any resale or other disposition of such securities; or (b) to any person upon delivery of a prospectus then meeting the requirements of the Securities Act relating to such securities and the offering thereof for such sale or disposition. In the event any Holder shall propose to sell, transfer, pledge, or hypothecate or otherwise dispose of this Warrant, such Holder shall first (i) surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, and (ii) deliver to the Company of the opinion of counsel to the Holder as required by the legend set forth at Section 7 hereof. Upon receipt of the foregoing and -3- 9 provided that the Company has received an opinion of its counsel that such proposed sale, transfer, pledge or hypothecation is in compliance with all applicable laws, rules, regulations and ordinances, the Company shall execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. 7. LEGEND. Unless the shares of Warrant Stock or Other Securities have been registered under the Securities Act, upon exercise of any of the Warrants and the issuance of any of the shares of Warrant Stock, all certificates representing shares shall bear on the face thereof substantially the following legend: THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND ISSUABLE UPON EXERCISE HEREOF (COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF THE SECURITIES LAWS OF ANY OTHER JURISDICTION, BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE SECURITIES ACT, AND IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. THE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT, AND WHICH IS IN COMPLIANCE WITH ALL OTHER APPLICABLE SECURITIES LAWS, RULES, REGULATIONS AND ORDINANCES, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE WITH SUCH APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT, AND THAT SUCH TRANSACTION IS IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. 8. NOTICES. All notices required hereunder shall be in writing and shall be deemed given when delivered personally, when delivered by facsimile against an electronic acknowledgment of delivery thereto, when delivered by a reputable world-wide courier contracting for delivery in three days or less, or five days after mailing when mailed by certified or registered mail, return receipt requested, to the Company or the Holder, as the case may be, for whom such notice is intended, at the address of such party as set forth below, or at such other address of which the Company or the Holder has been advised by notice hereunder. 9. APPLICABLE LAW. The Warrant is issued under and shall for all purposes be governed by and construed in accordance with the laws of the State of Georgia, United States of America, without giving effect to the conflict of laws rules applicable therein. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf, in its corporate name, by its duly authorized officer, all as of the day and year first above written. Attest: HARBINGER CORPORATION By: - - ---------------------------- -------------------------------- Joel G. Katz, Secretary C. Tycho Howle, Chairman and Chief Executive Officer [Corporate Seal] Address of Holder Address of Company: - - ---------------------------- 1055 Lenox Park Boulevard - - ---------------------------- Atlanta, Georgia 30319 -4- 10 THE RIGHT TO ASSIGN THIS WARRANT IS LIMITED BY THE TERMS AND CONDITIONS OF THE WARRANT TO WHICH THIS ASSIGNMENT FORM IS ATTACHED. SUCH WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO PROVISIONS OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION IS OBTAINED, WHICH OPINION AND WHICH COUNSEL SHALL BE SATISFACTORY TO THE CORPORATION IN ITS SOLE DISCRETION, IS DELIVERED TO THE CORPORATION STATING THAT SUCH SALE, OFFER FOR SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION UNDER SUCH ACT AND IS OTHERWISE IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. ASSIGNMENT FORM FOR VALUE RECEIVED, _______________ hereby sells, assigns and transfers unto ________________________________________________________________________________ (Please typewrite or print in block letters) the right to purchase Common Stock of Harbinger Corporation, a Georgia corporation (the "Company"), represented by this Warrant to the extent of shares as to which such right is exercisable and does hereby irrevocably constitute and appoint _______________________________ Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. DATED: ______________, 199_. THIS ASSIGNMENT SHALL NOT BE VALID UNLESS AND UNTIL CONSENTED TO BY THE COMPANY AS EVIDENCED BY THE SIGNATURE BELOW. _____________________________ Signature ______________________________ Signature, if jointly held ASSIGNMENT CONSENTED TO: Harbinger Corporation By:___________________________ C. Tycho Howle, CEO -5- 11 EXHIBIT A [ATTACHMENT TO WARRANT] THE SHARES OF COMMON STOCK OF HARBINGER CORPORATION ("HARBINGER") WHICH WILL BE ISSUED UPON THE EXERCISE OF THE WARRANTS (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE PROVISIONS OF THE SECURITIES LAWS OF ANY OTHER JURISDICTION, BUT HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS UNDER THE SECURITIES ACT, AND IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. THE SECURITIES MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT, AND WHICH IS IN COMPLIANCE WITH ALL OTHER APPLICABLE SECURITIES LAWS, RULES, REGULATIONS AND ORDINANCES, OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN A TRANSACTION OTHERWISE IN COMPLIANCE WITH SUCH APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES; AND IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT, AND THAT SUCH TRANSACTION IS IN COMPLIANCE WITH ALL OTHER APPLICABLE LAWS, RULES, REGULATIONS AND ORDINANCES. HARBINGER CORPORATION WARRANT EXERCISE AGREEMENT (INCLUDING INVESTOR SUITABILITY REPRESENTATIONS) This WARRANT EXERCISE AGREEMENT (the "Agreement") dated as of _____________, 19___ is made and entered into between HARBINGER CORPORATION, a Georgia corporation ("HARBINGER" or the "Company"); and the person executing this Agreement as the investor (the "Investor"). By executing this Agreement, Investor acknowledges that Investor understands that the Company is relying upon the accuracy of the representations and warranties of Investor contained herein in complying with its obligations under applicable securities laws. W I T N E S S E T H : WHEREAS, the Investor desires to exercise a Warrant to acquire shares of the Company's Common Stock (the "Common Stock"); and WHEREAS, the Company intends to use the proceeds of the sale of the Common Stock to supplement working capital; and WHEREAS, the Company has furnished to the Investor a copy of the information required by Rule 502(b)(2)(ii) of Regulation D promulgated under the Securities Act (the "Disclosure Information"); and NOW, THEREFORE, for and in consideration of ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Investor agree as follows: 1. EXERCISE OF THE WARRANTS. Subject to the terms and conditions set forth herein, Investor hereby exercises the Warrant to acquire the number of shares of Common Stock of HARBINGER set forth below the -1- 12 Investor's signature hereto (the "Securities"). The Warrant shall be deemed exercised only when and if this Agreement is countersigned by HARBINGER. HARBINGER shall countersign this Agreement only if HARBINGER determines that this Agreement is fully completed and executed by the Investor and that the Investor has represented that the Investor is an "accredited investor" as defined under Regulation D promulgated under the Securities Act ("Regulation D") and/or that Investor is not a "U.S. Person" as defined under Regulation S promulgated under the Securities Act ("Regulation S"). 2. INVESTOR'S REPRESENTATIONS AND WARRANTIES. Investor represents, warrants and covenants to HARBINGER as of the date hereof that: a. Investor acknowledges that he has received and reviewed a copy of the Disclosure Information. Investor also acknowledges that the Company has represented to the Investor that the Company has not experienced any material developments in its business, its prospects or its financial condition that is not described in the Disclosure Information. Investor is a resident of the jurisdiction shown in Investor's address below and will be the sole party in interest as to the Securities subscribed for and is acquiring the Securities for Investor's own account, for investment only and not with a view toward the resale or distribution thereof. b. Investor must bear the economic risk of this investment for an indefinite period of time because the Securities are not registered under the Securities Act or the securities laws of any state or other jurisdiction. Investor has been advised that the Securities are not being registered under the Securities Act upon the basis that the transactions involving their sale are exempt from such registration requirements as transactions by an issuer not involving any public offering in reliance on Sections 4(2) and 3(b) of the Securities Act, and that reliance by HARBINGER on such exemption is predicated in part on Investor's representations set forth in this Agreement. Investor acknowledges that HARBINGER makes no representations of any kind concerning its intent or ability to offer or sell the Securities to the public, under Rule 144 or otherwise. Investor further understands that HARBINGER makes no covenant, representation or warranty with respect to the registration of the Securities under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning HARBINGER. c. Investor is able to bear the economic risk of losing Investor's entire investment in HARBINGER, which is not disproportionate to Investor's net worth, and that Investor has adequate means of providing for Investor's current needs and personal contingencies without regard to the investment in HARBINGER. Investor further represents and warrants that Investor is an "accredited investor" as defined in Rule 501(a) of Regulation D and the Investor is not a "U.S. Person" as defined in Rule 902 of Regulation S. d. In connection with Investor's purchase of any of the Securities no oral or written representations or warranties have been made to Investor other than those as may be contained in the Disclosure Information. Investor acknowledges that no person is authorized to give any information or to make any statement not contained in the Disclosure Information, a copy of which Investor acknowledges has previously been received, and that any information or statement not contained therein or contemplated or permitted thereby must not be relied upon as having been authorized by HARBINGER or any Affiliate, or any professional advisors thereto. e. To the extent Investor has deemed necessary, Investor has consulted with Investor's attorney, financial advisors and others regarding all financial, securities and tax aspects of the proposed investment, and that said advisors have reviewed the Disclosure Information, this Agreement and all documents relating thereto on Investor's behalf. Investor and Investor's advisors have sufficient knowledge and experience in business and financial matters to evaluate HARBINGER, to evaluate the risks and merits of an investment in HARBINGER, to make an informed investment decision with respect thereto, and to protect Investor's interest in connection with Investor's purchase of the Securities without need for the additional information which would be required to be included in more complete registration statements effective under the 1933 Act. Investor acknowledges that an investment in HARBINGER involves a high degree of risk, and Investor represents that Investor and Investor's advisors have engaged in a complete and thorough independent analysis of HARBINGER (including the financial condition of HARBINGER) and have independently determined the advisability and suitability of Investor's investment in HARBINGER while taking into account Investor's level of sophistication, financial resources -2- 13 (including the percentage of Investor's total assets that this investment will represent), tolerance for risk, and investment objectives. f. Investor and Investor's advisors have had an opportunity to ask questions of and to receive answers from the officers of HARBINGER and to obtain additional information in writing to the extent that HARBINGER possesses such information or could acquire it without unreasonable effort or expense: (i) relative to HARBINGER and the offering of the Securities; and (ii) necessary to verify the accuracy of any information, documents, books and records furnished. All such materials and information requested by Investor and Investor's advisors (including information requested to verify information previously furnished) have been made available and examined by Investor or Investor's advisors. Investor further acknowledges that Investor and Investor's advisors have met with (or have been provided an opportunity to meet with) an executive officer of HARBINGER, or have had an opportunity to ask any and all questions of, and receive answers to their satisfaction from, such executive officer. Investor acknowledges that all discussions with executive officers of HARBINGER as well as any written information issued by HARBINGER, were intended to describe the aspects of HARBINGER's business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description. Investor acknowledges that HARBINGER has not provided any information to Investor regarding HARBINGER's future prospects for success nor has HARBINGER made any representations or warranties to Investor (other than those explicit representations and warranties that may be contained in the Disclosure Information) regarding the merits or advisability of purchasing the Securities. g. Investor agrees that Investor will not attempt to pledge, transfer, convey or otherwise dispose of the Securities in the United States except in a transaction made pursuant to the following offering restrictions: all offers and sales of the Securities to a U.S. person or inside the United States prior to the expiration of a one-year period immediately following the date of this Subscription Agreement shall be made only upon receipt by the Company of an opinion of counsel satisfactory to the Company that such transaction complies with all applicable securities laws and only (i) in accordance with the provisions of Rules 903 or 904 of Regulation S, or (ii) pursuant to the registration requirements under the 1933 Act, or (ii) pursuant to an available exemption from registration under the 1933 Act. Investor consents to the placement of legends on any certificates or documents representing any of the Securities stating that they have not been registered under the 1933 Act or any applicable securities laws of other jurisdictions and setting forth or referring to such offering restrictions. Investor is aware that the Company will make a notation in its appropriate records, and notify its transfer agent, with respect to the restrictions on the transferability of the Securities. h. Investor is the beneficial owner of the Warrants registered in his name, that such Warrants are free and clear of all liens and encumbrances, and that there are no liens or encumbrances on Investor's right to receive the Securities on the exercise of the Warrant. 3. INDEMNIFICATION AND RELEASE. Investor recognizes that the sale of the Securities to him will be based upon his representations and warranties set forth above and on the Disclosure Information supplied by Investor to HARBINGER. Investor agrees to indemnify and to hold harmless HARBINGER, and its affiliates from and against any and all loss, damage, liability or expense, including costs and reasonable attorney's fees, arising out of or based upon any false representation or warranty made by the Investor in this Warrant Exercise Agreement and/or any failure by Investor to fulfill any covenants or agreements set forth herein or in the other documents executed and delivered by him in connection with this transaction. Investor hereby forever releases, dismisses, and discharges, HARBINGER and its affiliates, and their respective officers, directors, employees, shareholders, successors, assigns, and transferees (collectively the "Released Persons"), from any and all now or hereafter existing actions, causes of action, suits, damages, debts, claims, counterclaims, obligations and liabilities of any nature whatsoever, known or unknown, suspected or unsuspected (collectively the "Released Claims"), that Investor may have against any of the Released Persons, including, without limitation, any Released Claim which in whole or in part is based upon or arises out of the purchase and sale of the Securities pursuant to this Subscription Agreement. 4. REPRESENTATIONS BY HARBINGER. HARBINGER represents and warrants to Investor as follows: -3- 14 a. HARBINGER is a corporation duly organized, existing and in good standing under the laws of the State of Georgia and has the corporate power to conduct its business. b. The execution, delivery and performance of this Agreement by HARBINGER has been duly approved by the Board of Directors of HARBINGER. c. The issuance of the Securities has been duly authorized and when paid for and issued pursuant to the terms hereof, the Securities will be validly issued, fully paid, and non-assessable. 5. TERMS OF OFFERING. No commission or similar compensation will be paid in connection with the purchase of the Securities pursuant to the exercise of the Warrants. 6. SURVIVAL OF REGISTRATION RIGHTS AND OTHER INVESTOR PROTECTIONS. Neither the execution of this Agreement nor the exercise or partial exercise of the Warrant shall terminate the registration rights of the Investor set forth in the Warrant, which shall survive such execution and exercise. 7. FURTHER INVESTOR SUITABILITY REPRESENTATIONS. Investor understands that the Securities offered by HARBINGER will not be registered under the 1933 Act. Investor also understands that in order to ensure that the offering and sale of the Securities are exempt from registration under the 1933 Act, HARBINGER is required to have reasonable grounds to believe that Investor qualifies as an "accredited investor" as defined in Rule 501(a) of Regulation D and that Investor is not a U.S. Person as defined by Regulation S. Investor understands that the information supplied in this section will be disclosed to no one other than officers and agents of HARBINGER without Investor's consent unless it is necessary for HARBINGER to use such information to support the exemptions from registration under the 1933 Act and under the law of any state or other jurisdiction. In order to induce HARBINGER to permit Investor to purchase a portion of the Securities, Investor makes the following representations and warranties. ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED CONFIDENTIALLY. The undersigned understands, however, that the Company may present this Questionnaire to such parties as it deems appropriate if called upon to establish that the proposed offer and sale of the Securities is exempt from registration under the Securities Act, or meets the requirements of other applicable securities laws. Further, the undersigned understands that the offering is required to be reported to the U.S. Securities and Exchange Commission. I. PLEASE INITIAL TO CERTIFY THAT THE FOLLOWING STATEMENTS ARE TRUE, CORRECT AND COMPLETE. [ ] 1. Investor is a partnership, corporation or other organization with total assets (Initials) in excess of U.S. $5,000,000. [ ] (Initials) 2. Investor is not a "U.S. Person" as defined in Rule 902 of Regulation S. [ ] 3. Investor is not a resident of the United States for federal income tax (Initials) purposes. [ ] 4. Investor has no affiliation with the U.S. National Association of Securities (Initials) Dealers ("NASD").
-4- 15 II. OTHER CERTIFICATIONS. By signing the Signature Page, the undersigned certifies the following: (a) that the purchase of Warrants will be solely for the account of the undersigned and not for the account of any other person or entity; and (b) that the name and address set forth in this Questionnaire are true, correct and complete. III. GENERAL INFORMATION. Name of Purchaser:______________________________________________________________ Address: _______________________________________________________________________ (Number and Street) ________________________________________________________________________________ (City) (State) (County) (Zip Code) Telephone Number: --- --- ___________________________________________________ (Country Code) (Area Code) (Number) The undersigned represents that (a) the undersigned has read and understands this Subscription Agreement and (b) the information contained in this Questionnaire is complete and accurate. _________________________________ __________________________________, 19___ Number of Shares subscribed for Date _______________________________________ Name of Investor (Please Type or Print) By:_____________________________________ Authorized Signature _______________________________________ Name of Person Authorized to Sign (Please Type or Print) -5- EX-11.1 11 COMPUTATION OF PRIMARY AND FULLY DILUTED PER SHARE 1 EXHIBIT 11.1 2 HARBINGER CORPORATION COMPUTATION OF PRIMARY AND FULLY DILUTED PER SHARE EARNINGS 1995 1994 1993 PRIMARY Weighted average common stock outstanding....................... 8,405,000 6,862,000 6,744,000 Net effect of dilutive stock options and warrants - based on the treasury method.................................. 527,000 - - ---------- ------------ ---------- Total................................... 8,932,000 6,862,000 6,744,000 ========== ============ ========== Net income applicable to common stockholders............................ $1,048,000 $(2,111,000) $3,242,000 ========== ============ ========== Net income per share applicable to common stockholders..................... $0.12 $(0.31) $0.48 ========== ============ ========== FULLY DILUTED Weighted average common stock outstanding............................. 8,405,000 6,862,000 7,112,000 Net effect of dilutive stock options and warrants - based on the treasury method.................................. 785,000 - - ---------- ------------ ---------- Total................................... 9,190,000 6,862,000 7,112,000 ========== ============ ========== Net income applicable to common stockholders............................ $1,048,000 $(2,111,000) $3,242,000 ========== ============ ========== Net income per share applicable to common stockholders..................... $0.11 $(0.31) $0.46 ========== ============ ==========
EX-13.1 12 FINANICAL DATA 1 EXHIBIT 13.1 2 Selected Financial Data
- - --------------------------------------------------------------------------------------------------- Year ended December 31, - - --------------------------------------------------------------------------------------------------- (in thousands, except per share data) 1995 1994 1993 1992 1991 Revenues $23,117 $ 13,652 $10,536 $ 6,717 $ 5,505 Direct costs 5,672 3,700 2,752 1,811 1,433 --------------------------------------------------------- Gross margin 17,445 9,952 7,784 4,906 4,072 --------------------------------------------------------- Operating income before charge for purchased in-process product development and write-off of software development costs 3,135 1,619 1,142 166 119 --------------------------------------------------------- Charge for purchased in-process product development and write-off of software development costs - 4,317 - - - Operating income (loss) 3,135 (2,698) 1,142 166 119 ========================================================= Net income (loss) applicable to common shareholders $ 1,048 $ (2,111) $ 3,242 $ (353) $ 46 ========================================================= Net income (loss) per share of common stock $ 0.12 $ (0.31) $ 0.48 $ (0.08) $ (0.03) ========================================================= Weighted average common and common equivalent shares outstanding 8,932 6,862 6,744 5,645 5,601 ========================================================= BALANCE SHEET DATA: At December 31, --------------------------------------------------------- (in thousands) 1995 1994 1993 1992 1991 - - --------------------------------------------------------------------------------------------------- Working capital 14,320 2,726 3,790 150 393 Total assets 40,260 15,661 12,201 4,832 3,100 Long-term obligations, redeemable preferred stock and puttable common stock 4,675 2,943 4,944 7,138 1,081 Shareholders' equity 29,133 5,399 4,337 (4,457) 821
1 3 Quarterly Results of Operations
- - ----------------------------------------------------------------------------------- Three Months Ended - - ----------------------------------------------------------------------------------- Mar. 31, June 30, Sept. 30, Dec. 31, (in thousands, except per share data) 1994 1994 1994 1994* - - ------------------------------------------------------------------------------------ Revenues $2,993 $3,542 $3,410 $ 3,707 ========================================= Gross margin 2,131 2,581 2,452 2,788 ========================================= Operating income (loss) 211 348 236 (3,493) ========================================= Net income (loss) applicable to common shareholders $ 43 $ 115 $ 55 $(2,324) ========================================= Net income (loss) per share of common stock and common stock equivalents $ 0.01 $ 0.02 $ 0.01 $(0.30) ========================================= Weighted average common and common equivalent shares outstanding 7,513 7,631 7,597 7,779 =========================================
Three Months Ended - - ------------------------------------------------------------------------------------ Mar. 31, June 30, Sept. 30, Dec. 31, (in thousands, except per share data) 1995 1995 1995 1995 - - ------------------------------------------------------------------------------------ REVENUES $4,542 $5,288 $6,102 $ 7,185 ========================================== GROSS MARGIN 3,418 4,055 4,505 5,467 ========================================== OPERATING INCOME 472 616 740 1,307 ========================================== NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 166 $ 209 $ 147 $ 526 ========================================== NET INCOME PER SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS $ 0.02 $ 0.03 $ 0.02 $ 0.05 ========================================== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 7,926 7,913 9,567 10,908 ========================================== - - ------------------------------------------------------------------------------------
* Includes pre-tax charge of $4.3 million, for purchased in-process product development and write-off of software development costs. 4 Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company generates revenues from various sources, including revenues for services and license fees for software sales. Revenues for services principally include subscription fees for transactions on the Company's VAN, software maintenance and implementation charges and charges for consulting and training services. Subscription fees are based on a combination of monthly access charges and transaction-based usage charges. Software maintenance and implementation charges represent recurring charges and are deferred and recognized ratably over 12 months. Charges for consulting and training services are based on actual services rendered and are recognized as services are performed. License fees for software sales are recognized at the time of product installation for the Company's PC-based EDI software products, and upon the latter of shipment or fulfillment of all significant post-contract vendor obligations for the Company's other software products. The Company accepts product returns for a specified period after delivery of software. License fees include royalty revenues under the Company's Alliance Agreement with System Software Associates, Inc. ("SSA") which are recognized as reported by SSA in relicensing the Company's software products. The Company modified its pricing structure for maintenance and implementation charges in March 1993 to be more consistent with customary pricing within the Company's industry. This included an increase in the recurring annual maintenance charges which were phased in over a 24-month period as maintenance contracts were renewed. In addition, the Company instituted a recurring annual software implementation charge to cover the costs of developing and updating custom software templates, known as Trading Partner Packs, for particular industries and trading partners. Most new software purchasers are required to contract for both software maintenance and implementation services. Effective December 31, 1994, the Company completed the acquisition (the "TI Acquisition") of certain assets from Texas Instruments, Incorporated relating to its EDI Software business. Effective July 21, 1995, the Company entered into a strategic alliance relationship with SSA (the "SSA Alliance") pursuant to which the Company acquired from SSA computer software that performs EDI functions on IBM AS/400 midrange computers and licensed to SSA the Company's AS/400, UNIX and PC-based EDI software and related tools and utilities, under agreements whereby SSA may remarket this Harbinger software to licensees of SSA's Business Planning and Control System. Through the TI Acquisition and the SSA Alliance, the Company acquired software products and technologies that complement the Company's existing software product line. In December 1994, the Company founded Harbinger NET Services, LLC ("HNS") to develop products and services to facilitate electronic commerce using the Internet. HNS was capitalized with an initial investment of approximately $360,000 from the Company and approximately $340,000 from certain other investors, including certain shareholders, executive officers and directors of the Company. In June 1995, the Company purchased additional HNS common shares for $2.0 million in cash and a note for $6.0 million, which was paid in full from the proceeds of the Company's initial public offering. Also, in June 1995, BellSouth invested $3.0 million in HNS in exchange for a five-year subordinated convertible debenture bearing interest at the rate of 6% per annum. The BellSouth debenture will convert automatically into common shares of HNS at such time, if ever, as BellSouth is permitted to make unrestricted equity investments in companies such as HNS under the terms of a consent decree applicable to BellSouth. Assuming the immediate conversion of the BellSouth debenture and exercise of outstanding HNS options, the Company and BellSouth would own approximately 70% and 24%, respectively, of HNS common shares outstanding following such conversion, and Harbinger shareholders, officers and directors would own 6% of HNS common shares outstanding following such conversion. HNS will concentrate its efforts on the design and development of software products and services to facilitate mass deployment of electronic commerce transactions over the Internet. The Company expects that it will realize significant losses on its investment in HNS through 1996, and such significant losses may continue thereafter. Since the Company reports its interest in HNS's losses by the equity method of accounting, the Company's net income and net income per share, if any, will be materially adversely affected by any significant losses incurred by HNS. 10 5 RESULTS OF OPERATIONS The following table presents, for the periods indicated, the percentage relationship of certain statement of operations data items to total revenues.
Percentage of Total Revenues --------------------------------- Year Ended December 31, --------------------------------- 1995 1994 1993 --------------------------------- Revenues: Services 71.0% 78.3% 65.3% Software 29.0 21.7 34.7 --------------------------------- Total revenues 100.0 100.0 100.0 --------------------------------- Direct costs: Services 18.7 22.1 21.0 Software 5.8 5.0 5.1 --------------------------------- Total direct costs 24.5 27.1 26.1 --------------------------------- Gross margin 75.5 72.9 73.9 Operating costs: Selling and marketing 21.1 21.4 21.8 General and administrative 20.9 22.9 27.3 Product development 16.5 13.0 10.4 Depreciation and amortization 3.4 3.8 3.5 Charge for purchased in-process product development and write-off of software development costs - 31.6 - --------------------------------- Total operating costs 61.9 92.7 63.0 --------------------------------- Operating income (loss) 13.6 (19.8) 10.9 --------------------------------- Interest expense (income), net (0.3) 0.2 1.0 Equity in losses of joint ventures 5.5 1.7 0.4 --------------------------------- Income (loss) before income tax expense (benefit) 8.4 (21.7) 9.5 Income tax expense (benefit) 3.0 (7.7) (24.4) --------------------------------- Net income (loss) 5.4% (14.0)% 33.9% =================================
1995 COMPARED TO 1994 AND 1994 COMPARED TO 1993 Revenues. Total revenues increased from $10.5 million in 1993 to $13.7 million in 1994 and $23.1 million in 1995. Revenues for services increased from $6.9 million in 1993 to $10.7 million in 1994 and to $16.4 million in 1995. These increases reflect an increase in the number of subscribers utilizing the Company's VAN, as well as increases in the average volume of transmissions by subscribers. Revenues from software maintenance and implementation also increased in each year, reflecting both an increase in the number of customers and the effect of the modification of the Company's pricing structure for these services in March 1993. Revenue from software sales decreased from $3.7 million in 1993 to $3.0 million in 1994, but increased to $6.7 million in 1995. The increase in 1995 as compared to 1994 was the result of the effect of $2.0 million in software sales attributable to products acquired from TI, $1.5 million in royalties for software products sold through the SSA channel and software sold in connection with several new hub programs. Software sales in 1994 included international sublicense revenues of approximately $500,000 which were substantially non-recurring. The decrease in 1994 as compared to 1993 was attributable to lower unit sales resulting from a lower number of trading partner seminars arranged and conducted by the Company, to delays in the Company's introduction of its Windows-based PC software products and to decreased international license fees derived from the Company sublicense arrangement with Sprint. The Company restructured its sales force to focus on a more effective implementation of its trading community strategy in 1995. Direct Costs. Direct costs for services increased from $2.2 million in 1993 to $3.0 million in 1994 and $4.3 million in 1995. As a percentage of services revenues, these costs were 32.2% in 1993, 28.1% in 1994 and 26.3% in 1995. The decreases as a percentage of services revenues from 1993 to 1995 reflect greater margins achieved from increased services revenues. Direct software costs increased from 11 6 Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) $534,000 in 1993 to $689,000 in 1994 and $1.3 million in 1995. Direct software costs, as a percentage of software revenues, were 14.6% in 1993, 23.2% in 1994 and 20.1% in 1995. The decrease in direct software costs as a percentage of software revenues from 1994 to 1995 primarily reflects the effect of higher margin royalty revenues and the sales of higher margin products acquired from TI. The increase in direct software costs as a percentage of software revenues from 1993 to 1994 primarily reflects both increased software amortization and higher sales of lower margin products. Total direct costs for software are expected to increase each year to reflect the amortization of purchased technology and software development costs. Selling and Marketing. Selling and marketing expenses increased from $2.3 million in 1993 to $2.9 million in 1994 and $4.9 million in 1995. As a percentage of revenues, these expenses were 21.8% in 1993, 21.4% in 1994, and 21.1% in 1995. The decreases between years principally reflect the effect of increased services revenues and efficiencies associated with other costs to support increased sales activity. General and Administrative. General and administrative expenses increased from $2.9 million in 1993 to $3.1 million in 1994 and $4.8 million in 1995. As a percentage of revenues, these expenses decreased from 27.3% in 1993 to 22.9% in 1994 and 20.9% in 1995. These decreases as a percentage of revenues reflect efficiencies associated with expanding the Company's operations and the effect of increases in software and service revenues. Product Development. Total expenditures for product development, including capitalized expenses, increased from $1.9 million in 1993 to $2.2 million in 1994 and $4.8 million in 1995. The Company capitalized product development expense of $826,000, $394,000 and $962,000, respectively, in 1993, 1994 and 1995, which represented 43.0%, 18.2% and 20.2% of total expenditures for product development in these respective periods. The increase in the amount capitalized, as a percentage of total expenditures for product development, from 1994 to 1995 reflects the fact that the Company incurred greater expenses in 1995 on products that had reached technological feasibility. As a percentage of revenues, product development costs increased from 10.4% in 1993 to 13.0% in 1994 and to 16.5% in 1995. The increase from 1994 to 1995 principally reflects substantially increased product development expenditures in 1995, including costs related to the continuing development of technologies acquired in connection with the TI Acquisition and the SSA Alliance. Amortization of capitalized product development cost totaled $231,000, $387,000 and $868,000 in 1993, 1994 and 1995, respectively. Additionally, the company has invested $8.4 million in HNS to develop products and services to facilitate electronic commerce using the Internet. Charge for Purchased In-Process Product Development and Write-off of Software Development Costs. The Company incurred an expense of $4.3 million in 1994 as a charge for purchased in-process product development and write-off of software development costs. In connection with the TI Acquisition, the Company acquired in-process software development for several software products. Since the Company determined that certain of the acquired technologies had not reached technological feasibility, the Company expensed the portion of the purchase price allocable to such in-process product development. Also, the Company wrote-off software development costs related to the Company's then existing Windows-based PC product which, as a result of the TI Acquisition, has been integrated with technologies acquired from TI to create a new Windows-based product offering. Equity in Losses of Joint Ventures. The Company recognized, as its equity in the losses of Harbinger NV, $41,000 in 1993, $227,000 in 1994 and $313,000 in 1995. These increases reflect the impact of the operations of Harbinger NV for the full year in 1994 and 1995 as compared to two months in 1993, and the increasing losses from these operations. In addition, the Company recognized, as its equity in the losses of HNS, $953,000 in 1995 reflecting the Company's allocation of losses associated with this joint venture with BellSouth. Income Taxes. The Company recorded an income tax expense of $687,000 and an income tax benefit of $1.1 million in 1995 and 1994, respectively, which represents an effective tax rate of approximately 35% and 36% for each of those respective periods. Pre-tax income of $7.6 million will be required in future years to fully utilize the deferred tax assets of $2.9 million as of December 31, 1995. During 1993, the Company determined that the valuation allowance recorded upon adoption of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" was no longer necessary. Therefore, the Company reversed the valuation allowance which resulted in a tax benefit in 1993 of $2.6 million. Net Income. The Company realized net income of $1.2 million in 1995 as compared to a net loss of $1.9 million in 1994 and net income of $3.6 million in 1993. The net loss in 1994 reflects principally the effect of the charge for purchased in-process product development and write-off of software development costs of $4.3 million in connection with the TI Acquisition. Without this charge, the 12 7 Company's net income for 1994 would have been approximately $867,000. LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company has financed its operations through a combination of private equity and debt financings, a bank line of credit and cash flows from operations. In 1995, 1994 and 1993, the Company generated cash from operating activities of $2.9 million, $3.4 million and $1.2 million, respectively. The Company used net cash in investing activities of $11.8 million in 1995 as compared to $511,000 in 1994 and $3.5 million in 1993. Cash used in investing activities for 1995 included principally investment in joint ventures and purchases of property and equipment. The Company generated net cash from financing activities of $16.2 million in 1995, representing principally proceeds from its initial public offering in August 1995. Financing activities generated cash of $1.0 million in 1994 and $2.6 million in 1993, representing principally the proceeds from the issuance of securities. The Company's bank credit facility consists of a revolving line of credit which bears interest at prime plus 0.625% and permits the Company to borrow a maximum of $4.0 million, limited to a borrowing base determined on the balance of the Company's qualified receivables. This facility, which also provides the Company with a 24-month termout feature for up to $2.0 million, contains certain restrictive covenants and is secured by substantially all of the Company's assets. The covenants include restrictions on the Company's capital expenditures and net losses, and require the Company to maintain certain financial ratios. The Company pays a commitment fee on the unused portion of this revolving credit facility. As of December 31, 1995, the Company had no outstanding balance on this facility. The Company's principal commitments consist of leases on its headquarters facilities, obligations under its bank credit facility and a $1.0 million loan commitment to Harbinger NV. Advances on the proposed Harbinger NV loan commitment will be funded on a monthly basis as determined by the Company, subject to the right of the Company at any time to discontinue advances under the loan agreement (except that in the event of the orderly liquidation of Harbinger NV, the Company must fund amounts necessary to enable Harbinger NV to satisfy its commitments). Under the Company's agreements with Harbinger NV, Harbinger NV is required to pay the Company a minimum of $2.0 million in royalties by December 31, 1997. The Company recognized no royalty revenue for 1994 or 1995 and does not believe that Harbinger NV will be able to meet this commitment by December 31, 1997. The Company currently has no material commitments for capital expenditures. Revenues for 1995 include minimum royalties payable to the Company by SSA of $1.4 million which was paid in January 1996. The terms of the distribution arrangement provides for SSA to pay the Company royalties through December 2000 based upon future software and services revenues that SSA derives from the sale of the Company's products including certain minimum royalties of $5.7 million in 1996. Under the royalty arrangement, royalties are not payable to Harbinger until 30 days after SSA has received payment from its customer. Accordingly, it is conceivable that the Company will not receive any payments on the 1996 guaranteed minimum until January 1997. The Company may from time to time issue debt or equity securities and otherwise raise long-term capital to finance the expansion of its business. The Company does not believe that inflation has had a material impact on its business. However, there can be no assurance that Harbinger's business will not be affected by inflation in the future. RECENT ACCOUNTING PRONOUNCEMENT On October 23, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 allows companies to retain the current approach set forth in APB Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), for recognizing stock-based expense in their financial statements in lieu of the new accounting method prescribed by SFAS No. 123 based on the estimated fair value of employee stock options. Companies that do not follow the new fair value based method will be required to provide expanded footnote disclosures. The provisions of SFAS No. 123 are effective for fiscal years beginning after December 15, 1995. However, disclosure of the pro forma net income and earnings per share, as if the fair value method of accounting for stock-based compensation had been elected, is required for all awards granted in fiscal years beginning after December 15, 1994. The Company intends to continue accounting for stock-related compensation using APB Opinion No. 25 and will provide the expanded footnote disclosures required under SFAS No. 123 beginning with its 1996 financial statements. 13 8 Balance Sheets
- - --------------------------------------------------------------------------------------------------------------- December 31, ------------------------------- 1995 1994 ------------------------------- ASSETS Current assets: Cash and cash equivalents $11,918,000 $ 4,642,000 Accounts receivable, less allowances for returns and doubtful accounts of $537,000 and $270,000 in 1995 and 1994, respectively 5,624,000 3,366,000 Royalty receivable 1,382,000 - Deferred income taxes 999,000 1,760,000 Due from joint ventures 566,000 50,000 Other current assets 283,000 227,000 ------------------------------- Total current assets 20,772,000 10,045,000 ------------------------------- Property and equipment, less accumulated depreciation and amortization 3,772,000 2,107,000 Investments in joint ventures 7,480,000 232,000 Intangible assets, less accumulated amortization 6,298,000 1,414,000 Deferred income taxes 1,938,000 1,863,000 ------------------------------- $40,260,000 $15,661,000 =============================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,335,000 $ 886,000 Accrued expenses 2,759,000 1,446,000 Deferred revenues 2,358,000 1,662,000 Note payable - 3,325,000 -------------------------------- Total current liabilities 6,452,000 7,319,000 -------------------------------- Commitments and contingencies Redeemable preferred stock: Series B, $10.00 par value; 48,000 shares issued and outstanding at December 31, 1994 - 480,000 Series C, $10.00 par value; 250,000 shares issued and outstanding at December 31, 1994 - 2,463,000 Zero Coupon, $1.00 redemption value; 4,000,000 shares issued and outstanding at December 31, 1995 - - -------------------------------- Total redeemable preferred stock - 2,943,000 -------------------------------- Puttable common stock $0.0001 par value; 550,000 shares issued and outstanding 4,675,000 - Shareholders' equity: Preferred stock, including redeemable preferred stock; 20,000,000 shares authorized -- Series C, $10.00 par value; 250,000 shares issued and outstanding at December 31, 1995 2,485,000 - Common stock, $0.0001 par value; 100,000,000 shares authorized, 9,690,684 and 7,397,434 shares issued and outstanding at December 31, 1995 and 1994, respectively 1,000 1,000 Additional paid-in capital 32,201,000 11,977,000 Accumulated deficit (5,554,000) (6,579,000) -------------------------------- Total shareholders' equity 29,133,000 5,399,000 -------------------------------- $40,260,000 $15,661,000 ===============================
See accompanying notes to financial statements. 14 9 Statements of Operations
- - -------------------------------------------------------------------------------------------------------------- Year Ended December 31, ---------------------------------------------- 1995 1994 1993 ---------------------------------------------- Revenues: Services $16,418,000 $10,688,000 $ 6,880,000 Software 6,699,000 2,964,000 3,656,000 ---------------------------------------------- Total revenues 23,117,000 13,652,000 10,536,000 ---------------------------------------------- Direct costs: Services 4,323,000 3,011,000 2,218,000 Software 1,349,000 689,000 534,000 --------------------------------------------- Total direct costs 5,672,000 3,700,000 2,752,000 --------------------------------------------- Gross margin 17,445,000 9,952,000 7,784,000 --------------------------------------------- Operating costs: Selling and marketing 4,875,000 2,922,000 2,298,000 General and administrative 4,832,000 3,132,000 2,880,000 Depreciation and amortization 794,000 512,000 371,000 Product development 3,809,000 1,767,000 1,093,000 Charge for purchased in-process product development and write-off of software development costs - 4,317,000 - ---------------------------------------------- Total operating costs 14,310,000 12,650,000 6,642,000 ---------------------------------------------- Operating income (loss) 3,135,000 (2,698,000) 1,142,000 Interest expense (income), net (65,000) 38,000 103,000 Equity in losses of joint ventures 1,266,000 227,000 41,000 ---------------------------------------------- Income (loss) before income tax expense (benefit) 1,934,000 (2,963,000) 998,000 Income tax expense (benefit) 687,000 (1,052,000) (2,571,000) ---------------------------------------------- Net income (loss) 1,247,000 (1,911,000) 3,569,000 Preferred stock dividends (199,000) (200,000) (327,000) ---------------------------------------------- Net income (loss) applicable to common shareholders $ 1,048,000 $(2,111,000) $ 3,242,000 ============================================== Net income (loss) per share of common stock $ 0.12 $ (0.31) $ 0.48 ============================================== Weighted average common and common equivalent shares outstanding 8,932,000 6,862,000 6,744,000 ==============================================
See accompanying notes to financial statements. 15 10 Statements of Shareholders' Equity
- - ------------------------------------------------------------------------------------------------------------------------------------ For the Years Ended December 31, 1995, 1994 and 1993 --------------------------------------------------------------------------------------------------------- Preferred stock, Series C Common stock Additional Total ---------------- ------------------ paid-in Accumulated Subscription shareholders' Shares Amount Shares Amount capital deficit receivable equity --------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1992 - $ - 5,688,305 $1,000 $ 3,254,000 $(7,689,000) $(23,000) $(4,457,000) Sale of common stock - - 363,637 - 1,943,000 - - 1,943,000 Conversion of Series A preferred stock to common stock - - 360,361 - 1,081,000 - - 1,081,000 Issuance of common stock in redemption of Series B preferred stock - - 301,209 - 2,346,000 - - 2,346,000 Warrants issued - - - - 66,000 - - 66,000 Exercise of stock options - - 34,206 - 93,000 - - 93,000 Receipt of subscription receivable - - - - - - 23,000 23,000 Net income - - - - - 3,569,000 - 3,569,000 Preferred stock dividends - - - - - (327,000) - (327,000) ------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1993 - - 6,747,718 1,000 8,783,000 (4,447,000) - 4,337,000 Exercise of stock options and warrants - - 336,236 - 1,193,000 - - 1,193,000 Issuance of common stock in redemption of Series B preferred stock - - - - 5,000 - - 5,000 Amortization of discount on Series C preferred stock - - - - - (21,000) - (21,000) Conversion of debt to common stock - - 313,480 - 1,996,000 - - 1,996,000 Net loss - - - - - (1,911,000) - (1,911,000) Preferred stock dividends - - - - - (200,000) - (200,000) ------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1994 - - 7,397,434 1,000 11,977,000 (6,579,000) - 5,399,000 Exercise of stock options and warrants - - 610,714 - 1,945,000 - - 1,945,000 Purchase and retirement of treasury stock - - (1,000) - (5,000) - - (5,000) Sale of common stock - - 1,683,536 - 18,284,000 - - 18,284,000 Reclassification of Series C preferred stock to shareholders' equity 250,000 2,485,000 - - - - - 2,485,000 Amortization of discount on Series C preferred stock - - - - - (23,000) - (23,000) Net income - - - - - 1,247,000 - 1,247,000 Preferred stock dividends - - - - - (199,000) - (199,000) ------------------------------------------------------------------------------------------------------- BALANCE, December 31, 1995 250,000 $2,485,000 9,690,684 $1,000 $32,201,000 $(5,554,000) - $29,133,000 =======================================================================================================
See accompanying notes to financial statements. 16 11 Statements of Cash Flows
- - ---------------------------------------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------------- 1995 1994 1993 ------------------------------------------------- Cash flows from operating activities: Net income (loss) $ 1,247,000 $ (1,911,000) $ 3,569,000 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Charge for purchased in-process product development and write-off of capitalized software - 4,317,000 - Depreciation and amortization 1,666,000 899,000 621,000 Gain on sale of property and equipment - (3,000) - Discount amortization on subordinated debt - 19,000 26,000 Equity in losses of joint ventures 1,266,000 227,000 41,000 Deferred income tax expense (benefit) 687,000 (1,052,000) (2,571,000) (Increase) decrease in: Accounts receivable (2,303,000) 35,000 (1,396,000) Royalty receivable (1,382,000) - - Due from joint ventures (516,000) 140,000 (190,000) Other current assets (68,000) (69,000) (63,000) Note receivable - 180,000 - Increase in: Accounts payable and accrued expenses 1,603,000 70,000 601,000 Deferred revenues 696,000 517,000 590,000 ------------------------------------------------- Net cash provided by operating activities 2,896,000 3,369,000 1,228,000 ------------------------------------------------- Cash flows from investing activities: Short-term investment - 1,000,000 (1,000,000) Purchases of property and equipment (2,364,000) (899,000) (867,000) Additions to software development costs (962,000) (394,000) (826,000) Purchased technology - (218,000) (260,000) Investment in joint ventures (8,514,000) - (500,000) ------------------------------------------------- Net cash used in investing activities (11,840,000) (511,000) (3,453,000) ------------------------------------------------- Cash flows from financing activities: Dividends paid on preferred stock (199,000) (167,000) (276,000) Exercise of stock options and warrants 1,945,000 1,149,000 93,000 Repayment of note payable (3,325,000) - - Proceeds from issuance of common stock 18,284,000 - 1,943,000 Proceeds from issuance of Series C preferred stock and warrants - - 2,489,000 Purchase of treasury stock (5,000) - - Redemption of Series B preferred stock (480,000) - (1,101,000) Repayments under credit facility - - (380,000) Payments of long-term debt - - (177,000) Principal payments under capital lease obligations - - (8,000) ------------------------------------------------- Net cash provided by financing activities 16,220,000 982,000 2,583,000 ------------------------------------------------- Net increase in cash and cash equivalents 7,276,000 3,840,000 358,000 Cash and cash equivalents at beginning of year 4,642,000 802,000 444,000 ------------------------------------------------- Cash and cash equivalents at end of year $ 11,918,000 $ 4,642,000 $ 802,000 ================================================= Supplemental disclosure of cash paid for interest $ 123,000 $ 150,000 $ 158,000 ================================================= Supplemental disclosure of noncash investing activities: Acquisition of technology and distribution agreement in exchange for common stock $ 4,675,000 $ - $ - ================================================= Acquisition of business in exchange for note and assumption of liabilities $ - $ 3,826,000 $ - =================================================
See accompanying notes to financial statements. 17 12 Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS AND PRESENTATION Harbinger Corporation (the "Company") develops, markets and supports software products and provides computer communications network and consulting services to enable businesses to engage in electronic commerce. The Company's products and services are used by more than 17,000 customers in targeted industries, including the petroleum, chemical, utility, financial services, electronics, distribution, aerospace, textile/apparel and healthcare industries. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. REVENUE RECOGNITION Software Revenues derived from software license fees are recognized upon installation of the Company's PC-based products and are recognized upon shipment for all other software products. Royalty revenues are recognized as reported. Services Revenues derived from services include subscription fees, maintenance and implementation fees and consulting and training fees. Subscription fees include both fixed and usage based fees for use of the Company's value-added network and are recognized over the service period and as transactions are processed. Maintenance and implementation fees are generally billed annually in advance, include fixed fees for customer support and product updates and are recognized ratably over the service period. Consulting and training fees are billed under both time and materials and fixed fee arrangements and are recognized as services are performed. Deferred revenue Deferred revenues represent payments received from customers for software and services billed in advance. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Computer and communications equipment 3 - 5 years Furniture, fixtures and leasehold improvements 5 - 10 years
INVESTMENTS IN JOINT VENTURES The Company's 93% investment in Harbinger NET Services, LLC (HNS) and its 20% investment in Harbinger NV (HNV) (collectively, the Joint Ventures) are accounted for using the equity method of accounting. The Company applies the equity method of accounting for its investment in HNS because of a shareholders' agreement among all HNS shareholders which provides for all significant operating and management decisions for HNS to be vested in the HNS board of managers and provides that the Company can elect only a minority of the HNS board of managers until December 31, 1996. INTANGIBLE ASSETS Purchased technology, goodwill and other intangible assets Purchased technology, goodwill and other intangible assets are being amortized over periods of up to five years. The Company evaluates the recoverability of these intangible assets at each period end using the undiscounted estimated future cash flows expected to be derived from such assets. If such evaluation indicates a potential impairment, the Company uses fair value in determining the amount of these intangible assets that should be written off. 18 13 Software development costs The Company capitalizes certain software development costs in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." Costs incurred internally to create a computer software product or to develop an enhancement to an existing product are charged to expense when incurred as research and development until technological feasibility has been established for the product or enhancement. Thereafter, all software production costs are capitalized and reported at the lower of unamortized cost or net realizable value. Capitalization ceases when the product or enhancement is available for general release to customers. Software development costs are amortized on a product-by-product basis at the greater of the amounts computed using (a) the ratio of current gross revenues for a product or enhancement to the total current and anticipated future gross revenues for that product or enhancement or (b) the straight-line method over the remaining estimated economic life of the product or enhancement, not to exceed five years. The Company evaluates the recoverability of its software development costs at each period end using the undiscounted estimated future cash flows expected to be derived from the software product or enhancement. If such evaluation indicates a potential impairment, the Company uses fair value in determining the amount of software development costs that should be written off. INCOME TAXES The Company accounts for income taxes using the asset and liability method of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Under SFAS No. 109, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. EARNINGS PER SHARE Net income per share has been computed using the weighted average common and common equivalent shares outstanding. Stock options and warrants issued in the twelve months prior to the Company's initial public offering have been considered outstanding and included in the computations of weighted average common and common equivalent shares outstanding for all periods presented, even if anti-dilutive. Net income per share computed on a fully diluted basis is not significantly different than net income per share computed using the primary method described above. RECLASSIFICATIONS Certain amounts in the accompanying 1994 and 1993 financial statements have been reclassified to conform to the presentation adopted in the 1995 financial statements. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company uses financial instruments in the normal course of its business. The carrying values of cash equivalents, accounts and royalty receivable, accounts payable, accrued expenses and deferred revenues approximate fair value due to the short-term maturities of these assets and liabilities. The Company's investments in joint ventures are accounted for using the equity method and pertain to privately held companies for which fair values are not readily available. The Company believes the fair values of its joint venture investments exceed the carrying values. FOREIGN CURRENCY TRANSLATION Foreign currency financial statements of the Company's foreign joint venture are translated into U.S. dollars at current exchange rates, except for revenues, costs and expenses and net losses which are translated at average exchange rates during each reporting period. Net exchange gains or losses resulting from the translation of assets and liabilities of the Company's equity investment in its foreign joint venture were not significant to the Company's 1995 financial statements. RECENT ACCOUNTING PRONOUNCEMENT On October 23, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 19 14 Notes to Financial Statements (Continued) allows companies to retain the current approach set forth in APB Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB Opinion No. 25") for recognizing stock-based expense in their financial statements in lieu of the new accounting method prescribed by SFAS No. 123 based on the estimated fair value of employee stock options. Companies that do not follow the new fair value based method will be required to provide expanded footnote disclosures. The provisions of SFAS No. 123 are effective for fiscal years beginning after December 15, 1995. However, disclosure of the pro forma net income and earnings per share, as if the fair value method of accounting for stock-based compensation had been elected, is required for all awards granted in fiscal years beginning after December 15, 1994. The Company intends to continue accounting for stock related compensation using APB Opinion No. 25 and will provide the expanded footnote disclosures required under SFAS No. 123 beginning with its 1996 financial statements. 2. ACQUISITION On December 31, 1994, the Company acquired certain assets and assumed certain liabilities of the EDI business unit of Texas Instruments, Incorporated in exchange for a $3.325 million note, the assumption of liabilities of $526,000, and an agreement to pay royalties through 1998 based upon future software license fee revenues derived from certain of the software products acquired if such revenues exceed certain specified levels. The Company has accounted for the transaction using the purchase method of accounting and the results of operations of the business acquired have been included in the Company's accompanying statement of operations since the acquisition date. The Company paid the $3.325 million note in January 1995 and did not incur any additional royalties under the terms of the agreement for the period ended December 31, 1995. Of the total purchase price of $3.851 million, $2.66 million was allocated to in-process product development and charged to the statement of operations at the acquisition date, $441,000 was allocated to purchased technology, $318,000 was allocated to tangible assets (primarily working capital and equipment) and $432,000 was allocated to goodwill. The unaudited pro forma results of operations of the Company for 1994 as if the transaction described above had been effected on January 1, 1994 are summarized below: Revenues $ 15,738,000 ============ Net loss applicable to common shareholders $ (2,894,000) ============ Net loss per share of common stock $ (0.42) ============
The pro forma results do not necessarily represent results which would have occurred if the acquisition had taken place on the date indicated nor are they necessarily indicative of the results of future operations. 3. PURCHASED TECHNOLOGY AND DISTRIBUTION AGREEMENT On July 21, 1995, the Company entered into a distribution arrangement and purchased certain software products and equipment from SSA in exchange for the issuance of 550,000 shares of the Company's common stock valued at $4,675,000 at the date of issuance and the issuance of 4 million shares of the Company's Zero Coupon Redeemable Preferred Stock. The Company also provided SSA with an option to put the 550,000 shares of common stock issued back to the Company for cash on January 31, 1997 exercisable only if the market value of the common stock on that date is less than $9.00 per share. The Zero Coupon Redeemable Preferred Stock issued has no voting or dividend rights, vests only if SSA attains certain royalty targets for the years 1997 through 2000 and contains mandatory redemption provisions of $1.00 per share payable in cash or the Company's common stock at the option of the holder thirty days after the end of each year. The Company will accrete the Zero Coupon Redeemable Preferred Stock to its redemption price as it becomes probable that it will be earned through a reduction in royalty revenues in the period earned. The terms of the distribution arrangement provide for SSA to pay the Company royalties through December 2000 based upon future software and service revenues that SSA derives from the sale of the Company's products including certain minimum royalties of $1.4 million for 1995 and $5.7 million in 1996. Payments by SSA to the Company under these minimum royalty provisions in 20 15 excess of royalties on actual software and service revenues will be creditable against SSA royalty obligations through 1997. Royalty revenues are recognized as reported by SSA in relicensing the Company's products and providing post-contract support services to end-users. The Company has allocated $2.3 million of the fair value of the common stock issued to purchased technology and $2.4 million to other intangibles (the distribution arrangement) based upon their estimated relative fair values. 4. PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1995 and 1994:
1995 1994 ------------------------ Computer and communications equipment $4,696,000 $2,932,000 Furniture, fixtures and leasehold improvements 1,618,000 983,000 ------------------------ 6,314,000 3,915,000 Less accumulated depreciation and amortization (2,542,000) (1,808,000) ------------------------ $3,772,000 $2,107,000 ========================
5. INVESTMENTS IN JOINT VENTURES INVESTMENT IN HNS The Company founded HNS to develop products and services to facilitate electronic commerce using the Internet. In March 1995, HNS was capitalized with an investment of approximately $360,000 from the Company and approximately $340,000 from certain other investors, including certain shareholders, executives, officers and directors of the Company. In June 1995, the Company and BellSouth Corporation ("BellSouth") contributed cash for stock and convertible debt of HNS in the amounts of $8.0 million and $3.0 million, respectively. The Company owns an equity interest in HNS of approximately 93% or 70%, assuming the conversion of the BellSouth Debenture and the exercise of outstanding HNS options by certain shareholders of Harbinger Corporation. The Company recognized equity in losses of HNS of $953,000 for the year ended December 31, 1995. The Operating agreement among the Company, HNS and its shareholders grants certain designated shareholders, presently including the Company and BellSouth, the right after December 1, 1996 to initiate a buy-sell procedure with respect to the shares owned by such designated shareholders. Under this buy-sell arrangement, any such designated shareholder may offer to buy or sell the HNS shares held by the other designated shareholders at a specified price, in which case the other designated shareholders will have the right to elect either to sell their shares or purchase the shares of the designated shareholder initiating the buy-sell procedure. The Company has several agreements with HNS governing certain transactions between them, including the use of personnel, the management and operation of HNS, the use by HNS of the Company's products and services, the Company's right to license and distribute HNS products, if any, derived from the Company's products and the payment by HNS and the Company of royalties and other amounts. Amounts charged to HNS by the Company for services provided during the period ending December 31, 1995 were $324,000. This included $94,000 in general and administrative, $36,000 in selling and marketing and $194,000 in product development costs. These amounts have been included in the statement of operations for the Company as a reduction of expense in the above categories. Additionally, the Company paid expenses of $413,000 that have been reimbursed by HNS. At December 31, 1995, the Company had an amount due from HNS of approximately $97,000 for such services provided and certain direct expenses incurred by the Company on behalf of HNS. The following table sets forth the condensed balance sheet and statement of operations of HNS as of and for the year ended December 31, 1995: Balance sheet: Cash $10,645,000 Accounts payable and other current liabilities $ 353,000 Long-term debt 3,000,000 Other assets 261,000 Shareholders' equity 7,553,000 ----------- ----------- $10,906,000 $10,906,000 =========== =========== Statement of operations: Operating costs: Selling and marketing $ 84,000 General and administrative 133,000 Depreciation and amortization 21,000 Product development 1,077,000 ----------- Total operating costs 1,315,000 ----------- Operating loss (1,315,000) ----------- Interest income (165,000) ----------- Net loss $(1,150,000) ===========
21 16 Notes to Financial Statements (Continued) INVESTMENT IN HNV On November 5, 1993, the Company acquired a 20% interest in HNV, a new venture headquartered in The Netherlands, which was formed to offer electronic commerce services in the European marketplace. The initial capitalization of HNV consisted of an investment of $500,000 from the Company and $2,000,000 from certain other investors, including certain shareholders of the Company. In December 1995, the Company and certain other investors, including certain shareholders of the Company, contributed an additional $150,000 and $600,000 to HNV, respectively. The Company has a $1.0 million loan commitment to HNV. Advances on the proposed loan commitment will be funded on a monthly basis as determined by the Company, subject to the right of the Company at any time to discontinue advances under the loan agreement (except that in the event of the orderly liquidation of HNV, the Company must fund amounts necessary to enable HNV to satisfy its commitments). HNV has a license to use the Company's network and PC technology and will pay the Company certain royalty fees based on a percentage of software and network revenues, as defined. The Company recognized no royalty revenue for 1994 or 1995. Under a management agreement, the Company provides certain consulting and management services to HNV. At December 31, 1995, the Company had an amount due from HNV of approximately $469,000 for such services provided and certain direct expenses incurred by the Company on behalf of HNV, which was paid in January 1996. Under a shareholders' agreement dated November 5, 1993 among the shareholders of HNV, during the period commencing November 5, 1994 and ending November 4, 1997 the Company has an option (the "Call Option") to purchase from the other shareholders of HNV all of their shares of HNV at a purchase price, which shall be one of the following two choices (with each HNV shareholder entitled to an independent selection of the purchase price choice): (i) one share of the Company's common stock for each seven shares of HNV common stock held by the shareholder at the time the Company exercises the Call Option, or (ii) the total amount contributed to the capital of HNV by the respective shareholder plus 30% compounded annual interest calculated from the date of the original capital contribution. The shareholders' agreement includes restrictions on the transfer of the securities of HNV and provides a put-call option to any shareholder holding 9% or more of the outstanding common shares of HNV at any time on or after November 5, 1994. Notwithstanding the call option held by the Company, the put-call option provided for in the shareholders' agreement does not require the shareholder to accept the put. The shareholders' agreement is effective until the earlier of December 31, 1999 or termination by written agreement of HNV and shareholders holding at least 80% of the aggregate issued shares. The Company recognized equity in losses of HNV of $313,000, $227,000 and $41,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Amounts charged to HNV by the Company for services provided during the years ended December 31, 1995, 1994 and 1993 were:
1995 1994 1993 ------------------------------- General and administrative $182,000 $187,000 $88,000 Selling and marketing - 6,000 2,000 Product development 27,000 40,000 4,000 Services - direct costs 63,000 47,000 - Depreciation 4,000 5,000 1,000 ------------------------------- $276,000 $285,000 $95,000 ===============================
These amounts have been included in the statements of operations for the Company as a reduction of expense in the above categories. Additionally, the Company paid expenses of $95,000, $95,000 and $39,000 for the years ended December 31, 1995, 1994 and 1993, respectively, that were reimbursed by HNV. During the year ended December 31, 1995 the Company reimbursed HNV for $488,000 for the cost of facilities in Hoorne, The Netherlands, which the Company assumed in connection with the SSA alliance. This included $221,000 in general and administrative costs and $267,000 in product development costs. 22 17 6. INTANGIBLE ASSETS Intangible assets consist of the following at December 31, 1995 and 1994:
1995 1994 ------------------------ Software development costs $2,423,000 $1,461,000 Purchased technology 2,772,000 441,000 Goodwill and other intangible assets 2,911,000 388,000 ------------------------ 8,106,000 2,290,000 Less accumulated amortization (1,808,000) (876,000) ------------------------ $6,298,000 $1,414,000 ========================
During 1994, the Company wrote off $1,659,000 in capitalized software development costs related to products which the Company stopped marketing. Approximately $1,419,000 of such amount relates to a product development effort that was discontinued as a result of certain technology acquired in connection with the acquisition described in Note 2. 7. ACCRUED EXPENSES Accrued expenses consist of the following at December 31, 1995 and 1994:
1995 1994 ------------------------ Accrued salaries and wages $1,635,000 $ 608,000 Accrued rent 353,000 405,000 Other accrued expenses 771,000 433,000 ------------------------ $2,759,000 $1,446,000 ========================
8. INCOME TAXES The provision for income taxes includes income taxes deferred because of temporary differences between the financial statement and tax bases of assets and liabilities and any increase or decrease in the valuation allowance for deferred income tax assets. Income tax expense (benefit) for the years ended December 31, 1995, 1994 and 1993 is summarized as follows:
1995 1994 1993 ---------------------------------- Current $ - $ - $ - Deferred 687,000 (1,052,000) (2,571,000) ---------------------------------- $687,000 $(1,052,000) $(2,571,000) ==================================
The significant components of the deferred income tax expense (benefit) for the years ended December 31, 1995, 1994 and 1993 are summarized as follows:
1995 1994 1993 ---------------------------------- Deferred income tax expense (benefit) $687,000 $(1,052,000) $ 355,000 Decrease in the beginning of the year balance of the valuation allowance for deferred income tax assets - - (2,926,000) ---------------------------------- $687,000 $(1,052,000) $(2,571,000) ==================================
The income tax effects of the temporary differences that give rise to the Company's deferred income tax assets and liabilities as of December 31, 1995 and 1994 are as follows:
1995 1994 ------------------------ Deferred income tax assets: Net operating loss ("NOL") carryforward $ 894,000 $2,095,000 Deferred revenue 542,000 329,000 Intangible assets 943,000 1,010,000 Other 825,000 375,000 ------------------------ Gross deferred income tax assets 3,204,000 3,809,000 Deferred income tax liabilities - principally due to depreciation (267,000) (186,000) ------------------------ Net deferred income tax assets 2,937,000 3,623,000 Less current deferred income tax assets 999,000 1,760,000 ------------------------ Noncurrent deferred income tax assets $1,938,000 $1,863,000 ========================
Income tax expense (benefit) differs from the amounts computed by applying the federal statutory income tax rate of 34% to income (loss) before income taxes as a result of the following:
1995 1994 1993 ---------------------------------- Computed "expected" income tax (benefit) expense $658,000 $(1,007,000) $ 339,000 State income taxes, net of federal income tax benefit 77,000 (78,000) 26,000 Decrease in the valuation allowance for the deferred income tax assets - - (2,926,000) Other (48,000) 33,000 (10,000) ---------------------------------- $687,000 $(1,052,000) $(2,571,000) ==================================
23 18 Notes to Financial Statements (Continued) The increase (decrease) in net deferred income tax assets for the years ended December 31, 1995, 1994 and 1993, was $687,000, $1,052,000 and $(355,000), respectively. The decrease in the valuation allowance for deferred income tax assets for the year ended December 31, 1993 was $2,926,000. Under SFAS No. 109, deferred income tax assets and liabilities are recognized for differences between the financial statement carrying amounts and the tax bases of assets and liabilities which will result in future deductible or taxable amounts and for net operating loss and tax credit carryforwards. A valuation allowance is then established to reduce the deferred income tax assets to the level at which it is "more likely than not" that the tax benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss and tax credit carryforwards depends on having sufficient taxable income within the carryback and carryforward periods. Sources of taxable income that may allow for the realization of tax benefits include (1) taxable income in the current year or prior years that is available through carryback, (2) future taxable income that will result from the reversal of existing taxable temporary differences and (3) future taxable income generated by future operations. The Company believes that realization of the deferred income tax assets recorded at December 31, 1995 is more likely than not. At December 31, 1995, the Company has NOL carryforwards for tax purposes of approximately $5.9 million which expire at various dates through the year 2009 unless utilized. The Company's NOL at December 31, 1995 includes $3.6 million in income tax deductions related to stock options not included in the table of deferred income tax assets included above, which will be reflected as a credit to additional paid-in capital when realized. 9. SHAREHOLDERS' EQUITY AMENDMENT TO THE ARTICLES OF INCORPORATION Effective June 1995, the Company increased its authorized shares of common stock and preferred stock to 100,000,000 and 20,000,000, respectively, and established a par value of $0.0001 per share for the Company's authorized but unissued capital stock. INITIAL PUBLIC OFFERING In August 1995, the Company completed an initial public offering of its common stock. The Company sold 1,683,536 shares at $12.00 per share resulting in net proceeds to the Company, after underwriters commissions and offering expenses, of $18.3 million. PREFERRED STOCK, SERIES C In 1993, the Company sold Series C redeemable preferred stock and warrants in a private placement resulting in proceeds of $2.5 million. The terms of the Series C redeemable preferred stock include a 7% cash dividend payable quarterly and a mandatory redemption on March 1, 1996. The proceeds of the placement were allocated between the preferred stock and warrants based on their estimated relative fair values. This resulted in a discount from the face amount of the stock of approximately $66,000 which was allocated to the warrants. The warrants were exercised during fiscal 1995. In June 1995, the Company entered into agreements with holders of its Series C redeemable preferred stock to provide for the conversion on March 1, 1996 of all Series C redeemable preferred stock to the Company's Common Stock. The number of shares of common stock issuable upon conversion will be determined by dividing (i) the issue price of $10.00 times the number of shares of the Series C redeemable preferred stock outstanding by (ii) 95% of the average trading price of the common stock, as defined. As a result of the June 1995 agreement, the Company reclassified the preferred stock from redeemable preferred stock to shareholders' equity. See Note 12. RESTRICTED NET ASSETS The 1995 balance sheet includes restricted net assets related to investments in joint ventures of $7,480,000. STOCK OPTIONS On January 24, 1996, the Board of Directors adopted the 1996 Stock Option Plan which provides for the grant of up to 1,750,000 options plus an amount equal to the number of all shares that are either not subject to options granted under the 1989 Stock Option Plan or were subject to options granted thereunder that expire without exercise to officers and key employees, subject to stock- 24 19 holder approval of the plan. Options granted under the terms of the plan vest ratably over four years and are granted with an exercise price no less than the fair market value of common stock on the grant date. All options granted expire seven years from the date of the grant. The stock option committee of the Board of Directors is currently authorized under the 1989 Stock Option Plan to issue options to acquire up to 1,500,000 shares of common stock at an option price no less than the fair market value of common stock on the option grant date. Options granted prior to July 1994 vest ratably at one-third per year and options granted since July 1994 vest ratably at one-fourth per year. All options granted expire seven years from the date of grant. At December 31, 1995, there were options outstanding to purchase 1,010,574 shares of the Company's common stock, of which options to purchase 402,565 shares were exercisable. There were 76,104 options available for grant at December 31, 1995. In 1993, the Board of Directors authorized the creation of a stock option plan for nonemployee members of the Company's Board of Directors (the "Nonemployee Directors Plan"). A total of 150,000 shares of common stock has been reserved for issuance under the Nonemployee Directors Plan at an option price no less than the fair value of the common stock on the option grant date. Options expire seven years from the date of grant. The options granted under the Nonemployee Directors Plan vest annually based on attendance at regularly scheduled board meetings. Options for 60,000 shares of common stock were outstanding and exercisable as of December 31, 1995. There were 78,750 options available for grant at December 31, 1995. In addition to outstanding options granted under the Company's existing stock option plans, the Company has granted options to acquire 70,000 shares of common stock to certain existing and former nonemployee directors for past services. As of December 31, 1995, all were outstanding and exercisable. The following table summarizes option activity for the three years ended December 31, 1995:
Stock Options ------------------------------ Number Range ------------------------------ January 1, 1993 787,583 $1.17 - $ 3.50 Granted 236,000 4.00 - 4.88 Exercised (34,206) 1.17 - 3.50 Forfeited/canceled (57,667) 2.50 - 4.00 ------------------------------ December 31, 1993 931,710 1.17 - 4.88 Granted 243,000 6.38 Exercised (136,236) 1.17 - 6.38 Forfeited/canceled (62,133) 3.50 - 6.38 ------------------------------ December 31, 1994 976,341 1.17 - 6.38 Granted 489,000 6.38 - 13.75 Exercised (214,464) 1.17 - 6.38 Forfeited/canceled (110,303) 3.50 - 7.00 ------------------------------ December 31, 1995 1,140,574 $1.17 - $13.75 ==============================
10. RELATED PARTY TRANSACTIONS The Company paid fees to Westinghouse Communications, Inc. ("Westinghouse") of approximately $930,000, $520,000 and $249,000 in 1995, 1994 and 1993, respectively, under telecommunications agreements with Westinghouse. Westinghouse owned more than 5% of the Company until the sale of its investment in the Company's common stock in August 1995. 11. COMMITMENTS EMPLOYEE BENEFIT PLANS 401(k) Profit sharing plan The Company maintains a 401(k) Profit Sharing Plan (the "401(k) Plan") for the benefit of employees, which is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Code. Under the 401(k) Plan, employees who have completed one year of service and at 25 20 Notes to Financial Statements (Continued) least 1,000 hours of service during that period are eligible to participate. Subject to certain Code limitations, the Company may make a matching contribution at a rate determined by the Board of Directors of the Company each year. The Board of Directors approved the contribution by the Company to the 401(k) Plan of $27,000, $19,000 and $9,500 for the years 1995, 1994 and 1993, respectively. Employee Stock Purchase Plan Effective January 1, 1996, the Company began offering employees the right to purchase shares of the Company's common stock at a 15% discount from market value pursuant to the Employee Stock Purchase Plan (the "Purchase Plan"), conditioned upon stockholder approval of the plan. Under the Purchase Plan, full-time employees, except persons owning 5% or more of the Company's common stock, are eligible to participate after six months of employment. A maximum of 150,000 shares of common stock are issuable under the Purchase Plan. CREDIT FACILITY The Company maintains a credit facility which provides $4 million in borrowing availability, subject to the terms of the facility, at an interest rate of prime plus 0.625% and requires the Company to pay a commitment fee on the unused portion of 0.25%. The credit facility requires, among other things, the Company to maintain certain minimum financial ratios and restricts the Company from making certain investments, incurring additional indebtedness and making capital expenditures in excess of certain specified levels, as defined in the terms of the facility. No amounts were outstanding under the facility at December 31, 1995 or 1994. LEASES The Company leases office space and automobiles under operating leases which extend through 2000. Rent expense under all operating leases was approximately $784,000, $655,000 and $504,000 for 1995, 1994 and 1993, respectively. Future minimum lease payments under operating leases with noncancelable lease terms in excess of one year for the next five years and in the aggregate are as follows: 1996 $1,142,000 1997 1,233,000 1998 319,000 1999 153,000 2000 38,000 ---------- $2,885,000 ==========
CONTINGENT WARRANT COMMITMENT The Company is committed to issue warrants in June 1996 to two shareholders if certain events do not occur with respect to the performance of an affiliated company. The warrants, if issued, will enable the holders to acquire 50,000 shares of the Company's common stock at a price equivalent to fair market value at the date of issuance. 12. SUBSEQUENT EVENTS (UNAUDITED) On January 24, 1996, the Board of Directors adopted the 1996 Stock Option Plan which provides for the grant of up to 1,750,000 options plus an amount equal to the number of all shares that are either not subject to options granted under the 1989 Stock Option Plan or were subject to options granted thereunder that expire without exercise to officers and key employees, subject to stockholder approval of the plan. Options granted under the terms of the plan vest ratably over four years and are granted with an exercise price no less than the fair market value of common stock on the grant date. All options granted expire seven years from the date of the grant. On March 1, 1996, the Company exchanged 140,692 shares of common stock for all outstanding shares of the Company's Series C Preferred Stock. 26 21 Independent Auditors' Report KPMG Peat Marwick LLP The Board of Directors and Shareholders Harbinger Corporation: We have audited the accompanying balance sheet of Harbinger Corporation as of December 31, 1995 and the related statements of operations, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The accompanying financial statements of Harbinger Corporation as of December 31, 1994 and for the two year period then ended, were audited by other auditors whose report thereon dated March 14, 1995 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1995 financial statements referred to above present fairly, in all material respects, the financial position of Harbinger Corporation as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, Georgia February 9, 1996 27 EX-23.1 13 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23.1 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K for the fiscal year ended December 31, 1995 into Harbinger Corporation's previously filed Registration Statement on Form S-8 (File No. 33-96774). ARTHUR ANDERSEN LLP /s/ Arthur Andersen LLP -------------------------- Atlanta, Georgia March 26, 1996 - 1 - EX-23.2 14 INDEPENDENT AUDITOR'S CONSENT 1 EXHIBIT 23.2 2 INDEPENDENT AUDITORS' CONSENT The Board of Directors Harbinger Corporation We consent to the incorporation by reference in the Registration Statement (No. 33-96774) on Form S-8 of our report dated February 9, 1996, relating to the balance sheet of Harbinger Corporation as of December 31, 1995 and the related statements of operations, shareholders' equity, and cash flows for the year then ended, which report appears in the 1995 Annual Report to Shareholders and is incorporated by reference in the 1995 Annual Report on Form 10-K of Harbinger Corporation. KPMG PEAT MARWICK LLP /s/ KPMG Peat Marwick LLP --------------------------- Atlanta, Georgia March 26, 1996 -1- EX-27 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE YEAR ENDED DEC-31-1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 11,918 0 6,161 537 0 20,772 6,314 2,542 40,260 6,452 4,675 2,485 0 32,202 (5,554) 40,260 6,699 23,117 1,349 5,672 14,310 0 65 1,934 687 0 0 0 0 1,048 0.12 0.11
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