-----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, HT4/UD/sz1H6BaNvxuixoZohPz5ZX+LhAxxvX8M2KD7rz3XvSJEGp7YV73teGz0R 1TOVb4uu3Igbe5U249wvWw== 0000950144-96-006649.txt : 19960930 0000950144-96-006649.hdr.sgml : 19960930 ACCESSION NUMBER: 0000950144-96-006649 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960927 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONCURRENT COMPUTER CORP/DE CENTRAL INDEX KEY: 0000749038 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 042735766 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13150 FILM NUMBER: 96635824 BUSINESS ADDRESS: STREET 1: 2 CRECENT PLACE CITY: OCEANPORT STATE: NJ ZIP: 07757 BUSINESS PHONE: 9088704500 MAIL ADDRESS: STREET 1: 2 CRECENT PLACE CITY: OCEANPORT STATE: NJ ZIP: 07757 FORMER COMPANY: FORMER CONFORMED NAME: MASSACHUSETTS COMPUTER CORP DATE OF NAME CHANGE: 19881018 10-K 1 CONCURRENT COMPUTER CORP. 10-K 06/30/96 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 0-13150 CONCURRENT COMPUTER CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 04-2735766 (State of Incorporation) (I.R.S. Employer Identification Number)
2101 WEST CYPRESS CREEK ROAD, FORT LAUDERDALE, FLORIDA 33309-1892 (954) 974-1700 (Address and telephone number of principal executive offices) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock (par value $0.01 per share) Preferred Stock Purchase Rights Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or Information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / As of September 20, 1996, there were 42,767,500 shares of Common Stock outstanding. The aggregate market value of shares of such Common Stock (based upon the last sale price of $2.15625 of a share as reported for September 26, 1996 on the NASDAQ National Market System) held by non-affiliates was approximately $91,906,000. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of Registrant's Proxy Statement to be dated October 1, 1996 in connection with Registrant's 1996 Annual Meeting of Stockholders scheduled to be held on November 8, 1996 are incorporated by reference in Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS (A) GENERAL DEVELOPMENT OF BUSINESS Concurrent Computer Corporation ("Concurrent" or the "Company") is a supplier of high-performance real-time computer systems and services. A "real-time" system is one specially designed to acquire, process, store and display large amounts of rapidly changing information in real time -- that is, with microsecond response as changes occur. Concurrent has nearly 30 years of experience in real-time systems, including specific expertise in systems, applications software, productivity tools and networking. Its systems provide real-time applications for gaming, simulation, air traffic control, weather analysis, multimedia and mission critical data services such as financial market information. The Company was incorporated in Delaware in 1981 under the name Massachusetts Computer Company. On June 27, 1996, pursuant to a negotiated agreement (the "Acquisition"), Concurrent acquired the assets of the Real-Time Division of Harris Computer Systems Corporation ("HCSC") and 683,178 newly-issued shares of HCSC, which was renamed CyberGuard Corporation, in exchange for 10,000,000 shares of Common Stock of Concurrent, 1,000,000 shares of convertible exchangeable preferred stock of Concurrent with a 9% cumulative annual dividend payable quarterly in arrears and a mandatory redemption value of $6,263,000, and the assumption of certain liabilities relating to the HCSC Real-Time Division. The issuance of the shares in connection with the Acquisition was approved by a special meeting of shareholders held on June 26, 1996. The Company believes that the Acquisition offers a number of significant strategic and financial benefits to Concurrent and its shareholders, as well as its employees and customers. These benefits include an enhanced competitive position through the combination of the best technologies of the two businesses; a larger and more diverse market coverage; significant cost savings primarily obtained through headcount reductions, as well as facilities cost reductions through the integration of corporate management and administrative functions, the consolidation of production and research and development facilities and the consolidation of sales and service offices. (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company considers its products to be one class of products which accounted for 44.3%, 51.4% and 56.0% of total revenues in the 1996, 1995 and 1994 fiscal years, respectively. Service and other operating revenues (including maintenance, support and training) accounted for 55.7%, 48.6% and 44.0% of total revenues in the 1996, 1995 and 1994 fiscal years, respectively. Financial information about the Company's foreign operations is included in Note 13 to the financial statements included herein. The Company's Tokyo-based subsidiary, a joint venture with Nippon Steel Corporation, provides for marketing and sales in the Japanese market and accounted for approximately $10.4 million in net sales (10.9%) for the 1996 fiscal year. The Company and Nippon Steel Corporation consider the renewal of the joint venture agreement on an annual basis. The agreement has been renewed through calendar year 1996. The Company expects to extend the joint venture agreement through June 30, 1998. (C) NARRATIVE DESCRIPTION OF BUSINESS Concurrent's vision is to remain the premier supplier of high-technology real-time computer systems and services through customer focus, total quality and the rapid development of standard and custom products with the objective of profitable growth. Real-time systems concurrently acquire, analyze, store, display and control data to provide critical information within a predictable time as real world events occur. Compared to general purpose computer systems, these unique real-time capabilities are applicable to a wide range of application requirements, including higher performance processing, higher data throughput, predictable and repeatable response times, reliably meeting required deadlines, consistently handling peak loads, and better balancing of system resources. These benefits are useful for an ever increasing range of existing and emerging markets. 1 3 Concurrent has nearly thirty years of real-time systems experience, including specific design, development and manufacturing expertise in system architectures, system software, application software, productivity tools and networking. Concurrent's real-time systems are currently used in host, client server and distributed computing solutions, including software controlled configurations to provide fault tolerance. The Company sells its systems worldwide through its sales offices, distributors and strategic alliances to end-users as well as to original equipment manufacturers, systems integrators, independent software vendors and value-added resellers. End uses of the Company's systems include product design and testing; simulation and training systems; telemetry and range systems; servers for interactive real time applications, such as video-on-demand and wagering and gaming; power plant control and simulation; airline reservation systems and cockpit communications; weather satellite data acquisition and forecasting; intelligence data acquisition and analysis; financial trading and services; and automated mass transit control. Concurrent designs, manufactures, sells, and supports real-time standards-based open computer systems and proprietary computer systems. It offers worldwide hardware and software maintenance and support services ("Traditional Services") for its products and for the products of other computer and peripheral suppliers. The Company routinely offers and successfully delivers long term service and support of its products for as long as fifteen to twenty years. The Company also has a long and successful history of customizing systems with both specialized hardware and software to meet unique customer requirements. Frequently in demand, these special support services ("Professional Services") have included system integration, performance and capacity analysis, and application migration. As the computer market continues its shift in end-user demand to open systems, the Company has developed a strategy to adjust service offerings to those more appropriate for open systems, while maintaining support for its proprietary systems. The Company's strategy also strikes a balance between appropriate upgrades for proprietary system offerings while predominantly investing in its open-system computing platforms. The Company is also leveraging its investment in research and development and enhancing market penetration through strategic alliances. Markets Concurrent focuses its business on the following strategic target markets: simulation; data acquisition; instrumentation and process control; interactive real-time systems and telecommunications. Summaries of these markets follows: Simulation. Concurrent is a recognized leader in real-time systems for simulation. That position was strengthened by the Acquisition since HCSC was also a recognized leader in this market. Primary applications include trainers/simulators for operators in commercial and military aviation, vehicle operation and power plants, scenario trainers for battle management, mission planning and rehearsal, engineering design simulation for avionics and automotive labs and modeling systems for war gaming and synthetic environments. An emerging new segment of this market is Hardware-In-The-Loop (HITL), in which accurate simulations are constructed to verify hardware designs, thereby minimizing or eliminating entirely the need for expensive prototypes. Concurrent is addressing this segment by selecting software applications that provide a unique real-time advantage to its customers and integrating these applications to provide unique solutions. Data Acquisition. Concurrent is a leading supplier of systems for radar data processing and control, data fusion applications and weather analysis, all of which require the ability to gather, analyze and display continuous flows of information from simultaneous sources. Primary applications include environmental analysis and display, Doppler weather radar, and numerical weather prediction. For example, the Company provides the computer systems which power the computing requirements for the U.S. Department of Commerce's Next Generation Radar (NEXRAD) weather program and Terminal Doppler Weather Radar (TDWR) systems for use in determining wind shear activity. Other customers typical of this market include Lockheed Martin Corporation on the Navy's Aegis systems and NASA for the Atlas Centaur Vehicle. 2 4 Instrumentation and Process Control. Concurrent also manufactures systems to collect, control, analyze and distribute test data from multiple high speed sources for industrial automation systems, product test systems (particularly engine test), Supervisory Control and Data Acquisition (SCADA) systems, and instrumentation systems. Concurrent's strategy to serve this market involves the employment of third-party software applications to provide a unique solution for its customers. Customers typical of this market include Pratt Whitney for jet engine test, Weyerhauser for industrial automation, Ford Motor Company for instrumentation, and Nissin (Japan) for SCADA. Interactive Real-Time. Concurrent is pursuing an emerging growth market in which its interactive, time critical video/image on demand capabilities provide a unique advantage, such as in video-on-demand (VOD), wagering and gaming, and other transaction-based applications for the financial services, hotels, airline and entertainment industries. Concurrent has identified the network server resident in interactive VOD as an emerging growth market where its real-time systems technology provides unique market advantages. Concurrent s strategy is to position itself as a supplier of servers and server technology for interactive VOD applications which require reliable delivery of multiple streams of high quality video and simultaneous servicing of interactive requests from multiple users. Further, Concurrent is a leading provider of systems for the wagering and gaming industry. Concurrent has provided the processing systems for the wagering and gaming industry's largest provider of public lottery systems, the majority of tabulator (off-track betting) systems in Australia and Asia/Pacific and for large scale casino systems such as Keno. Telecommunications. Concurrent is focusing on the rapidly expanding market for digital cellular data communications, digital wireless gateways, internetworking systems and high-band width switching. The Company has, together with a telecommunications industry software supplier, developed a software switch on Concurrent's platforms, which will allow field upgradeable, flexible systems to be fielded for wireless communications that require data transfers, store and forward functions, protocol conversions, and interfaces to on-line service providers. Series 3200 Systems Installed Base. Concurrent's reputation in the industry has historically been attributable to its proprietary real-time computing systems. Now in their fifth generation, these proprietary systems meet customers' needs in extremely demanding real-time environments. Many of the applications using the Series 3200 systems, including the U.S. Department of Commerce's Next Generation Radar (NEXRAD) program, are unique with long life cycles and "mission critical" demands and are the result of a significant investment in application software by the customer. The Company is committed to continuing to meet the needs of its Series 3200 customer base. Products and Services The Company considers its products and services a total package to provide complete value-added real-time solutions. The Company offers two types of systems, open and proprietary, as well as Traditional Services and Professional Services. The Acquisition strengthened Concurrent's position in the open systems markets, where HCSC was a recognized leader that had completed the transition from proprietary to open systems. PowerWorks, the Company's real-time technology package, includes an industry standard UNIX operating system that is enhanced for real-time performance, a set of tools that allows developers to quickly bring new real-time applications to market, and a set of compilers that are designed to obtain maximum real-time performance. This unique and comprehensive real-time technology package can be purchased for a wide range of PowerPC(TM) 604 platforms. At the high end, Concurrent provides the optimum real-time platform with its Night Hawk products. The Company's Power Maxion is the industry's only 6U VME based symmetrical multi-processor (SMP). The Power Hawk is a VME based system that provides up to fourteen "loosely coupled" processors and allows customers to choose between the top two VME CPU board vendors (Motorola, Inc. and Force Computers, Inc.). The Company's PowerStack provides desktop convenience and augments the graphics capabilities of the Night Hawk and the Power Maxion. PowerWorks is also available on disk to customers with large volume and flexible purchasing needs. 3 5 OPEN SYSTEMS PRODUCT LINE POWER WORKS -- POWERPC(TM) 604
MAX. NO. MODEL OF CPUS PRICE RANGE - -------------------------------------------------------------------- --------- ------------- Night Hawk 6800..................................................... 8 $40K - $500K Power Maxion........................................................ 8 $40K - $400K Power Hawk.......................................................... 14 $15K - $400K PowerStack.......................................................... 1 $15K Software Stand Alone................................................ N/A $ 3K - $40K
LEGACY SYSTEMS
MAX. NO. MODEL OF CPUS CPU PRICE RANGE - -------------------------------------------------------- -------- ------------ --------------- Night Hawk 5800......................................... 8 MC88110 $35K - $350K Night Hawk 4800......................................... 8 MC88100 $20K - $250K Maxion.................................................. 4 MIPS $27K - $170K 7000 Series............................................. 2 MC68040 $24K - $150K 3200 Series............................................. 4 Proprietary $55K - $1,350K
Traditional Services. One of the largest benefits to the Company of its extensive installed customer base is the large and generally predictable revenue stream generated from Traditional Services. While Traditional Services revenue has declined and is expected to further decline as a result of the industry shift to open systems, the Company expects this business to be a significant source of revenue and cash flow for the foreseeable future. The Company offers a variety of service and support programs to meet the customer's maintenance needs for both its hardware and software products. The Company also offers contract service for selected third party equipment. The service and support programs offered by Concurrent include rentals and exchanges, diagnostic and repair service, resident service, and preventive maintenance. The Company routinely offers long-term service and support of its products for as long as fifteen to twenty years. Professional Services and Custom Engineering. Throughout the Company's history, it has supported its customers through Professional Services and custom engineering support efforts. This remains true today as customers transition to open systems and manage their costs through the increased use of outsourcing. This is especially true for the time constrained, cost sensitive or mission critical requirements of real-time applications. Custom engineering frequently assists customers in designing their application systems. In many cases, the Company also provides custom and integration engineering services to implement the design. This may include custom modifications to the Company's products or integration of third party interfaces or devices into the Company's systems. Many customers use Professional Services to migrate existing applications from earlier generations of the Company's or competitor's systems to the Company's state-of-the-art systems. Professional Services also include classroom and on-site training, system and site performance analysis, and multiple vendor support planning. Although the total revenues associated with any single Professional Services or custom engineering effort may be small in comparison to total revenues, increased customer satisfaction is an integral part of the business plan of the Company. Systems and Technology Concurrent has made a considerable investment in developing its product lines and today offers computer systems satisfying a broad range of high-performance requirements for real-time applications. While maintaining a competitive capability and continued enhancement of the Company's proprietary product line for a still significant installed base, the primary investments have been in the evolution of the open systems product line. The Company is currently developing an enhanced 6000 and new Series of Night Hawk computers, and the Power Maxion, integrating expected future versions of the IBM PowerPC(TM) microprocessor chip. The Company has also implemented a new technology road map to combine the best technologies of its Night Hawk and MAXION product lines, including a modular operating system approach and ultimately a 4 6 chip-independent multiprocessing architecture. The Company has delivered a unique balance of supporting industry standards while providing innovative superiority in key architectural issues. Sales and Service The Company sells its systems in key markets worldwide through direct field sales and services offices as well as through a network of software suppliers, distributors and system integrators. The Company does not believe the loss of any particular distributor or system integrator would have a material impact on the Company's operating results. The Company's principal customers are original equipment manufacturers (OEMs), systems integrators, independent software vendors (ISVs) and value-added resellers (VARs) who combine the Company's products with other equipment or with additional application software for resale to end-users. Collectively, these customers account for approximately 65% of sales, with sales to end-users accounting for the remaining 35%. Several major customer accounts historically have provided a stable and generally predictable contribution to revenue. Servicing the Company's large installed base, particularly its proprietary systems, is an important element in Concurrent's business strategy and generates significant revenue and cash flow to the Company. Total service revenue in fiscal year 1996 was approximately $53.4 million (55.7% of total revenue). Substantially all of Traditional Services revenue is generated from maintenance and support contracts which generally run from one to three years with annual renewal provisions. The Company's existing installed base of proprietary systems also represents an opportunity for incremental sales of both systems and Traditional and Professional Services. No customer, other than the U.S. Government, has accounted for 10% or more of Concurrent's net sales in the three fiscal years ended June 30, 1996. For the 1996 fiscal year, approximately $16 million of the Company's revenue was attributable directly or indirectly to entities related to branches of the U.S. Government. This amount represented approximately 17% of the Company's worldwide revenue, compared to 28% and 31% for the 1995 and 1994 fiscal years, respectively. The Company's revenue related to sales to the U.S. Government is derived from various Federal agencies, no one of which accounted for more than 5% of total revenue (e.g., several agencies participate under the NEXRAD program). Sales to Unisys Corp., as prime contractor, under the NEXRAD program are considered sales to the U.S. Government. The NEXRAD program contributed approximately $0.7, $17.5 and $23 million in revenue in fiscal years 1996, 1995 and 1994, respectively. In an effort to reduce total program costs, sales of spare parts by Concurrent under the program are now being made directly to the Government. The program is completed and no significant revenue is planned for future periods. U.S. Government contracts and subcontracts generally contain provision for cancellation at the convenience of the Government. Substantially all of the Company's U.S. Government related orders are subcontracts and most are for standard catalog equipment which would be available for sale to others in the event of cancellation. To date, there have been no cancellations that have had a material impact on the Company's business or results of operations. Research and Development The Company's continued success depends heavily on researching and utilizing the latest available hardware and software computer technology. Success will also depend significantly on the Company's ability to combine the best technologies of its Night Hawk and MAXION product lines and to bring new products to the market in a timely fashion. Concurrent, together with HCSC, invested $19 million in fiscal year 1996, $26 million in fiscal year 1995, and $30 million in fiscal year 1994, in research and development. Research and development investment was made across all of Concurrent's key technology areas for both open and proprietary systems. New networking products, graphics, data acquisition sub-systems, enhancements to the proprietary OS/32 and UNIX-based operating systems, the MAXION multiprocessing open system and the 6000 Series Night Hawk Series open systems, as well as three new proprietary Series 3200 systems (32-400, 32-600 and 32-850 Series) products resulted from this investment. Although in terms of absolute dollar amounts total research and development investment has declined over the past several years, the Company expects a greater return on its total research and development investment for two reasons. First, research and development investment is focused solely on products and applications for its target markets. Second, the 5 7 Company's increasing use of joint research and development and technology sharing arrangements is expected to leverage the Company's investment in research and development. The Company's strategy is to acquire or co-develop technology when the market requires parity with competitive technology and to develop technology internally when market leadership is possible. This strategy is expected to give the Company greater flexibility in meeting the technology requirements of its customers and to allow it to provide increasingly higher performance products by focusing its research and development resources where it can add the most value. Manufacturing Operations The Company's manufacturing operations are located at its Ft. Lauderdale, Florida and Oceanport, New Jersey facilities. Manufacturing operations occupy approximately 60,000 square feet of the Ft. Lauderdale facility. The Company has entered into an agreement for the sale and partial leaseback of its Oceanport, New Jersey facility. The transaction is expected to be completed in the quarter ending December 31, 1996. The Company is reducing its manufacturing operations in Oceanport, New Jersey as it transitions the manufacture of all of its open systems to Florida. Approximately 40,000 square feet are expected to be retained in the Oceanport facility for the manufacture of proprietary systems. Utilization of manufacturing capacity was approximately 40% based on a limited two shift operation in fiscal year 1996. The Company leases its Ft. Lauderdale facility from Harris Corporation pursuant to a lease which expires June 1997. The Company plans to move its Ft. Lauderdale operations to another facility in the Southern Florida area prior to the expiration of the lease. Management believes that the manufacturing capacity available at its existing and future facilities could be significantly increased (with minimal capital spending) to meet increased manufacturing requirements either by raising the utilization rate or by adding assembly personnel on its first and second shift or by adding a third shift. The Company outsources several subassembly operations, including some of its printed circuit board subassemblies, which has resulted in significant cost savings. The Company's manufacturing operations are now focused on systems assembly, systems integration and systems test. Extensive testing and burn-in conditioning is performed at the board and subassembly levels and at final system integration. Because of the wide range of product configurations, final assembly and test usually occur when a specific customer order is being prepared for shipment. Sources of Supply Concurrent has multiple commercial sources of supply throughout the world for most of the materials and components it uses to produce its products. In some cases, components are being purchased by the Company from a single supplier to obtain the required technology and the most favorable price and delivery terms. The Company depends on the availability of the Motorola 88110 and 88100 microprocessor chips in the manufacture of its Night Hawk 5800, 4800 and 4400 Series computers. Motorola is the only source of supply for these chips. For its current and next generation Night Hawk computer systems the Company will depend on the availability of PowerPC(TM) microprocessor chips provided by both IBM and Motorola. Although the Company has not experienced any materially adverse impact on its operating results as a result of a delay in supplier performance, any delay in delivery of components may cause a delay in shipments by the Company of certain products. The Company estimates that a lead time of up to 16-24 weeks may be necessary to switch to an alternate supplier of certain custom application specific integrated circuits and printed circuit assemblies. A change in the supplier of these circuits without the appropriate lead time would result in a delay in shipments by the Company of certain products. Since revenue is recognized typically upon shipment, any delay in shipment may also result in a delay in revenue recognition, possibly outside the fiscal period originally planned, and, as a result, may adversely affect the Company's financial results for that particular period. A transition from one single supplier to another could have a similar impact. The Company carefully monitors the ability of any single supplier to timely meet the Company's requirements, including the supplier's financial condition. Management believes it has good relationships with its suppliers, including alternative suppliers, and expects that adequate sources of supply for components and peripheral equipment will continue to be available. 6 8 Competition The Company operates in a highly competitive market driven by rapid technological innovation. The shift from proprietary systems to standards-based open systems is expected both to expand market demand for systems with performance characteristics previously only found in proprietary real-time computing systems and to increase competition, making product differentiation a more important factor. Due in part to the range of performance and applications capabilities of its products, the Company competes in various markets against a number of companies, many of which have greater financial and operating resources than the Company. Competition in the high performance real-time computing systems and applications market comes from four sources: (1) major computer companies that participate in the real-time marketplace by layering specialized hardware and software on top of or as an extension of their general purpose product platforms -- these are principally Digital Equipment Corporation and Hewlett-Packard Corporation; (2) other computer companies that provide solutions for applications that address a specific characteristic of real-time, such as fault tolerance or high-performance graphics -- these computer companies include Silicon Graphics Inc., Stratus Computer, Inc., and Tandem Computers, Inc.; (3) general purpose computing companies that provide a platform on which third party vendors add real-time capabilities -- these computer companies include International Business Machines Corp. and Sun Microsystems, Inc.; and (4) single board computer companies that provide board-level processors that are typically integrated into a customer's computer system -- these computer companies include Force Computers, Inc. and Motorola, Inc. Intellectual Property The Company relies on a combination of contracts and copyright, trademark and trade secret laws to establish and protect its proprietary rights in its technology. The Company distributes its products under software license agreements which grant customers perpetual licenses to the Company's products and which contain various provisions protecting the Company's ownership and confidentiality of the licensed technology. The source code of the Company's products is protected as a trade secret and as an unpublished copyright work. In addition, in limited instances the Company licenses its products under licenses that give licensees limited access to the source code of certain of the Company's products, particularly in connection with its strategic alliances. Despite precautions taken by the Company, however, there can be no assurance that the Company's products or technology will not be copied or otherwise obtained and used without authorization. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries. The Company believes that, due to the rapid pace of innovation within its industry, factors such as the technological and creative skills of its personnel are more important to establishing and maintaining a technology leadership position within the industry than are the various legal protections of its technology. Concurrent has entered into licensing agreements with several third-party software developers and suppliers. Generally, such agreements grant to the Company non-exclusive, worldwide licenses with respect to certain software provided as part of computers and systems marketed by the Company and terminate on varying dates. For example, Concurrent is licensed by Santa Cruz Operation (SCO) to use and sublicense SCO's operating system in the Company's computer systems. The Company has entered into licensing agreements with SCO for internal use of source code version of the UNIX operating system and for the sublicensing of binary version of the UNIX operating system. Both licenses are perpetual unless terminated in accordance with the notice provisions and address versions of the UNIX operating system through and including System V, Release 4.0 (SVR4). The Company pays a royalty to SCO for each computer system shipped using the UNIX operating system equal to approximately 2% of the list price of the basic (minimum) configuration of the system. Employees As of June 30, 1996, the Company employed approximately 900 employees worldwide of whom approximately 500 were employed in the United States, compared to approximately 825 and 1,250 employees worldwide at June 30, 1995 and 1994, respectively. The Company's employees are not unionized. The Company has developed a restructuring plan which will reduce the total headcount to approximately 700 by the end of calendar year 1996. 7 9 Backlog Generally, the Company records in "backlog" computer orders which it is anticipated will be shipped during the subsequent six months or, where special engineering is required, in the subsequent twelve months. The backlog of unfilled computer systems orders was approximately $12.0 million on June 30, 1996 compared to approximately $9.8 million a year earlier. While the Company anticipates shipping the majority of backlog during subsequent periods, the amount of orders in backlog is not necessarily a meaningful indicator of business trends for the Company because orders may be canceled before shipment or rescheduled for a subsequent period which may affect the amount of backlog that may be realized in revenue in any succeeding period. In addition, with the increasing emphasis on open systems, more customers are placing orders within the quarter where delivery is expected thus backlog is a less meaningful measurement of anticipated revenue. Environmental Matters The Company purchases, uses and arranges for disposal of chemicals used in the manufacturing process at its Ft. Lauderdale facility. As a result, the Company is subject to federal and state environmental protection and community right-to-know laws. Violations of such laws, in certain circumstances, can result in the imposition of substantial remediation costs and penalties. The Company believes it is in compliance with all material environmental laws and regulations. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES A summary of net sales (consolidated net sales reflects sales to unaffiliated customers), attributable to Concurrent's foreign and domestic operations for the fiscal years ended June 30, 1996, 1995 and 1994, respectively, is presented at Note 13 to the financial statements of the Registrant included herein. ITEM 2. PROPERTIES Listed below are Concurrent's principal facilities as of June 30, 1996. Management considers all facilities listed below to be suitable for the purpose(s) for which they are used, including manufacturing, research and development, sales, marketing, service and administration. Management believes that its Fort Lauderdale, Florida and Oceanport, New Jersey manufacturing facilities have more than sufficient capacity to meet the Company's projected manufacturing requirements. The Company plans to move its Ft. Lauderdale operations to another Southern Florida location prior to the expiration of its existing lease. The Company believes there is sufficient, suitable commercial space available on acceptable terms to meet its requirements; however, there is no guarantee that the Company will be successful in obtaining such facilities on favorable terms. Any sustained interruption in manufacturing resulting from such relocation would likely result in a loss of revenue.
APPROX. FLOOR OWNED EXPIRATION AREA LOCATION PRINCIPAL USE OR LEASED DATE OF LEASE (SQ. FEET) - ------------------------------------ ----------------------- --------- ------------- ------------- Corporate Headquarters, Leased June 1997 100,000 2101 West Cypress Creek Road Manufacturing, Sales Fort Lauderdale, Florida and Service, Marketing 2 Crescent Place Manufacturing Owned (1) n/a(1) 285,000 Oceanport, New Jersey (held for disposition) 227 Barth Rd., Sales/Research & Leased 1998 36,000 Slough, England Development
- --------------- (1) The Company has entered into a contingent contract for the sale and leaseback of its Oceanport, New Jersey facility expected to be completed in the quarter ending December 31, 1996. In addition to the facilities listed above, Concurrent also leases space in various domestic and international industrial centers for use as sales and service offices and warehousing. 8 10 ITEM 3. LEGAL PROCEEDINGS From time to time, as a normal incident of the nature and kind of business in which the Company is engaged, various claims or charges are asserted and litigation commenced against the Company arising from or related to product liability; patents; trademarks or trade secrets; breach of warranty; antitrust; distribution; or contractual relations. Claimed amounts may be substantial, but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court awards. In the opinion of management, final judgments, if any, which might be rendered against the Company in such litigation are reserved against or would not have a material adverse effect on the financial position or the business of the Company as a whole. The Company may from time to time be, either individually or in conjunction with other major U.S. manufacturers or defense contractors, the subject of U.S. government investigations for alleged criminal or civil violations of procurement or other federal laws. No criminal charges are presently known to be filed against the Company and the Company is unable to predict the outcome of such investigations or to estimate the amounts of claims or other actions that could be instituted against it, its officers or employees as a result of such investigations. Under present government procurement regulations, indictment could result in a government contractor, such as the Company, being suspended or debarred from eligibility for awards of new government contracts for up to three years. In addition, the Company s foreign export control licenses could be suspended or revoked. The Company is currently involved in one such investigation and is cooperating with the representatives of the responsible government agencies. Management does not believe that the outcome of this investigation will have a material adverse effect on the financial position or the business of the Company. There are no material legal proceedings pending to which the Company or any of its subsidiaries is a party or to which any of the Company's or any of its subsidiaries' property is subject. To Concurrent's knowledge there are no material legal proceedings to which any director, officer or affiliate of Concurrent, or any owner of record or beneficially of more than five percent of Common Stock, or any associate of any of the foregoing, is a party adverse to Concurrent or any of its subsidiaries. No material legal proceedings were terminated during the fourth quarter of the fiscal year ended June 30, 1996. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held a special meeting of shareholders on June 26, 1996 in connection with the Acquisition. The three matters submitted to shareholders and the resulting votes are summarized below: 1. Shareholders approved a proposal for the issuance of both (i) 10,000,000 shares of common stock, par value $0.01 per share ("Concurrent Common Stock"), and (ii) a maximum of 4,000,000 shares, subject to anti-dilution adjustment, of Concurrent Common Stock which will be issuable upon the conversion of the convertible exchangeable preferred stock of Concurrent to be issued to Harris upon consummation of the Acquisition and the debentures into which such preferred stock is exchangeable pursuant to the terms of such stock. 16,386,374 shares voted for the proposal; 865,800 shares voted against; 150,191 shares abstained; and 1,052,262 shares represented broker non-votes. 2. Shareholders approved an amendment to the Concurrent 1991 Restated Stock Option Plan (the "Concurrent Stock Plan") to increase the number of shares of Concurrent Common Stock authorized for issuance under the Concurrent Stock Plan to 9,000,000 shares of Concurrent Common Stock. 15,629,089 shares voted for the proposal; 1,948,897 shares voted against; 274,339 shares abstained; and 602,302 shares represented broker non-votes. 3. Shareholders approved an amendment to the Concurrent Stock Plan to (i) increase the number of shares of Concurrent Common Stock underlying the options initially granted to each non-employee director following the adoption of such amendment to 20,000 shares of Concurrent Common Stock, (ii) provide for the automatic grant to continuing non-employee directors of options to purchase 3,000 shares of Concurrent Common Stock on the date of each annual meeting of shareholders, and (iii) provide that each option granted to the non-employee directors shall expire on the earlier of the tenth anniversary of the date of grant or the resignation or removal (other than by reason of death or disability) of such non-employee director. 15,644,924 shares voted for the proposal; 1,947,087 shares voted against; and 862,616 shares abstained; there were no broker non-votes. 9 11 ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of Concurrent are elected by the Board of Directors to hold office until their successors have been chosen and qualified or until earlier resignation or removal. Set forth below are the names, positions and ages of the Company's executive officers as of September 27, 1996:
DIRECTOR OR EXECUTIVE NAME POSITION AGE OFFICER - ----------------------- -------------------------------------------- --- ----------- E. Courtney Siegel..... Director, President and Chief Executive Officer 46 1996* George E. Chapman...... Vice President, International Operations 62 1994 Robert E. Chism........ Vice President, Development 43 1996* Daniel S. Dunleavy..... Vice President, Chief Financial Officer and Chief Administrative Officer 43 1996* Karen G. Fink.......... Vice President, General Counsel and Secretary 40 1996* Fred R. Lee............ Vice President, Production Operations & Logistics 68 1996* Robert T. Menzel....... Vice President, North American Sales 43 1996* Michael N. Smith....... Vice President, Marketing 43 1996*
- --------------- * Elected to the position upon completion of the Acquisition in June 1996. E. COURTNEY SIEGEL. DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. Siegel was elected to this position upon completion of the Acquisition in June 1996. He previously served as Chairman, President and Chief Executive Officer of CyberGuard Corporation (f/k/a Harris Computer Systems Corporation) since its spin-off from Harris Corporation in October 1994 (the "1994 Spin Off"). Prior to that time, and since 1990, Mr. Siegel served as Vice President and General Manager of the Harris Computer Systems Division of Harris Corporation. Mr. Siegel's twenty year career in the computer technology field includes serving as vice president of standoff weapons at Rockwell International Corp., a producer of electronics, aerospace, automotive and graphics equipment, and as vice president of Harris Government Support Systems Division's Orlando operations. GEORGE E. CHAPMAN. VICE PRESIDENT, INTERNATIONAL OPERATIONS. Mr. Chapman was elected to this position in November 1994. During the period January through June 1996 he also had responsibility for North American Sales as Vice President, Field Operations. He previously served as Vice President, Marketing from January to November 1994. He joined Concurrent in 1992 as Director, Business Development for Weather and Airspace Management. In 1988, after retiring as a Brigadier General from the United States Air Force, he joined Lockheed Corporation's Austin Division as Senior Staff Engineer working toward the worldwide commercial application of high technology systems developed for the U.S. Government. In December 1989, he received an appointment as Executive Director to the newly legislated Texas Workers Compensation Commission. His career with the U.S. Air Force spanned thirty-six years, with the last six years devoted to leadership of a 5,000 person organization responsible for the long-range technology, investment and training requirements for the nation's weather prediction and warning capability supporting U.S. forces throughout the world. ROBERT E. CHISM. VICE PRESIDENT, DEVELOPMENT. Mr. Chism was elected to this position upon completion of the Acquisition in June 1996. From the 1994 Spin-Off until the Acquisition, he served as Vice President, Technical and Production Operations of CyberGuard Corporation (f/k/a Harris Computer Systems Corporation). He joined the Harris Computer Systems Division of Harris Corporation in June 1993 as Director, Simulation Business Area. Before joining the division, he held diverse engineering, program management and marketing assignments in computer and related industries with General Electric Company from May 1978 through June 1993, where he was Subsection Manager of Satellite Command and Data Handling at the time he left to join the Harris Computer Systems Division. 10 12 DANIEL S. DUNLEAVY. VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF ADMINISTRATIVE OFFICER. Mr. Dunleavy was elected to this position upon completion of the Acquisition in June 1996. He served in this position with CyberGuard Corporation (f/k/a Harris Computer Systems Corporation) since the 1994 Spin-Off. Prior to that time and since 1991, he served as Vice President, Strategic Alliances and International Operations of the Harris Computer Systems Division. After joining Harris Corporation in 1978, he served in various positions of increasing responsibility, including Controller, Harris Computer Systems Division, from 1988 until 1991. KAREN G. FINK. VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. Ms. Fink was elected to this position upon completion of the Acquisition, joining the Company in July 1996 from Harris Corporation where she served since 1985, most recently as Counsel and Assistant Secretary. Prior to that time since she was associated with the law firm of Seward & Kissel in its New York City office. FRED R. LEE. VICE PRESIDENT, PRODUCTION OPERATIONS AND LOGISTICS. Mr. Lee was elected to this position upon completion of the Acquisition in June 1996. He was previously president of TQM TRACKS, INC., a privately held management services company, since its inception in 1990. From 1984 to 1990, Mr. Lee served as Director - Operations of Rockwell International Corp. Mr. Lee served in various positions over a twenty-nine year period at General Dynamics Electronics, from which he retired in 1984 as Vice President, Production. ROBERT T. MENZEL. VICE PRESIDENT, NORTH AMERICAN SALES. Mr. Menzel was elected to this position upon completion of the Acquisition in June 1996. From April 1995 until the Acquisition, he served as Vice President and General Manager of the Trusted Systems Division of CyberGuard Corporation (f/k/a Harris Computer Systems Corporation). From the 1994 Spin-Off until April 1995, he served as Vice President, National Sales of Harris Computer Systems Corporation. He joined the Computer Systems Division of Harris Corporation in 1992 as Manager, Secure Systems Marketing and subsequently assumed responsibility for the entire Secure Business Area and ultimately became Vice President, National Sales. Prior to joining the Harris Computer Systems Division, he held positions of increasing responsibility over a twelve year period at the Aerospace division of General Electric Company within the Business Development and Marketing Group, serving as Manager, Army Business Development at the time he joined Harris Computer Systems Division. MICHAEL N. SMITH. VICE PRESIDENT, MARKETING. Mr. Smith was elected to this position upon completion of the Acquisition in June 1996. From April 1995 until the Acquisition, he served as Vice President and General Manager of the Real-Time Division of CyberGuard Corporation (f/k/a Harris Computer Systems Corporation). From the 1994 Spin-Off until April 1995, he served as Vice President, Marketing of Harris Computer Systems Corporation, a position he served in from January 1993 with the Harris Computer Systems Division. He joined the Harris Computer Systems Division in March 1992 as Director, Secure Systems Business. Prior to that time, he served in positions of increasing responsibility over a fifteen year period at the Aerospace division of General Electric Company, serving as Program Manager, Armor Training at the time he joined the Harris Computer Systems Division. 11 13 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is currently traded under the symbol "CCUR" on the NASDAQ National Market System. The following table sets forth the high and low last sale information for the Common Stock for the periods indicated, as reported by NASDAQ.
HIGH LOW ---- --- Fiscal Year 1996 Quarter Ended: September 30, 1995......................................................... 2 7/8 1 7/16 December 31, 1995.......................................................... 2 25/32 March 31, 1996............................................................. 1 7/8 3/4 June 30, 1996.............................................................. 3 23/32 1 5/8 Fiscal Year 1995 Quarter Ended: September 30, 1994......................................................... 2 1/2 1 5/16 December 31, 1994.......................................................... 2 1 March 31, 1995............................................................. 1 7/16 11/16 June 30, 1995.............................................................. 2 3/4 11/16
As of September 20, 1996, there were 42,767,500 shares of Common Stock outstanding, held of record by approximately 2,280 stockholders. The Company has never declared or paid any cash dividends on its capital stock. The Company's present policy is to retain earnings to finance expansion and growth, and no change in the policy is anticipated. In addition, the terms of the Company's loan agreement with its lender prohibit the Company from payment of cash dividends on its capital stock. As a result, it is not anticipated that cash dividends will be paid in the foreseeable future. On July 31, 1992, the Board of Directors of the Company declared a dividend distribution of one Right for each outstanding share of Common Stock and then outstanding Convertible Preferred Stock of the Company to stockholders of record at the close of business on August 14, 1992. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Participating Cumulative Preferred Stock, par value $.01 per share, at a cash purchase price of $30.00 per Right, subject to adjustment, which become exercisable upon the occurrence of certain events. (See Note 17 of Notes to Consolidated Financial Statements.) ITEM 6. SELECTED FINANCIAL DATA This information is set forth in the Selected Financial Data section of the Consolidated Financial Statements in Item 8 and incorporated into this Item 6. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This information is set forth in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of the Consolidated Financial Statements in Item 8 and incorporated into this Item 7. 12 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Consolidated Financial Statements and supplementary data for Concurrent are attached and incorporated into Item 8.
PAGE ---- Report of Independent Accountants................................... 21 Consolidated Statements of Operations for the years ended June 30, 1996, 1995 and 1994............................................... 22 Consolidated Balance Sheets as of June 30, 1996 and 1995............ 23 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994............................................... 24 Consolidated Statements of Stockholders' Equity (deficiency) for the years ended June 30, 1996, 1995 and 1994.......................... 25 Notes to Consolidated Financial Statements.......................... 26 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. 44 Selected Financial Data............................................. 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE A change in independent accountants has previously been reported. See the Company's Report on Form 8-K filed on September 26, 1996. There have been no disagreements with independent accountants on accounting and financial disclosure matters. 13 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (A) IDENTIFICATION OF DIRECTORS Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Election of Directors" in Registrant's Proxy Statement to be dated October 1, 1996 in connection with its Annual Meeting of Stockholders to be held on November 8, 1996 ("Registrant's 1996 Proxy Statement"). (B) IDENTIFICATION OF EXECUTIVE OFFICERS The information called for hereunder is included in Part I of this Form 10-K under the caption "Executive Officers of the Registrant". (C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES Not applicable. (D) FAMILY RELATIONSHIPS There is no family relationship between any director and/or executive officer of the Company. (E) BUSINESS EXPERIENCE The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Election of Directors" in Registrant's 1996 Proxy Statement with respect to the business experience of Registrant's directors. The information called for by this Item 10 with respect to executive officers of Registrant is included in Part I of this Form 10-K under the caption "Executive Officers of the Registrant". (F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Election of Directors" in Registrant's 1996 Proxy Statement. (G) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in Registrant's 1996 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Executive Compensation" in Registrant's 1996 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" in Registrant's 1996 Proxy Statement. 14 16 (B) SECURITY OWNERSHIP OF MANAGEMENT The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" in Registrant's 1996 Proxy Statement. (C) CHANGES IN CONTROL The Registrant knows of no contractual arrangements, including any pledge by any person of securities of the Registrant, the operation of which may at a subsequent date result in a change in control of the Registrant. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the captions "Security Ownership of Certain Beneficial Owners and Management," "Election of Directors" and "Executive Compensation" in Registrant's 1996 Proxy Statement. 15 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) (1) FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT: Report of Independent Accountants Consolidated Statements of Operations for the years ended June 30, 1996, 1995 and 1994 Consolidated Balance Sheets as of June 30, 1996 and 1995 Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994 Consolidated Statements of Stockholders' Equity (deficiency) for the years ended June 30, 1996, 1995 and 1994 Notes to Consolidated Financial Statements (2) FINANCIAL STATEMENT SCHEDULES Schedule II Valuation and Qualifying Accounts All other financial statements and schedules not listed have been omitted since the required information is included in the Consolidated Financial Statements or the Notes thereto, or is not applicable, material or required. (3) EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------- 2 -- Purchase and Sale Agreement dated March 26, 1996 as amended and restated on May 23, 1996, between Concurrent Computer Corporation (the "Company") and Harris Computer Systems Corporation ("HCSC").(a) 3.1 -- Restated Certificate of Incorporation of the Company.(b) 3.2 -- By-laws of the Company. 3.3 -- Certificate of Designation, Preferences and Rights of Class B Convertible Preferred Stock.(c) 4.1 -- Form of Share Holding Agreement dated June 27, 1996 between the Company and HCSC. (c) 4.2 -- Form of Common Stock Certificate.(d) 4.3 -- Rights Agreement dated as of July 31, 1992 between the Company and The First National Bank of Boston, as rights agent.(e) *10.1(a) -- 1991 Restated Stock Option Plan.(f) *10.1(b) -- Amendment No. 1 to 1991 Restated Stock Option Plan.(f) *10.1(c) -- Amendment to 1991 Restated Stock Option Plan dated May 13, 1996.(a) 10.2(a) -- Employee Stock Purchase Plan.(f) 10.2(b) -- Amendment No. 1 to Employee Stock Purchase Plan.(g) 10.3 -- Retirement Savings Plan (f/k/a Profit Sharing and Savings Plan) of former Concurrent dated August 1, 1985, as restated.(h) *10.4 -- Form of Severance Agreement between the Company and its executive officers. All agreements contain substantially the same terms other than annual base salary and annual target bonus percentage.(i)
16 18
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------- *10.4(a) -- Employment Agreement dated as of March 25, 1996 between the Company and E. Courtney Siegel. *10.5 -- Form of Incentive Stock Option Agreement between the Company and its executive officers. All agreements contain the same terms with the exception of the number or shares subject to the option and the vesting schedules.(j) 10.6(a) -- Amended and Restated Credit Agreement dated October 11, 1991 among the Company and the banks named therein, as amended by Amendment No. 1 dated November 14, 1991.(k) 10.6(b) -- Amendment No. 2 dated as of January 13, 1992 to Amended and Restated Credit Agreement. (j) 10.6(c) -- Amendment No. 3 dated as of March 1, 1993 to Amended and Restated Credit Agreement. (i) 10.7(a) -- Second Amended and Restated Credit Agreement.(l) 10.7(b) -- Amendment No. 1 dated September 28, 1993 to Second Amended and Restated Credit Agreement.(l) 10.7(c) -- Amendment No. 2 dated November 10, 1993 to Second Amended and Restated Credit Agreement.(m) 10.7(d) -- Amendment No. 3 dated November 18, 1993 to Second Amended and Restated Credit Agreement.(m) 10.7(e) -- Amendment No. 4 dated February 18, 1994 to Second Amended and Restated Credit Agreement.(m) 10.7(f) -- Amendment No. 5 dated August 19, 1994 to Second Amended and Restated Credit Agreement.(m) 10.7(g) -- Amendment No. 6 dated February 28, 1995 to Second Amended and Restated Credit Agreement.(n) 10.7(h) -- Amendment No. 7 dated March 31, 1995 to Second Amended and Restated Credit Agreement.(n) 10.7(i) -- Third Amended and Restated Credit Agreement dated June 29, 1995.(n) 10.8 -- AT&T Information Systems Sublicensing Agreement.(b) 10.9 -- Loan and Security Agreement dated June 29, 1995 between the Company and the lender named therein.(n) 10.9(a) -- Amended and Restated Amendment No. 1 to Loan and Security Agreement dated October 17, 1995. 10.9(b) -- Amendment No. 2 to Loan and Security Agreement dated October 12, 1995. 10.9(c) -- Amendment No. 3 to Loan and Security Agreement dated December 6, 1995. 10.9(d) -- Amendment No. 4 to Loan and Security Agreement dated January 25, 1996. 10.9(e) -- Amendment No. 5 to Loan and Security Agreement dated February 16, 1996. 10.9(f) -- Amendment No. 6 to Loan and Security Agreement dated February 27, 1996. 10.9(g) -- Amendment No. 7 to Loan and Security Agreement dated April 26, 1996. 10.9(h) -- Amendment No. 8 to Loan and Security Agreement dated June 11, 1996. 10.9(i) -- Amendment No. 9 to Loan and Security Agreement dated June 27, 1996. 10.9(j) -- Amendment No. 10 to Loan and Security Agreement dated August 28, 1996.
17 19
EXHIBIT NO. DESCRIPTION - ----------- ------------------------------------------------------------------------------- 11 -- Statement re: computation of per share earnings. 21 -- Subsidiaries of Registrant. 23 -- Consent of Coopers & Lybrand L.L.P. 27 -- Financial Data Schedule.
- --------------- * Management contract or compensatory plan or arrangement. (a) Incorporated herein by reference to the Exhibits to the Company's proxy materials dated May 23, 1996. (b) Incorporated herein by reference to the Exhibits to the Company's Amendment No. 3 to Registration Statement on Form S-2 dated July 14, 1993 (No. 33-62440). (c) Incorporated herein by reference to the Exhibits to the Company's Current Report on Form 8-K, dated April 19, 1996. (d) Incorporated herein by reference to Exhibit Number 4.4 of Item 14 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992. (e) Incorporated herein by reference to the Company's Current Report on Form 8-K dated August 20, 1992. (f) Incorporated herein by reference to Notice of 1991 Annual Meeting of Stockholders and Proxy Statement, dated January 10, 1992. (g) Incorporated herein by reference to Notice of 1992 Annual Meeting of Stockholders and Proxy Statement, dated October 2, 1992. (h) Incorporated herein by reference to Exhibit Number 10 of Item 14 of the Company's Annual Report on Form 10-K for the fiscal year ended July 2, 1988. (i) Incorporated herein by reference to Exhibit Number 10 of Item 14 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991. (j) Incorporated herein by reference to the Exhibits to the Company's Amendment No. 1 to Registration Statement on Form S-1 dated April 20, 1992. (No. 33-45871). (k) Incorporated hereby by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991. (l) Incorporated herein by reference to Exhibit Number 10 of Item 14 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993. (m) Incorporated herein by reference to Exhibit Number 10 of Item 14 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994. (n) Incorporated herein by reference to Exhibit Number 10 of Item 14 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995. (B) REPORTS ON FORM 8-K. During the quarter ended June 30, 1996, the Company filed a report on Form 8-K dated April 19, 1996 reporting that it had entered into a Purchase and Sale Agreement with Harris Computer Systems Corporation ("HCSC"), dated March 26, 1996, providing for, among other things, the purchase by Concurrent of the real- time business of HCSC. 18 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONCURRENT COMPUTER CORPORATION By: /s/ DANIEL S. DUNLEAVY ------------------------------------ Daniel S. Dunleavy Vice President, Chief Financial Officer Date: September 27, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Registrant and in the capacities and on the date indicated.
NAME CAPACITY - --------------------------------------------- ------------------------------ /s/ E. COURTNEY SIEGEL Director, President and Chief - --------------------------------------------- Executive Officer (Principal E. Courtney Siegel Executive Officer) /s/ DANIEL S. DUNLEAVY Vice President, Chief - --------------------------------------------- Financial Officer (Principal Daniel S. Dunleavy Financial and Accounting Officer) /s/ MICHAEL A. BRUNNER Director - --------------------------------------------- Michael A. Brunner /s/ C. FORBES DEWEY, JR. Director - --------------------------------------------- C. Forbes Dewey, Jr. /s/ MORTON E. HANDEL Director September 27, 1996 - --------------------------------------------- Morton E. Handel /s/ C. SHELTON JAMES Director - --------------------------------------------- C. Shelton James /s/ MICHAEL F. MAGUIRE Director - --------------------------------------------- Michael F. Maguire /s/ RICHARD P. RIFENBURGH Director - --------------------------------------------- Richard P. Rifenburgh /s/ ROBERT R. SPARACINO Director - --------------------------------------------- Robert R. Sparacino
19 21 CONCURRENT COMPUTER CORPORATION ANNUAL REPORT ON FORM 10-K ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA YEAR ENDED JUNE 30, 1996 20 22 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and the Board of Directors of Concurrent Computer Corporation We have audited the accompanying consolidated balance sheets of Concurrent Computer Corporation (the "Company") as of June 30, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity (deficiency) and cash flows for each of the three years in the period ended June 30, 1996, and the financial statement schedule listed in Item 14(a) of the Company's 1996 Annual Report on Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Concurrent Computer Corporation as of June 30, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. As discussed in Notes 2 and 12 to the consolidated financial statements, in 1994 the Company changed its method of accounting for income taxes and changed its method of accounting for postretirement benefits other than pensions. COOPERS & LYBRAND L.L.P. Parsippany, New Jersey August 12, 1996, except for Note 20, as to which the date is September 27, 1996 21 23 CONCURRENT COMPUTER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JUNE 30, ------------------------------ 1996 1995 1994* -------- -------- -------- Net sales: Computer systems............................................. $ 42,430 $ 72,074 $100,293 Service and other............................................ 53,370 68,070 78,738 -------- -------- -------- Total................................................ 95,800 140,144 179,031 -------- -------- -------- Cost of sales: Computer systems............................................. 27,487 38,639 54,517 Service and other............................................ 33,048 40,838 48,473 -------- -------- -------- Total................................................ 60,535 79,477 102,990 -------- -------- -------- Gross margin................................................... 35,265 60,667 76,041 -------- -------- -------- Operating expenses: Research and development..................................... 13,837 19,464 23,823 Selling, general and administrative.......................... 29,818 36,921 48,651 Provision for restructuring.................................. 24,480 3,200 12,000 Sales and use tax credit..................................... -- (1,000) (1,440) -------- -------- -------- Total operating expenses............................. 68,135 58,585 83,034 -------- -------- -------- Operating income (loss)........................................ (32,870) 2,082 (6,993) Interest expense............................................... (2,316) (2,638) (3,486) Interest income................................................ 226 513 634 Other non-recurring charge..................................... (1,700) (1,000) -- Other income (expense) -- net.................................. (1,502) 737 (486) -------- -------- -------- Loss before provision for income taxes, extraordinary loss and cumulative effect of change in accounting principles......... (38,162) (306) (10,331) Provision for income taxes..................................... 1,550 1,700 1,300 -------- -------- -------- Loss before extraordinary loss and cumulative effect of change in accounting principles..................................... (39,712) (2,006) (11,631) Extraordinary loss on early extinguishment of debt............. -- -- (23,193) Cumulative effect of change in accounting principles for income taxes and postretirement benefits............................ -- -- (5,000) -------- -------- -------- Net loss....................................................... $(39,712) $ (2,006) $(39,824) ======== ======== ======== Loss per share: Loss before extraordinary loss and cumulative effect of change in accounting principles........................... $ (1.30) $ (0.07) $ (0.41) Extraordinary loss on early extinguishment of debt........... -- -- (0.83) Cumulative effect of change in accounting principles for income taxes and postretirement benefits.................. -- -- (0.18) -------- -------- -------- Net loss..................................................... $ (1.30) $ (0.07) $ (1.42) ======== ======== ========
- --------------- * Reclassified to conform to current year presentation. The accompanying notes are an integral part of the consolidated financial statements. 22 24 CONCURRENT COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, JUNE 30, 1996 1995* -------- -------- ASSETS Current assets: Cash and cash equivalents............................................ $ 3,562 $ 5,728 Trading securities................................................... 10,077 -- Accounts receivable, less allowance for doubtful accounts of $1,143 -- 1996; $1,434 -- 1995.................................... 27,948 25,456 Inventories.......................................................... 11,683 14,510 Prepaid expenses and other current assets............................ 2,384 4,303 ------- ------- Total current assets......................................... 55,654 49,997 Property, plant and equipment -- net................................... 16,453 38,567 Facilities held for disposal........................................... 4,700 4,000 Other long term assets................................................. 3,407 5,795 ------- ------- Total assets........................................................... $ 80,214 $ 98,359 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable........................................................ $ 5,013 $ 6,716 Current portion of long-term debt.................................... 1,241 1,529 Revolving credit facility............................................ 5,014 5,761 Accounts payable and accrued expenses................................ 40,638 29,285 Deferred revenue..................................................... 4,573 4,841 ------- ------- Total current liabilities.................................... 56,479 48,132 Long-term debt......................................................... 6,603 9,536 Other long-term liabilities............................................ 4,454 5,521 Commitments and contingencies.......................................... -- -- Class B 9% cumulative convertible, redeemable, exchangeable preferred stock, mandatory redemption value of $6,263,000, $.01 par value per share 1,000,000 authorized -- Issued and outstanding 1,000,000 at June 30, 1996........................................................ 5,610 -- Stockholders' equity: Shares of preferred stock, par value $.01; authorized 25,000,000..... -- -- Shares of common stock, par value $.01; authorized 100,000,000; issued 41,223,610 -- 1996 and 30,208,276 -- 1995.................. 412 302 Capital in excess of par value....................................... 84,252 73,112 Accumulated deficit after eliminating accumulated deficit of $81,826 at December 31, 1991, date of quasi-reorganization................ (76,740) (37,028) Treasury stock, at cost; 840 shares.................................. (58) (58) Cumulative translation adjustment.................................... (798) (1,158) ------- ------- Total stockholders' equity................................... 7,068 35,170 ------- ------- Total liabilities and stockholders' equity................... $ 80,214 $ 98,359 ======= =======
- --------------- * Reclassified to conform to current year presentation. The accompanying notes are an integral part of the consolidated financial statements. 23 25 CONCURRENT COMPUTER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED JUNE 30, ------------------------------ 1996 1995 1994* -------- -------- -------- Cash flows provided by (used by) operating activities: Net loss............................................................... $(39,712) $ (2,006) $(39,824) -------- -------- -------- Adjustments to reconcile net loss to net cash provided by (used by) operating activities: Depreciation, amortization and other................................. 11,067 12,284 12,527 Provision for inventory reserves..................................... 4,904 5,037 4,461 Non-cash taxes related to the utilization of net operating loss carryforwards which originated prior to the Company's quasi-reorganization, effected on December 31, 1991................. -- 300 -- Non-cash interest and amortization of financing costs................ 213 450 1,061 Extraordinary loss on early extinguishment of debt................... -- -- 23,193 Cumulative effect of change in accounting principles................. -- -- 5,000 Provisions for restructuring......................................... 24,480 3,200 12,000 Other non-recurring charge........................................... 1,700 1,000 -- Sales and use tax credit............................................. -- (1,000) (1,440) Decrease (increase) in current assets: Accounts receivable................................................ 6,086 10,431 3,690 Inventories........................................................ (157) (2,044) (319) Prepaid expenses and other current assets.......................... 555 998 1,238 Decrease in current liabilities, other than debt obligations......... (6,104) (18,017) (14,797) Decrease (increase) in other long-term assets........................ 880 599 (1,790) (Decrease) increase in other long-term liabilities................... (639) (1,983) 193 -------- -------- -------- Total adjustments to net loss................................... 42,985 11,255 45,017 -------- -------- -------- Net cash provided by operating activities................................ 3,273 9,249 5,193 -------- -------- -------- Cash flows used by investing activities: Additions to property, plant and equipment............................. (2,513) (5,140) (7,584) Proceeds from sale of facility......................................... 2,300 -- -- Acquisition of business, net of cash received and non-cash transactions......................................................... (2,980) -- -- -------- -------- -------- Net cash used by investing activities.................................... (3,193) (5,140) (7,584) -------- -------- -------- Cash flows provided by (used by) financing activities: Net (payments) proceeds of notes payable............................... (99) (100) 2,511 Repayment of long-term debt............................................ (3,915) (23,395) (76,602) Issuance of long-term debt............................................. -- 15,761 708 Net proceeds from issuance of common stock............................. 1,031 150 55,001 -------- -------- -------- Net cash used by financing activities.................................... (2,983) (7,584) (18,382) -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents............. 737 (171) (275) -------- -------- -------- Decrease in cash and cash equivalents.................................... $ (2,166) $ (3,646) $(21,048) ======== ======== ======== Cash and cash equivalents -- Beginning of year........................... $ 5,728 $ 9,374 $ 30,422 ======== ======== ======== Cash and cash equivalents -- End of year................................. $ 3,562 $ 5,728 $ 9,374 ======== ======== ======== Cash paid during the period for: Interest............................................................. $ 1,931 $ 2,256 $ 2,731 ======== ======== ======== Income taxes (net of refunds)........................................ $ 1,659 $ 727 $ 659 ======== ======== ======== Non-cash investing/financing activities related to acquisition of business: Issuance of common stock............................................... 10,111 -- -- -------- Issuance of preferred stock............................................ 5,610 -- -- --------
- --------------- * Reclassified to conform to current year presentation. The accompanying notes are an integral part of the consolidated financial statements. 24 26 CONCURRENT COMPUTER CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
PREFERRED STOCK COMMON STOCK TREASURY ------------------ ------------------ CAPITAL IN ACCUMULATED CUMULATIVE STOCK PAR PAR EXCESS OF EARNINGS TRANSLATION ------------- SHARES VALUE SHARES VALUE PAR VALUE (DEFICIT) ADJUSTMENT SHARES COST TOTAL ---------- ----- ---------- ----- ---------- ----------- ---------- ------ ---- ------- Balance June 30, 1993................ 6,981,706 $ 70 2,579,026 $ 26 $ 15,626 $ 4,802 $ (1,963) (840 ) $(58) $18,503 Issuance of common stock under retirement savings plan................ 324,377 3 1,057 1,060 Issuance of common stock............... 19,700,000 197 54,803 55,000 Conversion of preferred stock..... (6,981,706) (70 ) 6,981,706 70 -- Other................. 279 61 61 Net Loss.............. (39,824) (39,824) Foreign currency translation adjustment.......... 248 248 --------- --- ---------- ---- ------- -------- ------- ---- ---- ------- Balance June 30, 1994................ 29,585,388 296 71,547 (35,022) (1,715) (840 ) (58) 35,048 Sale of common stock under stock plans... 85,358 1 149 150 Issuance of common stock under retirement savings plan................ 368,823 3 762 765 Issuance of common stock under bonus plan................ 168,707 2 324 326 Other................. 30 30 Net loss.............. (2,006) (2,006) Foreign currency translation adjustment.......... 557 557 Quasi-reorganization related adjustments: Utilization of net operating loss carryforwards....... 300 300 --------- --- ---------- ---- ------- -------- ------- ---- ---- ------- Balance June 30, 1995................ -- -- 30,208,276 302 73,112 (37,028) (1,158) (840 ) (58) 35,170 Sale of common stock under stock plans... 379,679 4 513 517 Issuance of common stock under retirement savings plan................ 270,109 3 516 519 Issuance of common stock in connection with acquisition of business, including certain advisory fees................ 10,365,546 103 10,111 10,214 Net loss.............. (39,712) (39,712) Foreign currency translation adjustment.......... 360 360 --------- --- ---------- ---- ------- -------- ------- ---- ---- ------- Balance June 30, 1996................ -- -- 41,223,610 $412 $ 84,252 $ (76,740) $ (798) (840 ) $(58) $ 7,068 ========= === ========== ==== ======= ======== ======= ==== ==== =======
The accompanying notes are an integral part of the consolidated financial statements. 25 27 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION Concurrent Computer Corporation ("Concurrent" or the "Company") is a supplier of high-performance real-time computer systems and services. A "real-time" system is one specially designed to acquire, process, store and display large amounts of rapidly changing information in real time -- that is, with microsecond response as changes occur. Concurrent sells its systems in strategic target markets worldwide primarily through direct field sales and services offices. Such target markets include simulation; data acquisition; instrumentation and process control; interactive real time (includes multimedia and wagering and gaming) and telecommunications. During fiscal year 1996, the Company continued to experience a decline in net sales. In addition, Concurrent incurred a substantial operating loss, cash flow from operations declined from the previous fiscal year and the Company had a working capital deficiency at June 30, 1996. Accordingly, the Company continued to closely manage its resources and, in order to enhance its competitive position and improve its cost structure and liquidity, on June 27, 1996, the Company acquired the Real-Time Division of Harris Computer Systems Corporation ("HCSC"), along with 683,178 shares of newly issued shares of HCSC (see Note 3) which was renamed CyberGuard Corporation ("CyberGuard"). In addition, on March 20, 1996, the Company completed the sale of its Tinton Falls, New Jersey facility (see note 10). The acquisition of HCSC's Real-Time Division and the related business integration and consolidation is expected to improve Concurrent's liquidity through improved operating performance, additional borrowing availability and the planned disposition of its Oceanport, New Jersey facility. The Company may also utilize its CyberGuard common stock holdings as an additional source of liquidity if needed. The Company anticipates a continuing decline in its proprietary computer systems sales, however, it believes the combination of the best technologies of the two businesses will offset the proprietary systems sales decline through increased open systems sales. The Company plans to manage its cost structure and cash flow to anticipated revenue levels and believes its restructuring plans will reduce its expenses to a level consistent with its forecasted volume. The Company believes that it will be able to fund its acquisition costs, as well as its fiscal year 1997 operations, through its operating results, existing financing facilities and the planned disposition of its Oceanport, New Jersey facility. However, there can be no assurance that the Company's plans will be achieved. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of all majority-owned domestic and foreign subsidiary companies. All intercompany transactions and balances have been eliminated. Foreign Currency The functional currency of substantially all of the Company's foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using average rates of exchange prevailing during the fiscal year. Adjustments resulting from the translation of foreign currency financial statements are accumulated in a separate component of stockholders' equity until the entity is sold or substantially liquidated. Gains or losses resulting from foreign currency transactions are included in the results of operations, except for those relating to intercompany transactions of a long-term investment nature which are accumulated in a separate component of stockholders' equity. Gains (losses) on foreign currency transactions of ($934,000), $175,000 and ($360,000) for the fiscal years ended June 30, 1996, 1995 and 1994, respectively, are included in Other income (expense) -- net. 26 28 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Cash and Cash Equivalents For financial statement purposes, short-term investments with original maturities of ninety days or less from the date of purchase are considered cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market, and represents cash invested in U.S. Government securities, bank certificates of deposit, or commercial paper. Such short-term investments amounted to $26,000 and $480,000 at June 30, 1996 and 1995, respectively. At June 30, 1996, the Company had $439,000 of restricted cash primarily supporting building rental deposits. Inventories Inventories are stated at the lower of cost or market, with cost determined on the first-in, first-out basis. The Company establishes excess and obsolete inventory reserves based upon historical and anticipated usage. Property, Plant and Equipment Property, plant and equipment are stated at acquired cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of assets ranging from three to forty years. Leasehold improvements are amortized over the shorter of the useful lives of the improvements or the terms of the related lease. Gains and losses resulting from the disposition of property, plant and equipment are included in Other income (expense) -- net. Expenditures for repairs and maintenance are charged to operations as incurred and expenditures for major renewals and betterments are capitalized. Revenue Recognition Computer systems sales (hardware and software, including bundled software) are recorded when the earnings process is complete, typically upon shipment to customers. Service contract revenue related to hardware and software is recognized separately and as earned over the respective maintenance period in accordance with the terms of the applicable contract. Revenue from long-term development contracts is accounted for by the percentage of completion method whereby income is recognized based on the estimated stage of completion of individual contracts using costs incurred as a percentage of total estimated costs at completion. Losses on long-term contracts are recognized in the period in which such losses are determined. Capitalized Software The Company, in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed", commences capitalization of software production costs upon the achievement of technological feasibility and ceases capitalization upon the achievement of customer availability. Such costs are amortized over the greater of the ratio of the product's current to total revenue stream or the straight-line method over its estimated useful life. Such amortization period generally does not exceed three years. For the years ended June 30, 1996, 1995 and 1994, amortization expense relating to software production costs which is included as a component of cost of sales amounted to $1,070,000, $1,160,000 and $445,000, respectively. Accumulated amortization amounted to $2,261,000 and $1,325,000, respectively, at June 30, 1996 and 1995. Capitalized software (net) amounted to $29,000 and $965,000 at June 30, 1996 and 1995, respectively. Research and Development Research and development expenditures, other than capitalized software, are expensed when incurred. 27 29 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Loss per Share Loss per share is computed on the basis of the weighted average number of common shares outstanding during each year for the period. The number of shares used in computing loss per share was 30,568,000, 30,095,000 and 28,054,000 for the years ended June 30, 1996, 1995 and 1994, respectively. Impairment of Long-Lived Assets On July 1, 1995, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS No. 121"). This statement establishes accounting standards for when impairment losses relating to long-lived assets, identifiable intangibles, and goodwill related to those assets should be reviewed and how the losses should be measured. The adoption of this standard did not materially affect the Company's earnings, financial condition or cash flows as this was essentially the same method used in the past to measure and record asset impairments. The Company's fiscal 1996 provision for restructuring included the recognition of certain asset impairments as a result of the Company's restructuring plans. Income Taxes The Company and its domestic subsidiaries file a consolidated Federal income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes and are accounted for under the asset and liability method as required by the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS No. 109"). On July 1, 1993, the Company adopted the provisions of FAS No. 109. This standard requires a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, a deferred tax asset or liability is recognized for temporary differences between financial reporting and income tax bases of assets and liabilities, tax credit carryforwards and operating loss carryforwards. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that such deferred tax assets will not be realized. Utilization of net operating loss carryforwards and tax credits, which originated prior to the Company's quasi-reorganization effected on December 31, 1991, are recorded as adjustments to capital in excess of par value. Prior years' financial statements have not been restated. The cumulative effect of adopting this standard in fiscal year 1994 resulted in the Company recording a $2.0 million non-cash charge reducing its deferred tax assets as of the date of adoption. Postretirement Benefits Other Than Pensions On July 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106"). This standard requires companies to accrue postretirement benefits throughout the employees' active service periods until they attain full eligibility for those benefits. The transition obligation (the accumulated postretirement benefit obligation at the date of adoption) may be recognized either immediately or by amortization over the longer of the average remaining service period for active employees or 20 years. In connection with the adoption of this standard, in fiscal year 1994, the Company recorded a non-cash charge of $3.0 million representing the immediate recognition of the accumulated postretirement benefit obligation at the date of adoption. Stock-Based Compensation In fiscal year 1997, the Company will adopt the provisions of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS No. 123"). This standard establishes a fair value method for accounting for stock-based compensation plans based upon the fair value of stock 28 30 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) options and similar instruments, but does not require the adoption of this preferred method. The Company intends to adopt this standard by disclosing the pro forma net income and earnings per share amounts assuming the fair value method was adopted on July 1, 1996. The adoption of this standard will not impact results of operations, financial position or cash flows. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. ACQUISITION On June 27, 1996 Concurrent acquired the assets of the Real-Time Division of Harris Computer Systems Corporation ("HCSC") and 683,178 newly-issued shares of HCSC, which was renamed CyberGuard Corporation ("CyberGuard"), in exchange for 10,000,000 shares or $9.7 million of Common Stock of Concurrent, 1,000,000 shares of convertible exchangeable preferred stock of Concurrent with a 9% cumulative annual dividend payable quarterly in arrears, mandatory redemption value of $6,263,000 (with an estimated fair value of $5.6 million), and the assumption of certain liabilities relating to the HCSC Real-Time Division (the "Acquisition"). The aggregate purchase price of the Acquisition was approximately $18.7 million, including $3.4 million in transaction expenses (principally financial advisor, legal and other professional fees). The Acquisition has been accounted for as a purchase effective June 30, 1996. The Acquisition resulted in excess of acquired net assets over cost (negative goodwill) amounting to approximately $8.7 million which has been allocated to reduce proportionately the values assigned to non-current assets. In connection with the Acquisition, the Company recorded a $1.4 million liability for the estimated costs of exiting certain activities of the acquired business and the cost of termination benefits for employees of the acquired business. This liability included the estimated costs for workforce reductions, office closings and other related costs which represented approximately 45%, 45% and 10% of the provision, respectively. The following unaudited pro forma financial information gives effect to the Acquisition as if it had been consummated as of July 1, 1995 and 1994. In accordance with generally accepted accounting principles, pro forma adjustments related to the depreciation and amortization of assets, preferred stock dividends, interest income and certain other adjustments are included in the pro forma financial information. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the Acquisition been in effect at the beginning of the periods, nor of the future results of operations of the combined companies.
YEAR ENDED JUNE 30, ------------------- 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Net sales................................................................ $133,871 $180,438 Net loss................................................................. $(44,498) $ (8,102) Net loss per share....................................................... $ (1.10) $ (0.22)
29 31 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assets acquired and liabilities assumed as a result of the Acquisition, after eliminating the excess of acquired net assets over cost by allocating such excess to reduce proportionately the values assigned to noncurrent assets, were as follows:
(DOLLARS IN THOUSANDS) --------- Cash............................................................. $ 420 Trading securities............................................... 10,077 Accounts receivable.............................................. 9,695 Inventories...................................................... 3,785 Other current assets............................................. 110 Property, plant and equipment.................................... 921 Other assets..................................................... 376 Accounts payable and accrued liabilities......................... (6,674) ------- Total -- net........................................... $18,710 =======
The value assigned to trading securities reflects the acquisition of 683,173 shares of CyberGuard common stock at the market price per share on the date of the Acquisition. The market value of this asset is subject to changes in the market price of CyberGuard stock. The amount the Company will ultimately realize from any disposition of these securities could differ materially in the near term from the amounts reflected in the Company's June 30, 1996 balance sheet. As of September 20, 1996, the market value of the Company's CyberGuard stock holdings amounted to approximately $5.5 million. 4. PROVISION FOR RESTRUCTURING The Company recorded a $1.3 million and a $23.2 million provision for restructuring during the quarters ended December 31, 1995 and June 30, 1996, respectively. In October 1995, the Company's management approved a plan to restructure its operations. This plan provided for a reduction of approximately 55 employees worldwide and the downsizing or closing of certain office locations, representing approximately 85% and 15% of the related $1.3 million provision. In connection with the Acquisition, based on formal, approved plans, the Company recorded a $23.2 million restructuring provision. Such charge included the estimated costs related to the rationalization of facilities, workforce reductions, asset writedowns and other costs which represent approximately 44%, 28%, 26% and 2%, respectively. The rationalization of facilities includes the planned disposition of the Company's Oceanport, New Jersey facility (see Notes 10 and 20), as well as the closing or downsizing of certain offices located throughout the world. The workforce reductions include the termination of approximately 200 employees worldwide, encompassing substantially all of the Company's employee groups. The asset writedowns are primarily related to the planned disposition of duplicative machinery and equipment. During the year ended June 30, 1996, the actual cash payments related to the 1996 restructurings amounted to approximately $1.4 million and were primarily related to employee termination costs. On May 5, 1992, the Company had entered into an agreement with Industrial Development Authority (IDA) in Ireland to maintain a presence in Ireland through April 30, 1998. In connection with the Acquisition, the Company has decided to close its Ireland operations. As such, the Company may be required to pay approximately $575,000 (360,000 Irish Pounds) to the IDA. The Company is currently negotiating this with the IDA. During the year ended June 30, 1995, the Company recorded a provision for restructuring of $3.2 million. The provision included costs for workforce reductions, office closings or downsizings and other related costs which represented approximately 60%, 30% and 10% of the provision, respectively. During the year ended June 30, 1996, the actual cash payments related to the 1995 restructuring amounted to approximately $0.7 million and were primarily related to employee termination and office closing costs. 30 32 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During the year ended June 30, 1994, the Company recorded a provision for restructuring of $12.0 million in connection with its operational restructuring to reduce its worldwide cost structure. The provision included workforce reductions, office closings or downsizings and other related costs which represented approximately 65%, 25% and 10% of the provision, respectively. During the year ended June 30, 1996, the actual cash payments related to the 1994 restructuring amounted to approximately $0.9 million and were primarily related to office closing costs. 5. DEBT AND LINES OF CREDIT On June 28, 1996, the Company entered into a new agreement providing for a $19.9 million credit facility which matures August 1, 1999. The facility includes a $7.2 million term loan (the "New Term Loan") and a $12.7 million revolving credit facility (the "New Revolver"). The New Revolver represents a $4.7 million increase to the maximum revolver availability, subject to certain restrictions. In addition, the Company can borrow up to $3.0 million in standby letters of credit (the LOC's) in connection with overseas lines of credit. These LOC's mature on July 31, 1997, at which time the Company must extend the expiration date of the LOC's to August 1, 1999 or obtain alternative financing or guarantees in lieu thereof. At June 30, 1996, the outstanding balances under the New Term Loan and the New Revolver were $7.2 and $5.0 million, respectively. The entire outstanding balance of the New Revolver has been classified as a current liability at June 30, 1996. Both the New Term Loan and the New Revolver bear interest at the prime rate plus 2.0%. The New Term Loan is payable in 28 monthly installments of approximately $139,000 each, commencing October 1, 1996 and ending January 1, 1999, with the final balance of approximately $3.3 million payable August 1, 1999. The New Revolver may be repaid and reborrowed, subject to certain collateral requirements, at any time during the term ending August 1, 1999. The Company has pledged substantially all of its domestic assets as collateral for the New Term Loan and the New Revolver. The Company may repay the New Term Loan at any time without penalty. In the event of a sale, or sale/leaseback, of its Oceanport facility, the Company is required to make a prepayment of the New Term Loan up to an amount equal to 75% of the net sale proceeds. Certain early termination fees apply if the Company terminates the facility in its entirety prior to August 1, 1999. On August 5, 1996, the Company obtained a waiver of compliance with respect to certain financial covenants for the year ended June 30, 1996. The new agreement contains various covenants (for periods subsequent to June 30, 1996) and restrictions, which among other things (1) place certain limits on corporate acts of the Company such as fundamental changes in the corporate structure of the Company, investments in other entities, incurrence of additional indebtedness, creation of liens or certain distributions or dispositions of assets, including cash dividends, and (2) require the Company to meet financial tests on a periodic basis, the most restrictive of which relate to the maintenance of collateral coverage and debt coverage all as defined in the agreement. In addition, the new agreement contains a subjective provision entitling the lender to accelerate payments under the New Term Loan and New Revolver. At June 30, 1995, the outstanding balance under the then existing term loan (the "Old Term Loan") and the then existing revolver (the "Old Revolver"), which resulted from the refinancing of a previous bank term loan, amounted to $10.0 and $5.8 million, respectively. Both bore interest at the prime rate plus 2.0%. The Old Term Loan was payable in 36 equal installments of $139,000 each, commencing August 1, 1995, with a final payment of approximately $5.0 million payable August 1, 1998. The Company had pledged substantially all of its domestic assets as collateral for the Old Term Loan and the Old Revolver. The Company's foreign subsidiaries have certain bank borrowing arrangements in local currencies which provide for borrowings of up to $6,702,000 at prevailing rates of interest ranging from 1.625% to 9.3% at June 30, 1996. At June 30, 1996, $5,013,000 of demand notes were outstanding under such arrangements of which $1,834,000 is guaranteed by the minority shareholder in the Company's Japanese subsidiary and $2,734,000 is guaranteed by the Company (one of these demand notes is not guaranteed by either the 31 33 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company or the minority shareholder). Foreign unused lines of credit can be withdrawn at any time at the option of either the Company or the lending institutions. The joint venture agreement between the Company and the minority shareholder in the Japanese subsidiary expires on December 31, 1996. Management expects to extend the joint venture agreement through June 30, 1998. There can be no assurance that the agreement will be extended and, in the event the agreement is not extended, the Company may be required to extend its guarantees, or repay the demand notes and seek alternative financing. Annual maturities of all the Company's debt (including $5,013,000 of foreign demand notes) for the fiscal years ended June 30, 1997 through 2001, and thereafter, are as follows:
ANNUAL MATURITIES ----------- (DOLLARS IN THOUSANDS) 1997........................................................... $11,268 1998........................................................... 2,081 1999........................................................... 1,194 2000........................................................... 3,328 2001........................................................... -- Thereafter..................................................... -- ------- Total................................................ $17,871 =======
6. REFINANCING On July 21, 1993, the Company completed a comprehensive refinancing (the "1993 Refinancing"). The 1993 Refinancing consisted of the following: a) the sale and issuance of 19,700,000 shares of common stock, with a par value of $0.01, at a price of $3.00 per share for $59.1 million less issuance costs of approximately $4.1 million (the "Offering"); b) the modification of the Company's then existing bank term loan to, among other things, extend the maturity date and reduce the interest rate; and c) the conversion of all of the 6,981,706 outstanding shares of the Company's convertible participating preferred stock (the "Convertible Preferred Stock") into shares of common stock at a ratio of one to one. The net proceeds of the Offering ($55.0 million) together with $11.9 million of Company cash were used to redeem in full the Company's outstanding 12.08% Senior Subordinated Notes due 1997 (the "Subordinated Debt") at face amount, plus accrued interest, as of July 21, 1993. The Subordinated Debt was originally recorded with an original issue discount resulting in an effective yield-to-maturity of 25%. The redemption of the Subordinated Debt resulted in an extraordinary charge reducing net income by $23.2 million during the first quarter of fiscal year 1994 based on an aggregate cash redemption price of $66.9 million and a book value of $43.7 million. The 1993 Refinancing, including the effect of the redemption of the Subordinated Debt and related $23.2 million extraordinary charge, resulted in a $31.8 million increase to stockholders' equity as of the date the transactions were completed. The extraordinary loss on the early extinguishment of debt is determined as follows:
(DOLLARS IN THOUSANDS) Face amount of Subordinated Debt............................... $64,206 Accrued interest on Subordinated Debt.......................... 2,715 Sub-total.................................................... 66,921 Book value of Subordinated Debt................................ (43,728) ------- Extraordinary loss............................................. $23,193 =======
32 34 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The extraordinary loss on the early extinguishment of debt did not result in the recognition of a tax benefit due to a difference in the financial reporting and tax bases of the underlying subordinated debt. 7. CHANGE IN ACCOUNTING ESTIMATE During the three months ended December 31, 1994 and 1993, the Company recorded a sales and use tax credit of $1.0 million, or $.03 per share, and $1.4 million, or $.05 per share, respectively, related to a change in the estimate of state sales and use tax reserves based on a final state audit determination. 8. CONCENTRATION OF CREDIT RISK Concentration of credit risk with respect to trade receivables is limited due to the large number of customers comprising the Company's customer base. Ongoing credit evaluations of customers' financial condition are performed and collateral is generally not required. 9. INVENTORIES Inventories consist of:
1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Raw Materials.................................................. $ 8,789 $ 7,111 Work-in-process................................................ 352 753 Finished goods................................................. 2,542 6,646 ------- ------- $11,683 $14,510 ======= =======
At June 30, 1996, some portion of the Company's inventory was in excess of its planned requirements based upon forecasted level of sales for the fiscal year 1997. Accordingly, the Company has recorded a provision for inventory reserves to reduce the value of the inventory to its estimated net realizable value. There can be no assurance that the amounts the Company will ultimately realize from the disposition of this inventory will not differ materially from the reported amounts. 10. PROPERTY, PLANT AND EQUIPMENT AND OTHER LONG-TERM ASSETS Property, plant and equipment consists of:
1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Land........................................................... $ 2,449 $ 5,346 Buildings...................................................... 3,015 17,158 Machinery and equipment........................................ 55,202 53,636 ------- ------- 60,666 76,140 Less: Accumulated depreciation................................. (44,213) (37,573) ------- ------- $16,453 $38,567 ======= =======
For the years ended June 30, 1996, 1995 and 1994, depreciation and amortization expense for property plant and equipment amounted to $9,254,000, $10,641,000 and $11,685,000, respectively. On March 20, 1996, the Company completed the sale of its Tinton Falls, New Jersey facility. The net proceeds from this transaction amounted to approximately $2.3 million. During the quarter ended September 30, 1995, the Company recorded a non-recurring charge of $1.7 million to adjust the book value of this facility to its estimated fair value of $2.3 million. Upon completion of this transaction, the Company made a 33 35 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) mandatory prepayment of $1.7 million (75% of the net proceeds) related to the Old Term Loan, of which 50% was applied to the next six scheduled monthly principal payments and 50% was applied to the final maturity payment. During the quarter ended June 30, 1996, in connection with the Acquisition and the resulting planned disposition of the Company's Oceanport, New Jersey facility, the book value of land and building related to this facility was written down by $6,805,000 to its estimated fair value of $4,700,000 and classified as a facility held for disposal. While the estimated fair value at June 30, 1996 was based upon a valuation by independent appraisers, there have been limited recent sales of comparable properties to consider in preparing such valuation. The $6,805,000 write down was included in the provision for restructuring recorded in the quarter ended June 30, 1996 (see Note 4). 11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of:
1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Accounts payable -- trade.......................................... $ 9,453 $11,023 Accrued payroll, vacation and other employee expenses.............. 7,934 8,510 Restructuring costs................................................ 12,975 2,568 Other accrued expenses............................................. 10,276 7,184 ------- ------- $40,638 $29,285 ======= =======
12. INCOME TAXES The domestic and foreign components of income (loss) before provision for income taxes, extraordinary gain (loss) on early extinguishment of debt, and the cumulative effect of change in accounting principles are as follows:
1996 1995 1994 -------- ------- -------- (DOLLARS IN THOUSANDS) United States........................................... $(35,588) $(4,705) $ (5,758) Foreign................................................. (2,574) 4,399 (4,573) -------- ------- -------- $(38,162) $ (306) $(10,331) ======== ======= ========
34 36 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the provision for income taxes are as follows:
1996 1995 1994 ------ ------ ------ (DOLLARS IN THOUSANDS) Current: Federal............................................ $ -- $ -- Foreign............................................ 1,550 1,700 1,300 State.............................................. -- -- ------ ------ ------ Total...................................... $1,550 $1,700 $1,300 ------ ------ ------ Deferred: Federal............................................ $ -- $ -- $ -- Foreign............................................ -- -- State.............................................. -- -- -- ------ ------ ------ Total...................................... $ -- $ -- ------ ------ ------ Total................................................ $1,550 $1,700 $1,300 ====== ====== ======
For the fiscal year ended June 30, 1995, the current provision for income taxes includes an equivalent charge of $300,000, which was fully offset in capital in excess of par value due to the utilization of tax loss carryforwards which originated prior to the Company's quasi-reorganization, effected on December 31, 1991. A reconciliation of the Federal statutory tax provision to the Company's provision for income taxes is as follows:
1996 1995 1994 -------- ------- -------- (DOLLARS IN THOUSANDS) Income (loss) before provision for income taxes, extraordinary gain (loss) and cumulative effect of change in accounting principles....................... $(38,162) $ (306) $(10,331) -------- ------- -------- Tax at Federal statutory rate........................... (12,975) (104) (3,513) U.S. Federal and non U.S. net operating losses for which no tax benefit was recorded........................... 12,074 2,890 4,466 Difference between U.S. and non U.S. income tax rates... 70 (1,146) 10 Tax benefit related to permanent differences............ -- -- State income tax........................................ -- -- Other................................................... 2,381 60 337 -------- ------- -------- Provision for income taxes.............................. $ 1,550 $ 1,700 $ 1,300 ======== ======= ========
35 37 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of June 30, 1996 and 1995, the Company's deferred tax assets were comprised of the following:
JUNE 30, JUNE 30, 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Gross deferred tax assets related to: Net operating loss carryforwards............................... $ 40,657 $ 37,740 Accumulated depreciation....................................... 7,579 3,737 Restructuring reserves......................................... 7,833 3,253 Inventory reserves............................................. 5,609 3,300 Accrued compensation........................................... 496 931 Post-retirement benefits....................................... 844 928 Other.......................................................... 1,879 2,426 -------- -------- Total Gross deferred tax assets................................ 64,897 52,315 Valuation Allowance.............................................. (64,897) (52,315) -------- -------- Net deferred tax assets.......................................... $ 0 $ 0 ======== ========
During fiscal year 1994, the deferred tax liability related to the Company's Subordinated Debt was reversed upon the early extinguishment of such debt. In connection with this reversal, the Company recorded a corresponding increase to its deferred tax asset valuation allowance. Any future benefits attributable to the net operating loss carryforwards which originated prior to the Company's quasi-reorganization are accounted for through adjustments to capital in excess of par value. Under Section 382 of the Internal Revenue Code, future benefits attributable to the net operating loss carryforwards and tax credits which originated prior to the quasi-reorganization are limited to approximately $1.3 million per year and those which originated subsequent to the Company's quasi-reorganization through the date of the 1993 Refinancing are limited to approximately $0.3 million per year. The Company's net operating loss carryforwards begin to expire in 2004. As of June 30, 1996, after giving effect to the aforementioned Internal Revenue Code limitation, the Company has remaining utilizable net operating loss carryforwards of approximately $119.5 million for income tax purposes. Approximately $61 million of these net operating loss carryforwards originated prior to the Company's quasi-reorganization, effected on December 31, 1991. In addition, approximately $9 million of these net operating loss carryforwards originated subsequent to the Company's quasi-reorganization through the date of the 1993 Refinancing. Deferred income taxes have not been provided on approximately $10 million of undistributed earnings of foreign subsidiaries, which originated subsequent to the Company's quasi-reorganization, primarily due to either the Company's required investment in certain subsidiaries or foreign tax rates which exceed the U.S. tax rate. Additionally, deferred income taxes have not been provided on approximately $3 million of undistributed earnings of foreign subsidiaries which originated prior to the Company's quasi-reorganization. The impact of both the subsequent repatriation of such earnings and the resulting offset, in full, from the utilization of net operating loss carryforwards will be accounted for through adjustments to capital in excess of par value. 36 38 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. GEOGRAPHIC INFORMATION Below is a summary of the Company's 1996, 1995 and 1994 financial data by geographic area.
1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) Net Sales: United States................................................ $ 43,119 $ 75,362 $106,256 Intercompany................................................. 10,065 15,265 17,241 -------- -------- -------- 53,184 90,627 123,497 -------- -------- -------- Europe....................................................... 27,668 39,431 43,807 Intercompany................................................. 141 127 38 -------- -------- -------- 27,809 39,558 43,845 -------- -------- -------- Asia/Pacific................................................. 12,554 14,100 14,380 Japan........................................................ 10,410 7,818 11,759 Other........................................................ 2,049 3,433 2,829 -------- -------- -------- 106,006 155,536 28,968 Eliminations................................................. (10,206) (15,392) (17,279) -------- -------- -------- Total................................................ $ 95,800 $140,144 $179,031 ======== ======== ======== Operating income (loss): United States................................................ $(15,167) $ (2,398) $ (3,836) Europe....................................................... (18,583) 4,602 (2,432) Asia/Pacific................................................. 3,457 3,809 2,010 Japan........................................................ (388) (1,792) (103) Other........................................................ 441 863 853 General corporate expenses................................... (1,943) (2,741) (2,976) Eliminations................................................. (687) (261) (509) -------- -------- -------- Total................................................ $(32,870) $ 2,082 $ (6,993) ======== ======== ========
1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Identifiable assets: United States.......................................................... $ 91,674 $106,510 Europe................................................................. 24,520 24,493 Asia/Pacific........................................................... 10,736 7,441 Japan.................................................................. 8,467 11,559 Other.................................................................. 2,438 1,807 Corporate.............................................................. 11,927 5,489 Eliminations........................................................... (69,548) (58,940) -------- -------- Total.......................................................... $ 80,214 $ 98,359 ======== ========
Intercompany transfers between geographic areas are accounted for at prices similar to those available to comparable unaffiliated customers. Sales to unaffiliated customers outside the U.S., including U.S. export sales, were $54,236,000, $66,913,000 and $73,893,000 for the years ended June 30, 1996, 1995 and 1994, respectively, which amounts represented 57%, 48%, and 41% of total sales for the respective years. Sales to the U.S. Government and its agencies amounted to approximately $21,750,000, $39,200,000 and $54,750,000, respectively, for the years ended June 30, 1996, 1995 and 1994, and represented 23%, 28% and 31% of total sales for the respective years. The Company's revenues are derived from various customer sources including Unisys Corp., the prime contractor under the U.S. Department of Commerce's Next Generation 37 39 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Radar (NEXRAD) program and the U.S. Department of Commerce under the NEXRAD program. Sales to Unisys Corp. amounted to $732,253, $7,473,000 and $22,245,000, respectively, for the years ended June 30, 1996, 1995 and 1994, which amounts represented less than 1%, 5% and 12%, respectively, of total revenues. 14. RETIREMENT BENEFITS The Company has a retirement savings plan (the "Plan") available to U.S. employees which qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code. Annual Company contributions currently are determined based upon the achievement of certain return on equity objectives with the minimum contribution being 2% of employees' eligible earnings, as defined by the Plan. The Company also matches a portion of employees' before-tax savings. The Company's annual and matching contributions under this plan are as follows:
1996 1995 1994 ---- ---- ------ (DOLLARS IN THOUSANDS) Annual contribution in common stock............................. $326 $518 $ 767 Matching contribution........................................... 147 251 333 ---- ---- ------ Total................................................. $473 $769 $1,100 ==== ==== ======
The Company's annual contribution under this Plan for the year ended June 30, 1995 was funded in common stock of the Company during the quarter ended September 30, 1995. Certain foreign subsidiaries of the Company maintain pension plans for their employees which conform to the common practice in their respective countries. The pension expense related to these plans amounted to $263,000, $381,000 and $213,000 for the years ended June 30, 1996, 1995 and 1994, respectively. The Company's net pension expense (income) for the years ended June 30, 1996, 1995 and 1994 consists of the following components:
1996 1995 1994 ----- ----- ----- (DOLLARS IN THOUSANDS) Service cost............................................... $ 449 $ 645 $ 522 Interest cost.............................................. 720 653 546 Return on plan assets...................................... (752) (661) (707) Net amortization and deferral.............................. (154) (256) (148) ----- ----- ----- $ 263 $ 381 $ 213 ===== ===== =====
The funded status of the Company's international pension plans at June 30, 1996 and 1995 was as follows:
1996 1995 ------- ------ (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligations: Vested benefit obligation......................................... $ 7,751 $7,624 Accumulated benefit obligation.................................... 7,887 7,783 Projected benefit obligation...................................... 9,556 9,288 Plan assets at fair value......................................... 11,097 9,531 ------- ------ Plan assets in excess of projected benefit obligation............. 1,541 243 Unrecognized net asset at transition.............................. (346) (418) Unrecognized net gain............................................. (2,112) (806) ------- ------ Accrued pension liability......................................... $ (917) $ (981) ======= ======
38 40 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In determining the present value of benefit obligations and the expected return on plan assets for the Company's foreign pension plans, the following assumptions were used for the years ended June 30, 1996, 1995 and 1994:
1996 1995 1994 ------------ ------------ ------------- Discount rate............................... 6.5% to 9.0% 6.0% to 9.0% 6.0% to 9.0% Rate of increase in future compensation levels.................................... 3.5% to 7.0% 4.0% to 7.0% 4.0% to 6.0% Expected long-term rate of return........... 7.0% to 9.0% 7.0% to 9.0% 7.0% to 10.0%
Plan assets are comprised primarily of investments in managed funds consisting of common stock, money market and real estate investments. 15. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS On July 1, 1993, the Company adopted the provisions of FAS No. 106. In connection with the adoption of this standard, the Company recorded a non-cash charge of $3.0 million representing the immediate recognition of the accumulated postretirement benefit obligation at the date of adoption. The Company has a plan for retiree medical and life insurance benefits for its U.S. employees but does not have any significant foreign plans. Based on the terms of the U.S. plan, participants must be age 55 with at least 10 years of service to be eligible for medical benefits. If the retiree is age 55 and has a minimum of five years of service, but less than 10 years of service, coverage of certain medical benefits can be purchased through the Company. The comprehensive plan, which may be amended at the Company's discretion, provides lifetime coverage for retirees and coverage for spouses until one year after the death of the retiree. The plan provides that the Company's costs will be capped at the 1993 level. Eligibility for life insurance is restricted to employees who retired prior to January 1993. The unfunded status of the plan at June 30, 1996 and 1995 was as follows: Accumulated Postretirement Benefit Obligation:
JUNE 30, JUNE 30, 1996 1995 -------- -------- (DOLLARS IN THOUSANDS) Active Ineligible Plan Participants............................... $ 458 $ 790 Active Eligible Plan Participants................................. 329 521 Retirees and Dependents........................................... 1,219 1,275 -------- -------- Total accumulated postretirement benefit obligation..... 2,006 2,586 Unrecognized net gain............................................. 495 144 -------- -------- Accrued postretirement benefit obligation......................... $2,501 $2,730 ====== ======
39 41 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company's net periodic postretirement benefit expense (income) for the years ended June 30, 1996, 1995 and 1994 consist of the following components:
1996 1995 1994 ----- ----- ----- (DOLLARS IN THOUSANDS) Service cost................................................... $ 92 $ 116 $ 188 Interest cost.................................................. 186 209 238 Return on plan assets.......................................... -- -- -- Curtailment gain............................................... (299) (422) (300) ----- ----- ----- $ (21) $ (97) $ 126 ===== ===== =====
During the years ended June 30, 1996, 1995 and 1994, the Company recorded a curtailment gain of $299,000, $422,000 and $300,000, respectively as a result of the reduction in work force in connection with several restructuring initiatives undertaken by the Company. In determining the accumulated postretirement benefit obligation for the year ended June 30, 1996, the assumed weighted discount rate was 7.75% and the assumed rate of increase in compensation was 5.0%. For the years ended June 30, 1995 and 1994, the assumed weighted average discount rate was 7.5% and the assumed rate of increase in compensation was 5.0%. Assumed health care cost increases, estimated to be 7% for the fiscal year 1997, decline at a rate of approximately 0.5% per year to the ultimate trend rate of 5.0% in the year 2001. Notwithstanding the above, a 1% increase in the health care cost trend rate would not have an effect on the accumulated postretirement benefit obligation since the plan provides that the Company's future costs will be capped at the 1993 level. As a result of the Acquisition, the Company has made a decision to terminate the benefits offered under the medical and life insurance plan for retirees. The Company will offer continued coverage through COBRA programs. Although the Company has not assessed the full impact of the plan termination, a curtailment gain is expected to result during the first quarter of fiscal year 1997. 16. EMPLOYEE STOCK PLANS The Company has a Stock Option Plan providing for the grant of incentive stock options to employees and non-qualified stock options (NSOs) to employees, non-employee directors and consultants. The Stock Option Plan is administered by the Stock Award Committee comprised of members of the Compensation Committee of the Board of Directors or the Board of Directors, as the case may be. Under the plan, the Stock Award Committee may award, in addition to stock options, shares of Common Stock on a restricted basis. The plan also specifically provides for stock appreciation rights and authorizes the Stock Award Committee to provide, either at the time of the grant of an option or otherwise, that the option may be cashed out upon terms and conditions to be determined by the Committee or the Board. Only stock options, which for the most part contain limited stock appreciation rights in connection with a change of control followed by certain subsequent events, have been granted under the plan. The plan terminates on January 31, 2002. Stockholders have approved the issuance of up to 9,000,000 options under the plan. 40 42 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Changes in options outstanding under the plan during the years ended June 30, 1994, 1995 and 1996 are as follows:
NUMBER OF OPTIONS PRICE PER OPTION ---------- ---------------- Outstanding at June 30, 1993....................... 1,703,191 $ .10 - $58.75 Granted.......................................... 1,787,596 $1.63 - $ 3.31 Exercised........................................ (283) $1.88 - $ 2.13 Canceled......................................... (697,663) $1.88 - $58.75 ---------- ---------------- Outstanding at June 30, 1994....................... 2,792,841 $ .10 - $56.25 Granted.......................................... 3,128,942 $ .875 - $ 2.12 Exercised........................................ -- -- Canceled......................................... (2,685,080) $1.63 - $45.00 ---------- ---------------- Outstanding at June 30, 1995....................... 3,236,703 $ .10 - $56.25 Granted.......................................... 3,815,675 $1.56 - $ 2.10 Exercised........................................ (324,596) $ .87 - $ 2.12 Canceled......................................... (457,356) $ .87 - $51.25 ---------- ---------------- Outstanding at June 30, 1996....................... 6,270,426 $ .10 - $56.25 ========= ==============
Included in the 3,128,942 options granted in fiscal year 1995 are 1,917,493 options granted in a stock option repricing program. Included in the 1,787,596 options granted in fiscal year 1994 are 777,850 options granted in consideration of the eight-month deferral of worldwide annual merit salary increases and 117,728 options granted in consideration of the cancellation of a like number of previously granted stock options and the restarting of the vesting schedule associated with the canceled options. Options with respect to 2,620,077 shares of common stock, with an average exercise price of $1.70, were exercisable at June 30, 1996. The Company has an Employee Stock Purchase Plan (the "Purchase Plan") pursuant to which the Company is authorized to grant rights to employees to purchase up to an aggregate of 1,000,000 shares of common stock in a series of offerings, each of which generally lasts six to twelve months. Unless extended by the stockholders, the Purchase Plan expires December 31, 1997. Substantially all employees are eligible to participate in the Purchase Plan. The purchase price of shares of common stock is limited to the lesser of 85% of the fair market value of the common stock on the commencement of the offering and the last day of the offering. As of June 30, 1996, the Company had issued 432,478 shares and had 567,522 shares of common stock available for issuance pursuant to the Purchase Plan. 17. RIGHTS PLAN On July 31, 1992, the Board of Directors of the Company declared a dividend distribution of one Series A Participating Cumulative Preferred Right for each share of the Company's common stock and Convertible Preferred Stock. The dividend was made to stockholders of record on August 14, 1992. Under the rights plan, each right becomes exercisable unless redeemed (1) after a third party owns 20% or more of the outstanding shares of the Company's voting stock and engages in one or more specified self-dealing transactions, (2) after a third party owns 30% or more of the outstanding voting stock or (3) following the announcement of a tender or exchange offer that would result in a third party owning 30% or more of the Company's voting stock. Any of these events would trigger the rights plan and entitle each right holder to purchase from the Company one one-hundredth of a share of Series A Participating Cumulative Preferred Stock at a cash price of $30 per right. 41 43 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Under certain circumstances following satisfaction of third party ownership tests of the Company's voting stock, upon exercise, each holder of a right would be able to receive common stock of the Company or its equivalent, or common stock of the acquiring entity, in each case having a value of two times the exercise price of the right. The rights will expire on August 14, 2002 unless earlier exercised or redeemed, or earlier termination of the plan. The adoption of the plan reinstated a similar rights plan put in place in July 1989, which was terminated in connection with the recapitalization of the Company in November 1991 to avoid its inadvertent trigger. 18. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) The following is a summary of quarterly financial results for the years ended June 30, 1996 and 1995:
THREE MONTHS ENDED ------------------------------------------------------ SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, 1995 1995 1996 1996 ------------- ------------ --------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 Net sales.............................. $26,452 $ 24,483 $26,173 $ 18,692 Gross margin........................... $11,205 $ 10,587 $10,890 $ 2,583 Net income (loss)(a)................... $(3,632) $ (2,557) $ 533 $(34,056) Net income (loss) per share............ $ (0.12) $ (0.08) $ 0.02 $ (1.11)
- --------------- (a) Net income/(loss) for the three months ended December 31, 1995 and June 30, 1996 reflect a provision for restructuring of $1.3 and $23.2 million, respectively. Net income for the three months ended September 30, 1995 reflects a non-recurring charge of $1.7 million to reduce the carrying amount of certain assets held for sale. Net income for the three months ended June 30, 1996 reflects a provision for inventory reserves of $2.6 million.
THREE MONTHS ENDED ------------------------------------------------------ SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, 1994 1994 1995 1995 ------------- ------------ --------- -------- 1995 Net sales............................... $41,508 $ 37,786 $30,344 $ 30,506 Gross margin............................ $18,777 $ 17,286 $11,384 $ 13,220 Net income (loss)(a).................... $ 1,674 $ 1,040 $(4,985) $ 265 Net income (loss) per share............. $ 0.06 $ 0.03 $ (0.17) $ 0.01
- --------------- (a) Net income/(loss) for the three months ended March 31, and June 30, 1995 reflect a provision for restructuring of $2.7 and $0.5 million, respectively. Net income for the three months ended December 31, 1995 reflects a sales and use tax credit of $1.0 million. Net income for the three months ended June 30, 1995 reflects a provision for inventory reserves of $0.9 million. 19. COMMITMENTS AND CONTINGENCIES The Company leases certain sales and service offices, warehousing, and equipment. The leases expire at various dates through 2001 and generally provide for the payment of taxes, insurance and maintenance costs. Additionally, certain leases contain escalation clauses which provide for increased rents resulting from the pass through of increases in operating costs, property taxes and consumer price indexes. At June 30, 1996, future minimum payments under noncancelable operating leases for the fiscal years ending June 30 of each year are as follows: 42 44 CONCURRENT COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS) 1997................................................... $3,641 1998................................................... 1,974 1999................................................... 781 2000................................................... 549 2001 and thereafter.................................... 687 ------ $7,632 ======
Rent expense amounted to $4,871,000, $6,686,000, and $8,369,000 for the years ended June 30, 1996, 1995 and 1994, respectively. The Company, from time to time, is involved in litigation incidental to the conduct of its business. The Company and its counsel believe that such pending litigation will not have a material adverse effect on the Company's results of operations or financial condition. Additionally, the U.S. government has asserted that the Company's prices for shipments of spare parts prior to 1994 under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program were too high. No claim or action has been filed against the Company. The Company believes that its pricing practices are in compliance with applicable regulations and intends to vigorously defend against any claim. Although there can be no assurance, the Company expects that any resolution of the matter will not have a material adverse affect on the Company's financial condition or liquidity. The Company has entered into employment agreements with its executive officers. In the event an executive officer is terminated directly by the Company without cause or in certain circumstances constructively by the Company, the terminated officer will be paid severance compensation for a one-year period (a two-year period in the case of the Chief Executive Officer) in an annualized amount equal to the respective officer's annual salary then in effect plus an amount equal to the then most recent annual bonus paid or, if determined, payable, to such officer. At June 30, 1996, the maximum contingent liability under these agreements is approximately $1.6 million. The Company's employment agreements with its executive officers contain certain offset provisions, as defined in their respective agreements. 20. SUBSEQUENT EVENT On September 27, 1996, the Company entered into a Purchase and Sale Agreement providing for the sale/leaseback of its Oceanport, New Jersey facility. The transaction is contingent upon the buyer's ability to lease approximately 100,000 square feet of the 280,000 square foot building. The transaction is expected to close during the quarter ending December 31, 1996. The $5.0 million sales price will be reduced by estimated selling costs of approximately $0.3 million. In accordance with the terms of the agreement under the New Term Loan, the Company is required to prepay the New Term Loan in an amount equal to 75% of the net proceeds. Accordingly, the net proceeds will be applied to the remaining outstanding balance of the New Term Loan (approximately $3.5 million). The remainder of the net proceeds will be then available for working capital purposes. However, there can be no assurance that the transaction will be completed as contemplated. On September 13, 1996, the Company entered into a working capital management agreement and a margin loan with an investment bank, which provides the Company with borrowing availability up to 30% of the value of the Company's CyberGuard common stock holdings. As a result of the Acquisition, the Company has made a decision to terminate the benefits offered under the medical and life insurance plan for retirees. The Company will offer continued coverage through COBRA programs. Although the Company has not assessed the full impact of the plan termination, a curtailment gain is expected to result during the first quarter of fiscal year 1997. 43 45 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW During fiscal year 1996, the Company continued to experience a decline in net sales. In addition, operating income and cash flow from operations declined from the previous fiscal year. Accordingly, the Company continued to closely manage its resources and, in order to enhance its competitive position and improve cash flow, on June 27, 1996, the Company acquired the Real-Time Division of Harris Computer Systems Corporation ("HCSC"), along with 683,178 shares of newly issued shares of HCSC, which was renamed CyberGuard Corporation, in exchange for 10,000,000 shares of Concurrent common stock, 1,000,000 shares of convertible exchangeable preferred stock of Concurrent with a 9% cumulative annual dividend payable quarterly in arrears and a mandatory redemption value of $6,263,000 and the assumption of certain liabilities relating to the HCSC Real-Time Division (the "Acquisition"). The aggregate purchase price of this acquisition was approximately $18.7 million. The Acquisition has been accounted for as a purchase effective June 30, 1996. Also during fiscal year 1996, to enhance its liquidity, the Company completed the sale of its Tinton Falls, New Jersey building and renegotiated its domestic credit facility. The Acquisition offers a number of significant strategic and financial benefits to Concurrent, including: an enhanced competitive position through the combination of the best technologies of the two businesses; a larger and more diverse market coverage; and, significant cost savings primarily obtained through headcount reductions, as well as facilities cost reductions through the integration of corporate management and administrative functions, the consolidation of production and research and development facilities and the consolidation of sales and service offices. Obtaining these benefits presents significant management challenges. There can be no assurance that benefits will be fully realized, or realized within the time periods contemplated. The Acquisition and related business integration and consolidation is expected to improve Concurrent's liquidity through improved operating performance, additional borrowing availability and the planned disposition of its Oceanport, New Jersey facility. The Company may also utilize its CyberGuard common stock holdings as an additional source of liquidity if needed. The Company believes that it will be able to fund the costs of the Acquisition, as well as its fiscal year 1997 operations, through its operating results, existing financing facilities and the planned disposition of its Oceanport, New Jersey facility. The decline in total revenue during fiscal year 1996 reflects the anticipated continued decline in proprietary computer systems sales, primarily related to the revenue decline in the United States attributable to reduced shipments under the U.S. Department of Commerce's Next Generation Weather Radar program, and the decline in service revenue, along with the negative impact of the prolonged Acquisition process. During fiscal year 1996, revenues from international markets exceeded those of North America, continuing the trend from the second half of fiscal year 1995. Also in fiscal year 1996, service revenue exceeded computer system revenue. Prior to fiscal year 1996, computer system revenue exceeded service revenue. The Company is focused on the consolidation of the operations of the HCSC Real-Time business and Concurrent. The consolidation of research and development efforts has resulted in a single line of products ranging from a software-only product to an eight-way, multiprocessing computer, all running the Company's real-time UNIX operating system Power-Max, which combines the best features of Concurrent's and HCSC's technologies. The Company will use these products to exploit its three core markets (simulation, data acquisition, instrumentation and process control) and its two new markets (interactive real-time and telecommunications). See Markets in the BUSINESS section for further discussion regarding the Company's markets. The Company believes that the unified focus of the combined company, as well as the increased and enhanced product line, will effect a turnaround of the declining trend in product revenue experienced over the past few years. The Company anticipates improvements in gross margin resulting from increased volume due to the acquisition of the HCSC Real-Time business, improved market focus and cost reductions and efficiencies gained by the closing of its Cork, Ireland operation and the scale-down of its New Jersey manufacturing operations from approximately 280,000 square feet to no more than 40,000 square feet. 44 46 SELECTED OPERATING DATA AS A PERCENTAGE OF NET SALES The Company considers its computer systems and service business (including maintenance, support and training) to be one class of products which accounted for the percentages of net sales set forth below. The following table sets forth selected operating data as a percentage of net sales for certain items in the Company's consolidated statements of operations for the periods indicated.
1996 1995 1994* ----- ----- ----- Net sales: Computer systems.............................................. 44.3% 51.4% 56.0% Service and other............................................. 55.7 48.6 44.0 ----- ----- ----- Total net sales....................................... 100.0 100.0 100.0 Cost of sales (% of respective sales category): Computer systems.............................................. 64.8 53.6 54.3 Service and other............................................. 61.9 60.0 61.6 ----- ----- ----- Total cost of sales................................... 63.2 56.7 57.5 Gross margin.................................................... 36.8 43.3 42.5 Operating expenses: Research and development...................................... 14.4 13.9 13.3 Selling, general and administrative........................... 31.1 26.3 27.2 Provision for restructuring................................... 25.5 2.3 6.7 Sales and use tax credit...................................... -- (0.7) (0.8) ----- ----- ----- Total operating expenses.............................. 71.1 41.8 46.4 ----- ----- ----- Operating income (loss)......................................... (34.3) 1.5 (3.9) Interest expense................................................ (2.4) (1.9) (1.9) Interest income................................................. 0.2 0.4 0.3 Other non-recurring charge...................................... (1.7) (0.7) -- Other income (expense) -- net................................... (1.6) 0.5 (0.3) ----- ----- ----- Loss before provision for income taxes, extraordinary loss and cumulative effect of change in accounting principles.......... (39.8) (0.2) (5.8) Provision for income taxes...................................... 1.6 1.2 0.7 ----- ----- ----- Loss before extraordinary loss and cumulative effect of change in accounting principles(a)................................... (41.4)% (1.4)% (6.5)% ===== ===== =====
- --------------- * Reclassified to conform to current year presentation. (a) The percentage for the year ended June 30, 1994 excludes a $23.2 million extraordinary loss on early extinguishment of debt and a $5.0 million non-cash charge for the cumulative effect of change in accounting principles. RESULTS OF OPERATIONS Fiscal Year 1996 in Comparison to Fiscal Year 1995 Net Sales Net sales for fiscal year 1996 were $95.8 million, a decrease of $44.3 million from fiscal year 1995, partially reflecting the prolonged acquisition process. The sales decline was comprised of a decrease of $29.6 million, or 41.1%, in computer systems sales and a decrease of $14.7 million, or 21.6%, in service and other revenues. The decrease in computer system sales was primarily due to reduced shipments under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program and reduced sales of open systems. The decline in sales of open systems is attributable to a decline in North America business, which was partially offset by an ongoing increase in international business. The decrease in sales is also attributable to the protracted nature of the Acquisition which created instability in the Company's sales force. The decrease in service and other revenues was primarily due to the decline in computer system sales 45 47 experienced in prior periods which resulted in fewer maintenance contracts and a decline in renewal rates on maturing contracts partially offset by approximately $0.3 million related to the impact of favorable foreign exchange rates. Gross Margin Gross Margin, as measured in dollars and as a percentage of net sales, was $35.3 million and 36.8%, respectively, for fiscal year 1996 compared to $60.7 million and 43.3%, respectively, for fiscal year 1995. The decrease in gross margin dollars and percentage was primarily due to the aforementioned decline in net sales partially offset by cost savings resulting from the operational restructurings implemented during fiscal year 1995 and fiscal year 1996. Included in fiscal year 1996 cost of sales is a $4.5 million charge, reflecting the impact of consolidated product lines and a substantial portion of the Company's manufacturing operations, comprised of $2.6 million for excess inventory attributable to a shift in product focus, $0.6 million for the write-off of customer support inventory and $1.3 million for consolidation of its manufacturing and customer support operations. Operating Income (loss) Operating loss for fiscal year 1996 was $32.9 million compared to operating income of $2.1 million for fiscal year 1995. The $35.0 million decrease in operating income was due to the aforementioned $25.4 million decrease in gross margin, a $21.3 million increase in the provision for restructuring (a $24.5 million provision for restructuring in the current year offset by a $3.2 million provision for restructuring in the prior year) and a $1.0 million reduction in the sales and use tax credit, partially offset by the $12.7 million decrease in operating expenses. The sales and use tax credit in the prior period relates to a change in the estimate of state sales and use tax reserves based on a final state audit determination. The $12.7 million decrease in operating expenses was primarily due to a $7.1 million decrease in selling, general and administrative expenses and a $5.6 million decrease in net research and development expenses. The $5.6 million decrease in net research and development expenses reflects a $5.7 million decrease in gross research and development expenses partially as compared to a $0.1 million decrease in the amount of software production costs which were capitalized during the period. The decrease in selling, general and administrative and gross research and development expenses is primarily due to cost savings resulting from the operational restructurings implemented during fiscal year 1995 and fiscal year 1996. Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of Change in Accounting Principles Loss before extraordinary loss and cumulative effect of change in accounting principles was $39.7 million for fiscal year 1996 compared to a loss of $2.0 million for fiscal year 1995. The $37.7 million change results from the $35.0 million decrease in operating income and a $2.7 million net increase in non-operating expenses. The increase in non-operating expenses was primarily due to a $2.2 million increase in other expenses, a $0.3 million decrease in interest income, and a $0.7 million increase in other non-recurring charges partially offset by a $0.3 million reduction in interest expense and a $0.2 million decrease in the provision for income taxes. The $1.7 million other non-recurring charge incurred in the current year and the $1.0 million charge from the previous year was a result of an adjustment of the carrying value to its estimated fair value based on current market conditions of the Company's Tinton Falls, New Jersey facilities, respectively. The decrease in the provision for income taxes relates primarily to international operations. Fiscal Year 1995 in Comparison to Fiscal Year 1994 Net Sales Net sales for fiscal year 1995 were $140.1 million, a decrease of $38.9 million from fiscal year 1994. This decrease was due to a decrease of $28.2 million, or 28.1%, in computer systems sales and a decrease of $10.7 million, or 13.5%, in service and other revenues. The decrease in computer system sales was primarily due to the anticipated decline in sales of proprietary systems and reduced shipments under the U.S. Department of 46 48 Commerce's Next Generation Weather Radar (NEXRAD) program. Although sales of open systems remained constant, sales of the Company's MAXION open systems increased while sales of other open systems declined. The decrease in service and other revenues was primarily due to the decline in computer system sales experienced in prior periods which resulted in fewer maintenance contracts and a decline in renewal rates on maturing contracts partially offset by approximately $0.3 million related to the impact of favorable foreign exchange rates. Gross Margin Gross Margin, as measured in dollars and as a percentage of net sales, was $60.6 million and 43.3%, respectively, for fiscal year 1995 compared to $76.0 million and 42.5%, respectively, for fiscal year 1994. The decrease in gross margin dollars was primarily due to the aforementioned decline in net sales partially offset by cost savings resulting from the operational restructurings implemented during fiscal year 1994 and fiscal year 1995. The increase in gross margin as a percentage of net sales was primarily due to cost savings resulting from the operational restructurings implemented during fiscal year 1994 and fiscal year 1995 partially offset by the decline in net sales. Operating Income Operating income for fiscal year 1995 was $2.1 million compared to operating loss of $7.0 million for fiscal year 1994. The $9.1 million increase in operating income was due to a $16.1 million reduction in operating expenses and a net reduction of $8.8 million in the provision for restructuring (a $3.2 million provision for restructuring in the current year offset by a $12.0 million provision for restructuring in the prior year) partially offset by the $15.4 million decrease in gross margin and a $0.4 million reduction in the sales and use tax credit as compared to a similar credit in the prior year. The sales and use tax credit in both periods relates to a change in the estimate of state sales and use tax reserves based on a final state audit determination. The $16.1 million decrease in operating expenses was primarily due to a $11.7 million decrease in selling, general and administrative expenses and a $4.4 million decrease in net research and development expenses. The $4.4 million decrease in net research and development expenses reflects a $5.8 million decrease in gross research and development expenses partially offset by a $1.4 million decrease in the amount of software production costs which were capitalized during the period. The decrease in selling, general and administrative and gross research and development expenses is primarily due to cost savings resulting from the operational restructurings implemented during fiscal year 1994 and fiscal year 1995. Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of Change in Accounting Principles Loss before extraordinary loss and cumulative effect of change in accounting principles was $2.0 million for fiscal year 1995 compared to a loss of $11.6 million for fiscal year 1994. The $9.6 million change results from the $9.1 million increase in operating income and a $0.5 million net decrease in non-operating expenses. The decrease in nonoperating expenses was primarily due to a $0.8 million decrease in interest expense resulting from the reduction of the Company's indebtedness, a $0.6 million increase in income related to minority interest and a $0.5 million decrease in foreign exchange losses partially offset by a $1.0 million other non-recurring charge incurred in the current year period and a $0.4 million increase in the provision for income taxes. The $1.0 million other non-recurring charge incurred in the current year was a result of an adjustment of the carrying value of the Company's Tinton Falls, New Jersey facility to its net realizable value based on current market conditions. The increase in the provision for income taxes relates primarily to international operations. Financial Resources and Liquidity The Acquisition and related business integration and consolidation is expected to improve Concurrent's liquidity through improved operating performance, additional borrowing availability and the planned disposition of its Oceanport, New Jersey facility. The Company may also utilize its CyberGuard common stock 47 49 holdings as an additional source of liquidity if needed. Concurrent's liquidity is dependent on many factors, including sales volume, operating profit ratio, debt service and the efficiency of asset use and turnover. The future liquidity of Concurrent depends to a significant extent on (i) the actual versus anticipated decline in sales of proprietary systems and service maintenance revenue; (ii) revenue growth from open systems; (iii) both the related costs and the length of time to realize the anticipated benefits from the combination of the real-time businesses of Concurrent and HCSC; and (iv) ongoing cost control actions. Liquidity will also be affected by: (i) timing of shipments which predominately occur during the last month of the quarter; (ii) the percentage of sales derived from outside the United States where there are generally longer accounts receivable collection cycles and which receivables are not included in Concurrent's borrowing base under its revolving credit facility; (iii) the sales level in the United States where related accounts receivable are included in the borrowing base of Concurrent's revolving credit facility; and (iv) the number of countries in which Concurrent will operate, which may require maintenance of minimum cash levels in each country and, in certain cases, may restrict the repatriation of cash, such as cash held on deposit for office leases. The Company believes that it will be able to fund the acquisition costs, as well as fiscal year 1997 operations, through its operating results, existing financing facilities and the planned disposition of its Oceanport, New Jersey facility. There is no assurance that the Company's plans will be achieved. On June 28, 1996, the Company entered into a new agreement providing for a $19.9 million credit facility which matures August 1, 1999. The facility includes a $7.2 million term loan (the "New Term Loan") and a $12.7 million revolving credit facility (the "New Revolver"). The New Revolver represents a $4.7 million increase to the maximum revolver amount, subject to certain restrictions. In addition, the Company can borrow up to $3.0 million in standby letters of credit (the LOC's) in connection with overseas lines of credit. These LOC's mature on July 31, 1997, at which time the Company must extend the expiration date of the LOC's to August 1, 1999 or obtain alternative financing or guaranties in lieu thereof. At June 30, 1996, the outstanding balances under the New Term Loan and the New Revolver were $7.2 and $5.0 million, respectively. The entire outstanding balance of the New Revolver has been classified as a current liability at June 30, 1996. Both the New Term Loan and the New Revolver bear interest at the prime rate plus 2.0%. The New Term Loan is payable in 28 monthly installments of approximately $139,000 each, commencing October 1, 1996 and ending January 1, 1999, with the final balance of approximately $3.3 million payable August 1, 1999. The New Revolver may be repaid and reborrowed, subject to certain collateral requirements, at any time during the term ending August 1, 1999. The Company has pledged substantially all of its domestic assets as collateral for the New Term Loan and the New Revolver. The Company may repay the New Term Loan at any time without penalty. In the event the Company completes a sale or sale/leaseback of its Oceanport facility, the Company is required to make a prepayment of the New Term Loan up to an amount equal to 75% of the net sale proceeds. Certain early termination fees apply if the Company terminates the facility in its entirety prior to August 1, 1999. The Company's joint venture agreement regarding its Japanese subsidiary has been renewed through calendar year 1996. In the event such agreement is not further extended, the Company could be required to satisfy the then outstanding amount of demand notes which are guaranteed by the Company ($2,734,000 at June 30, 1996). There can be no assurance that the agreement will be extended and, in the event the agreement is not extended, that the Company may be required to extend its guarantees, or repay the demand notes and seek alternative financing. The Company expects to extend the joint venture agreement through June 30, 1998. As of June 30, 1996, the Company had a current ratio of 0.98 to 1, an inventory turnover ratio of 2.1 times (based on computer systems cost of sales) and net working capital of ($0.8) million. At June 30, 1996, cash and cash equivalents amounted to $3.6 million and accounts receivable amounted to $27.9 million. The Company recorded a $1.3 million and a $23.2 million provision for restructuring during the quarters ended December 31, 1995 and June 30, 1996, respectively. In October 1995, the Company's management approved a plan to restructure its operations. This plan provided for a reduction of approximately 55 employees worldwide and the downsizing or closing of certain office locations, representing approximately 85% and 15% of the related $1.3 million provision. In connection with the Acquisition, based on formal, approved plans, the Company recorded a $23.2 million restructuring provision. Such charge included the estimated costs related to 48 50 the rationalization of facilities, workforce reductions, asset writedowns and other costs which represent approximately 44%, 28%, 26% and 2%, respectively. The rationalization of facilities includes the planned disposition of the Company's Oceanport, New Jersey facility, as well as the closing or downsizing of certain offices located throughout the world. The workforce reductions include the termination of approximately 200 employees worldwide, encompassing substantially all of the Company's employee groups. The asset writedowns are primarily related to the planned disposition of duplicative machinery and equipment. Although management believes that improvements in cash flow will result from the Acquisition and its new bank agreement, the short term prospects for the Company's liquidity are dependent to a significant degree upon the level and stability of revenue from sales and service of its computer systems and the Company's ongoing cost control actions. The Company plans to continue to evaluate and manage its resources to anticipated revenue levels to achieve improved profitability and quarter to quarter revenue growth during fiscal year 1997. The Company believes that it will be able to meet its obligations when due through its operating results and its existing financing facilities and the planned disposition of its Oceanport, New Jersey facility. The Company may also utilize its CyberGuard common stock holdings as an additional source of liquidity if needed. However, there can be no assurance that the Company's operating and financing efforts will be achieved. In fiscal year 1997 the Company will adopt the provisions of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS No. 123"). This standard establishes a fair value method for accounting for stock-based compensation plans based upon the fair value of stock options and similar instruments, but does not require the adoption of this preferred method. The Company intends to adopt this standard by disclosing the pro forma net income and earnings per share amounts assuming the fair value method was adopted on July 1, 1996. The adoption of this standard will not impact results of operations, financial position or cash flows. 49 51 CONCURRENT COMPUTER CORPORATION SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED JUNE 30, ---------------------------------------------------- INCOME STATEMENT DATA 1996 1995 1994 1993 1992 - -------------------------------------------- -------- -------- -------- -------- -------- Net sales................................... $ 95,800 $140,144 $179,031 $220,464 $221,572 Gross margin................................ 35,265 60,667 76,041 104,841 104,711 Operating income (loss)..................... (32,870) 2,082 (6,993) 18,738 16,783 Income (loss) before extraordinary gain (loss) and cumulative effect of change in accounting principles..................... (39,712) (2,006) (11,631) 3,869 (955) Net income (loss)........................... $(39,712) $ (2,006) $(39,824) $ 3,869 $ 60,147 Income (loss) per share: Income (loss) before extraordinary gain (loss) and cumulative effect of change in accounting principles..................... $ (1.30) $ (0.07) $ (0.41) $ 0.40 $ (0.13) Net income (loss)......................... $ (1.30) $ (0.07) $ (1.42) $ 0.40 $ 8.00
AT JUNE 30, -------------------------------------------------- BALANCE SHEET DATA 1996 1995 1994 1993 1992 - ---------------------------------------------- ------- ------- -------- -------- -------- Cash and short-term investments............... $ 3,562 $ 5,728 $ 9,374 $ 30,422 $ 20,611 Working capital............................... (825) 1,865 (616) 36,673 22,742 Total assets.................................. 80,214 98,359 123,170 157,086 158,136 Long-term debt................................ 6,603 9,536 13,240 67,938 61,613 Redeemable preferred stock.................... 5,610 -- -- -- -- Stockholders' equity.......................... 7,068 35,170 35,048 18,503 14,739 Book value per share.......................... $ 0.17 $ 1.16 $ 1.18 $ 1.94 $ 1.61
50 52 SCHEDULE II CONCURRENT COMPUTER CORPORATION VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994 (DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND OTHER AT END DESCRIPTION OF YEAR EXPENSES DEDUCTIONS (A) OF YEAR - -------------------------------------------- ---------- ---------- ---------- ----- -------- Reserves and allowances deducted from asset accounts: 1996 Reserve for inventory obsolescence and shrinkage................................. $8,544 $4,904 $ (2,597)(b) $(174) $ 10,677 Allowance for doubtful accounts............. 1,434 135 (155)(c) -- 1,143 1995 Reserve for inventory obsolescence and shrinkage................................. $6,138 $5,037 $ (2,712)(b) $ 81 $ 8,544 Allowance for doubtful accounts............. 3,405 130 (2,117)(c) 16 1,434 1994 Reserve for inventory obsolescence and shrinkage................................. $3,167 $4,461 $ (1,753)(b) $ 263 $ 6,138 Allowance for doubtful accounts............. 2,173 2,114 (882)(c) -- 3,405
- --------------- (a) Includes adjustments to the reserve account and allowance for doubtful accounts for foreign currency translation. (b) Charges and adjustments to the reserve account primarily for inventory write offs. (c) Charges to the reserve account for uncollectible amounts written off and credits issued during the year. 51 EX-3.2 2 BY-LAWS 1 EXHIBIT 3.2 Restated as of June 27, 1996 BY-LAWS OF CONCURRENT COMPUTER CORPORATION **** ARTICLE I. Certificate of Incorporation These by-laws, the powers of the corporation and of its directors and stockholders, and all matters concerning the conduct and regulation of the business of the corporation shall be subject to such provisions in regard thereto as are set forth in the certificate of incorporation filed pursuant to the General Corporation Law of the State of Delaware, which is hereby made a part of these by-laws. The term "Certificate of Incorporation" in these by-laws unless the context requires otherwise, includes not only the original certificate of incorporation filed to create the corporation but also all other certificates, agreements of merger or consolidation, plans of reorganization, or other instruments, howsoever designated, filed pursuant to the General Corporation Law of the State of Delaware which have the effect of amending or supplementing in some respect the corporation's original certificate of incorporation. ARTICLE II. Annual Meeting An annual meeting of stockholders shall be held for the election of directors and for the transaction of any other business for the transaction of which the meeting shall have been properly convened on such day not a legal holiday in the months of September, October, or November in each year, at such place, within or without the State of Delaware, and at such time as such day, place and time shall be fixed by the board of directors and specified in the notice of the meeting. Any other proper business may be transacted at the annual meeting. If the annual meeting for election of directors shall not be held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. ARTICLE III. Special Meetings of Stockholders Special meetings of the stockholders may be held either within or without the State of Delaware, at such time and place and for such purposes as shall be specified in a call for such meeting made by the board of directors or by a writing filed with the secretary signed by the president or by a majority of the directors. -1- 2 ARTICLE IV. Notice of Stockholders' Meetings Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, which notice shall be given not less than ten nor more than fifty days before the date of the meeting, except where longer notice is required by law, to each stockholder entitled to vote at such meeting, by leaving such notice with him or by mailing it, postage prepaid, directed to him at his address as it appears upon the records of the corporation. In case of the death, absence, incapacity or refusal of the secretary, such notice may be given by a person designated either by the secretary or by the person or persons calling the meeting or by the board of directors. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. At an annual or special meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Provided at all times that stockholders may only give notice to the Secretary of matters to be brought before a meeting that are suitable and appropriate for consideration by stockholders of a public company. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at any meeting except in accordance with the procedures set forth in this paragraph. The Chairman of the meeting shall, it the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of -2- 3 this paragraph, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Only persons who are nominated in accordance with the procedures set forth in this paragraph shall be eligible for election as Directors at a meeting of stockholders. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this paragraph. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such persons' written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this paragraph. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE V. Quorum of Stockholder; Stockholder List At any meeting of the stockholders, a majority (based on voting rights of all shares) of all shares issued and outstanding and entitled to vote upon a question to be considered at the meeting shall constitute a quorum for the consideration of such question when represented at such meeting by the holders thereof in person or by their duly constituted and authorized attorney, but a less interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting a majority of the stock so represented thereat and entitled to vote shall, except where a larger vote is required by law, by the certificate of incorporation or by these by-laws, decide any question brought before such meeting. -3- 4 The secretary or other officer having charge of the stock ledger shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city or town where the meeting is to be held, which place shall have been specified in the notice of the meeting, or, If not so specified, at the place where the meeting is to be held. Said list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders required by this Article or the books of the corporation, or the stockholders entitled to vote in person or, by proxy at any meeting of stockholders. ARTICLE VI. Proxies and Voting Except as otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote for each share of the capital stock held by such stockholder. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy but (except as otherwise expressly permitted by law) no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period or so long as it is coupled with an interest sufficient in law to support an irrevocable power. ARTICLE VII. Stockholders' Record Date In order that the corporation may determine the stockholders entitled to notice or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (2) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by -4- 5 the board of directors is necessary, shall be the day on which the first written consent is expressed. (3) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the board of directors may fix a new record date for the adjourned meeting ARTICLE VIII. Board of Directors Except as otherwise provided by law or by the certificate of incorporation, the business and affairs of the corporation shall be managed by the board of directors. The number of directors shall be such number, not fewer than three nor more than twelve, as may be determined from time to time by resolution of the Board of Directors. Directors shall be elected by the stockholders at the annual meeting. Each director shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. No director need be a stockholder. ARTICLE IX. Committees The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee and may define the number and qualifications which shall constitute a quorum of such committee. Except as otherwise limited by law, any such committee, to the extent provided in the resolution appointing such committee, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE X. Meetings of the Board of Directors and of Committees Regular meetings of the board of directors may be held without call or formal notice at such places either within or without the State of Delaware and at such times as the board may by vote from time to time determine. -5- 6 Special meetings of the board of directors may be held at any place either within or without the State of Delaware at any time when called by the chairman of the board, secretary or two or more directors, reasonable notice of the time and place thereof being given to each director. Unless otherwise restricted by the certificate of incorporation or by other provisions of these by-laws, (a) any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if all members of the board or of such committee, as the case may be, consent thereto in writing and such writing or writings are filed with the minutes of proceedings of the board or committee, and (b) members of the board of directors or of any committee designated by the board may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. ARTICLE XI. Quorum of the Board of Directors Except as otherwise expressly provided in the certificate of incorporation or in these by-laws, a majority of the total number of directors at the time in office shall constitute a quorum for the transaction of business, but a less number may adjourn any meeting from time to time. Except as otherwise so expressly provided, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, provided, that the affirmative vote in good faith of a majority of the disinterested directors, even though the disinterested directors shall be fewer than a quorum, shall be sufficient to authorize a contract or transaction in which one or more directors have an interest if the material facts as to such interest and the relation of the interested directors to the contract or transaction have been disclosed or are known to the directors. ARTICLE XII. Waiver of Notice of Meetings Whenever notice is required to be given under any provision of law or the certificate of incorporation or by-laws, a written waiver thereof, signed by the person entitled to notice whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or the by-laws. ARTICLE XIII. Officers and Agents The corporation shall have a president, secretary and treasurer, who shall be chosen by the directors, each of whom shall hold his office until his successor has been chosen and qualified or until his earlier resignation or removal. The corporation may have -6- 7 such other officers and agents as are desired, including without limitation a chairman of the board of directors and an executive vice president, each of whom shall be chosen by the board of directors and shall hold his office for such term and have such authority and duties as shall be determined by the board of directors. The board of directors may secure the fidelity of any or all of such officers or agents by bond or otherwise. Any number of offices may be held by the same person. Each officer shall, subject to these by-laws, have in addition to the duties and powers herein set forth, such duties and powers as the board of directors shall from time to time designate. In all cases where the duties of any officer, agent or employee are not specifically prescribed by the by-laws, or by the board of directors, such officer, agent or employee shall obey the orders and instructions of the president. Any officer may resign at any time upon written notice to the corporation. ARTICLE XIV. Chairman of the Board Except as otherwise voted by the board, the chairman of that board shall preside at all meetings of the stockholders and of the board of directors at which he is present. President & Chief Executive Officer The president and chief executive officer shall, subject to the direction and under the supervision of the board of directors, have general and active control of the corporation's affairs and business, and general supervision over its officers, agents and employees. In the absence of and when so designated by the chairman of the board, the president and chief executive officer shall perform the duties and responsibilities of the chairman of the board on a temporary basis in accordance with and as specifically prescribed by the by-laws or as specifically prescribed by the board of directors. The president and chief executive officer shall have custody of the treasurer's bond, if any. ARTICLE XV. Secretary The secretary shall record all the proceedings of the meetings of the stockholders and directors in a book, which shall be the property of the corporation, to be kept for that purpose. The secretary shall perform such other duties as shall be assigned to him by the board of directors. In the absence of the secretary from any such meeting, a temporary secretary shall be chosen, who shall record the proceedings of such meeting in the aforesaid book. ARTICLE XVI. Treasurer The treasurer shall, subject to the direction and under the supervision of the board of directors, have the care and custody of the funds and valuable papers of the corporation, except his own bond, and he shall, except as the board of directors shall generally or in particular cases authorize the endorsement thereof in some other manner, -7- 8 have power to endorse for deposit or collection all notes, checks, drafts and other obligations for the payment of money to the corporation or its order. He shall keep, or cause to be kept, accurate books of account, which shall be the property of the corporation. ARTICLE XVII. Removals The stockholders may, at any meeting called for the purpose, by vote of a majority of the capital stock issued and outstanding and entitled to vote thereon, remove any director from office. The board of directors may, at any meeting called for the purpose, by vote of a majority of their entire number remove from office any officer or agent of the corporation or any member of any committee appointed by the board of directors or by any committee of the board of directors or by any officer or agent of the corporation. ARTICLE XVIII. Vacancies Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise and newly created directorships resulting from any increase in the authorized number of directors, may be filled by a majority of the directors then in office (though less than a quorum) or by a sole remaining director, and each of the incumbents so chosen shall hold office for the unexpired term in respect of which the vacancy occurred and until his successor shall have been duly elected and qualified or for such shorter period as shall be specified in the filling of such vacancy or, it such vacancy shall have occurred in the office of director, until such a successor shall have been chosen by the stockholders. ARTICLE XIX. Certificates of Stock Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors (if one shall be incumbent) or the president or a vice-president and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary, certifying the number of shares owned by him in the corporation. If such certificate is countersigned (1) by a transfer agent other than the corporation or its employee, or (2) by a registrar other than the corporation or its employee, any other signatures on the certificate may be facsimile. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be is issued by the corporation with the same effect as if he were such officer at the date of issue. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue to represent such class or series of stock or there shall be set forth on the face or back of the certificates which the corporation shall issue to represent such class or series of stock, a -8- 9 statement that the corporation will furnish, without charge to each stockholder who so requests, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Any restriction imposed upon the transfer of shares or registration of transfer of shares shall be noted conspicuously on the certificate representing the shares subject to such restriction. ARTICLE XX. Loss of Certificate The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the directors may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate in its place and upon such other terms or without any such bond which the board of directors shall prescribe. ARTICLE XXI. Seal The corporate seal shall, subject to alteration by the board of directors, consist of a flat-faced circular die with the word "Delaware" together with the name of the corporation and the year of its organization cut or engraved thereon. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE XXII. Execution of Papers Except as otherwise provided in these by-laws or as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the corporation, shall be signed by the president or by the treasurer. ARTICLE XXIII. Indemnification The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving, at the request of the corporation, another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments and fines actually imposed or reasonably incurred by him in connection with such action, suit or proceeding unless in any proceeding he shall be finally adjudged not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation; provided, however, that such indemnification shall not cover liabilities in connection with any matter which shall be disposed of through a -9- 10 compromise payment by such person, pursuant to a consent decree or otherwise, unless such compromise shall be approved as in the best interest of the corporation, after notice that it involves such indemnification, (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, event or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. Such indemnification may include payment by the corporation of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding, upon receipt of an undertaking by the person indemnified to repay such payment if he shall be adjudicated to be not entitled to indemnification under these provisions. The rights of indemnification hereby provided shall not be exclusive of or affect other rights to which any director, officer, employee, agent or stockholder may be entitled. As used in this paragraph, the terms "director", "officer", "employee", "agent" or "stockholder" include their respective heirs, executors and administrators, and an "interested" director or officer is one against whom as such the proceeding in question or another proceeding on the same or similar grounds is then pending. Any indemnification to which a person is entitled under this paragraph shall be provided although the person to be indemnified is no longer such a director, officer, employee, agent or stockholder. Notwithstanding the foregoing, no indemnification shall be provided hereunder to the extent then prohibited by applicable law. ARTICLE XXIV. Fiscal Year Except as from time to time otherwise provided by the board of directors, the fiscal year of the corporation shall end on the last day of June of each year. ARTICLE XXV. Restrictions on Transfer The following restrictions are imposed upon the transfer of shares of the capital stock of the corporation, except that such restrictions shall not apply to shares of the corporation's Class C Preferred Stock or any shares issued upon the conversion or otherwise in respect thereof: (a) The corporation shall have the right to purchase, or to direct the transfer of, the shares of its capital stock in the events and subject to the conditions and at a price fixed as provided below; each holder of shares of such capital stock holds his shares subject to this right and by accepting the same upon original issue or subsequent transfer thereof, the stockholder agrees for himself, his legal representatives and assigns as hereinafter in this Article XXV provided. (b) In the event of any change in the ownership of any share or shares of such capital stock (made or proposed) or in the right to vote thereon (whether by the holder's act or by death, legal disability, operation of law, legal processes, order or court, or otherwise, except by ordinary proxies or powers of attorney) the corporation has the right to purchase such share or all or any part of such shares or to require the same to be sold to a purchaser or purchasers designated by the corporation or to follow each such method in part at a price per share equal to the fair value -10- 11 thereof at the close of business on the last business day next preceding such event as determined by mutual agreement or, failing such agreement, by arbitration as provided below. (c) In any such event the owner of the share or shares concerned therein (being for the purposes of these provisions, all persons having any property interest therein) shall give notice thereof in detail satisfactory to the corporation. Within ten days after receipt of said owner's notice, the corporation shall elect whether or not to exercise its said rights in respect to said shares and, if it elects to exercise them, shall give notice of its election. (d) Failing agreement between the owner and the corporation as to the price per share to be paid, such price shall be the fair value of such shares as determined by three arbitrators, one designated within five days after the termination of said ten-day period the registered holder of said share or shares or his legal representatives, one within said period of five days by the corporation and the third within five days after said appointment last occurring by the two so chosen. Successor arbitrators, if any shall be required, shall be appointed, within reasonable time, as nearly as may be in the manner provided as to the related original appointment. No appointment shall be deemed as having been accomplished unless such arbitrator shall have accepted in writing his appointment as such within the time limited for his appointment. Notice of each appointment of an arbitrator shall be given promptly to the other parties in interest. Said arbitrators shall proceed promptly to determine said fair value. The determination of the fair value of said share or shares by agreement of any two of the arbitrators shall be conclusive upon all parties interested in such shares. Forthwith upon such determination the arbitrators shall mail or deliver notice of such determination to the owner (as above defined) and to the corporation. (e) Within ten days after agreement upon said price or mailing of notice of determination of said price by arbitrators as provided below (whichever shall last occur), the shares specified therein for purchase shall be transferred to the corporation or to the purchaser or purchasers designated therein or in part to each as indicated in such notice of election against payment of said price at the principal office of the corporation. (f) If in any of the said events, notice therefor having been given as provided above, the corporation elects in respect of any such shares or any part thereof not to exercise its said rights, or fails to exercise them or to give notice or make payment all as provided above, or waives said rights by vote or in authorized writing, then such contemplated transfer or such change may become effective as to those shares with respect to which the corporation elects not to exercise its rights or fails to exercise them or to give notice or to make payment, it consummated within thirty days after such election, failure to waiver by the corporation, or within such longer period as the corporation may authorize. -11- 12 (g) It the owner's notice in respect of any to such shares of capital stock is not received by the corporation as provided above, or if the owner falls to comply with these provisions in respect of any such shares in any other regard, the corporation, at its option and in addition to its other remedies, may suspend the rights to vote or to receive dividends on said shares, or may refuse to register on its books any transfer of said shares or otherwise to recognize any transfer or change in the ownership thereof or in right to vote thereon, one or more, until these provisions are complied with to the satisfaction of the corporation; and if the required owner's notice is not received by the corporation after written demand by the corporation it may also or independently proceed as though a proper owner's notice had been received at the expiration of ten days after mailing such demand, and, if it exercises its rights with respect to said shares or any of them, the shares specified shall be transferred accordingly. (h) In respect of these provisions with respect to the transfer of shares of capital stock, the corporation may act by its board of directors. Any notice or demand under said provision shall be deemed to have been sufficiently given it in writing delivered by hand or addressed by mail postpaid, to the corporation at its principal office or to the owner (as above defined) or to the holder registered on the books of the corporation (or his legal representative) of the shares or shares in question at the address stated in his notice or at his address appearing on the books of the corporation. (i) Nothing herein contained shall prevent the pledging of shares, if there is neither a transfer of the legal title thereto nor a transfer on the books of the corporation into the name of the pledgee, but no pledgee or person claiming thereunder shall be entitled to make or cause to be made any transfer of pledged shares by sale thereof or otherwise (including in this prohibition transfer on the books of the corporation into the name of the pledgee) except upon compliance herewith and any such pledge shall be subject to those conditions and restrictions. (j) Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the provisions of this by-law: (1) A stockholder's transfer of any or all shares held either during such stockholder's lifetime or on death by will or intestacy to or to a trust or a custodian for the benefit of such stockholder's immediate family. "Immediate family" as used herein shall mean spouse, lineal descendant, father, mother, brother, sister, aunt or uncle, or niece or nephew of the stockholder making such transfer. (2) A stockholder's transfer of any or all of such stockholder's shares to any other stockholder of the corporation. (3) A stockholder's transfer of any or all of such stockholder's shares to a person who, at the time of such transfer, is an officer or director of the corporation. -12- 13 (4) A corporate stockholder's transfer of any or all of its shares (i) pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of the corporate stockholder, or (ii) to any or all of its stockholders. (5) A transfer by a stockholder which is a limited or general partnership to any or all of its partners or retired partners. In any such case, the transferee, assignee, or other recipient shall receive and hold such stock subject to the provisions of this by-law, and there shall be no further transfer of such stock except in accordance with this by-law. (k) The restrictions on transfer contained in this Article XXV shall terminate on either of the following dates, whichever shall first occur (1) On July 31, 1996; or (2) Upon the date securities of the corporation are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended, (other than an offering pursuant to (i) an offer on sale of securities to employees of, or other persons providing services to, the corporation pursuant to an employee or similar benefit plan, registered on Form S-8 or comparable form; or (ii) a merger, acquisition, or other transaction of the type described in Rule 145 or comparable rule promulgated pursuant to such Act, registered on Form S-14, Form S-15 or similar form). (l) Notwithstanding the foregoing provisions of this Article XXV with respect to the determination of purchase price of shares of stock, in the event of any inconsistency between such provisions and those of management purchase or other agreements between the corporation and persons who purchase shares of its capital stock, those of such management purchase or other agreements shall govern. ARTICLE XXVI. Amendments Except as otherwise provided by law or by the certificate of incorporation, these by-laws, as from time to time altered or amended, may be made, altered or amended at any annual or special meeting of the stockholders called for the purpose, of which the notice shall specify the subject matter of the proposed alteration or amendment or new by-law or the article or articles to be affected thereby. If the certificate of incorporation so provides, these by-laws may also be made, altered or amended by a majority of the whole number of directors. Such action may be taken at any meeting of the board of directors, of which notice shall have been given as for a meeting of stockholders. -13- EX-10.4 3 EMPLOYMENT AGREEMENT - SIEGEL 1 EXHIBIT 10.4(a) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the 25th day of March, 1996 by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Company"), and E. COURTNEY SIEGEL ("Employee"). WHEREAS, the Company, through its Board of Directors, desires to retain the services of Employee, and Employee desires to be retained by the Company, on the terms and conditions set forth in this Agreement; WHEREAS, the Company has agreed to purchase and is as of the "Effective Date" (as defined below) purchasing all of the assets and liabilities associated with the "real-time" computer business of Harris Computer Systems Corporation ("Harris") pursuant to which Employee will serve as the President and Chief Executive Officer and a member of the Board of Directors of the Company, and will cease to be the Chairman and a member of the Board of Directors and an officer of Harris; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby accepts employment, as President and Chief Executive Officer of the Company upon the terms of and subject to this Agreement. 2. TERM. The term ("Term") of this Agreement shall commence and this Agreement shall become effective on the date of the closing of the acquisition by the Company of the real-time business of Harris (the "Effective Date") and shall continue until otherwise terminated by either party at any time in accordance with the terms hereof. 3. DUTIES. During his employment hereunder, Employee will serve as the President and Chief Executive Officer of the Company and the Company will take such actions as necessary to cause his -1- 2 nomination as a member of the Board of Directors of the Company. Employee shall have general and active charge of the business and affairs of the Company and, in such capacity, shall have responsibility for the day-to-day operations of the Company, subject to the authority and control of the Board of Directors of the Company. Employee shall report directly to the Board of Directors of the Company. Throughout the term of employment hereunder, the Employee shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, as appropriate to his duties and responsibilities hereunder, except for reasonable vacations and illness or other disability, but nothing in this Agreement shall preclude the Employee from devoting reasonable periods required for serving as a director or member of any advisory committee of not more than two (at any time) "for profit" organizations involving no conflict of interest with the interests of the Company (subject to approval by the Board of Directors, which approval shall not be unreasonably withheld), or from engaging in charitable and community activities, or from managing his personal investments, provided such activities do not materially interfere with the performance of his duties and responsibilities under this Agreement. 4. COMPENSATION. a. Salary: During his employment hereunder, Employee shall be paid an initial salary of $300,000 per year, payable in equal installments not less than monthly. The Employee's salary shall be reviewed at least annually by the Board of Directors or any Committee of the Board delegated the authority to review executive compensation. b. Stock Option/Bonus: In addition to salary, Employee shall be entitled to participate in the Company's Stock Option Plan (the "Stock Option Plan") and Employee shall be initially granted, as of the Effective Date, an option to purchase 1,000,000 shares of common stock of the Company (such number to be subject to adjustment as provided in Section 5, paragraph 3, of the Stock Option Plan). The per share exercise price of the option shall be the fair market value of the Company's common stock as of the date of grant (calculated as the average closing stock price for the five day period prior to the Effective Date), and the option shall vest in three equal annual installments over the three-year period beginning on the first anniversary of the date of grant. The Employee shall be additionally granted, as of the Effective Date, a long-term incentive compensation option to purchase up to 250,000 shares of common stock of the Company, at an exercise price equal to the fair market value of a share of common stock as of the date of grant with vesting based on the achievement of Company performance objectives for the three fiscal years following the Effective Date. The objectives for each year of such three-year period, and other terms and conditions of the long-term incentive compensation plan grant, shall be established by the Board -2- 3 of Directors or a committee thereof. Further, Employee will be provided with an annual bonus opportunity with an initial target bonus for Employee of $195,000, representing 65% of Employee's annual salary as set forth in Paragraph 4.a, above (hereafter the "Executive Bonus Plan"), the actual amount to be paid depending upon the degree of achievement of various objectives. The objectives for each year and other terms and conditions of the bonus opportunity shall be established by the Board of Directors or a committee thereof and shall be reasonably consistent with the business plan of the Company for such year, or portion thereof, established in advance. The target bonus opportunity may be increased to no more than an additional 50% ($97,500) for superior performance as defined and determined under the Executive Bonus Plan. c. Insurance: During his employment hereunder, Employee shall be entitled to participate in such health, life, disability and other insurance programs, if any, that the Company may offer to other key executive employees of the Company from time to time. d. Other Benefits: During his employment hereunder, Employee shall be entitled to such other benefits, if any that the Company may offer to other key executive employees of the Company from time to time. Certain other benefits are described on Schedule A hereto. e. Vacation: Employee shall be entitled to four weeks vacation leave (in addition to holidays) in each calendar year during the Term, or such additional amount as may be set forth in the vacation policy that the Company shall establish from time to time. f. Expense Reimbursement: Employee shall, upon submission of appropriate supporting documentation, be entitled to reimbursement of reasonable out-of-pocket expenses incurred in the performance of his duties hereunder in accordance with policies established by the Company. Such expenses shall include, without limitation, reasonable entertainment expenses, gasoline and toll expenses and cellular phone use charges, if such charges are directly related to the business of the Company. 5. GROUNDS FOR TERMINATION. The Board of Directors of the Company may terminate this Agreement for Cause. As used herein, "Cause" shall mean any of the following: (a) the Employee has committed a willful serious act against the Company intended to enrich himself at the expense of the Company, such as embezzlement, or has been convicted of a felony involving moral turpitude; or (b) Employee has (i) willfully and grossly neglected his duties hereunder, or (ii) intentionally failed to observe specific directives or policies of the Board of Directors, which directives or policies were consistent with his positions, duties and responsibilities hereunder, and which failure had, or continuing failure will have, a material adverse effect on the Company. Prior to any such termination, Employee shall be given written -3- 4 notice by the Board of Directors that the Company intends to terminate his employment for Cause under this Section 5, which written notice shall specify the particular acts or omissions on the basis of which the Company intends to so terminate Employee's employment, and Employee (with his counsel, if he so chooses) shall be given the opportunity, within 15 days of his receipt of such notice, to have a meeting with the Board of Directors to discuss such acts or omissions and be given reasonable time to remedy the situation. In the event of such termination, the Employee shall be promptly furnished written specification of the basis therefor in reasonable detail. 6. TERMINATION BY EMPLOYEE: Employee may terminate this Agreement at any time with Good Reason. "Good Reason" shall exist if: a. the Company demotes or otherwise elects or appoints the Employee to lesser offices than set forth in Section 3, or fails to elect or appoint him to such positions; b. the Company causes a material change in the nature or scope of the authorities, powers, functions, duties or responsibilities attached to the Employee's positions as described in Section 3; c. at any time the Employee is no longer a member of the Board of Directors of the Company for any reason other than resignation by Employee, removal for Cause, death or disability; d. the Company decreases the Employee's compensation below the levels provided for by the terms of Section 4 (taking into account increases made from time to time in accordance with Section 4); e. the Company materially reduces the Employee's benefits under any employee benefit plan, program or arrangement of the Company (other than a change that affects all employees similarly situated) from the level in effect upon the Employee's commencement or participation; f. the Company commits any other material breach of the provisions of this Agreement (except those set forth in Paragraph 4.a.) and Employee provides at least 15 days's prior written notice to at least two members of the Company's Board of Directors of the existence of such breach and his intention to terminate this Agreement (no such termination shall be effective if such breach is cured during such period); or g. the Company fails to comply with the provisions of Paragraph 4.a. for an uninterrupted 10 day period. -4- 5 7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION. a. In the event Employee's employment with the Company (including its subsidiaries) is terminated by the Company for Cause as provided in Paragraph 5 then, on or before Employee's last day of employment with the Company, the provisions of this Paragraph 7.a shall apply. These same provisions shall apply if the Employee terminates his employment other than in accordance with the provisions of Paragraph 6 hereof. i. Compensation: The Company shall pay in a lump sum to Employee such amount of compensation due Employee for services rendered to the Company, as well as compensation for unused vacation time, as has accrued but remains unpaid. Any and all other rights to compensation of any kind granted to Employee under this Agreement shall terminate as of the date of termination, except as may be otherwise required by statute. ii. Noncompetition/Nonsolicitation Period: The provisions of Paragraphs 13 and 14 shall continue to apply with respect to Employee for a period of one year following the date of termination. b. In the event Employee's employment with the Company (including its subsidiaries) is terminated by the Company for any reason other than for Cause as provided in Paragraph 5 and other than as a consequence of Employee's death, disability, or normal retirement under the Company's retirement plans and practices, then the following provisions apply. These same provisions shall apply if Employee terminates his employment in accordance with the provisions of Paragraph 6 hereof. i. Salary and Bonus Payments: On or before Employee's last day of employment with the Company, the Company shall promptly pay in a lump sum to Employee as compensation for services rendered to the Company a cash amount equal to twice the amount of Employee's annual base salary and twice the target bonus under the Executive Bonus Plan as in effect immediately prior to his date of termination. At the election of the Company, the cash amount referred to in this subparagraph 7.b.i may be paid to Employee in periodic installments in accordance with the normal salary payment procedures of the Company. ii. Vesting of Options and Rights: Notwithstanding the vesting period provided for in the Stock Option Plan and related stock option agreements between the Company and Employee for stock options ("options") and stock appreciation rights ("rights") granted Employee by the Company, at least one-third of the options and stock appreciation rights shall be exercisable upon termination of employment. In addition, Employee will have the right to exercise such options and rights for the shorter of (a) one year following his termination of employment or (b) with respect to each option, -5- 6 the remainder of the period of exercisability under the terms of the appropriate documents that grant such options. iii. Benefit Plan Coverage: The Company shall maintain in full force and effect for Employee and his dependents for two years after the date of termination, all life, health, accident and disability benefit plans and other similar employee benefit plans, programs and arrangements in which Employee or his dependents were entitled to participate immediately prior to the date of termination, in such amounts as were in effect immediately prior to the date of termination, provided that such continued participation is possible under the general terms and provisions of such benefit plans, programs and arrangements. In the event that participation in any benefit plan, program or arrangement described above is barred, or any such benefit plan, program or arrangement is discontinued or the benefits thereunder materially reduced, the Company shall arrange to provide Employee and his dependents for two years after the date of termination with benefits substantially similar to those that they were entitled to receive under such benefit plans, programs and arrangements immediately prior to the date of termination. If immediately prior to the date of termination the Company provided Employee with any club memberships, Employee will be entitled to continue such memberships at his sole expense. Notwithstanding any time period for continued benefits stated in this subparagraph 7.b.iii, all benefits in this subparagraph 7.b.iii will terminate on the date that Employee becomes an employee of another employer and eligible to participate in the employee benefit plans of such other employer. To the extent that Employee was required to contribute amounts for the benefits described in this subparagraph 7.b.iii prior to his termination, he shall continue to contribute such amounts for such time as these benefits continue in effect after termination. iv. Savings and Other Plans: Except as otherwise more specifically provided herein or under the terms of the respective plans relating to termination of employment, Employee's active participation in any applicable savings, retirement, profit sharing or supplemental employee retirement plans or any deferred compensation or similar plan of the Company or any of its subsidiaries shall continue only through the last day of his employment. All other provisions, including any distribution and/or vested rights under such plans, shall be governed by the terms of those respective plans. v. Noncompetition/Nonsolicitation Period: The provisions of Paragraph 13 and 14 shall continue, beyond the time periods set forth in such paragraphs, to apply with respect to employee for the shorter of (x) twenty-four (24) months following the date of termination or (y) until such time as the Company has failed to comply with the provisions of subparagraph 7.b.i for an uninterrupted 10 day period and such failure is not cured within 15 days after written notice of such failure is delivered to at least two non-employee directors of the Company. -6- 7 c. The provisions of this Paragraph 7 shall apply if Employee's employment is terminated prior to a Change of Control or more than three years after the occurrence of a Change of Control (as defined in Paragraph 8.c). From the occurrence of any Change of Control until the third anniversary of such Change of Control, the provisions of Paragraph 8 shall apply in place of this Paragraph 7; provided, however, that in the event Employee terminates his employment with the Company after a Change in Control other than in accordance with the provisions of Paragraph 6 hereof, then the provisions of Paragraph 8 hereof shall not apply and the provisions of Paragraph 7.a. shall apply. Termination upon death, disability and retirement are covered by Paragraphs 9, 10 and 11, respectively. 8. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL. a. Salary, Performance Award and Bonus Payments: In the event Employee's employment with the Company is terminated within three years following the occurrence of a Change of Control (other than as a consequence of his death or disability, or of his normal retirement under the Company's retirement plans and practices) either (i) by the Company for any reason other than for Cause in accordance with Paragraph 5, or (ii) by Employee in accordance with the provisions of Paragraph 6 hereof, then Employee shall be entitled to receive from the Company, the following: i. Base Salary: Employee's annual base salary as in effect at the date of termination, multiplied by three, shall be paid on the date of termination; ii. Target Bonus: The amount of the Employee's target bonus under the Executive Bonus Plan for the fiscal year in which the date of termination occurs, multiplied by three, shall be paid on the date of termination; and iii. Other Benefits: All benefits under Paragraphs 7.b.ii, 7.b.iii and 7.b.iv shall be extended to Employee as described in such paragraphs, except that notwithstanding the vesting period provided for in the Stock Option Plan and any related stock option agreements between the Company and Employee for stock options ("options") and stock appreciation rights ("rights") granted Employee by the Company, all options and rights shall be fully vested and exercisable upon termination of employment and the period for exercise of options and rights described in the last sentence of Paragraph 7.b.ii shall be the shorter of (a) three years following his termination of employment or (b) with respect to each option, the remainder of the period of exercisability under the terms of the appropriate documents that grant such Options. -7- 8 b. Noncompetition/Nonsolicitation Period: In the event of a termination under the circumstances described in Paragraph 8.a, the provisions of Paragraphs 13 and 14 shall be without force and effect and shall not apply to Employee. c. For purposes of this Agreement, the term "Change of Control" shall mean: i. The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Rule 13d-3 promulgated under the Exchange Act or any successor provision)(any of the foregoing described in this Paragraph 8.c.i hereafter a "Person") of 33% or more of either (a) the then outstanding shares of Capital Stock of the Company (the "Outstanding Capital Stock") or (b) the combined voting power by the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Voting Securities"), provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any Person that is eligible, pursuant to Rule 13d-l(b) under the Exchange Act, to file a statement on Schedule 13G with respect to its beneficial ownership of Voting Securities, whether or not such Person shall have filed a statement on Schedule 13G, unless such Person shall have filed a statement on Schedule 13D with respect to beneficial ownership of 33% or more of the Voting Securities or (z) any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Capital Stock and Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Capital Stock and Voting Securities, as the case may be, shall not constitute a Change of Control; or ii. Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Effective Date whose election or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A, or any successor section, promulgated under the Exchange Act); or -8- 9 iii. Approval by the shareholders of the Company of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all holders of the Outstanding Capital Stock and Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from the Business Combination; or iv. (a) a complete liquidation or dissolution of the Company or (b) a sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Capital Stock and Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding Capital Stock and Voting Securities, as the case may be, immediately prior to such sale or disposition. 9. TERMINATION BY REASON OF DEATH. If Employee shall die while employed by the Company both prior to termination of employment and during the effective term of this Agreement, all Employee's rights under this Agreement shall terminate with the payment of such amounts of annual base salary as have accrued but remain unpaid and a prorated amount of targeted bonus under the Executive Bonus Plan through the month in which his death occurs, plus six additional months of the fixed salary and targeted bonus. All benefits under Paragraphs 7.b.ii and 7.b.iv shall be extended to Employee's estate as described in such paragraphs. In addition, Employees eligible dependents shall receive continued benefit plan coverage under Paragraph 7.b.iii for six months from the date of Employee's death. 10. TERMINATION BY DISABILITY. Employee's employment hereunder may be terminated by the Company for disability. In such event, all Employee's rights under this Agreement shall terminate with the payment of such amounts of annual base salary as have accrued but remain unpaid as of the thirtieth (30th) day after such notice is given except that all benefits under Paragraphs 7.b.ii, 7-b.iii and 7.b.iv shall be extended to Employee as described in such paragraphs, provided, however, that, with respect to Paragraph 7.b.iii, the period for continued benefit plan coverage shall be limited to six months from the date of -9- 10 termination. In addition, the noncompetition and nonsolicitation provisions of Paragraphs 13 and 14 shall continue to apply for a period of six months from the date of termination for disability. For purposes of this Agreement, "disability" is defined to mean that, as a result of Employee's incapacity due to physical or mental illness: a. Employee shall have been absent from his duties as an officer of the Company on a substantially full-time basis for six (6) consecutive months: and b. Within thirty (30) days after the Company notifies Employee in writing that it intends to replace him, Employee shall not have returned to the performance of his duties as an officer for the Company on a full-time basis. Such notice may be given by the Company at any time after Employee has been absent for a total of four consecutive months. 11. RETIREMENT. Employee shall be entitled to participate in the Company's Retirement Savings Plan and any other retirement plan hereafter made available to senior executive officers of the Company in accordance with the provisions thereof as in effect from time to time. 12. INDEMNIFICATION. If litigation shall be brought to enforce or interpret any provision contained herein, the non-prevailing party shall indemnify the prevailing party for reasonable attorney's fees (including those for negotiations, trial and appeals) and disbursements incurred by the prevailing party in such litigation, and hereby agrees to pay prejudgment interest on any money judgment obtained by the prevailing party calculated at the generally prevailing Nations Bank of Florida, N.A. base rate of interest charged to its commercial customers in effect from time to time from the date that payment(s) to him should have been made under this Agreement. 13. NONCOMPETITION. a. At all times during Employee's employment hereunder, and for such additional periods as may otherwise be set forth in this Agreement in reference to this Paragraph 13, Employee shall not, directly or indirectly, engage in any business, enterprise or employment, whether as owner, operator, shareholder, director, partner, creditor, consultant, agent or any capacity whatsoever that manufactures products designed to compete directly with products of the Company or markets such products anywhere in the world where the Company (i) is engaged in business or (ii) has evidenced an intention of engaging in business. Employee acknowledges that he has read the foregoing and agrees that the nature of the geographical restrictions are reasonable given the international nature of the Company's business. In the -10- 11 event that these geographical or temporal restrictions are judicially determined to be unreasonable, the parties agree that these restrictions shall be judicially reformed to the maximum restrictions which are reasonable. b. Notwithstanding the provisions of the preceding Subparagraph, the Employee may accept employment with a company that would be deemed to be a competitor of the Company as described in the previous subparagraph ("Competitor"), so long as (i) the Competitor has had annual revenues of at least $1 billion in each of the prior two fiscal years, (ii) the Competitor's revenues for products and maintenance in direct competition with the Company do not exceed 50% of its total revenues, and (iii) the Employee's responsibilities are solely for divisions or subsidiaries of the Competitor that do not compete with the Company. 14. NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. At all times during the Employee's employment hereunder, and for such additional periods as may otherwise be set forth in this Agreement, in reference to this Paragraph 14, the Employee shall not, directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity (a) attempt to employ, employ or enter into any contractual arrangement with any employee or former employee of the Company, its affiliates, subsidiaries or predecessors in interest, unless such employee or former employee has not been employed by the Company, its affiliates, subsidiaries or predecessors in interest, during the six months prior to the Employee's attempt to employ him, or (b) call on or solicit any of the actual or targeted prospective customers of the Company or its affiliates, subsidiaries or predecessors in interest with respect to any matters related to or competitive with the business of the Company. 15. CONFIDENTIALITY. a. Nondisclosure: The Employee acknowledges and agrees that the Confidential Information (as defined below) is a valuable, special and unique asset of the Company's business. Accordingly, except in connection with the performance of his duties hereunder, the Employee shall not at any time during or subsequent to the term of his employment hereunder disclose, directly or indirectly, to any person, firm, corporation, partnership, association or other entity any proprietary or confidential information relating to the Company or any information concerning the Company's financial condition or prospects, the Company's customers, the design, development, manufacture, marketing or sale of the Company's products or the Company's methods of operating its business (collectively, "Confidential Information"). Confidential Information shall not include information which, at the time of disclosure, is -11- 12 known or available to the general public by publication or otherwise through no act or failure to act on the part of Employee. b. Return of Confidential Information: Upon termination of Employee's employment, for whatever reason and whether voluntary or involuntary, or at any time at the request of the Company, Employee shall promptly return all Confidential Information in the possession or under the control of Employee to the Company and shall not retain any copies or other reproductions or extracts thereof. Employee shall at any time at the request of the Company destroy or have destroyed all memoranda, notes, reports, and documents, whether in "hard copy" form or as stored on magnetic or other media, and all copies and other reproductions and extracts thereof, prepared by Employee and shall provide the Company with a certificate that the foregoing materials have in fact been returned or destroyed. c. Books and Records: All books, records and accounts whether prepared by Employee or otherwise coming into Employee's possession, shall be the exclusive property of the Company and shall be returned immediately to the Company upon termination of Employee's employment hereunder or upon the Company's request at any time. 16. INJUNCTION/SPECIFIC PERFORMANCE SETOFF. Employee acknowledges that a breach of any of the provisions of Paragraphs 13, 14, or 15 hereof would result in immediate and irreparable injury to the Company which cannot be adequately or reasonably compensated at law. Therefore, Employee agrees that the Company shall be entitled, if any such breach shall occur or be threatened or attempted, to a decree of specific performance and to a temporary and permanent injunction, without the posting of a bond, enjoining and restraining such breach by Employee or his agents, either directly or indirectly, and that such right to injunction shall be cumulative to whatever other remedies for actual damages to which the Company is entitled. Employee further agrees that the Company may set off against or recoup from any amounts due under this Agreement to the extent of any losses incurred by the Company as a result of any breach by Employee of the provisions of Paragraphs 13, 14 or 15 hereof. 17. SEVERABILITY. Any provision in this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. -12- 13 18. SUCCESSORS. This Agreement shall be binding upon Employee and inure to the benefit of the Company and any permitted successor of the Company. Neither this Agreement nor any rights arising hereunder may be assigned or pledged by Employee or anyone claiming through Employee; or by the Company, except to any corporation which is the successor in interest to the Company by reason of a merger, consolidation or sale of substantially all of the assets of the Company. The foregoing sentence shall not be deemed to have any effect upon the rights of Employee upon a Change of Control. 19. CONTROLLING LAW. This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of Florida. 20. NOTICES. Any notice required or permitted to be given hereunder shall be written and sent by registered or certified mail, telecommunicated or hand delivered at the address set forth herein or to any other address of which notice is given: TO THE COMPANY: CONCURRENT COMPUTER CORPORATION 2101 WEST CYPRESS CREEK ROAD FORT LAUDERDALE, FLORIDA 33309 TO THE EMPLOYEE: E. COURTNEY SIEGEL 2400 N.W. 53RD STREET BOCA RATON, FLORIDA 33496 -13- 14 21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto on the subject matter hereof and may not be modified without the written agreement of both parties hereto. 22. WAIVER. A waiver by any party of any of the terms and conditions hereof shall not be construed as a general waiver by such party. 23. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which together shall constitute a single agreement. 24. INTERPRETATION. In the event of a conflict between the provisions of this Agreement and any other agreement or document defining rights and duties of Employee or the Company upon Employee's termination, the rights and duties set forth in this Agreement shall control. 25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph 7.b. provides that certain payments and other benefits shall be received by Employee upon the termination of Employee by the Company other than for Cause and states that these same provisions shall apply if Employee terminates his employment in accordance with the provisions of Paragraph 6 hereof. It is the intention of this Agreement that if the Company terminates Employee other than for Cause (and other than as a consequence of Employee's death, disability or normal retirement) or if Employee terminates his employment in accordance with the provisions of Paragraph 6 hereof, then the payments and other benefits set forth in Paragraph 7.b. shall constitute the sole and exclusive remedies of Employee. This Paragraph 25 shall have no effect upon the provisions of Paragraph 8 of this Agreement. IN WITNESS WHEREOF, this Employment Agreement has been executed by the parties as of the date first above written. CONCURRENT COMPUTER CORPORATION EMPLOYEE /s/ Michael A. Brunner /s/ E. Courtney Siegel - ------------------------------------ ------------------------- Michael A. Brunner E. Courtney Siegel Director Chairman, Compensation Committee -14- 15 SCHEDULE A OTHER BENEFITS 1. Use of golf club membership maintained by the Company at Broken Sound Country Club, Boca Raton, Florida, as of the date of this Agreement. 2. Right to First Class tickets on airlines when traveling on business related to the Company. -15- EX-10.9A 4 AMENDED & RESTATED AMEND. NO. 1 TO LOAN AGREEMENT 1 EXHIBIT 10.9(a) AMENDED AND RESTATED AMENDMENT NO. ONE TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amended And Restated Amendment No. One To The Loan And Security Agreement (the "Amendment") is entered into this 17th day of October, 1995, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from June 30, 1995 through July 31, 1995, Cubic Defense Systems, whose total obligations to Borrower exceed fifteen percent (15%) and Arinc, whose total obligations to Borrower exceed twenty percent (20%) and (ii) commencing August 1, 1995, Cubic Defense Systems, whose total obligations to Borrower shall revert to ten percent (10%) and Airinc Systems, whose total obligations to Borrower shall revert to fifteen percent (15%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2 2. Foothill shall charge Borrower's loan account a fee in the amount of Five Hundred Dollars ($500.00). Said fee shall be earned at the time of payment and shall be non-refundable. 3. This Amendment amends, restates and supersedes in its entirety that certain Amendment No. One To The Loan And Security Agreement by and between Foothill and Borrower dated August 15, 1995. 4. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason --------------------------- ---------------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its Vice President Finance and -------------------------- --------------------------------- Treasurer Chief Financial Officer EX-10.9B 5 AMENDED & RESTATED AMEND. NO. 2 TO LOAN AGREEMENT 1 EXHIBIT 10.9(b) AMENDMENT NO. TWO TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Two To The Loan And Security Agreement (this "Amendment") is entered into as of the 12th day of October, 1995, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from September 30, 1995 through November 30, 1995, Hughes Aircraft Company, whose total obligations to Borrower exceed twenty percent (20%) and (ii) commencing December 1, 1995, Hughes Aircraft Company, whose total obligations to Borrower shall revert to ten percent (10%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2. Foothill shall charge Borrower's loan account a fee in the amount of Two Thousand Seven-Hundred and Fifty ($2,750.00). Said fee shall be earned at the time of payment and shall be non-refundable. 2 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason ------------------------ --------------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its Vice President Finance and ------------------------ --------------------------------- Treasurer Chief Financial Officer EX-10.9C 6 AMENDED & RESTATED AMEND. NO. 3 TO LOAN AGREEMENT 1 EXHIBIT 10.9(c) AMENDMENT NO. THREE TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Three To The Loan And Security Agreement (this "Amendment") is entered into as of the 6th day of December, 1995, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from December 1, 1995 through December 31, 1995, Hughes Aircraft Company, whose total obligations to Borrower exceed twenty percent (20%) and (ii) commencing January 1, 1996, Hughes Aircraft Company, whose total obligations to Borrower shall revert to ten percent (10%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2. Foothill shall charge Borrower's loan account a fee in the amount of One Thousand Two Hundred Fifty Dollars ($1,250.00). Said fee shall be earned at the time of payment and shall be non-refundable. 2 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason --------------------------- ---------------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its Vice President Finance and -------------------------- ---------------------------------- Treasurer Chief Financial Officer EX-10.9D 7 AMENDED & RESTATED AMEND. NO. 4 TO LOAN AGREEMENT 1 EXHIBIT 10.9(d) AMENDMENT NO. FOUR TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Four To The Loan And Security Agreement (this "Amendment") is entered into as of the 25th day of January, 1996, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from December 31, 1995 through February 28, 1996, Dow Jones Telerate, whose total obligations to Borrower exceed twenty percent (20%) and (ii) commencing February 29, 1996, Dow Jones Telerate, whose total obligations to Borrower shall revert to ten percent (10%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2. Foothill shall charge Borrower's loan account a fee in the amount of Two Thousand Seven Hundred Fifty Dollars ($2,750.00). Said fee shall be earned at the time of payment and shall be non-refundable. 2 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason -------------------------- ----------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its Vice President Finance and ------------------------ ----------------------------- Treasurer Chief Financial Officer EX-10.9E 8 AMEND. NO. 5 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.9(e) AMENDMENT NO. FIVE TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Five To The Loan And Security Agreement (this "Amendment") is entered into as of the 16th day of February, 1996, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (e) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(e) Accounts, in excess of $500,000, with respect to which the Account Debtor is the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Borrower has complied, to the satisfaction of Foothill, with the Assignment of Claims Act, 31 U.S.C. Section 3727);". 2. Foothill shall charge Borrower's loan account a fee in the amount of Two Thousand Seven Hundred Fifty Dollars ($2,750.00). Said fee shall be fully-earned, non-refundable, and due and payable on the date Borrower's loan account is charged. 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. 2 IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason ------------------------ ----------------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its Vice President Finance and ------------------------ --------------------------------- Treasurer Chief Financial Officer EX-10.9F 9 AMEND. NO. 6 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.9(f) AMENDMENT NO. SIX TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Six To The Loan And Security Agreement (this "Amendment") is entered into as of the 27th day of February, 1996, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from February 28, 1996 through March 31, 1996, Dow Jones Telerate, whose total obligations to Borrower exceed twenty percent (20%) and (ii) commencing April 1, 1996, Dow Jones Telerate, whose total obligations to Borrower shall revert to ten percent (10%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2. Foothill shall charge Borrower's loan account a fee in the amount of Seven Hundred Fifty Dollars ($750.00). Said fee shall be earned at the time of payment and shall be non-refundable. 2 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason ------------------------ ----------------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its Vice President Finance and ------------------------ ---------------------------------- Treasurer Chief Financial Officer EX-10.9G 10 AMEND. NO. 7 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.9(g) AMENDMENT NO. SEVEN TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Seven To The Loan And Security Agreement (this "Amendment") is entered into as of the 26th day of April, 1996, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from March 31, 1996 through June 30, 1996, Hughes Training, Inc., whose total obligations to Borrower exceed twenty-five percent (25%) and (ii) commencing July 1, 1996, Hughes Aircraft, whose total obligations to Borrower shall be increased to fifteen percent (15%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., Hughes Training, Inc., ABB Combustion Engineering, and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2. Foothill shall charge Borrower's loan account a fee in the amount of Two Thousand Two Hundred Fifty Dollars ($2,250.00). Said fee shall be earned at the time of payment and shall be non-refundable. 2 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason ------------------------ -------------------------------- Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its V.P. Finance & Treasurer CFO ------------------------ ------------------------------- EX-10.9H 11 AMEND. NO. 8 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.9(h) AMENDMENT NO. EIGHT TO THE LOAN AND SECURITY AGREEMENT CONCURRENT COMPUTER CORPORATION This Amendment No. Eight To The Loan And Security Agreement (this "Amendment") is entered into as of the 11th day of June, 1996, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), whose chief executive office is located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (g) of the Definition "Eligible Accounts" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage, and with respect to (i) from March 31, 1996 through June 30, 1996, Hughes Training, Inc., whose total obligations to Borrower exceed twenty-five percent (25%) (ii) from May 31, 1996 through June 30, 1996, Illinois Department of Public Aid whose total obligations to Borrower exceed twenty percent (20%), and (iii) commencing July 1, 1996, Hughes Training, Inc. and Illinois Department of Public Aid, whose total obligations to Borrower shall revert to fifteen percent (15%); provided, however, that accounts owed by the Illinois Department of Public Aid, Loral, Lockheed, Airinc, Boeing Co., Grumman Aircraft, Martin Marietta Corp., Hughes Aircraft, Hughes Training, Inc., ABB Combustion Engineering, and other accounts that may be approved from time to time by Foothill may be eligible up to a maximum, per Account Debtor, of fifteen percent (15%) of all Eligible Accounts, so long as they are otherwise eligible hereunder;". 2 2. Foothill shall charge Borrower's loan account a fee in the amount of Seven Hundred Fifty Dollars ($750.00). Said fee shall be earned at the time of payment and shall be non-refundable. 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Roger J. Mason --------------------------- ------------------------------ Lisa M. Gonzales Roger J. Mason Its Assistant Vice President Its V.P. Finance & Treasurer CFO -------------------------- ------------------------------ EX-10.9I 12 AMEND. NO. 9 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.9(i) AMENDMENT NUMBER NINE TO LOAN AND SECURITY AGREEMENT This AMENDMENT NUMBER NINE TO LOAN AND SECURITY AGREEMENT (this "Amendment") is entered into as of June 27, 1996 by and between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), and CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), with reference to the following facts: A. Foothill and Borrower heretofore have entered into that certain Loan and Security Agreement, dated as of June 29, 1995, that has been amended pursuant to that certain Amendment No. One to the Loan and Security Agreement, dated as of October 17, 1995, that certain Amendment No. Two to the Loan and Security Agreement, dated as of October 12, 1995, that certain Amendment No. Three to the Loan and Security Agreement, dated as of December 6, 1995, that certain Amendment No. Four to the Loan and Security Agreement, dated as of January 25, 1996, that certain Amendment No. Five to the Loan and Security Agreement, dated as of February 16, 1996, that certain Amendment No. Six to the Loan and Security Agreement, dated as of February 27, 1996, that certain Amendment No. Seven to the Loan and Security Agreement, dated as of April 26, 1996, and that certain Amendment No. Eight to the Loan and Security Agreement, dated as of June 11, 1996 (as amended, the "Agreement"); B. Borrower has requested Foothill to amend the Agreement, among other things, to increase the Maximum Amount of the credit facility and to extend the term of the Agreement; C. Foothill is willing to so amend the Agreement in accordance with the terms and conditions hereof; and D. All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement, as amended hereby. NOW, THEREFORE, in consideration of the above recitals and the mutual premises contained herein, Foothill and Borrower hereby agree as follows: 2 1. Amendment to the Agreement. a. The address of Borrower set forth in the preamble to the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: 2101 W. Cypress Creek Road Fort Lauderdale, Florida 33309 b. The definition of "Dilution Reserve" in Section 1.1 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: "Dilution Reserve" means, as of the date of any determination, a Dollar amount sufficient to reduce Foothill's advance rate against Eligible Accounts by 1 percentage point each for each percentage point by which the amount (expressed as a percentage point and based upon the immediately prior 12 months) of Borrower's Accounts that are subject to bad debt write-downs, credits, or other dilution is in excess of 6%. c. Subsection (e) of the definition of "Eligible Accounts" in Section 1.1 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: (e) Accounts, in excess of $1,000,000, with respect to which the Account Debtor is the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Borrower has complied, to the satisfaction of Foothill, with the Assignment of Claims Act, 31 U.S.C. Section 3727); d. The definition of "Maximum Amount" in Section 1.1 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: "Maximum Amount" means $19,950,500. e. The definition of "Maximum Revolver Amount" in Section 1.1 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: "Maximum Revolver Amount" means $12,750,000. 2 3 f. Section 1.1 of the Agreement hereby is amended by adding the following new defined terms in alphabetical order: "Amendment to Mortgage" means that certain Amendment to Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 27, 1996, between Foothill and Borrower in the form attached hereto as Exhibit M-1. "Harris" means Harris Computer Systems Corporation, a Florida corporation. "Harris Acquisition" means the acquisition by Borrower of the real-time computer business and shares of common stock of Harris pursuant to the Purchase and Sale Agreement. "Harris Loan Agreement" means that certain Loan and Security Agreement, dated as of April 1, 1996, between Foothill and Harris. "Ninth Amendment" means that certain Amendment Number Nine to Loan and Security Agreement, dated as of June 27, 1996, between Foothill and Borrower. "Ninth Amendment Closing Date" means the date on which the Harris Acquisition is consummated pursuant to the terms of the Purchase and Sale Agreement. "Purchase and Sale Agreement" means that certain Purchase and Sale Agreement, dated as of March 26, 1996, between Borrower and Harris, as amended by that certain Amendment No. 1 to the Purchase and Sale Agreement, dated as of May 13, 1996, and as further amended by that certain Amendment No. 2 to the Purchase and Sale Agreement, dated as of May 23, 1996. g. Subsection (a) of Section 2.1 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: 2.1 REVOLVING ADVANCES. (a) Subject to the terms and conditions of this Agreement, Foothill agrees to make revolving advances to Borrower in an amount at any one time outstanding not to exceed the Borrowing Base hereunder. For purposes of this Agreement, "Borrowing Base," as of any date of determination, shall mean the sum of: (i) an amount equal to the lesser of: (x) $12,750,000, (y)(1) 80% of the amount of Eligible Accounts, less (2) the amount of the Dilution Reserve, and (z) an amount equal to 75% of Borrower's domestic cash collections with respect to Accounts for the immediately preceding 90 day period; plus (ii) an 3 4 amount equal to the lesser of: (y) $1,500,000, and (z) 80% of Eligible Unearned Service Accounts; plus (iii) an amount equal to the lowest of: (x)(1) the value of Eligible Raw Materials Inventory plus the value of Eligible Spare Parts Inventory less the amount of the Inventory Reserve, times (2) 25%, (y) 133% of the amount of credit availability created by clauses (i) and (ii) above, and (z) $2,000,000, less an amount equal to (1) $50,000 times (2) the number of months since the Closing Date. h. Subsection (a) of Section 2.2 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: (a) Foothill has agreed to make a term loan to Borrower in the original principal amount of $7,200,500, to be evidenced by and repayable in accordance with the terms and conditions of a promissory note (the "Term Note"), dated June 27, 1996, executed by Borrower in favor of Foothill. The term loan shall be repaid in 35 installments of principal in the following amounts:
MONTH INSTALLMENT AMOUNT ------------- -------------------- 1 $129,250 2 through 27 $139,000 28 $129,250 29 through 34 -0- (Payments Deferred) 35 Balance
Each such installment shall be due and payable on the first day of each month commencing on October, 1996 and continuing on the first day of each month thereafter until and including the date on which the unpaid balance of the Term Loan is paid in full. The outstanding principal balance and all accrued and unpaid interest under the Term Loan shall be due and payable upon the termination of this Agreement, whether by its terms, by prepayment, by acceleration, or otherwise. All amounts evidenced by the Term Note shall constitute Obligations. i. The "Renewal Date" set forth in Section 3.4 of the Agreement hereby is amended to read "August 1, 1999." 4 5 j. Section 3.6 of the Agreement hereby is deleted in its entirety and the following hereby is substituted in lieu thereof: 3.6 EARLY TERMINATION BY BORROWER. The provisions of Section 3.4 that allow termination of this Agreement by Borrower only on the Renewal Date and certain anniversaries thereof notwithstanding, Borrower has the option, at any time upon 90 days prior written notice to Foothill, to terminate this Agreement by paying to Foothill, in cash, the Obligations, together with a premium (the "Early Termination Premium") equal to (a) the Maximum Revolver Amount, plus the then outstanding principal balance of the Term Note as of the date of termination, times (b)(i) 3%, if during the first year following the Ninth Amendment Closing Date, (ii) 1.5%, if during the second year following the Ninth Amendment Closing Date, (iii) 0.75%, if during the third year following the Ninth Amendment Closing Date, and (iv) -0-, if thereafter. The foregoing notwithstanding, in the event Borrower terminates this Agreement in connection with the consummation of a Qualified Transaction, the Early Termination Premium payable shall be equal to 1/2 of the applicable amount otherwise payable. At times other than in connection with the termination of this Agreement, Borrower shall have the right to prepay the Term Note, in whole or in part, upon 10 days prior written notice to Foothill, without penalty or premium, such prepayments to be applied to installments due under the Term Note in the inverse order of their maturity. k. Section 6 of the Agreement hereby is amended by adding the following: 6.20 MAINTENANCE OF LETTERS OF CREDIT. If and to the extent that during the term of this Agreement the Letters of Credit, alternative financing, or guaranties are required in connection with the Indebtedness of Concurrent Nippon owing to Sumitomo Bank, Ltd., Mitsubishi Bank, Ltd., and Industrial Bank of Japan, then no later than 45 days prior to the expiry date of the Letters of Credit, Borrower shall either (a) extend the expiry date of the Letters of Credit to on or after the Renewal Date or (b) obtain alternative financing or guaranties in lieu thereof, in each case in accordance with Sections 7.1 and 7.6 hereof; such alternative financing or guaranties to be in form and amount satisfactory to Foothill in its sole discretion. l. The addresses for notices to Borrower set forth in Section 12 of the Agreement hereby are deleted in their entirety and the following hereby is substituted in lieu thereof: 2101 W. Cypress Creek Road Fort Lauderdale, Florida 33309 5 6 m. Schedules E-1 and 6.14 to the Agreement hereby are replaced and superceded by revised Schedules E-1 and 6.14 attached hereto. 2. Representations and Warranties. Borrower hereby represents and warrants to Foothill that (a) the execution, delivery, and performance of this Amendment and of the Agreement, as amended by this Amendment, are within its corporate powers, have been duly authorized by all necessary corporate action, and are not in contravention of any law, rule, or regulation, or any order, judgment, decree, writ, injunction, or award of any arbitrator, court, or governmental authority, or of the terms of its charter or bylaws, or of any contract or undertaking to which it is a party or by which any of its properties may be bound or affected, and (b) this Amendment and the Agreement, as amended by this Amendment, constitute Borrower's legal, valid, and binding obligation, enforceable against Borrower in accordance with its terms. 3. Conditions Precedent to Effectiveness of Amendment. The effectiveness of this Amendment is subject to the fulfillment, to the satisfaction of Foothill and its counsel, of each of the following conditions on or prior to the Closing Date: a. Foothill shall have received a term note duly executed in the form of Exhibit T-1 attached hereto (the "Term Note"), such document to be in full force and effect. Promptly upon receipt of the Term Note, Foothill shall (i) cancel the existing term note, dated June 29, 1995, made by Borrower to the order of Foothill in the original principal amount of $10,000,000 (the "Existing Term Note") and (ii) return the Existing Term Note to Borrower; b. Foothill shall have received the Amendment to Mortgage duly executed; c. Foothill shall have received evidence satisfactory to it that the Amendment to Mortgage has been recorded in the official records of the county in which the Premises is located; d. Foothill shall have received appropriate endorsement(s) to the Title Policy in form satisfactory to Lender; e. Foothill shall have received a landlord waiver, in form and substance satisfactory to Foothill, from the lessor of Borrower's leased facility located in Florida; and f. Foothill shall have received a certificate of the Secretary of Borrower attesting to the resolutions of Borrower's Board of Directors authorizing the execution, delivery, and performance of the Agreement as amended by this Amendment and authorizing the specific officers of Borrower to execute same; 6 7 g. Foothill shall have received confirmation of the filing of its financing statements against Borrower in the State of Florida; h. Foothill shall have received a certificate of corporate status with respect to Borrower, such certificate to be issued by the appropriate officer of the State of Florida, which certificate shall indicate that Borrower is in good standing in such jurisdiction; i. Foothill shall have received evidence satisfactory to it that Borrower and Harris have consummated the Harris Acquisition in accordance with the terms of the Purchase and Sale Agreement; j. Foothill shall have received a duly executed amendment to the Harris Loan Agreement, in form and substance satisfactory to Foothill; k. The representations and warranties in this Amendment, the Agreement as amended by this Amendment, and the other Loan Documents shall be true and correct in all respects on and as of the date hereof, as though made on such date (except to the extent that such representations and warranties relate solely to an earlier date); l. No Event of Default or event which with the giving of notice or passage of time would constitute an Event of Default shall have occurred and be continuing on the date hereof, nor shall result from the consummation of the transactions contemplated herein; m. No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the transactions contemplated herein shall have been issued and remain in force by any governmental authority against Borrower, Foothill, or any of their Affiliates; n. No material adverse change in the financial condition of Borrower or in the value of the Collateral, including that portion of the Collateral acquired by Borrower in connection with the Harris Acquisition, shall have occurred; and o. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Foothill and its counsel. 4. Condition Subsequent. As a condition subsequent to the effectiveness of this Amendment, Borrower shall perform or cause to be performed the following (the failure by Borrower to so perform or cause to be performed constituting an Event of Default): 7 8 a. Foothill and Borrower shall use reasonable commercial efforts to establish revised financial covenants under Section 6.12 of the Agreement giving effect to the transactions contemplated by this Amendment and to the Harris Acquisition. 5. Effect on Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. The execution, delivery, and performance of this Amendment shall not operate as a waiver of or, except as expressly set forth herein, as an amendment, of any right, power, or remedy of Foothill under the Agreement, as in effect prior to the date hereof. 6. Further Assurances. Borrower shall execute and deliver all agreements, documents, and instruments, in form and substance satisfactory to Foothill, and take all actions as Foothill may reasonably request from time to time, to perfect and maintain the perfection and priority of Foothill's security interests in the Collateral and to fully consummate the transactions contemplated under this Amendment and the Agreement, as amended by this Amendment. 7. Miscellaneous. a. Upon the effectiveness of this Amendment, each reference in the Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like import referring to the Agreement shall mean and refer to the Agreement as amended by this Amendment. b. Upon the effectiveness of this Amendment, each reference in the Loan Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words of like import referring to the Agreement shall mean and refer to the Agreement as amended by this Amendment. c. This Amendment shall be governed by and construed in accordance with the laws of the State of California. d. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Amendment by signing any such counterpart. [Remainder of page intentionally left blank.] 8 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above. FOOTHILL CAPITAL CORPORATION, a California corporation By /s/ Lisa M. Gonzales ----------------------------- Title: Assistant Vice President -------------------------- CONCURRENT COMPUTER CORPORATION, a Delaware corporation By /s/ Kevin Dell ---------------------------- Title: Vice President, General Counsel and Secretary --------------------------------------------- 9 EX-10.9J 13 AMEND. NO. 10 TO LOAN & SECURITY AGREEMENT 1 EXHIBIT 10.9(j) AMENDMENT NO. TEN TO THE LOAN AND SECURITY AGREEMENT This Amendment No. Ten To The Loan And Security Agreement (this "Amendment") is entered into as of the 28th day of August, 1996, by and between CONCURRENT COMPUTER CORPORATION, a Delaware corporation ("Borrower"), with its chief executive office located at 2 Crescent Place, Oceanport, New Jersey 07757 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts: FACTS FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated as of June 29, 1995 (as amended and the "Agreement"). FACT TWO: Foothill and Borrower desires to further amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified. NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows: 1. Subsection (b) of the Definition "Permitted Real Property Dispositions" under Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "(b) the sale of the Oceanport Real Property so long as at the time thereof (i) no Event of Default has occurred and is continuing, and (ii) the net cash proceeds of such sale equals or exceeds Five Million Dollars ($5,000,000). 2. Foothill shall charge Borrower's loan account a fee in the amount of Two Thousand Dollars ($2,000). Said fee shall be fully-earned, non-refundable, and due and payable on the date Borrower's loan account is charged. 3. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect. IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above. FOOTHILL CAPITAL CORPORATION CONCURRENT COMPUTER CORPORATION By /s/ Lisa M. Gonzales By /s/ Robert Fitzpatrick --------------------------- -------------------------------- Lisa M. Gonzales Robert Fitzpatrick Its Assistant Vice President Its Vice President & Treasurer -------------------------- ------------------------------ EX-11 14 EARNINGS PER COMMON SHARE 1 EXHIBIT 11 CONCURRENT COMPUTER CORPORATION PRIMARY AND FULLY DILUTED EARNINGS PER SHARE COMPUTATION (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED JUNE 30, -------------------------------------- 1996 1995 1994 -------- -------- -------- Income (loss) before extraordinary loss and cumulative effect of change in accounting principles............ $(39,712) $ (2,006) $(11,631) Extraordinary loss on early extinguishment of debt..... -- (23,193) Cumulative effect of change in accounting principles... -- (5,000) -------- -------- -------- Net income (loss)...................................... $(39,712) $ (2,006) $(39,824) ======== ======== ======== Weighted average number of common shares............... 30,568 30,095 28,054 Increase in weighted average number of common shares upon assumed conversion of preferred stock........... -- -- -- Increase in weighted average number of common shares upon assumed exercise of stock options............... -- -- -- -------- -------- -------- Total........................................ 30,568 30,095 28,054 ======== ======== ======== Income (loss) per share: Income (loss) before extraordinary loss and cumulative effect of change in accounting principles........................................ $ (1.30) $ (0.07) $ (0.41) Extraordinary loss on early extinguishment of debt... -- -- (0.83) Cumulative effect of change in accounting principles........................................ -- -- (0.18) -------- -------- -------- Net income (loss)...................................... $ (1.30) $ (0.07) $ 1.42 ======== ======== ========
52 EX-21 15 SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Each of the below listed subsidiaries is 100% directly or indirectly owned by Concurrent Computer Corporation except as otherwise indicated, and all are included in the consolidated financial statements.
STATE OR OTHER JURISDICTION OF NAME OF SUBSIDIARY INCORPORATION/ORGANIZATION - ----------------------------------------------------------------------- -------------------------- Concurrent Computer Asia Corp. Delaware Concurrent Computer Belgium B.V./S.A. Belgium Concurrent Computer Canada, Inc. Canada Concurrent Computer Corp. (France) Delaware Concurrent Computer Corp. Pty. Ltd. Australia Concurrent Computer Corporation, Ltd. United Kingdom Concurrent Computer Far East Pte. Ltd. Singapore Concurrent Computer France S.A. France Concurrent Computer GmbH Germany Concurrent Computer Hispania, S.A. Spain Concurrent Computer Holding Co. Ltd. United Kingdom Concurrent Computer Hong Kong Limited Hong Kong Concurrent Computer Ireland, Ltd. Ireland Concurrent Computer Nederland, Ltd. United Kingdom Concurrent Computer New Zealand New Zealand Concurrent Nederland B.V. The Netherlands Concurrent Computer Scandinavia Limited United Kingdom Concurrent Nippon Corporation (60% of voting securities owned) Japan Concurrent Securities Corp. Massachusetts Harris GmbH Germany Harris Computer Systems Corporation Technology, Inc. Florida Harris Computer Systems Ltd. United Kingdom Harris Systemes Electroniques, S.A. France
53 EX-23 16 CONSENT OF COOPERS & LYBRAND LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS ------------------------ We consent to the incorporation by reference in the registration statements of Concurrent Computer Corporation (the "Company") on Form S-8 and Form S-3 of our report dated August 12, 1996, except for Note 20, as to which the date is September 27, 1996, on our audits of the consolidated financial statements and the financial statement schedule of Concurrent Computer Corporation as of June 30, 1996 and 1995 and for the three years in the period ended June 30, 1996, which report is included in the Company's Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Parsippany, New Jersey September 27, 1996 EX-27 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUN-30-1996 JUN-30-1996 3,562 10,077 29,127 1,143 11,683 55,654 60,666 44,213 80,214 56,479 6,603 5,610 0 412 6,656 80,214 42,430 95,800 27,487 60,535 0 135 2,316 (38,162) 1,550 (39,712) 0 0 0 (39,712) (1.30) (1.30)
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