-----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, JgkvI6m9yz63EUfmaZ6jJZ8MHF9Zq4PWDvWCNPUPDBAMFPAG6ia6oeJ3ZbLzGUFy zFUwDOniLRwh5Vp41v6MZQ== 0000950144-98-009905.txt : 19980817 0000950144-98-009905.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950144-98-009905 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARBINGER CORP CENTRAL INDEX KEY: 0000947116 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 581817306 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26298 FILM NUMBER: 98689752 BUSINESS ADDRESS: STREET 1: 1055 LENOX PK BLVD CITY: ATLANTA STATE: GA ZIP: 30319 BUSINESS PHONE: 4048414334 10-Q 1 HARBINGER CORPORATION 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [MARK ONE] [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ------------ ------------ COMMISSION FILE NUMBER 0-26298 HARBINGER CORPORATION (Exact name of registrant as specified in its charter) GEORGIA 58-1817306 (State or other Jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1277 LENOX PARK BOULEVARD 30319 ATLANTA, GEORGIA (Zip Code) (Address of principal executive offices) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (404) 467-3000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| The number of shares of the issuer's class of capital stock outstanding as of August 4, 1998, the latest practicable date, is as follows: 42,153,610 shares of Common Stock, $.0001 par value. - -------------------------------------------------------------------------------- FORM 10-Q PAGE 1 OF 17 2 HARBINGER CORPORATION FORM 10-Q QUARTER ENDED JUNE 30, 1998 TABLE OF CONTENTS
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - (unaudited) June 30, 1998 and December 31, 1997...................................................... 3 Consolidated Statements of Operations (unaudited) - Three Months and Six Months Ended June 30, 1998 and 1997......................... 4 Consolidated Statements of Comprehensive Income (Loss) (unaudited) - Three Months and Six Months Ended June 30, 1998 and 1997................... 5 Condensed Consolidated Statements of Cash Flows (unaudited) - Six Months Ended June 30, 1998 and 1997.................................... 6 Notes to Consolidated Financial Statements (unaudited)......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.............................. 16 Item 6. Exhibits and Reports on Form 8-K................................................. 16 SIGNATURES................................................................................ 17
FORM 10-Q PAGE 2 OF 17 3 ITEM 1. FINANCIAL STATEMENTS HARBINGER CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
June 30, December 31, 1998 1997 --------- ------------ ASSETS Current assets: Cash and cash equivalents .................................. $ 67,477 $ 69,811 Short-term investments ..................................... 37,647 32,333 Accounts receivable, less allowances for returns and doubtful accounts of $2,587 at June 30, 1998 and $2,790 at December 31, 1997 .............................. 29,073 35,017 Royalties receivable ....................................... 7,130 5,364 Deferred income taxes ...................................... 1,892 1,892 Other current assets ....................................... 5,201 3,431 --------- --------- Total current assets ................................... 148,420 147,848 --------- --------- Property and equipment, less accumulated depreciation and amortization ........................................... 21,080 18,167 Intangible assets, less accumulated amortization .............. 17,008 16,464 Deferred income taxes ......................................... 909 909 Other non-current assets ...................................... 232 171 ========= ========= $ 187,649 $ 183,559 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ........................................... $ 4,662 $ 8,734 Accrued expenses ........................................... 24,001 25,835 Deferred revenues .......................................... 19,130 18,349 Current portion of long-term debt .......................... 205 623 --------- --------- Total current liabilities .............................. 47,998 53,541 --------- --------- Commitments and contingencies Redeemable preferred stock: Zero Coupon, $1.00 redemption value; 4,000,000 shares issued and outstanding at June 30, 1998 and December 31, 1997 ........................................ -- -- Shareholders' equity: Common stock, $0.0001 par value; 100,000,000 shares authorized, 41,979,331 shares and 40,827,856 shares issued and outstanding at June 30, 1998 and December 31, 1997 ... 4 4 Additional paid-in capital ................................. 199,214 189,841 Accumulated deficit ........................................ (58,194) (58,945) Accumulated other comprehensive loss ....................... (1,373) (882) --------- --------- Total shareholders' equity ............................. 139,651 130,018 --------- --------- $ 187,649 $ 183,559 ========= =========
See accompanying notes to consolidated financial statements FORM 10-Q PAGE 3 OF 17 4 HARBINGER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended June 30, Six Months Ended June 30, ----------------------------- --------------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Revenues: Services ................................................ $ 22,619 $ 15,095 $ 43,293 $ 29,845 Software ................................................ 11,650 13,322 22,076 22,892 -------- -------- -------- -------- Total revenues ........................................ 34,269 28,417 65,369 52,737 -------- -------- -------- -------- Direct costs: Services ................................................ 9,028 5,206 16,688 10,042 Software ................................................ 1,000 2,159 1,979 4,005 -------- -------- -------- -------- Total direct costs .................................... 10,028 7,365 18,667 14,047 -------- -------- -------- -------- Gross margin ....................................... 24,241 21,052 46,702 38,690 -------- -------- -------- -------- Operating costs: Selling and marketing ................................... 7,769 6,657 14,495 12,475 General and administrative .............................. 6,033 5,267 11,519 10,077 Depreciation and amortization ........................... 2,098 1,622 4,117 3,213 Product development ..................................... 2,628 3,739 5,333 7,833 Charge for purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges ........ 5,010 -- 13,049 16,236 -------- -------- -------- -------- Total operating costs .............................. 23,538 17,285 48,513 49,834 -------- -------- -------- -------- Operating income (loss) ............................ 703 3,767 (1,811) (11,144) Interest income, net ........................................ (1,265) (695) (2,578) (1,425) Equity in losses of joint ventures .......................... -- 35 -- 176 Minority interest (income) loss ............................. -- 3 -- (2) -------- -------- -------- -------- Income (loss) from continuing operations before income taxes .......................................... 1,968 4,424 767 (9,893) Income tax expense .......................................... 9 1,688 145 1,353 -------- -------- -------- -------- Income (loss) from continuing operations ................ 1,959 2,736 622 (11,246) Loss (income) from discontinued operations .................. -- 12 -- (35) -------- -------- -------- -------- Income (loss) before extraordinary item ................. 1,959 2,724 622 (11,211) Extraordinary loss on debt extinguishment ................... -- -- -- 2,419 -------- -------- -------- -------- Net income (loss) applicable to common shareholders ..... $ 1,959 $ 2,724 $ 622 $(13,630) ======== ======== ======== ======== Basic earnings per common share: Income (loss) from continuing operations ................ $ 0.05 $ 0.07 $ 0.01 $ (0.31) Loss (income) from discontinued operations .............. -- -- -- -- Extraordinary loss on debt extinguishment ............... -- -- -- (0.06) -------- -------- -------- -------- Net income (loss) per common share .................... $ 0.05 $ 0.07 $ 0.01 $ (0.37) ======== ======== ======== ======== Weighted average number of common shares outstanding ........ 41,853 36,847 41,451 36,639 ======== ======== ======== ======== Earnings per common share assuming dilution: Income (loss) from continuing operations ................ $ 0.04 $ 0.07 $ 0.01 $ (0.31) Loss (income) from discontinued operations .............. -- -- -- -- Extraordinary loss on debt extinguishment ............... -- -- -- (0.06) -------- -------- -------- -------- Net income (loss) per common share .................... $ 0.04 $ 0.07 $ 0.01 $ (0.37) ======== ======== ======== ======== Weighted average number of common shares outstanding assuming dilution ................................................ 44,480 38,987 44,103 36,639 ======== ======== ======== ========
See accompanying notes to consolidated financial statements FORM 10-Q PAGE 4 OF 17 5 HARBINGER CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (IN THOUSANDS)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net income (loss) applicable to common shareholders $ 1,959 $ 2,724 $ 622 $(13,630) Other comprehensive loss, net of tax: Foreign currency translation adjustments ...... (286) (93) (491) (198) -------- -------- -------- -------- Comprehensive income (loss) ................. $ 1,673 $ 2,631 $ 131 $(13,828) ======== ======== ======== ========
See accompanying notes to consolidated financial statements FORM 10-Q PAGE 5 OF 17 6 HARBINGER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Six Months Ended June 30, -------------------- 1998 1997 -------- -------- Cash flows provided by operating activities ................................ $ 2,665 $ 1,721 -------- -------- Cash flows from investing activities: Short-term investments ................................................. (5,220) 4,793 Purchases of property and equipment .................................... (6,725) (4,692) Additions to software development costs ................................ (2,042) (2,485) Investment in acquisitions ............................................. -- (1,932) -------- -------- Net cash used in investing activities ................................ (13,987) (4,316) -------- -------- Cash flows from financing activities: Exercise of stock options and warrants and issuance of stock under employee stock purchase plan ......................................... 9,373 2,626 Principal payments under notes payable, long-term debt and capital lease obligations .......................................................... (418) (461) Repayments under credit agreement ...................................... -- (1,778) Purchase of subordinated debenture ..................................... -- (1,500) -------- -------- Net cash provided by (used in) financing activities .................. 8,955 (1,113) -------- -------- Net decrease in cash and cash equivalents .................................. (2,367) (3,708) Cash and cash equivalents at beginning of period ........................... 69,811 35,697 Effect of exchange rates on cash held in foreign currencies ................ (19) (55) Cash received from acquisitions ............................................ 52 3,322 -------- -------- Cash and cash equivalents at end of period ................................. $ 67,477 $ 35,256 ======== ======== Supplemental disclosures: Cash paid for interest ................................................. $ 50 $ 45 ======== ======== Cash paid for income taxes ............................................. $ 463 $ -- ======== ======== Supplemental disclosures of noncash investing and financing activities: Purchase of subordinated debenture in exchange for common stock ..................................................... $ -- $ 4,200 ======== ======== Acquisition of minority interest in exchange for issuance of options .................................................. $ -- $ 2,216 ======== ======== Acquisition of businesses in exchange for assumption of liabilities and issuance of common stock ............................. $ -- $ 454 ======== ========
See accompanying notes to consolidated financial statements FORM 10-Q PAGE 6 OF 17 7 HARBINGER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial information included herein is unaudited; however, the information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations, and cash flows for the interim periods. Operating results for the three months and six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in Harbinger Corporation's ("Harbinger" or the "Company") Form 10-K for the year ended December 31, 1997 and the Company's current reports on Form 8-K dated February 24, 1998 and May 26, 1998. All share, per share and shareholders' equity amounts in the unaudited consolidated financial statements have been retroactively restated to reflect a three-for-two stock split in the form of a stock dividend paid on May 15, 1998 (see Note 4). REVENUE RECOGNITION On January 1, 1998, the Company adopted Statement of Position 97-2, Software Revenue Recognition, issued by the Accounting Standards Executive Committee in October 1997, effective for financial statements for fiscal years beginning after December 15, 1997. The implementation of this statement did not have a material impact on the Company's unaudited consolidated financial statements for the three-month and six-month periods ended June 30, 1998. COMPREHENSIVE INCOME On January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, issued by the Financial Accounting Standards Board ("FASB") in June 1997, effective for fiscal years beginning after December 15, 1997. Comprehensive income includes all changes in equity during a period except those resulting in investments by owners and distributions to owners. OTHER The Company continues to evaluate the requirements of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, issued by the FASB in June 1997, effective for fiscal years beginning after December 15, 1997. The provisions of this standard do not apply to interim periods in the year of adoption. The Accounting Standards Executive Committee has issued Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, effective for fiscal years beginning after December 15, 1998. The Company currently anticipates early adoption of this standard, possibly beginning in the third quarter of 1998. FORM 10-Q PAGE 7 OF 17 8 HARBINGER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) 2. ACQUISITION Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI Works!"), a Texas limited liability company, for 194,497 shares of the Company's common stock in a transaction accounted for using the pooling-of-interests method of accounting with a per-share value of $23.14. The EDI Works! business combination is not material, and therefore has been accounted for as an immaterial pooling with EDI Works! retained earnings of $130,000 at December 31, 1997 being credited directly to the Company's accumulated deficit effective January 1, 1998. The results of operations of EDI Works! are included in the Company's consolidated statement of operations for the six months ended June 30, 1998. In connection with the EDI Works! acquisition, the Company incurred a charge of $758,000 for acquisition-related expenses, asset write downs and integration costs in the consolidated statement of operations for the six months ended June 30, 1998. 3. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES In connection with the acquisitions made in 1998 and 1997, the Company incurred charges for purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges ("acquisition and integration related charges"). A summary of the components is as follows (in thousands):
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 1998 1997 1998 1997 ------- -------- ------- ------- In-process product development .... $ -- $ -- $ -- $ 2,715 Integration costs and non recurring one-time charges ............... 4,645 -- 11,025 5,993 Transaction charges ............... 250 -- 638 4,904 Intangible asset write downs ...... -- -- -- 2,322 Asset write downs ................. 115 -- 266 302 Restructuring charges ............. -- -- 1,120 -- ------- -------- ------- ------- $ 5,010 $ -- $13,049 $16,236 ======= ======== ======= =======
Approximately $1.7 million of the costs and expenses incurred in the three months ended June 30, 1998 and $3.7 million for the six months ended June 30, 1998 in connection with recent acquisitions included certain internal expense allocations which may recur in other expense categories in the future, potentially resulting in an increase in such expense categories as a percentage of total revenues. 4. SHAREHOLDERS' EQUITY On March 31, 1998, the Company issued 194,497 shares of the Company's common stock as consideration related to the Company's acquisition of EDI Works! (See Note 2). On April 24, 1998, the Board of Directors declared a three-for-two stock split in the form of a stock dividend on the Company's common stock payable on May 15, 1998, to shareholders of record on May 1, 1998. All share, per share and shareholders' equity amounts included in the Company's consolidated financial statements have been retroactively restated to reflect the split for all periods presented. FORM 10-Q PAGE 8 OF 17 9 HARBINGER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 (UNAUDITED) 5. COMMITMENTS During the first quarter ended March 31, 1998, the Company entered into agreements with certain vendors to supply services to the Company related to the integration of its recent acquisitions. The remaining commitment for such agreements at June 30, 1998 is approximately $2.9 million. 6. SUBSEQUENT EVENT Effective July 9, 1998, the Company acquired substantially all of the assets of the Materials Management Division of MACTEC, Inc., located in Tulsa, Oklahoma., for approximately $3.5 million in cash, subject to certain post-closing adjustments. The Company will record the acquisition using the purchase method of accounting, with approximately $3.5 million expected to be recorded to goodwill and amortized ratably over 10 years. FORM 10-Q PAGE 9 OF 17 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein and the Company's Form 10-K for the year ended December 31, 1997 and the Company's current reports on Form 8-K dated February 24, 1998 and May 26, 1998. OVERVIEW Harbinger Corporation (the "Company") generates revenues from various sources, including revenues for services and license fees for software. Revenues for services principally include subscription fees for transactions on the Company's Value Added Network ("VAN"), software maintenance and implementation charges and charges for consulting and training services. Subscription fees are based on a combination of monthly access charges and transaction-based usage charges and are recognized based on actual charges incurred each month. Software maintenance and implementation revenues represent recurring charges to customers and are deferred and recognized ratably over the service period. Revenues for consulting and training services are based on actual services rendered and are recognized as services are performed. License fees for software are generally recognized upon shipment, net of estimated returns. Software revenues include royalty revenues under distribution agreements with third parties which are recognized either on shipment of software to a distributor or upon sales to end users by a distributor depending on the terms of the distribution agreement. In 1998 the Company adopted Statement of Position 97-2, Software Revenue Recognition, issued by the Accounting Standards Executive Committee. The implementation of this statement did not have a material impact on the Company's consolidated financial statements for the period ended June 30, 1998. During the first half of 1998, the Company continued to work through integration issues associated with its three acquisitions made between October 1997 and March 1998. In the three months ended June 30, 1998 the Company incurred $5.0 million in acquisition and integration related and other one-time charges associated with these recent acquisitions. These costs related to business combinations include activities such as cross training, planning, product integration and marketing ("Integration Activities"). Due to Integration Activities in the six months ended June 30, 1998, certain internal expense allocations ("Integration Activity Costs") included in the acquisition and integration related charges may recur in other expense categories in the future and may result in an increase in some expense categories as a percentage of total revenues. The total acquisition and integration related charges for the six months ended June 30, 1998 and 1997 was $13.0 million and $16.2 million, respectively. The Company expects to incur additional merger related charges from the completed acquisitions totaling $2.9 million in subsequent quarters of 1998. 1998 ACQUISITION Effective March 31, 1998, the Company acquired EDI Works! LLC ("EDI Works!"), a Texas limited liability company, for 194,497 shares of the Company's common stock in a transaction accounted for using the pooling-of-interests method of accounting. The EDI Works! business combination is not material, and therefore has been accounted for as an immaterial pooling. The results of operations of EDI Works! are included in the Company's consolidated statement of operations for the six months ended June 30, 1998. In connection with the EDI Works! acquisition, the Company incurred a charge of $323,000 for acquisition related expenses, asset write downs and integration costs in the consolidated statement of operations for the three months ended March 31, 1998 and $435,000 for the three months ended June 30, 1998. FORM 10-Q PAGE 10 OF 17 11 RESULTS OF OPERATIONS REVENUES Total revenues increased 24% from $52.7 million in the six months ended June 30, 1997 to $65.4 million in the same period in 1998. Revenues for services increased 45% from $29.8 million in the six months ended June 30, 1997 to $43.3 million in the same period in 1998. This increase is attributable to growth in VAN fees, increased professional services, increased maintenance and installation revenues as well as three acquisitions made in the last 12 months, of which two were treated as immaterial poolings for accounting purposes and one was a purchase. Revenue from software sales decreased 4% from $22.9 million in the six months ended June 30, 1997 to $22.1 million in the same period in 1998. The overall decrease in software sales for the six months ended June 30, 1998 compared to the same period in 1997 was heavily impacted by a decline in software sales in the second quarter 1998. Several factors contributed to the decline, including the Company's inability to ship $1.1 million in software orders placed in the second quarter. The decline for the six months of 1998 was partially offset by a first quarter 1998 increase in software sales of 9% compared to the first quarter of 1997. Total revenues increased 21% from $28.4 million in the three months ended June 30, 1997 to $34.3 million in the same period in 1998. Revenues for services increased 50% from $15.1 million in the three months ended June 30, 1997 to $22.6 million in the same period in 1998. This increase is attributable to growth in VAN fees, increased professional services, increased maintenance and installation revenues as well as three acquisitions made in the last 12 months, of which two were treated as immaterial poolings for accounting purposes and one was a purchase. Revenues from software license fees decreased 13% from $13.3 million in the three months ended June 30, 1997 to $11.6 million in the same period in 1998 primarily as a result of missed shipments, as discussed above, plus a modest decline in sales of the Company's PC product lines. DIRECT COSTS Direct costs for services increased from $10 million, or 33.6% of services revenues, in the six months ended June 30, 1997, to $16.7 million, or 38.5% of services revenues, in the six months ended June 30, 1998. The increase in direct costs for services as a percentage of services revenues reflects a modest decrease in professional service margins as a result of nonbillable work performed by the professional services staff for both internal and external projects and the use of higher cost outside contractors. The Company expects the use of outside contractors to decrease by the end of 1998. This increase in direct costs was partially offset by the impact of Integration Activity Costs. Direct costs for software decreased from $4.0 million, or 17.5% of software revenues, in the six months ended June 30, 1997, to $2.0 million, or 8.9% of software revenues, in the six months ended June 30, 1998. The decrease in direct software costs as a percentage of software revenues from the first six months of 1997 compared to the comparable period of 1998 primarily reflects the effects of a decrease in software amortization in 1998 as a result of write-offs of capitalized software development in connection with certain business combinations in 1997 and a decrease in royalty fees paid by the Company for the use of third parties' products embedded in the Company's products. Direct costs for services increased from $5.2 million, or 34.5% of services revenue, in the three months ended June 30, 1997, to $9.0 million, or 39.9% of services revenue, in the three months ended June 30, 1998. The increase in direct costs for services as a percentage of services revenues reflects a modest decrease in professional service margins as a result of nonbillable work performed by the professional services staff for both internal and external projects and the use of higher cost outside contractors. This increase in direct costs was partially offset by the impact of Integration Activity Costs. Direct costs for software decreased from $2.2 million, or 16.2% of software revenues, in the three months ended June 30, 1997, to $1.0 million, or 8.6% of software revenues, in the three months ended June 30, 1998, primarily as a result of a decrease in software amortization in 1998 as a result of write-offs of capitalized software development in connection with certain business combinations in 1997 and a decrease in royalty fees paid by the Company for the use of third parties' products embedded in the Company's products. FORM 10-Q PAGE 11 OF 17 12 SELLING AND MARKETING Selling and marketing expenses increased 16% from $12.5 million, or 23.7% of revenues, in the six months ended June 30, 1997 to $14.5 million, or 22.2% of revenues, in the six months ended June 30, 1998. For the second quarters, selling and marketing expenses increased 17% from $6.7 million, or 23.4% of revenues, in the three months ended June 30, 1997 to $7.8 million, or 22.7% of revenues, in the three months ended June 30, 1998. For both the six-month and three-month period comparisons, the increase in expenses is primarily due to increased sales and marketing personnel. The decrease in selling and marketing expenses as a percentage of revenues is primarily due to the effect of increased revenues, efficiencies gained through recent mergers and the effect of Integration Activity Costs. GENERAL AND ADMINISTRATIVE General and administrative expenses increased 14% from $10.1 million in the six months ended June 30, 1997 to $11.5 million in the six months ended June 30, 1998. As a percentage of revenues, these expenses decreased from 19.1% of revenues in the six months ended June 30, 1997 to 17.6% of revenues in the six months ended June 30, 1998. For the second quarters, general and administrative expenses increased 15% from $5.3 million in the three months ended June 30, 1997 to $6.0 million in the three months ended June 30, 1998. As a percentage of revenues, these expenses decreased from 18.5% of revenues in the three months ended June 30, 1997 to 17.6% of revenues in the three months ended June 30, 1998. For both the six-month and three-month period comparisons, the decrease in general and administrative expenses as a percentage of revenues reflects efficiencies gained in consolidation of merged companies over the past year and the effect of Integration Activity Costs. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased 28% from $3.2 million in the six months ended June 30, 1997 to $4.1 million in the six months ended June 30, 1998. As a percentage of revenues, these expenses increased from 6.1% of revenues in the six months ended June 30, 1997 to 6.3% of revenues in the six months ended June 30, 1998. For the second quarters, depreciation and amortization increased 29% from $1.6 million in the three months ended June 30, 1997 to $2.1 million in the three months ended June 30, 1998. As a percentage of revenues, these expenses were 5.7% and 6.1% for the three months ended June 30, 1997 and June 30, 1998, respectively. The increase in depreciation and amortization for the six-month and three-month periods of 1998 compared to 1997, respectively, is a result of additions to property, plant and equipment, primarily in computer hardware and software. PRODUCT DEVELOPMENT Total expenditures for product development, including capitalized software development costs, decreased from $10.3 million in the six months ended June 30, 1997 to $7.3 million in the same period in 1998. The Company capitalized product development costs of $2.5 million and $2.0 million in the six months ended June 30, 1997 and 1998, respectively, which represented 24.1% and 27.7% of total expenditures for product development in these respective periods. As a percentage of total revenues, product development expenses decreased from $7.8 million, or 14.8% of revenues, in the six months ended June 30, 1997, to $5.3 million, or 8.2% of revenues, in the six months ended June 30, 1998, reflecting efficiencies from rationalizing product lines for the merged companies and the effect of Integration Activity Costs. Amortization of capitalized software development costs is charged to direct costs of software revenues and totaled $1.8 million and $575,000, in the six months ended June 30, 1997 and 1998, respectively. FORM 10-Q PAGE 12 OF 17 13 Total expenditures for product development, including capitalized software development costs, decreased from $5.0 million in the three months ended June 30, 1997 to $3.7 million in the same period in 1998. The Company capitalized software development costs of $1.3 million and $1.1 million in the three months ended June 30, 1997 and 1998, respectively, which represented 26.1% and 29.9% of total expenditures for product development in these respective periods. As a percentage of total revenues, product development expenses were $3.7 million, or 13.2% of revenues, in the three months ended June 30, 1997, and $2.6 million, or 7.7% of revenues in the three months ended June 30, 1998, reflecting efficiencies from rationalizing product lines for the merged companies and the effect of Integration Activity Costs. Amortization of capitalized software development costs is charged to direct cost of software revenues and totaled $899,000 and $307,000 in the three months ended June 30, 1997 and 1998, respectively. CHARGE FOR PURCHASED IN-PROCESS PRODUCT DEVELOPMENT, WRITE-OFF OF SOFTWARE DEVELOPMENT COSTS, RESTRUCTURING, ACQUISITION RELATED AND OTHER ONE-TIME CHARGES Charges for purchased in-process product development, write-off of software development costs, restructuring, acquisition related and other one-time charges ("acquisition and integration related charges") decreased 20% from $16.2 million for the six months ended June 30, 1997 to $13.0 million for the comparable period in 1998. The charges in 1998 were incurred as a result of continued efforts to integrate recent acquisitions: 1) $11 million attributable to Premenos Technology Corp. ("Premenos") acquired on December 19, 1997, 2) $1.2 million to Atlas Products International, Limited ("Atlas") acquired on October 23, 1997, and 3) $758,000 to EDI Works!. The Company expects to incur additional acquisition and integration related charges of $2.9 million in subsequent periods in 1998. For the six months ended June 30, 1997 the acquisition and integration related charges of $16.2 million were attributable to: 1) $11.9 million for Supply Tech, Inc., and 2) $4.3 million to Harbinger NET Services. (See Note 3 to the unaudited consolidated financial statements.) There were no acquisition and integration related charges in the quarter ended June 30, 1997 compared to $5 million in the quarter ended June 30, 1998. The three-month 1998 charges were attributable to: 1) $ 3.9 million to Premenos, 2) $677,000 to Atlas, and 3) $435,000 to EDI Works! INTEREST INCOME, NET Interest income, net, increased 81% from $1.4 million for the six months ended June 30, 1997 to $2.6 million for the six months ended June 30, 1998. On a quarter-to-quarter comparison, interest income, net, increased 82% from $695,000 in the second quarter of 1997 to $1.3 million in the second quarter of 1998. The increase in all periods is due to an increase in combined cash and cash equivalents and short-term investments from $60.0 million at June 30, 1997 to $105.1 million at June 30, 1998, primarily as a result of a secondary stock offering in July 1997, exercises of stock options and warrants and issuance of stock under the employee stock purchase plan in the last 12 months. INCOME TAXES Income tax expense decreased 89% from $1.4 million for the six months ended June 30, 1997 to $145,000 for the six months ended June 30, 1998. For the quarters ended June 30, 1997 and 1998 income tax expense decreased from $1.7 million to $9,000, respectively. All decreases in income tax expense are attributable to the nondeductibility of certain expenses for tax purposes incurred in 1997, particularly acquisition and integration related charges. NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE Net income (loss) applicable to common shareholders increased from a loss of $13.6 million, or $0.37 per share, for the six months ended June 30, 1997 to net income of $622,000, or $0.01 per share, for the six months ended June 30, 1998. Net income, adjusted to exclude acquisition and integration related charges, and an extraordinary loss on debt extinguishment in 1997, net of the effect of income taxes, would have been $4.0 million, FORM 10-Q PAGE 13 OF 17 14 or $0.10 per share, for the six months ended June 30, 1997, compared to $8.6 million, or $0.19 per share, for the six months ended June 30, 1998, representing a 115% increase from 1997 to 1998. Net income applicable to common shareholders decreased from $2.7 million, or $0.07 per share, for the quarter ended June 30, 1997 to $1.9 million, or $0.04 per share, for the quarter ended June 30, 1998. Net income, adjusted to exclude acquisition and integration related charges, net of the effect of income taxes, would have been $2.7 million, or $0.07 per share, for the quarter ended June 30, 1997, compared to $4.3 million, or $0.10 per share, for the quarter ended June 30, 1998, representing a 57% increase from 1997 to 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital increased $6.1 million from $94.3 million as of December 31, 1997 to $100.4 million as of June 30, 1998. Net cash provided by operating activities increased 55% from $1.7 million for the six months ended June 30, 1997 to $2.7 million for the comparable period in 1998, primarily as a result of increased interest earnings in 1998 compared to 1997. Net cash used in investing activities increased $9.7 million from $4.3 million for the six months ended June 30, 1997 to $14 million for the six months ended June 30, 1998 as the Company expanded its investment in property, plant and equipment and continued to reinvest excess cash in short-term investments. Net cash provided by financing activities increased $10.1 million from net cash used of $1.1 million for the six months ended June 30, 1997 to net cash provided of $9.0 million for the six months ended June 30, 1998 as the Company has substantially eliminated borrowings and reliance on lines of credit in 1998 compared to 1997. Additionally, in 1998, the Company continued to experience a significant influx of cash from exercises of stock options and warrants and issuance of stock under its employee stock purchase plan. Management expects that the Company will continue to be able to fund its operations, investment needs and capital expenditures through cash flows generated from operations, cash on hand, borrowings under the Company's credit facilities and additional equity and debt capital. Management believes that outside sources for debt and additional equity capital, if needed, will be available to finance expansion projects and any potential future acquisitions. The form of any financing will vary depending upon prevailing market and other conditions and may include short or long term borrowings from financial institutions, or the issuance of additional equity or debt securities. However, there can be no assurances that funds will be available on terms acceptable to the Company. The Company does not believe that inflation has had a material impact on its business. However, there can be no assurance that Harbinger's business will not be affected by inflation in the future. YEAR 2000 COMPLIANCE The latest versions of the Company's products are designed to be Year 2000 compliant. The Company is in the process of determining the extent to which its earlier software products as implemented in the Company's installed customer base are Year 2000 compliant, as well as the impact of any non-compliance on the Company and its customers. The Company currently anticipates that any problems resulting from non-compliant products will be addressed through a combination of product modifications as part of planned product enhancements and migration of customers to functionally similar products which are Year 2000 compliant. Additional efforts are being made to modify or replace other non-compliant software, systems and equipment used by the Company internally, including third party software, before the year 1999. In addition, the Company is in the process of evaluating its Year 2000 readiness with respect to both information technology ("IT") and non-IT systems on which the Company's operations rely. Further, the Company is aware of the risk that third parties, including vendors and customers of the Company, will not adequately address the Year 2000 problem and the resultant potential adverse impact on the Company. The Company projects that the majority of the remaining compliance effort will be absorbed with the product enhancements planned for 1998, and thus management believes that the Year 2000 problem will not have a material adverse impact on the Company's business, operating results and financial condition, although there can be no assurance to that effect. Regardess of whether the Company's products are Year 2000 compliant, there can be no assurance that customers will not assert Year 2000 related claims against the Company. FORM 10-Q PAGE 14 OF 17 15 The Company believes that the purchasing patterns of customers and potential customers may be affected by Year 2000 issues in a variety of ways. Many companies are expending significant resources to correct or patch their current software systems for Year 2000 compliance. These expenditures may result in reduced funds available to purchase software products such as those offered by the Company. Potential customers may also choose to defer purchasing Year 2000 compliant products until they believe it is absolutely necessary, thus resulting in potentially stalled market sales within the industry. Conversely, Year 2000 issues may cause other companies to accelerate purchases, thereby causing an increase in short-term demand and a consequent decrease in long-term demand for software products. Additionally, Year 2000 issues could cause a significant number of companies, including current Company customers, to reevaluate their current software needs, and as a result switch to other systems or suppliers. Any of the foregoing could result in a material adverse effect on the Company's business, operating results and financial condition. FORWARD LOOKING STATEMENTS Other than historical information contained herein, certain statements included in this report may constitute "forward looking" statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 related to the Company that involve risks and uncertainties including, but not limited to, quarterly fluctuations in results, the management of growth, market acceptance of certain products, impact of Year 2000 compliance and other risks. For further information about these and other factors that could affect the Company's future results, please see the Company's most recent Form 10-K filed with the Securities and Exchange Commission. Investors are cautioned that any forward looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those contemplated by such forward looking statements. The Company undertakes no obligation to update or revise forward looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. RECENT ACCOUNTING PRONOUNCEMENTS In 1998 the Company adopted Statement of Position 97-2, Software Revenue Recognition, issued by the Accounting Standards Executive Committee, and Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, issued by the Financial Accounting Standards Board. The Company continues to evaluate the requirements of Statement of Financial Accounting Standard No. 131, Disclosures about Segments of an Enterprise and Related Information, which is effective for the year ending December 31, 1998 but does not apply to interim periods in the year of adoption. The Company currently anticipates early adoption of Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, issued by the Accounting Standards Executive Committee effective for fiscal years beginning after December 15, 1998. The potential impact of adopting this standard is presently not known. FORM 10-Q PAGE 15 OF 17 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of shareholders of Harbinger Corporation was held on April 24, 1998. The results of such meeting were included in Item 4 of Company's Form 10-Q for the quarterly period ended March 31, 1998 and are hereby incorporated by reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 10.1 Form of Amendment to Employment Agreement of James Travers and Joel Katz Exhibit 10.2 Form of Indemnification Agreement for certain Directors and Officers of the Company Exhibit 10.3 Form of Indemnification Agreement for certain Directors of the Company Exhibit 11.1 Computation of Earnings Per Share Exhibit 27.1 Financial Data Schedule Exhibit 27.2 Restated Financial Data Schedule Exhibit 99.1 Third Amendment to the Harbinger Corporation 1996 Stock Option Plan Exhibit 99.2 Second Amendment to the Amended and Restated Harbinger Corporation Employee Stock Purchase Plan Exhibit 99.3 Fourth Amendment to the Harbinger Corporation Amended and Restated 1993 Stock Option Plan for NonEmployee Directors (b) Reports on Form 8-K Form 8-K dated May 26, 1998 reporting under Item 5 the financial information of revenues and net losses for Harbinger Corporation for the one month ended April 30, 1998 for the purpose of ending the "risk-sharing" period with respect to the merger with EDI Works! L.L.C. FORM 10-Q PAGE 16 OF 17 17 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARBINGER CORPORATION Date: August 14, 1998 /s/ David T. Leach ------------------------------------- --------------------------- David T. Leach Chief Executive Officer (Principal Executive Officer) Date: August 14, 1998 /s/ Joel G. Katz ------------------------------------- --------------------------- Joel G. Katz Chief Financial Officer (Principal Financial Officer; Principal Accounting Officer) FORM 10-Q PAGE 17 OF 17 EX-10.1 2 FORM OF AMENDMENT TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10.1 AMENDMENT TO THE EMPLOYMENT AGREEMENT OF ---------------------------- DATED _____________ _____, 19___ THIS AMENDMENT is made this _____ day of _______, 1998, by and between HARBINGER CORPORATION, a Georgia corporation (the "Company"), and __________________ (the "Executive"). A. Purpose. The Executive is now employed by the Company pursuant to an Employment Agreement dated _______________ ____, 19___ (the "Agreement") and the Company desires to provide an incentive to the Executive to continue to devote his disinterested attention and undistracted dedication to the performance of his duties in the potentially disturbing circumstances of a Change of Control of the Company. B. Severance Benefits and Limitations on Payment. If the Executive's employment with the Company is terminated by the Company other than for Cause or by the Executive for Good Reason within the period beginning ninety (90) days before and ending one hundred and eighty (180) days after a Change of Control, any stock options awarded the Executive which remain outstanding and not vested as of the Date of Termination shall be deemed vested and exercisable; provided, that acceleration in vesting does not adversely impact the availability of pooling of interests accounting treatment, as such determination is made by the Board in its reasonable discretion. (C) Definitions. For purposes of this Amendment, the following definitions shall apply: 1. Change of Control. A "Change of Control" shall be conclusively deemed to have occurred if (and only if) any of the following shall have taken place: (i) a Change of Control is reported by the Company in response to either Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated under the Exchange Act; (ii) any person (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities of the Company representing forty percent (40%) or more of the combined voting power of 2 the Company's then outstanding securities; or (iii) following the election or removal of directors, a majority of the Board consists of individuals who were not members of the Board two years before such election or removal, unless the election of each director who was not a director at the beginning of such two-year period has been approved in advance by directors representing at least a majority of the directors then in office who were directors at the beginning of the two-year period. 2. Date of Termination. "Date of Termination" means the date on which a notice of termination is given either by the Company or by the Executive. 3. Good Reason. "Good Reason" means the Executive's termination of employment for any of the following events, unless such event occurs with the Executive's express prior written consent: (a) The assignment to the Executive of any duties materially inconsistent with, or a diminution of, his position, duties, titles, offices, responsibilities and status with the Company as in effect immediately prior to the Change of Control of the Company, except in connection with the termination of the Executive's employment for disability, retirement, or Cause or as a result of the Executive's death or termination of employment other than for Good Reason; (b) A reduction in the Executive's base salary as in effect on the date of this Amendment or as the same may be increased from time to time; (c) A change in the location of the Executive's principal place of employment by more than thirty five (75) miles from the location where he was principally employed immediately prior to the Change of Control; (d) Any material breach by the Company of any provision of this Amendment or the Agreement; or (e) Any failure by the Company to obtain the assumption of the Agreement by any successor or assign of the Company. 4. Cause. "Cause" means termination of the Executive's employment under any one or more of the following events: (a) Executive's knowing and wilful misconduct with respect to the business and affairs of the Company; -2- 3 (b) Any material violation by Executive of any policy of the Company relating to ethical conduct or practices or fiduciary duties of a similarly situated executive; (c) Knowing and wilful material breach of any provision of this Agreement which is not remedied within thirty (30) days after Executive's receipt of notice thereof; (d) Executive's commission of a felony or any illegal act involving moral turpitude or fraud or Executive's dishonesty which may reasonably be expected to have a material adverse effect on the Company; and/or (e) Failure to comply with reasonable directives of the Board which are consistent with the Executive's duties, if not remedied within thirty (30) days after the Executive's receipt of notice thereof. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the ______ day of ____________, 1998. HARBINGER CORPORATION By: --------------------------------------- Its: -------------------------------------- ------------------------------------------ Executive -3- EX-10.2 3 FORM OF INDEMNIFICATION AGREEMENT 1 EXHIBIT 10.2 INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT is made on this _____ day of ______, 19___, between HARBINGER CORPORATION, a Georgia corporation ("HC") and ("Indemnitee"). W I T N E S S E T H: WHEREAS, Indemnitee is a member of the Board of Directors of HC and in such capacity performs a valuable service for HC; WHEREAS, HC's Bylaws (the "Bylaws") authorize HC to indemnify its officers and directors in accordance with the Official Code of Georgia Annotated (the "Statute"); WHEREAS, Section 14-2-856 of the Statute specifically provides that the indemnification provided under the other sections of the Statute is not exclusive of any other rights in respect to indemnification or otherwise to which those seeking indemnification may be entitled under any resolution approved or ratified by the Shareholders by a majority of the votes entitled to be cast; WHEREAS, the shareholders of HC have authorized HC to enter into contracts with the members of the Board of Directors of HC with respect to the indemnification of such directors; and WHEREAS, in order to encourage Indemnitee to continue to serve as a member of the Board of Directors of HC and to perform other designated services for HC at its request, HC has determined and agreed to enter into this Agreement with Indemnitee; NOW, THEREFORE, in consideration of Indemnitee's continued service as a director of HC and the performance of such other services as requested by HC, the parties hereby agree as follows: 1. INDEMNITY OF INDEMNITEE. HC shall defend, hold harmless and indemnify Indemnitee to the full extent permitted by the provisions of the Statute, as currently in effect or as it may hereafter be amended, or by the provisions of any other statute authorizing or permitting such indemnification, whether currently in effect or hereafter adopted. 2. ADDITIONAL INDEMNITY. Subject to the provisions of Section 3 hereof, HC shall defend, hold harmless and indemnify Indemnitee in the event Indemnitee was, is, or is threatened to be made a named defendant or respondent, in any action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (including any such action, suit or proceeding brought by or in the right of HC), by reason of the fact that he is or was a director of HC, or is or was serving at the request of HC as a director of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employment benefit plan), expenses (including attorneys' fees), and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. For purposes of this Section 2, Indemnitee shall be considered to be serving an employee benefit plan at the request of HC if his duties to HC also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. 3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section 2 hereof shall be paid by HC to the extent of any liabilities incurred in a proceeding in which Indemnitee is adjudged liable to HC or is subjected to injunctive relief in favor of HC: (1) for any appropriation in violation of his duties, of any business opportunity of HC; 2 (2) for acts or omissions which involve intentional misconduct or a knowing violation of law; (3) for the types of liability set forth in O.C.G.A. ss.14-2-832; or (4) for any transaction from which Indemnitee received any improper personal benefit. 4. NOTIFICATION AND DEFENSE OF CLAIM. (a) Promptly after receipt by Indemnitee of notice of the commencement of any action, suit or proceeding, Indemnitee will, if a claim in respect thereto is to be made against HC under this Agreement, notify HC of the commencement thereof, but the failure to so notify HC will not relieve it from any liability which it may have to Indemnitee otherwise under this Agreement. With respect to any such action, suit or proceeding as to which Indemnitee so notifies HC: (i) HC will be entitled to participate therein at its own expense; and (ii) except as otherwise provided below, to the extent that it may desire, HC may assume the defense thereof. (b) After notice from HC to Indemnitee of its election to assume the defense thereof, HC will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ counsel of his choosing in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from HC of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized in writing by HC, (ii) HC and Indemnitee shall reasonably conclude that there may be a conflict of interest between HC and Indemnitee in the conduct of the defense of such action, or (iii) HC shall not in fact have employed counsel to assume the defense of such action, in each of which cases the reasonable fees and expenses of Indemnitee's counsel shall be paid by HC. (c) HC shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending action, suit or proceeding without its prior written consent. HC shall not settle any such action, suit or proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's prior written consent. Neither HC nor Indemnitee will unreasonably withhold his or its consent to any proposed settlement. 5. PREPAYMENT OF EXPENSES. Unless Indemnitee otherwise elects, expenses incurred in defending any civil or criminal action, suit or proceeding shall be paid by HC in advance of the final disposition of such action, suit or proceeding upon receipt by HC of a written affirmation of Indemnitee's good faith belief that his conduct does not constitute behavior of the kind described in Section 3 of this Agreement and Indemnitee furnishes HC a written undertaking, executed personally or on his behalf, to repay any advances if it is ultimately determined that he is not entitled to be indemnified by HC under this Agreement. 6. CONTINUATION OF INDEMNITY. All agreements and obligations of HC contained in this Agreement shall continue during the period Indemnitee is a member of the Board of Directors of HC and shall continue thereafter so long as Indemnitee shall be subject to any action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that Indemnitee was an officer of HC, or is or was serving at the request of HC as a director of another corporation, partnership, joint venture, trust or other enterprise. 3 7. RELIANCE. HC has entered into this Agreement in order to induce Indemnitee to continue as a member of the Board of Directors of HC and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity. 8. SEVERABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. 9. GENERAL. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. (b) Neither this Agreement nor any rights or obligations hereunder shall be assigned or transferred by Indemnitee. (c) This Agreement shall be binding upon Indemnitee and upon HC, its successors and assigns, including successors by merger or consolidation, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and permitted assigns and to the benefit of HC, its successors and assigns. (d) No amendment, modification or termination of this Agreement shall be effective unless in writing signed by both parties hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. INDEMNITEE: HARBINGER CORPORATION By: By: ----------------------------------- ------------------------------------- Name (Print): Title: ------------------------- ---------------------------------- Date: Date: --------------------------------- ----------------------------------- EX-10.3 4 FORM OF INDEMNIFICATION AGREEMENT 1 EXHIBIT 10.3 INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT ("Agreement") is made on this ____ day of ________, 19___, between HARBINGER CORPORATION, a Georgia corporation ("HC") and ("Indemnitee"). W I T N E S S E T H: WHEREAS, Indemnitee is a member of the Board of Directors of HC and in such capacity performs a valuable service for HC; WHEREAS, HC's Bylaws (the "Bylaws") authorize HC to indemnify its officers and directors in accordance with the Official Code of Georgia Annotated (the "Statute"); and WHEREAS, in order to encourage Indemnitee to continue to serve as a member of the Board of Directors of HC and to perform other designated services for HC at its request, HC has determined and agreed to enter into this Agreement with Indemnitee; NOW, THEREFORE, in consideration of Indemnitee's continued service as a director of HC and the performance of such other services as requested by HC, the parties hereby agree as follows: 1. INDEMNITY OF INDEMNITEE. HC shall defend, hold harmless and indemnify Indemnitee to the full extent permitted by the provisions of the Statute, as currently in effect or as it may hereafter be amended, or by the provisions of any other statute authorizing or permitting such indemnification, whether currently in effect or hereafter adopted. 2. ADDITIONAL INDEMNITY. (a) Except as provided in subsections (d) and (e) of this Section 2 below, HC shall indemnify Indemnitee to the fullest extent permitted by the Statute, and to the extent that applicable law from time to time in effect shall permit indemnification that is broader than provided in this Agreement, then to the maximum extent authorized by law, should Indemnitee be made a party to a proceeding because he is or was a member of the Board of Directors against liability incurred by him in the proceeding if Indemnitee acted in a manner he believed in good faith to be in or not opposed to the best interests of HC and, in the case of any criminal proceeding, he had no reasonable cause to be believe his conduct was unlawful. (b) Indemnitee's conduct with respect to an employee benefit plan for a purpose he believed in good faith to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subsection (a) of this Section 2 above. (c) The termination of a proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, be determinative that Indemnitee did not meet the standard of conduct set forth in subsection (a) of this Section 2 above. (d) HC shall not indemnify Indemnitee under this Agreement: (1) In connection with a proceeding by or in the right of HC in which Indemnitee was adjudged liable to HC; or (2) In connection with any other proceeding in which Indemnitee was adjudged liable on the basis that personal benefit was improperly received by him unless, and then only to the extent that, a 2 court of competent jurisdiction determines pursuant to Section 14-2-854 of the Statute that in view of the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification. (e) Indemnification permitted under this Agreement in connection with a proceeding by or in the right of HC is limited to reasonable expenses incurred in connection with the proceeding. 3. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION. (a) HC shall not indemnify Indemnitee under Section 2 of this Agreement above unless a determination has been made in the specific case that indemnification of Indemnitee is permissible in the circumstances because he has met the standard of conduct set forth in subsection (a) of Section 2 of this Agreement above; provided, however, that regardless of the result or absence of any such determination, and unless limited by the Articles of Incorporation of HC, to the extent that Indemnitee has been successful, on the merits or otherwise, in the defense of any proceeding to which he was a party, or in defense of any claim, issue or matter therein, because he is or was a member of the Board of Directors, HC shall indemnify Indemnitee against reasonable expenses incurred by him in connection therewith. (b) The determination specified in subsection (a) of this Section 3 shall be made: (1) By the Board of Directors of HC by majority vote of a quorum consisting of Directors not at the time parties to the proceeding; (2) If a quorum cannot be obtained under paragraph (1) of this subsection (b) of this Section 3, by majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties may participate), consisting solely of two or more Directors not at the time parties to the proceeding; (3) By special legal counsel: (A) Selected by the Board of Directors or its committee in the manner prescribed in paragraphs (1) and (2) of this subsection (b) of this Section 3; or (B) If a quorum of the Board of Directors cannot be obtained under paragraph (1) of this subsection (b) of this Section 3 and a committee cannot be designated under paragraph (2) of this subsection (b) of this Section 3, selected by a majority vote of the full Board of Directors (in which selection Directors who are parties may participate); or (4) By the shareholders of HC, but shares owned by or voted under the control of Directors who are at the time parties to the proceeding may not be voted on the determination. (c) Evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, evaluation as to reasonableness of expenses shall be made by those entitled under paragraph (3) of subsection (b) of this Section 3 to select counsel. (d) If the determination to be made pursuant to Section 3(a) above has not been made within thirty (30) days following Indemnitee's written request for indemnification, then Indemnitee shall be deemed to have met the standard of conduct set forth in subsection (a) of Section 3 of this Agreement. If the determination to be made pursuant to Section 3(c) above has not been made within thirty (30) days following Indemnitee's written request for indemnification for, or advancement of, expenses, then the expenses claimed shall be deemed reasonable. 3 4. NOTIFICATION AND DEFENSE OF CLAIM. (a) Promptly after receipt by Indemnitee of notice of the commencement of any action, suit or proceeding, Indemnitee will, if a claim in respect thereto is to be made against HC under this Agreement, notify HC of the commencement thereof, but the failure to so notify HC will not relieve it from any liability which it may have to Indemnitee otherwise under this Agreement. With respect to any such action, suit or proceeding as to which Indemnitee so notifies HC: (1) HC will be entitled to participate therein at its own expense; and (2) except as otherwise provided below, to the extent that it may desire, HC may assume the defense thereof. (b) After notice from HC to Indemnitee of its election to assume the defense thereof, HC will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ counsel of his choosing in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from HC of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized in writing by HC, (ii) HC and Indemnitee shall reasonably conclude that there may be a conflict of interest between HC and Indemnitee in the conduct of the defense of such action, or (iii) HC shall not in fact have employed counsel to assume the defense of such action, in each of which cases the reasonable fees and expenses of Indemnitee's counsel shall be paid by HC. (c) HC shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending action, suit or proceeding without its prior written consent. HC shall not settle any such action, suit or proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's prior written consent. Neither HC nor Indemnitee will unreasonably withhold his or its consent to any proposed settlement. 5. PREPAYMENT OF EXPENSES. (a) HC shall pay for or reimburse the reasonable expenses incurred by Indemnitee resulting from Indemnitee having been a party to a proceeding in advance of final disposition of the proceeding if: (1) Indemnitee furnishes HC with a written affirmation of his good faith belief that he has met the standard of conduct set forth in subsection (a) of Section 2 above; and (2) Indemnitee furnishes HC with a written undertaking, executed personally or on his behalf, to repay any advances if it is ultimately determined that he is not entitled to indemnification under this Agreement. (b) The undertaking required by paragraph (2) of subsection (a) of this Section 5 must be an unlimited general obligation of Indemnitee but need not be secured and may be accepted without reference to financial ability to make repayment. 6. CONTINUATION OF INDEMNITY. All agreements and obligations of HC contained in this Agreement shall continue during the period Indemnitee is a member of the Board of Directors of HC and shall continue thereafter so long as Indemnitee shall be subject to any action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, by reason of the fact that Indemnitee was an officer of HC, or is or was serving at the request of HC as a director of another corporation, partnership, joint venture, trust or other enterprise. 4 7. RELIANCE. HC has entered into this Agreement in order to induce Indemnitee to continue as a member of the Board of Directors of HC and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity. 8. SEVERABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. 9. GENERAL. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. (b) Neither this Agreement nor any rights or obligations hereunder shall be assigned or transferred by Indemnitee. (c) This Agreement shall be binding upon Indemnitee and upon HC, its successors and assigns, including successors by merger or consolidation, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and permitted assigns and to the benefit of HC, its successors and assigns. (d) No amendment, modification or termination of this Agreement shall be effective unless in writing signed by both parties hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. INDEMNITEE: HARBINGER CORPORATION By: By: ----------------------------------- ------------------------------------- Name (Print): Title: ------------------------- ---------------------------------- Date: Date: --------------------------------- ----------------------------------- EX-11.1 5 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 HARBINGER CORPORATION COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Basic: Net income (loss) available to common shareholders ............................. $ 1,959 $ 2,724 $ 622 $(13,630) ======== ======== ======== ======== Weighted average number of common shares outstanding ....................... 41,853 36,847 41,451 36,639 ======== ======== ======== ======== Basic earnings (loss) per share ............ $ 0.05 $ 0.07 $ 0.01 $ (0.37) ======== ======== ======== ======== Diluted : Net income (loss) available to common shareholders ............................. $ 1,959 $ 2,724 $ 622 $(13,630) ======== ======== ======== ======== Weighted average number of common shares outstanding ....................... 41,853 36,847 41,451 36,639 Effect of potentially dilutive stock options 2,522 2,070 2,552 -- Effect of potentially dilative warrants .... 105 70 100 -- -------- -------- -------- -------- Weighted average number of common shares outstanding assuming dilution ..... 44,480 38,987 44,103 36,639 ======== ======== ======== ======== Diluted earnings (loss) per share .......... $ 0.04 $ 0.07 $ 0.01 $ (0.37) ======== ======== ======== ========
Computational Note: In connection with the computation of diluted earnings per share for the six months ended June 30, 1997 all common share equivalents have been excluded because their impact on the Company's net loss per share is antidilutive. EX-27.1 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE SIX MONTHS ENDED JUN-30-1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 67,477 37,647 31,660 2,587 0 148,420 39,309 18,229 187,649 47,998 0 0 0 4 139,647 187,649 22,076 65,369 1,979 18,667 48,513 0 41 767 145 622 0 0 0 622 (0.01) (0.01) ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT A THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAID ON MAY 15, 1998.
EX-27.2 7 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS OF HARBINGER CORPORATION FOR THE SIX MONTHS ENDED JUN-30-1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 35,256 24,705 30,440 2,225 0 93,364 31,237 13,766 130,439 34,766 0 0 0 4 92,758 130,439 22,892 52,737 4,005 14,047 49,834 0 119 (9,893) 1,353 (11,246) 35 (2,419) 0 (13,630) (0.37) (0.37) ALL AMOUNTS HAVE BEEN RETROACTIVELY RESTATED TO REFLECT THE POOLING WITH PREMENOS TECHNOLOGY CORP. AND A THREE-FOR-TWO STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND PAID ON MAY 15, 1998.
EX-99.1 8 THIRD AMEND. TO 1996 STOCK OPTION PLAN 1 EXHIBIT 99.1 THIRD AMENDMENT TO THE HARBINGER CORPORATION 1996 STOCK OPTION PLAN THIS THIRD AMENDMENT TO THE HARBINGER CORPORATION 1996 STOCK OPTION PLAN (the "Amendment") is made effective as of the 24th day of April, 1998 (the "Effective Date"), by HARBINGER CORPORATION, a corporation organized and doing business under the laws of the State of Georgia (the "Company"). All capitalized terms in this Amendment have the meaning ascribed to such term as in the Harbinger Corporation 1996 Stock Option Plan (the "Plan"), unless otherwise stated herein. WITNESSETH: WHEREAS, First Amendment to the Plan was approved by the shareholders of the Company at the 1997 Annual Meeting of Shareholders; WHEREAS, Second Amendment to the Plan was approved by the shareholders of the Company at the Special Meeting of Shareholders held on December 18, 1997; and WHEREAS, the Board of Directors of the Company desires to amend the Plan to increase the number of shares that may be granted under the Plan; NOW THEREFORE, in consideration of the premises and mutual promises contained herein, the Plan is hereby amended as follows: SECTION 1. Section 3.1 of the Plan is hereby amended by deleting the first sentence of Section 3.1 of the Plan in its entirety and substituting in lieu thereof the following: "3.1 SHARES RESERVED FOR ISSUANCE. Subject to any antidilution adjustment pursuant to Section 3.2, the maximum number of Shares that may be subject to Options granted hereunder shall not exceed 5,825,000, plus the number of Prior Plan Shares." SECTION 2. Except as specifically amended by this Third Amendment, the Plan shall remain in full force and effect as prior to this Third Amendment. 2 IN WITNESS WHEREOF, the Company has caused this THIRD AMENDMENT TO THE HARBINGER CORPORATION 1996 STOCK OPTION PLAN to be executed on the Effective Date. HARBINGER CORPORATION By: /s/ David T. Leach ------------------------------- David T. Leach, CEO ATTEST: By: /s/ Joel G. Katz -------------------------------------- Joel G. Katz, Secretary EX-99.2 9 SECOND AMEND. TO AMENDED & RESTATED EMP. STK. PLAN 1 EXHIBIT 99.2 SECOND AMENDMENT TO THE AMENDED AND RESTATED HARBINGER CORPORATION EMPLOYEE STOCK PURCHASE PLAN THIS SECOND AMENDMENT TO THE AMENDED AND RESTATED HARBINGER CORPORATION EMPLOYEE STOCK PURCHASE PLAN (the "Amendment") is made effective as of the 24th day of April, 1998 (the "Effective Date"), by HARBINGER CORPORATION, a corporation organized and doing business under the laws of the State of Georgia (the "Company"). All capitalized terms in this Amendment have the meaning ascribed to such term as in the Harbinger Corporation 1996 Stock Option Plan (the "Plan"), unless otherwise stated herein. WITNESSETH: WHEREAS, First Amendment to the Plan was approved by the Board of Directors as of January 1, 1997; and WHEREAS, the Board of Directors of the Company desires to amend the Plan to increase the number of shares that may be granted under the Plan; NOW THEREFORE, in consideration of the premises and mutual promises contained herein, the Plan is hereby amended as follows: SECTION 1. Section 4(a) of the Plan is hereby amended by deleting the first sentence of Section 4(a) of the Plan in its entirety and substituting in lieu thereof the following: "(a) The maximum number of shares which may be granted and purchased under the Plan may not exceed 325,000 shares of Common Stock (subject to adjustment as provided in Section 15), which may be authorized but unissued shares, re-acquired shares or shares bought on the open market." SECTION 2. Except as specifically amended by this Second Amendment, the Plan shall remain in full force and effect as prior to this Second Amendment. 2 IN WITNESS WHEREOF, the Company has caused this SECOND AMENDMENT TO THE AMENDED AND RESTATED HARBINGER CORPORATION EMPLOYEE STOCK PURCHASE PLAN to be executed on the Effective Date. HARBINGER CORPORATION By: /s/ David T. Leach ------------------------------- David T. Leach, CEO ATTEST: By: /s/ Joel G. Katz ------------------------------------- Joel G. Katz, Secretary EX-99.3 10 FOURTH AMEND. TO AMENDED & RESTATED '93 STK OPTION 1 EXHIBIT 99.3 FOURTH AMENDMENT TO THE HARBINGER CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS THIS FOURTH AMENDMENT TO THE HARBINGER CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS (the "Amendment") is made effective as of the 24th day of April, 1998 (the "Effective Date"), by HARBINGER CORPORATION, a corporation organized and doing business under the laws of the State of Georgia (the "Company"). All capitalized terms in this Amendment have the meaning ascribed to such term as in the Harbinger Corporation Amended and Restated 1993 Stock Option Plan for Non-Employee Directors (the "Plan"), unless otherwise stated herein. WITNESSETH: WHEREAS, the Board of Directors of the Company desires to amend the Plan to increase the number of shares that may be granted under the Plan. NOW THEREFORE, in consideration of the premises and mutual promises contained herein, the Plan is hereby amended as follows: SECTION 1. Section 2 of the Plan is hereby amended by deleting the first sentence of Section 2 of the Plan in its entirety and substituting in lieu thereof the following: 2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 6, the total number of shares of $.0001 par value common stock (the "Common Stock") of the Company for which options may be granted under the Plan (the "Shares") shall be 350,000 less the number of Shares of Common Stock issuable pursuant to options granted under the Restated 1992 Stock Option Plan for Non-employee Directors." SECTION 2. The form of agreement currently used to evidence options granted under the Plan shall be replaced with the form of agreement attached hereto as Exhibit A for Non-employee Directors from The Netherlands and as Exhibit B for all other Non-employee Directors. SECTION 3. Except as specifically amended by this Fourth Amendment, the Plan shall remain in full force and effect as prior to this Fourth Amendment. 2 IN WITNESS WHEREOF, the Company has caused this Fourth Amendment to the Harbinger Corporation Amended and Restated 1993 Stock Option Plan for NonEmployee Directors to be executed on the Effective Date. HARBINGER CORPORATION By: /s/ David T. Leach --------------------------------- David T. Leach, CEO ATTEST: By: /s/ Joel G. Katz ------------------------------------ Joel G. Katz, Secretary 3 EXHIBIT A STOCK OPTION AGREEMENT AND OPTION GRANT HARBINGER CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION PLAN FOR (DUTCH) NONEMPLOYEE DIRECTORS THIS STOCK OPTION AGREEMENT (the "Option Agreement") is made and entered into as of the date set forth below, by and between HARBINGER CORPORATION (hereinafter called the "Company"), a corporation organized and existing under the laws of the State of Georgia, and the undersigned, an individual resident of the state designated below (hereinafter called "Optionee"). The Company has adopted the "Harbinger Corporation Amended and Restated 1993 Stock Option Plan for Nonemployee Directors" (the "Plan"). This Option Agreement is being made pursuant to the Plan and capitalized terms used herein shall have the same meanings as those terms have in the Plan unless the context in which these terms are used herein requires otherwise or the terms are otherwise defined herein. The date of the grant of the option under this Option Agreement is as of the date specified below (the "Option Date"). 1. GRANT OF OPTION. The Company hereby grants to Optionee an option to purchase the number of shares of $.0001 par value Common Stock of the Company (the "Shares") designated below ("Option Shares"), subject to the right to repurchase . Any portion of the option not exercised by Optionee as provided herein will expire on the day prior to the fifth anniversary of the Option Date unless sooner terminated as provided herein. Any option share subject to a repurchase right as of the Annual Meeting of Shareholders following the date hereof shall expire on the date of such meeting. The stock issued on the exercise of this option, when paid for as herein provided, will be fully paid and nonassessable. 2. EXERCISE OF OPTION. This option is fully vested and may be exercised only during the period beginning on the Option Date and ending on the day prior to the fifth anniversary date hereof (the "Term") described below. For purposes of this Option Agreement, the "Repurchase Period" for an option shall mean, for an Annual Grant, the approximate twelve (12) month period beginning upon the date of the Annual Grant and ending on the date of the next Annual Meeting, and for an Interim Grant, the period beginning upon the date of the Interim Grant and ending on the date of the next Annual Meeting. (a) Annual Grants: Options granted as an Annual Grant (see below) shall no longer be subject to repurchase as follows: (1) If Optionee attends one regular quarterly meeting of the Board of Directors ("Board") during the Repurchase Period, then the option shall no longer be subject to repurchase immediately thereafter as to twenty-five percent (25%) of 4 the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised; (2) If Optionee attends two regular quarterly meetings during the Repurchase Period, then the option shall no longer be subject to repurchase immediately after the second meeting as to fifty percent (50%) of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised; (3) If Optionee attends three regular quarterly meetings during the Repurchase Period, then the option shall no longer be subject to repurchase immediately after the third meeting as to seventy-five percent (75%) of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised; and (4) If Optionee attends four regular quarterly meetings during the Repurchase Period, then the option shall no longer be subject to repurchase immediately after the fourth meeting as to all of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised. (b) Interim Grants: Options granted as an Interim Grant (see below) shall no longer be subject to repurchase as follows: (1) If the fraction determined in Section 5.2.2 of the Plan is three fourths (75%), then one third (33.3%) of the Option Shares shall no longer be subject to repurchase immediately following the attendance by Optionee at a regular quarterly meeting of the Board during the Repurchase Period, and an additional one-third (33.3%) of the Option Shares shall no longer be subject to repurchase following attendance by Optionee at each of two (2) subsequent regular quarterly meetings during the Repurchase Period, such that the option shall no longer be subject to repurchase immediately after attendance by Optionee at the third regular quarterly meeting during the Repurchase Period as to all of the Option Shares subject to the option. (2) If the fraction determined in Section 5.2.2 of the Plan is one half (50%), then one half (50%) of the Option Shares shall no longer be subject to repurchase immediately following the attendance by Optionee at a regular quarterly meeting of the Board during the Repurchase Period, and the remaining one half (50%) of the Option Shares shall no longer be subject to repurchase immediately after attendance by Optionee at a second regular quarterly meeting during the Repurchase Period, as to all of the Option Shares subject to the option. (3) If the fraction determined in Section 5.2.2 of the Plan is one quarter (25%), then all (100%) of the Option Shares shall no longer be subject to repurchase immediately following the attendance by Optionee at a regular quarterly meeting of the Board during the Repurchase Period. The terms contained in the Plan are incorporated into and made a part of this Option Agreement, and this Option Agreement shall be governed by and construed in accordance with the Plan. 5 A "regular quarterly meeting" shall refer to a regular meeting (including an Annual Meeting or a special meeting held in lieu of a regular meeting) of the Board held on a quarterly basis, as determined by the Chief Executive Officer of the Company. In order to "attend" a meeting Optionee must be present as a Director at the meeting in person or by telephone connection for the entire period of the meeting and any adjournments thereof. Each exercise of the option shall be by written notice in the form of an exercise agreement provided by the Board to the President or principal financial officer of the Company at its principal place of business, accompanied by payment in cash, by bank-certified, cashier's or personal check in the amount of the purchase price for the number of the Shares purchased. The date of each exercise of this option shall be the date upon which the notice is received by the appropriate officer. The Company shall not be obligated to sell or issue any Shares pursuant to the option unless the issuance of such Shares is at that time effectively registered or exempt from registration under the Securities Act of 1933, as amended, and any other applicable securities laws. In connection therewith, the Company may require from Optionee at the time of exercise reasonable representations and warranties with respect to the investment intent of Optionee and Optionee's status as an investor in the Shares in order to qualify for exemptions from registration under state or federal securities laws. Within a reasonable time after receipt of the notice of exercise, the Company will take steps to ascertain compliance with this Option Agreement. The Company shall then cause certificates representing the Shares for the option exercised to be delivered as soon as reasonably possible, provided, however, that if any law, regulation, or agreement requires the Company to take action with respect to the Shares purchased prior to issuance, the date of issuance of the Shares shall be extended for the period necessary to take such action and comply with such law, regulation or agreement. 3. ADMINISTRATION. This Agreement shall be administered, construed and interpreted by the Board with reference to the terms, conditions, and interpretive provisions of the Plan. 4. PURCHASE PRICE. The purchase price per Option Share shall be as designated below ("Exercise Price"), which is equal to or greater than 100% of the fair market value of a share of Common Stock as of the Option Date. 5. TERMINATION OF SERVICE OR DEATH. In the event Optionee, during his or her life, ceases to be an Eligible Director for any reason, any unexercised portion of the option shall terminate one (1) year after termination of Optionee's status as an Eligible Director due to disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended) and thirty (30) days after the termination of Optionee's status as an Eligible Director for any other reason, but in no event after the expiration of the term of the option; provided further, however, that (a) with respect to any installment of the option that is subject to a right of repurchase at the time of termination of Optionee's status as an Eligible Director, the applicable extension period shall not, unless otherwise provided by the Board, operate to permit such installment to become no longer subject to a right of repurchase within such period; (b) with respect to any installment of the option that was no longer subject to a right of repurchase at the time of termination of service, the applicable extension period shall not operate to permit the exercise of such installment after the expiration of the period within which such installment may otherwise be exercised; and (c) the applicable extension period shall not operate to permit the exercise of an option if the service of Optionee is terminated prior to the term during which the option would otherwise have become no longer subject to a right of repurchase. 6 In the event of the death of Optionee while Optionee is an Eligible Director, but before the expiration of this option, the personal representatives, heirs or legatees of Optionee may exercise the option held by Optionee which was no longer subject to a right of repurchase on the date of Optionee's death. The personal representatives, heirs or legatees must exercise any such option within thirty (30) days after the date of the death of Optionee and in any event prior to the date of expiration of the option, and such exercise otherwise shall be subject to the terms and conditions of this Option Agreement and the Plan; provided, however, that with respect to any installment of the option that was subject to a right of repurchase on the date of Optionee's death, the extension period shall not, unless otherwise provided by the Board, operate to permit such installment to become no longer subject to a right of repurchase within such period. 6. NO RIGHTS IN OPTION SHARES. Optionee shall have no rights as a shareholder in respect of Shares covered by this Option Agreement until the date of issuance of the Shares to him or her and only after the Shares are fully paid. Optionee shall have no rights with respect to such Shares not expressly conferred by this Option Agreement. 7. COMPANY'S REPURCHASE OPTION. If Optionee should cease to be an Eligible Director, the Company or its assignee shall have the option to repurchase that number of Shares which then remains subject to a right of repurchase at a price equal to the exercise price per share indicated below as the Exercise Price during the term of this Option (the "Repurchase Option"). Each Share shall be deemed to be an unvested Share until the date that such Share is no longer subject to the Repurchase Option and shall thereafter be deemed to be a vested Share. At any time within three months after the expiration or termination of this Option, the Company or its assignee may elect to repurchase any or all unvested Shares at the Optionee's exercise price by giving Optionee or his representative written notice of exercise of the Repurchase Option. The repurchase price per Share may be paid by check or by cancellation of indebtedness, if any. 8. NONASSIGNABILITY. This option shall not be encumbered or transferred in whole or in part except by will or the laws of descent and distribution, and is exercisable during the lifetime of Optionee only by him or her, except as expressly permitted by the Board. In consideration for the grant of this option, Optionee promises to use his or her best efforts in furtherance of the Company's business and prospects and in the exercise of his or her duties as a member of the Board of Directors of the Company. 7 IN WITNESS WHEREOF, the parties hereunto have set their hands and seals as of the Option Date set forth below. Option Date: HARBINGER CORPORATION ---------------------- Option Shares: ---------------------- By: ----------------------- Exercise Price: ---------------------- Title: ----------------------- Check One: Annual Grant ------------- Interim Grant ------------- OPTIONEE ---------------------------- Address: ------------------ ------------------ ------------------ State of Residence: --------- 8 EXHIBIT B STOCK OPTION AGREEMENT AND OPTION GRANT HARBINGER CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS THIS STOCK OPTION AGREEMENT (the "Option Agreement") is made and entered into as of the date set forth below, by and between HARBINGER CORPORATION (hereinafter called the "Company"), a corporation organized and existing under the laws of the State of Georgia, and the undersigned, an individual resident of the state designated below (hereinafter called "Optionee"). The Company has adopted the "Harbinger Corporation Amended and Restated 1993 Stock Option Plan for Nonemployee Directors" (the "Plan"). This Option Agreement is being made pursuant to the Plan and capitalized terms used herein shall have the same meanings as those terms have in the Plan unless the context in which these terms are used herein requires otherwise or the terms are otherwise defined herein. The date of the grant of the option under this Option Agreement is as of the date specified below (the "Option Date"). 1. GRANT OF OPTION. The Company hereby grants to Optionee an option to purchase the number of shares of $.0001 par value Common Stock of the Company (the "Shares") designated below ("Option Shares"). Any portion of the option not exercised by Optionee as provided herein will expire on the seventh anniversary of the Option Date unless sooner terminated as provided herein. The stock issued on the exercise of this option, when paid for as herein provided, will be fully paid and nonassessable. 2. EXERCISE OF OPTION. This option shall become vested and may be exercised only during the period beginning on the Option Date and ending on the seventh anniversary date hereof (the "Term") described below. For purposes of this Option Agreement, the "Vesting Period" for an option shall mean, for an Annual Grant, the approximate twelve (12) month period beginning upon the date of the Annual Grant and ending on the date of the next Annual Meeting, and for an Interim Grant, the period beginning upon the date of the Interim Grant and ending on the date of the next Annual Meeting. (a) Annual Grants: Options granted as an Annual Grant (see below) shall become vested as follows: (1) If Optionee attends one regular quarterly meeting of the Board of Directors ("Board") during the Vesting Period, then the option shall be exercisable immediately thereafter as to twenty-five percent (25%) of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised; 9 (2) If Optionee attends two regular quarterly meetings during the Vesting Period, then the option shall be exercisable immediately after the second meeting as to fifty percent (50%) of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised; (3) If Optionee attends three regular quarterly meetings during the Vesting Period, then the option shall be exercisable immediately after the third meeting as to seventy-five percent (75%) of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised; and (4) If Optionee attends four regular quarterly meetings during the Vesting Period, then the option shall be exercisable immediately after the fourth meeting as to all of the Option Shares, minus the number of Shares, if any, as to which the option has been previously exercised. (b) Interim Grants: Options granted as an Interim Grant (see below) shall become vested as follows: (1) If the fraction determined in Section 5.2.2 of the Plan is three fourths (75%), then one third (33.3%) of the Option Shares shall become exercisable immediately following the attendance by Optionee at a regular quarterly meeting of the Board during the Vesting Period, and an additional one-third (33.3%) of the Option Shares shall become exercisable following attendance by Optionee at each of two (2) subsequent regular quarterly meetings during the Vesting Period, such that the option shall be exercisable immediately after attendance by Optionee at the third regular quarterly meeting during the Vesting Period as to all of the Option Shares subject to the option. (2) If the fraction determined in Section 5.2.2 of the Plan is one half (50%), then one half (50%) of the Option Shares shall be exercisable immediately following the attendance by Optionee at a regular quarterly meeting of the Board during the Vesting Period, and the remaining one half (50%) of the Option Shares shall be exercisable immediately after attendance by Optionee at a second regular quarterly meeting during the Vesting Period, as to all of the Option Shares subject to the option. (3) If the fraction determined in Section 5.2.2 of the Plan is one quarter (25%), then all (100%) of the Option Shares shall be exercisable immediately following the attendance by Optionee at a regular quarterly meeting of the Board during the Vesting Period. The terms contained in the Plan are incorporated into and made a part of this Option Agreement, and this Option Agreement shall be governed by and construed in accordance with the Plan. A "regular quarterly meeting" shall refer to a regular meeting (including an Annual Meeting or a special meeting held in lieu of a regular meeting) of the Board held on a quarterly basis, as determined by the Chief Executive Officer of the Company. In order to "attend" a meeting Optionee must be present as a Director at the meeting in person or by telephone connection for the entire period of the meeting and any adjournments thereof. 10 Each exercise of the option shall be by written notice in the form of an exercise agreement provided by the Board to the President or principal financial officer of the Company at its principal place of business, accompanied by payment in cash, by bank-certified, cashier's or personal check in the amount of the purchase price for the number of the Shares purchased. The date of each exercise of this option shall be the date upon which the notice is received by the appropriate officer. The Company shall not be obligated to sell or issue any Shares pursuant to the option unless the issuance of such Shares is at that time effectively registered or exempt from registration under the Securities Act of 1933, as amended, and any other applicable securities laws. In connection therewith, the Company may require from Optionee at the time of exercise reasonable representations and warranties with respect to the investment intent of Optionee and Optionee's status as an investor in the Shares in order to qualify for exemptions from registration under state or federal securities laws. Within a reasonable time after receipt of the notice of exercise, the Company will take steps to ascertain compliance with this Option Agreement. The Company shall then cause certificates representing the Shares for the option exercised to be delivered as soon as reasonably possible, provided, however, that if any law, regulation, or agreement requires the Company to take action with respect to the Shares purchased prior to issuance, the date of issuance of the Shares shall be extended for the period necessary to take such action and comply with such law, regulation or agreement. 3. ADMINISTRATION. This Agreement shall be administered, construed and interpreted by the Board with reference to the terms, conditions, and interpretive provisions of the Plan. 4. PURCHASE PRICE. The purchase price per Option Share shall be as designated below ("Exercise Price"), which is equal to or greater than 100% of the fair market value of a share of Common Stock as of the Option Date. 5. TERMINATION OF SERVICE OR DEATH. In the event Optionee, during his or her life, ceases to be an Eligible Director for any reason, any unexercised portion of the option shall terminate one (1) year after termination of Optionee's status as an Eligible Director due to disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended) and thirty (30) days after the termination of Optionee's status as an Eligible Director for any other reason, but in no event after the expiration of the term of the option; provided further, however, that (a) with respect to any installment of the option that had not become exercisable at the time of termination of Optionee's status as an Eligible Director, the applicable extension period shall not, unless otherwise provided by the Board, operate to permit such installment to become exercisable within such period; (b) with respect to any installment of the option that had become exercisable at the time of termination of service, the applicable extension period shall not operate to permit the exercise of such installment after the expiration of the period within which such installment may otherwise be exercised; and (c) the applicable extension period shall not operate to permit the exercise of an option if the service of Optionee is terminated prior to the term during which the option would otherwise have been exercisable. In the event of the death of Optionee while Optionee is an Eligible Director, but before the expiration of this option, the personal representatives, heirs or legatees of Optionee may exercise the option held by Optionee on the date of Optionee's death. The personal representatives, heirs or legatees must exercise any such option within thirty (30) days after the date of the death of Optionee and in any event prior to the date of expiration of the option, and such exercise otherwise shall be subject to the terms and conditions of this Option Agreement and the Plan; provided, however, that with respect to any installment of the option that had not become vested and exercisable on the date of Optionee's death, the 11 extension period shall not, unless otherwise provided by the Board, operate to permit such installment to become vested and exercisable within such period. 6. NO RIGHTS IN OPTION SHARES. Optionee shall have no rights as a shareholder in respect of Shares covered by this Option Agreement until the date of issuance of the Shares to him or her and only after the Shares are fully paid. Optionee shall have no rights with respect to such Shares not expressly conferred by this Option Agreement. 7. NONASSIGNABILITY. This option shall not be encumbered or transferred in whole or in part except by will or the laws of descent and distribution, and is exercisable during the lifetime of Optionee only by him or her, except as expressly permitted by the Board. In consideration for the grant of this option, Optionee promises to use his or her best efforts in furtherance of the Company's business and prospects and in the exercise of his or her duties as a member of the Board of Directors of the Company. IN WITNESS WHEREOF, the parties hereunto have set their hands and seals as of the Option Date set forth below. Option Date: HARBINGER CORPORATION ---------------------- Option Shares: ---------------------- By: ----------------------- Exercise Price: ---------------------- Title: ----------------------- Check One: Annual Grant ------------- Interim Grant ------------- OPTIONEE ---------------------------- Address: ------------------ ------------------ ------------------ State of Residence: --------- -----END PRIVACY-ENHANCED MESSAGE-----